Peers
TOTAL S.A. (ADR) (NYSE: TOT) is a French oil major with operations in both the upstream and downstream sector globally. The company generates about 85% of its revenues from its upstream activities. Total has not grown as much as its rivals, and has increased its earnings per share (EPS) only 7% since 2005. However, it has increased its dividend by 45% since 2005, though it has stopped repurchasing its shares with effect from 2006.
Total has a strong balance sheet with a low level of net debt that amounts to about 400% of its annual earnings. It has replaced only 93% of its reserves in 2012, compared to Exxon and Chevron Corporation (NYSE:CVX), which replaced 119% and 112%, respectively. Total has 13 years of proved reserve life and is setting out to increase its daily production from 2.4 to 3 million barrels/day over the next five years. The company has already started on the development of the projects that will drive growth until 2015 and 90% of the projects until 2017, and it is extremely likely that the company will accomplish its goal of production growth. Total has a low P/E ratio (around 7 times) and a high dividend yield of around 6%. However, there are better stocks to own in this sector. I recommending holding onto shares of Total, but I would avoid buying additional shares at this time.
Denbury Resources Inc. (NYSE: DNR) is approaching the production of oil differently from most other companies in the business, and this results in an environmentally-friendly business practice. Denbury, located in Dallas, Texas, produces oil using a process that captures carbon dioxide, which is subsequently injected at high pressure into old wells that would be considered useless. This means that an important greenhouse gas company is used fruitfully, along with the production of considerable amounts of oil that otherwise would not be produced.
The process is known as carbon dioxide enhanced oil recovery (CO2 EOR), and also as “tertiary recovery.” Once hydrocarbons have been produced through the EOR process, the carbon dioxide is separated at an on-site recycling center and then used for the production process. The carbon dioxide used in its operations is obtained from several areas, including the Rocky Mountains. The company reported adjusted fourth-quarter 2012 earnings of $0.36 per share, which was comfortably ahead of the analysts’ consensus forecast of $0.29. On a year-over-year basis, the company’s adjusted EPS figure was less than the $0.45 per share in the same quarter of the previous year because of lower price realizations. I recommend watching this stock carefully and being prepared to buy on more favorable developments.
Summary
Because of its size, ExxonMobil Corporation (NYSE:XOM) should be easily able to handle any liabilities arising out of its legal problems. Its transition to oil and liquids, even when it is the largest natural gas producer, means that future growth should be impressive. On the basis of this anticipated growth, investors should take a closer look at ExxonMobil and consider buying the stock.
The article 2 Legal Battle Updates In The Oil & Gas Sector originally appeared on Fool.com and is written by Maxwell Fisher.
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