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Exxon, Chevron beat Wall Street estimates, but Exxon production declines

BY CLAUDIA ASSIS, MarketWatch

SAN FRANCISCO -- Exxon Mobil and Chevron posted fourth-quarter earnings that beat Wall Street expectations, yet only Chevron got some love from investors. Shares of Chevron rose 1% on Friday, while Exxon shares flip-flopped between small gains and losses and recently traded 0.1% lower.

Production at Exxon dropped to a three-year low, clouding prospects for the Houston company. Chevron not only pumped more oil and gas -- production was up 1% on year -- but also has more crude oil in its portfolio.

Exxon, the world' s largest publicly traded oil company, is the No. 2 natural-gas producer in the U.S., which makes it vulnerable to the more volatile natural-gas prices, expected to remain low for some time to come amid a glut of supply and ongoing mild demand.

Chevron' s net earnings rose 41%, with the company posting per-share earnings of $3.70, compared with $2.58 a year ago and expectations around $3.03. Revenues were 1% higher at $60.55 billion.

Exxon' s net earnings rose 5.9%, with the firm reporting per-share earnings of $2.20 a share, compared with $1.97 a year earlier and expectations around $2. Revenues dropped 5.3% to $115.17 billion.

Chevron has been a market favorite for some time.

Exxon "needs multiple projects to offset declining production," but the company hasn' t announced substantial projects for some time, said Brian Youngberg, an analyst with Edward Jones.

"Production is declining across the board for them," although there are some high hopes for its Canadian oil-sands Kearl projects, which has been delayed.

In contrast, not only output at Chevron has been higher, its production prospects are brighter. "You see the potential for them to accelerate [production]," said Youngberg. Chevron is also more profitable on a per-barrel basis and it' s a cheaper stock in terms of valuation, he said.

Shares of the San Ramon, Calif. company trade at a price-to-earnings ratio of 9.4, compared with Exxon' s 11.4. Chevron stock is also cheaper than ConocoPhillips, another Big Oil stock, which trades at a P/E ratio of 10.3.

Exxon is still a solid option for investors, and both Exxon and Chevron are particularly attractive for those looking for safety, said Michael Kay, an equity analyst at S&P Capital IQ.

Exxon, being a much larger company than Chevron, has to grow production off a much larger base, he added. Kay has a "strong buy" rating on both stocks. Chevron and Exxon "are as steady as they go" and enjoy strong balance sheets, with low debt and plenty of cash on hand, he said.

Crude-oil prices have remained above most forecasts and first-quarter results for Chevron and Exxon may bring some welcome surprises, Kay said.

"If oil prices stay this way, most of the Street will have to revise earnings forecast upwards," he said.

Dow Jones Newswires

02/01/2013

 

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