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Douglas Grandt answerthecall@me.com

Financially, ExxonMobil is precarious
November 30, 2015 at 7:27 PM
Travis Lumpkin (Sen. Cantwell) Travis_Lumpkin@cantwell.senate.gov, Jeff Lomonaco (Sen. Franken)
Jeff_Lomonaco@franken.senate.gov, Joe Britton (Sen. Heinrich) Joe_Britton@heinrich.senate.gov, Betsy Lin (Sen. Hirono)
Betsy_Lin@hirono.senate.gov, Bill Sweeney (Sen. Stabenow) Bill_Sweeney@stabenow.senate.gov, Mindy Myers (Sen. Warren)
Mindy_Myers@warren.senate.gov, Jeff Michels (Sen. Wyden) Jeff_Michels@wyden.senate.gov,
Michaeleen Crowell (Sen. Sanders) Michaeleen_Crowell@sanders.senate.gov, Kay Rand (Sen. King) Kay_Rand@king.senate.gov

Dear Chiefs of Staff of Progressive Members of the Energy & Natural Resources Committee,
.
Please share this idea with your Senators. Petroleum CEOs will not act in our interest
.
Last week, I suggested that We the People could buy the $5 trillion global petroleum refining
industry in a single decade, one refinery at a time, and shut them down, replacing
refineries with renewables. This may be necessary if humanity is to survive the Saudi
and U.S. profit-driven petroleum industrys having shot themselves in their greedy, selfish
foot, with the resulting uneconomically low price of oil.
Today, we have two new reports that further support the idea that the people take control of
the petroleum companies lest the CEOs and Boards of Directors take myopic measures to
avert financial disaster and plunge society and the economy into chaotic catastrophe.
Doug Grandt

Exxon needs "another Mobil" to boost shareholder value, analyst says

By Carl Surran | Nov 30 2015, 12:18 P.M. ET | Seeking Alpha | Bit.ly/Alpha30Nov15
Exxon Mobil (XOM) needs another large acquisition - "another Mobil" - to create long-term shareholder value,
according to Oppenheimer analyst Fadel Gheit and his team.
Given XOM's large scale, Gheit believes XOM's production growth will be both "anemic and unsustainable," and
return on invested capital will fall short of historical levels even at much higher oil prices, meaning XOM needs a big
deal to create long-term shareholder value through synergy benefits from cost savings and efficiency gains.
Gheit expects XOM to generate operating cash flow of $34.8B this year and $34.3B next year, which will partially fund
respective capex of $29.7B and $29.4B and dividends of $12.1B and $12.7B, for a cash flow deficit of $7.0B and
$7.9B.

Why Exxon Needs Another Mobil

By Ben Levisohn | Nov 30 2015, 11:32 A.M. ET | Barrons | Bit.ly/Barrons30Nov15
Exxon maintained 2015 CAPEX guidance of $34B, but expects lower spending in 2016 and 2017 on increased capital
efficiency. Exxon also halved its share buyback program and expects repurchases of $500M in 4Q15, flat sequentially. Based
on the current strip, we expect Exxon to generate operating cash flow of $34.8B this year and $34.3B next year, which will
partially fund CAPEX of $29.7B and $29.4B and dividend of $12.1B and $12.7B, for a cash flow deficit of $7.0B and $7.9B, to
be funded from divestiture proceeds and additional debt
Given its large scale, we believe production growth will be both anemic and unsustainable and return on invested capital will fall
short of historical levels even at much higher, but more realistic oil prices. We believe Exxon needs another Mobil to create
long-term shareholder value through synergy benefits from cost savings and efficiency gains. We think such a move by Exxon
could accelerate industry consolidation and create companies that are more resilient to low and volatile oil prices.

How Safe Is Exxon Mobil's Dividend?

By Aristofanis Papadatos | Nov 30 2015, 2:07 P.M. ET | Seeking Alpha | Bit.ly/Alpha30NOV15

Summary
While Chevron and BP froze their dividend this year, Exxon Mobil raised it by 6%.
As numerous shareholders of Exxon Mobil hold the stock for its growing dividend, the big question is whether the
company will cut its dividend in the next few years.
Thanks to its relatively low payout ratio and some other factors mentioned in the article, Exxon Mobil will not have to
cut its dividend in the next few years.

Oil has been in a relentless bear market during the last one and a half year, plunging from $100 to $42 during that period.
Despite the adverse environment for the oil producers, Exxon Mobil (NYSE:XOM) raised its dividend by 6% this year and thus it
has now raised its dividend for 33 consecutive years at an average annual rate of 6.4%. As numerous investors, both
institutional and individual, hold the stock for its growing dividend, the big question is whether the company will be forced to cut
its dividend in the next few years.

First of all, it is interesting to note that two other oil majors, Chevron (NYSE:CVX) and BP (NYSE:BP), froze their dividend this
year, which might be a warning signal for the other oil majors as well. However, Exxon is less leveraged on the oil price than
Chevron and BP. To be sure, Exxon produces liquids and gases at a ratio of 5.5/4.5 while Chevron produces them at a ratio 2:1.
That's why the earnings per share [EPS] of Exxon have decreased 47% so far this year while the EPS of Chevron have
plunged by 70%. Moreover, while BP produces oil and gases at a ratio 1:1, it is more leveraged on the oil price than Exxon due
to its high debt load and its high liabilities for the Macondo accident (annual payments of $1 B for 18 years).
Even more importantly, Exxon has a much lower dividend payout ratio than the other two oil majors. More specifically, while
Exxon has a payout ratio of 74% this year, Chevron and BP have a payout ratio of 129% and 109%, respectively. In other
words, Chevron and BP already distribute more than they earn to their shareholders so the least they could do was to freeze
their dividend this year. On the other hand, Exxon has a more decent payout ratio, though it is still high given the huge capital
expenses of the company for the replenishment of its reserves.
In order to reduce the gap between its operating cash flows and its capital expenses plus dividend payments, Exxon has
reduced its capital expenses by 16% so far this year, from $28.1 B in 9M-2014 to $23.6 B in 9M-2015. Moreover, the company
has made great efforts to increase its operational efficiency and has thus managed to reduce its upstream unit cost by 10% this
year. While these moves are certainly in the right direction, the company still has a budget deficit of $5.7 B so far this year.
This is in line with the trend observed in the other oil giants as well. More specifically, according to a WSJ analysis, spending on
new projects, share repurchases and dividends at four of the biggest oil companies, Royal Dutch Shell (RDS.A, RDS.B), Exxon
Mobil, Chevron and BP, outstripped their cash flow by more than a combined $20B in H1 of this year. While this trend is
particularly strong this year due to the depressed earnings of the oil producers, it has been going on for many years. To make a
long story short, the oil majors have been raising debt in order to fund their huge capital expenses while increasing their
distributions to their shareholders. That's why Exxon increased its net debt (as per Buffett, net debt = total liabilities - cash receivables) from $124 B in 2012 to $144 B in 2015.
Nevertheless, while the net debt of Exxon seems extremely high, it is still about 8.5 times this year's depressed earnings and
hence it is still manageable. Moreover, the oil price is unlikely to remain depressed around its current level for many more
years, as all the oil producers have markedly cut their capital expenses, by a total of around $200 B. In addition, as mentioned
above, Exxon is already in the process of reducing its budget deficit and hence it will only have to issue a relatively small
amount of new debt in the next few years in order to sustain its dividend and its capital expenses.
To sum up, while Exxon has been hurt by the prolonged recession in the oil sector, it will be the last oil major to announce a
dividend cut. Thanks to its manageable payout ratio, its reduced budget for capital expenses and its efforts to reduce its
operating costs, the company will not have to cut its dividend for at least the next few years. In addition, Chevron and BP have
a much more vulnerable dividend than Exxon and hence the shareholders of the latter need not worry until at least the other oil
majors announce dividend cuts.