Trading at a discount to book value

They continue to burn billions of dollars in cash every quarter... I've said it before their business needs $80 Brent not $40.

They need to drastically reduce head count and shed assets (tough in this environment)

GE said:

---

Trading at a discount to book value

---

For now. If it were as easy as looking at the current numbers, they wouldn't be trading here.

Buying below "book value" can be a value trap in energy....it is a lagging indicator and can keep moving lower. I knew "value investors" buying WFT for years because it was below book value

cjsag94 said:

---

GE said:

---

Trading at a discount to book value

---

For now. If it were as easy as looking at the current numbers, they wouldn't be trading here.

---

So are you saying the stock price will increase or book value will decrease? Would have thought the biggest book value hit would have been in form of a write down in the first half of this year.

As I look through this they screwed up the captioning on their Q2 cash flow statement.

So continue to hold or get rid of?

MAS444 said:

---

So continue to hold or get rid of?

---

I'm holding at least until they cut dividend but I'm not great at these things. Oil stocks are so damn responsive to oil prices. It seems inevitable given historical volatility in the markets there will be a price run-up and corresponding increase in the stock price.

GE said:

---

cjsag94 said:

---

GE said:

---

Trading at a discount to book value

---

For now. If it were as easy as looking at the current numbers, they wouldn't be trading here.

---

So are you saying the stock price will increase or book value will decrease? Would have thought the biggest book value hit would have been in form of a write down in the first half of this year.

---

I have no idea.. but the market is clearly not optimistic. Until the losses subside, oil stabilizes at a higher level, political risks diminish, etc, book value is certainly declining. Stocks are forward looking.

XOM has much less institutional ownership than similar companies (52% vs 65% CVX). The big money just prefers other plays, and the retail guys are starting to get nervous from where I sit. Too many regular Joe's are sitting with ridiculous net worth exposure to this 1 stock, they've lost half that net worth and then some, and the dividend Outlook is in decline.

If these little guys begin to unwind, it could get ugly and snowball. Of course, with history as a guide, that's when the big money will swoop in, buy it cheap, and the rich will get richer while these XOM lifers wonder what went wrong.

I'm buying...

Q2 had to be the worst quarter in corporate history. I don't think the world is going to have a mass shutdown like we saw in Q2 again. XOM generated $0 cashflow from Operations. The losses were capex and dividend in that quarter. Prices have stabilized around 40 and they are doing real cuts now. Except for the dividend, it's hard to think they will be at 0 cash flow again going forward. At these prices you get paid 9% to wait for the turnaround.

The downsize risk is minimal to me compared to the upside. Inflation and supply shortages are going to make oil rebound in the next few years.

Dan Scott said:

---

Q2 had to be the worst quarter in corporate history. I don't think the world is going to have a mass shutdown like we saw in Q2 again. XOM generated $0 cashflow from Operations. The losses were capex and dividend in that quarter. Prices have stabilized around 40 and they are doing real cuts now. Except for the dividend, it's hard to think they will be at 0 cash flow again going forward. At these prices you get paid 9% to wait for the turnaround.

The downsize risk is minimal to me compared to the upside. Inflation and supply shortages are going to make oil rebound in the next few years.

---

This is where I'm at. The oil company stocks all seem to have been temporarily disconnected from oil prices but I doubt that holds for very long and also expect $50+ oil in the not too distant future given all the investment cuts companies have made

Ogre09 said:

---

I'm buying...

---

Same here..
I'm looking forward to the rebound. Bought at $42.. then some more at $40..

Will probably try to get some more at 39 or 39.5

Bocephus said:

---

When XOM drops down in the 50s, I buy. Just chugging along. Picked up some more at 59.80 today

---

Ouch.. hope we see a turnaround soon!

Bocephus said:

---

turfman80 said:

---

So I keep looking at XOM as it drops. I hear all about the "future" of oil and how renewable sources are making such gains and becoming much more feasible as energy sources, but I would think that Exxon, with their huge presence in the energy industry, would be positioning themselves to stay relevant for the next half century. Opinions from people that are more involved in the industry and XOM in particular?

---

7 percent dividends FTW

---

8.88% dividend

It is so interesting how the investment thesis amongst the buyers hasn't changed as the stock has dropped from 80, to 60, 50, 40, 30. Jumps back to low 40s then back down to high 30s, removed from the Dow, massive cost reductions seemingly all in the name to keep the dividend sacred. Now we even move on to the even if it isn't oil...surely the king will lead in whatever energy they decide to pursue. Their near to intermediate term strategic track record isn't very good.

Good luck, I guess as long as you keep repeating it all the way down, you will eventually get to say you were right.

cjsag94 said:

---

It is so interesting how the investment thesis amongst the buyers hasn't changed as the stock has dropped from 80, to 60, 50, 40, 30. Jumps back to low 40s then back down to high 30s, removed from the Dow, massive cost reductions seemingly all in the name to keep the dividend sacred. Now we even move on to the even if it isn't oil...surely the king will lead in whatever energy they decide to pursue. Their near to intermediate term strategic track record isn't very good.

Good luck, I guess as long as you keep repeating it all the way down, you will eventually get to say you were right.

---

Here is my mentality with XOM and I'm not saying this is necessarily rational (but then what is rational about the market these days!)....I bought it many years ago at an overall cost basis around $40. At this point, it's a sunk cost to me and I'm simply letting it ride and will see where it is when I actually need it or desire to cash it out for something else.

I have so little money in individual stocks as a percentage of my portfolio that pretty much every stock I actually own is funny money to me.

Based on their 10-Q earlier this month, it looks like their cash on hand comes up just shy to pay out 87 cents per outstanding share. Debt to equity still looks to be in good shape at 0.27 , and I imagine if push comes to shove they wont have trouble tapping debt to finance the shortfall necessary to maintain the dividend at current level - at least for the near to mid term.

Oil demand is now 10% below pre-COVID. It's actually pretty amazing how fast demand recovered considering the pandemic still isn't over and lots places still have some form of shutdown.

I think refining will drag XOM down some more. If I can get this <35 with a 10% dividend than I'm rebuilding my long. For now if you're playing oil recovery there are better options like PXD, EOG, and even OXY imo. OXY has restricted their near term maturities and if oil gets back up in the 50s, this is a double. The crappy part among the many is effing Buffet getting paid in shares diluting the stock. It's less painful at a higher stock price.

Once they come up with an electric airplane or ship, I'll reverse on oil. For now I really think it's setup for a nice bounce once COVID goes away

Well this stock is holding up today.

Jayhawk said:

---

Based on their 10-Q earlier this month, it looks like their cash on hand comes up just shy to pay out 87 cents per outstanding share. Debt to equity still looks to be in good shape at 0.27 , and I imagine if push comes to shove they wont have trouble tapping debt to finance the shortfall necessary to maintain the dividend at current level - at least for the near to mid term.

---

Is it common for companies to take on debt to pay a dividend? Maybe this happens more than I am aware, but seems to stray from sound business practices.

To me, it's not a dividend unless it from profit. I understand dipping into cash reserves after a bad quarter, but it seems they're cannibalising themselves.

CaptnCarl said:

---

Jayhawk said:

---

Based on their 10-Q earlier this month, it looks like their cash on hand comes up just shy to pay out 87 cents per outstanding share. Debt to equity still looks to be in good shape at 0.27 , and I imagine if push comes to shove they wont have trouble tapping debt to finance the shortfall necessary to maintain the dividend at current level - at least for the near to mid term.

---

Is it common for companies to take on debt to pay a dividend? Maybe this happens more than I am aware, but seems to stray from sound business practices.

---

Going public pretty much assures some departure from sound business practices. Shareholders want their money yesterday.

CaptnCarl said:

---

Jayhawk said:

---

Based on their 10-Q earlier this month, it looks like their cash on hand comes up just shy to pay out 87 cents per outstanding share. Debt to equity still looks to be in good shape at 0.27 , and I imagine if push comes to shove they wont have trouble tapping debt to finance the shortfall necessary to maintain the dividend at current level - at least for the near to mid term.

---

Is it common for companies to take on debt to pay a dividend? Maybe this happens more than I am aware, but seems to stray from sound business practices.

To me, it's not a dividend unless it from profit. I understand dipping into cash reserves after a bad quarter, but it seems they're cannibalising themselves.

---

That is a good observation and I hadn't considered it, guess I am overly cynical in my analysis of what companies will do with debt. I suppose they could make the case that the dividend, being intrinsic to the value of their stock, is a legit expenditure against a credit facility.

My opinion is that would mean they have a very favorable outlook on oil if they do take on additional debt to float the dividend.

CaptnCarl said:

---

My opinion is that would mean they have a very favorable outlook on oil if they do take on additional debt to float the dividend.

---

No.. they know they have a huge base of investors who will happily suffer a decade of horrific returns capped by a 50% decline... All they need is to say they'll collect their dividend while they wait.

They know cutting their dividend will kill their stock, especially since they've worked so hard to preserve it... T isn't a forecast on the price of oil.

Ah okay. What was I thinking trying to use logic...

FWIW I dumped my XOM stock ($35 entry) a few months ago. Grew tired of watching it slog around while my ETFs just kept trucking along.

cjsag94 said:

---

CaptnCarl said:

---

My opinion is that would mean they have a very favorable outlook on oil if they do take on additional debt to float the dividend.

---

No.. they know they have a huge base of investors who will happily suffer a decade of horrific returns capped by a 50% decline... All they need is to say they'll collect their dividend while they wait.

They know cutting their dividend will kill their stock, especially since they've worked so hard to preserve it... T isn't a forecast on the price of oil.

---

Exactly. Why would I even care about the share price if I can scoop up a giant at 9% dividend yield? Keep paying the dividend, and we won't have any problems. Share price is almost irrelevant. Heck, I'd use the dividend to buy more shares. The huge "if" is will they ever cave, or will they just keep paying...

That's absurd... It's only 10% (which it isn't btw) because the stock is down 50%. XOM is the only stock I've ever seen where people so gladly overlook the horrible price performance. It is a dog.

Buy away if you want, so many other better investments. Who knows, maybe it's XOM time, but so many reasons to bet against, virtually zero fundamental reasons to bet on it.
Just read this thread.. there isn't anything that paints a positive outlook on this company other than the sentiment that hey, it's Exxon, they always be the best as long as they want to. But the reality is there failed pretty badly with their strategic decisions of the part decade... But I'm sure the next decade they'll get it all together.

It feels an awful lot like the next GE.

Please point on the doll where Exxon touched you.

cjsag94 said:

---

That's absurd... It's only 10% (which it isn't btw) because the stock is down 50%. XOM is the only stock I've ever seen where people so gladly overlook the horrible price performance. It is a dog.

Buy away if you want, so many other better investments. Who knows, maybe it's XOM time, but so many reasons to bet against, virtually zero fundamental reasons to bet on it.
Just read this thread.. there isn't anything that paints a positive outlook on this company other than the sentiment that hey, it's Exxon, they always be the best as long as they want to. But the reality is there failed pretty badly with their strategic decisions of the part decade... But I'm sure the next decade they'll get it all together.

It feels an awful lot like the next GE.

---

XOM still produces a product. GE basically became an electron pusher.

Bob Knights Liver said:

---

Please point on the doll where Exxon touched you.

---

Just the opposite perspective of.. you can do anything to me that you want for $0.87 a share.

I bought at $39 in Mar/Apr, sold at $48 to take my profits. Buying back in recently. I want to buy more, but they're already about 1/3 of my playing around money portfolio and that feels like too much exposure to one company. Pre-Covid they were trucking along at $70-$80 pretty consistently. Looks like a bargain to me still, even if they cut the dividend in half.

If they touch the dividend, the intrinsic value will crater.

No reason to touch it if you don't think the dividend is safe. None at all.