As oil/gas reserves have been depleting with time, a large part of these reserves are now controlled by national entities. However, there is still a large share of oil that the private sector explores, produces, and refines. In this article, I will be comparing three major oil companies – Exxon Mobil Corporation (NYSE:XOM), TOTAL S.A. (ADR) (NYSE:TOT), and Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) – in terms of value being offered to investors.
Financial review
Currently, Exxon Mobil Corporation (NYSE:XOM) is a renowned stock, providing a stellar return on equity. Its ROE indicators are head and shoulders above peers. Total has its ROE metrics in double digits, while Petrobras experiences the primary drawback of state owned companies – the drop in efficiency and lower than expected results. Total and Exxon have kept their debt under control, while Total significantly decreased its total debt last year.
Over the last three years, Exxon Mobil Corporation (NYSE:XOM)’s growth and the grand nature of its operation have been providing a high growth rate. While Total and Petrobras have done well on this metric, they are easily outperformed by Exxon again. All three companies have been enjoying healthy sales growth over the last three years.
There is another key factor of a company’s financial health. I am talking about costs. Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) performs really badly in this aspect. Its net income growth is negative due to the inefficient bureaucratic structure and poor control over operational costs. The said drawbacks are costing the Brazilian giant in a massive way. TOTAL S.A. (ADR) (NYSE:TOT) and Exxon, on the other hand, are neck to neck in this point.
Competition
| Indicator | Total | Petroleo Brasileiro (NYSE:PBR) Petrobras | ExxonMobil |
|---|---|---|---|
| Market Cap | $131.1 bil | $102.0 bil | $402.8 bil |
| Price/Earnings ttm | 9.9 | 10.7 | 9.2 |
| Price/Book | 1.1 | 0.3 | 2.4 |
| Net Income Growth (3 Yr Avg.) | 8.2 | -10.7 | 15.8 |
| Revenue Growth (3 Yr Avg.) | 17.6 | 16.2 | 32.5 |
| Dividend Yield , % | 5.12% | 0.78% | 2.58% |
| Debt/Equity | 0.3 | 0.5 | – |
| Return on Equity | 11.8 | 3.6 | 27.7 |
| Current Price | $50.10 | $15.65 | $90.58 |
Considering dividend amount, Exxon Mobil Corporation (NYSE:XOM) offers a $2.18 annual dividend, while Total pays $1.93, and Petrobras delivers $0.12. Exxon’s payout ratio of 22.5% indicates strong potential of the company to increase the dividend in the near future. Total’s payout ratio is 40.9%, whereas the same indicator for Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR)stands at 7.1%.
What does the future hold?
TOTAL S.A. (ADR) (NYSE:TOT) is about to start its Angolan liquefied natural gas project and the Kashagan field in Kazakhstan to increase its production growth from 2% to 3% this year. The company seems to be ready to expand its operations in Africa, Europe, and Asia.
Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) has been investing $236.7 billion over five years in building refineries, developing deepwater fields, and ramping up output in deepwater fields including Lula. Petrobras produces more oil than any other company in waters deeper than 1,000 feet (305 meters) and as a result, it is building dozens of platforms and drill ships to expand output.
Exxon Mobil Corporation (NYSE:XOM) is engaged in mitigating an oil spill that dumped 200,000 gallons from the Pegasus pipeline into Mayflower, Arkansas. However, the company has sufficient proven oil and gas to produce at current levels for 16 years. In the last quarter, Exxon reported a flat profit with only its strong chemical business making up for the losses from oil exploration and production.
Final verdict
Honestly, TOTAL S.A. (ADR) (NYSE:TOT) has been unable to keep up with Exxon Mobil Corporation (NYSE:XOM) since 2010, but since last year, Total has been ramping up its efforts to rejoin the big boys of the oil and gas sector. The company has achieved a strong production base in Africa, and for the next three years, it is striving to capitalize in the Middle East as well by building a $1.5 billion condensate refinery in Qatar.
Total is surely a buy for the long-term, while dismal performance of Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) is a clear sigh of the company’s struggles and efforts. While Exxon has undeniable potential, when compared to TOTAL S.A. (ADR) (NYSE:TOT), I believe the French company holds the upper hand.
Marina Avilkina has no position in any stocks mentioned. The Motley Fool recommends Petroleo Brasileiro S.A. (ADR) and Total SA. (ADR).
The article Which Oil Stock Will Make You Really Rich? originally appeared on Fool.com.
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