Industry Spotlight
Last big quarter?
Exxon Mobil Corp. (XOM) last week reported the highest quarterly profit ever for a U. S. company, breaking its own record. Chevron Corp. (CVX), BP plc (BP) and ConocoPhillips (COP) likewise reported sharply higher profit. But Big Oil’s record-breaking streak could be over. Oil’s price has halved since its July 11 peak above $147 a barrel, as a sluggish global economy weighs on demand. Jefferies & Co. analyst Stephen D. Gengaro recently reduced his 2009 average crude oil price forecast to $60 a barrel from $85 and set a $75 estimate for 2010. He expects oil demand will slip 1.2 percent in 2009.
Gengaro expects oversupply amid waning demand. Chevron has “a series of massive projects set to deliver” including in Nigeria and Kazakhstan, writes Deutsche Bank analyst Paul Sankey. “The problem is, delivery comes right when more oil is least needed,” he says, affirming a “hold” rating. Gengaro also rates Exxon, the world’s largest public oil company, “hold” and rates ConocoPhillips “sell,” saying it has more debt and less free cash fiow than peers.
But Oppenheimer & Co. analyst Fadel Gheit rates the stocks “outperform,” saying they will only suffer in a severe global recession. By driving down share prices, lower oil prices could even benefit big players by allowing them to acquire rivals at a lower cost.
