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Exxon turns on the charm with once-shunned analysts

Exxon sign reflected in puddle
Exxon Mobil Corp. signage is reflected in a puddle at a gas station in Nashport, Ohio, U.S., on Friday, Jan. 26, 2018. Photographer: Ty Wright/Bloomberg

For many years Exxon Mobil Corp. had a frosty relationship with Wall Street, giving terse presentations and shutting down impertinent questions. Chief executives from Lee Raymond to Rex Tillerson didn’t participate in quarterly earnings calls, leaving many analysts frustrated.

Under CEO Darren Woods, that’s changing. Analysts praised the supermajor’s executive team for its candor and ambitious plans at Wednesday’s annual analyst day gathering at the New York Stock Exchange. The stock climbed 1.1 percent today, making it the joint top-performer in the Dow Jones Industrial Average, after falling yesterday.

After a decade of poor share-price performance, Woods needs Wall Street to get behind his $230 billion, seven-year plan to revamp everything from South American deepwater drilling to Gulf Coast chemical plants. Exxon is still the least-loved major oil stock but some analysts are finding reasons to be bullish.

Mizuho – Paul Sankey (Neutral)

“Aggressive outlook, muscularly delivered.”

“There were many terrific positives, notably the presenters, who were very impressive. It has become SO much more fun and challenging to be an XOM analyst – this is like the good old days when we got to actually analyse and second-guess company plans.”

“XOM’s management committee did not so much check in with an ‘on track’ progress report, but, frankly, to our great surprise, doubled down. This is a high-risk strategy, certainly for the highly conservative, guarded, belt-and-braces XOM of old.”

Barclays – Paul Cheng (Underweight)

“While Exxon has assembled an attractive asset portfolio post-2022, we think it is too early to own the shares given its lackluster near-term outlook vs. peers.”

“The incremental information regarding upcoming projects not only helps for forecasting purposes, but it also highlights Exxon’s effort to become more investor-friendly.”

Citigroup – Alastair Syme (Neutral)

“XOM’s annual strategy update is a statement of intent.”

“It is hard not to disagree with the economic-attractiveness of XOM’s growth-proposition, although the attractiveness as an equity investment we still see as constrained by a premium valuation.”

Goldman – Neil Mehta (Neutral)

“A broadly positive strategic update.”

“While we acknowledge the merit in Exxon’s growth strategy, we continue to see more upside in buy-rated Chevron.”

RBC Capital Markets – Biraj Borkhataria (Outperform)

“XOM’s Analyst Day reinforced the key differences between the company and peers. Doubling down on projects when costs are low and labour availability is high, while enhancing its US downstream position through growing production in the Permian could lead to higher returns over time. Time will tell whether this strategy works.”

Macquarie – David Hewitt (Outperform)

“With multiple growth drivers, which have been materially augmented in the last 12 months, a pipeline of material FID’s this year and the best execution record in the business we continue to prefer XOM in the US super-major space.”

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