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Gold/Mining/Energy : Exxon Mobil (XOM) -- Ignore unavailable to you. Want to Upgrade?

To: Dennis Roth who wrote (117)	4/28/2006 8:15:43 AM
From: Dennis Roth	Respond to of 585

Exxon Mobil (OP/A): Updating estimates - Goldman Sachs - April 27, 2006 We reiterate our OP/A rating on Exxon Mobil as well as our view that underlying 1Q 2006 results were strong, with the headline miss a function of tax rate volatility (see our note published earlier today). We peg adjusted EPS at $1.44-$1.50, which would be essentially in line with our $1.45 forecast and the $1.47 First Call consensus projection. A 5% year- over-year jump in E&P production volumes, including a 3% contribution from the newly added Upper Zakum field in the UAE, we think represents the beginning of a multi-year period of production growth for the company after a fairly long stretch of flattish volumes. An increase in the stock buyback rate to $6 billion per quarter from $5 billion previously shows Exxon's continued commitment to returning excess cash back to shareholders. We see 32% total return upside potential to a $81 "traditional" peak value for Exxon Mobil shares. We have lowered our full-year EPS by $0.08 to $6.07 from $6.15 to account for the reported shortfall in 1Q of $1.37 versus our $1.45 expectation. We have changed the quarterly pattern of EPS to now reflect $1.38 in 2QE ($1.47 before), $1.46 in 3QE ($1.53 before), and $1.87 in 4QE ($1.70 before) based on several minor modeling adjustments we have made to Exxon's E&P production profile, expected price/margin realizations, and cost/tax rate assumptions. We do not consider the change to be of a material nature. There is no change to our 2007-2010 EPS estimates of $6.70 for 2007E, $3.65 for 2008 (normalized), $3.88 for 2009N, and $4.12 for 2010N. We now project 5.5% E&P volume growth in 2006 and average growth of 2.3% over the 2006- 2010 period. Each of the analysts named below hereby certifies that, with respect to each subject company and its securities for which the analyst is responsible in this report, (1) all of the views expressed in this report accurately reflect his or her personal views about the subject companies and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report: Arjun Murti, Luis Ahn. ============ Exxon Mobil (OP/A): First take--Underlying results look strong, even though headline 1Q 2006 EPS was light; buy any dip - Goldman Sachs - April 27, 2006 Exxon Mobil reported 1Q 2006 EPS of $1.37 versus the $1.47 First Call estimate and our $1.45 forecast. On a headline basis, the company claimed no special items, but in the text of the release there appears to be $0.04 of litigation charges. In addition, much higher reported tax rates appear to have cost the company $0.16 and we think kept the company from beating consensus. We believe underlying results are stronger than the headline miss indicates and we would be buyers of any dip. Exxon Mobil remains OP/A rated. We see 31% upside to a $81 "traditional" peak value for XOM shares. --E&P production growth very strong. XOM reported 1Q 2006 E&P volume growth of a stunning 5% on a reported basis (7% adjusted for asset sales and production sharing contract (PSC) accounting effects). This is an amazing growth number for a company this large and in sharp contrast to what has essentially been flat growth over the past five years. We were expecting essentially flat growth in 1Q 2006. --Tax rates higher. It appears that much higher tax rates of 47% on a worldwide basis versus a more recent normal of 41% accounts for $0.16 of EPS impact in 1Q. The question for XOM is how much of the tax rate is timing and how much represents the possibility that volume growth is coming from higher tax rate countries. We would guess that it is a mixture, but that the "normal" tax rate has risen maybe 1-2% as opposed to 6%. --Stock buy-back increased to $6 billion per quarter from $5 billion per quarter. XOM now on-track to return over $31 billion per year to shareholders, an 8% yield (dividend plus share buyback). WHAT TO DO WITH STOCK Exxon Mobil remains OP/A rated. We would buy weakness, as we think the strong production growth and rising cash returned to shareholders overwhelms what is likely a transitory tax issue. Group has succumbed to recent profit taking after a strong rally. We are buyers of the dip. Each of the analysts named below hereby certifies that, with respect to each subject company and its securities for which the analyst is responsible in this report, (1) all of the views expressed in this report accurately reflect his or her personal views about the subject companies and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report: Arjun Murti, Luis Ahn.