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Chevron Corporation (CVX), Royal Dutch Shell plc (ADR) (RDS.A), Exxon Mobil Corporation (XOM): Which Energy Giant Can Make You Really Rich?

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Chevron Corporation (NYSE:CVX)As macroeconomic indicators show negative signs, how badly will the oil industry be hit? Is it worth investing in Chevron Corporation (NYSE:CVX) at a time when it faces court actions on multiple fronts and activist shareholders are demanding its CEO to be fired? With the buyback process initiated by Royal Dutch Shell plc (ADR) (NYSE:RDS.A), is it a better investment now than it was before? With slow growth anticipated to last on a global scale, will Exxon Mobil Corporation (NYSE:XOM)‘s geographic diversity end up hurting it instead of helping? In this article you will find the answers for all these questions.

Over the past year, energy prices have increased by a mere 7.5%. While China is the largest consumer of energy altogether, the U.S. remains the largest consumer of oil. This does not bode well for growth in the oil sector, especially when U.S. growth is meager and China’s GDP estimates have been below analyst estimates for the first quarter of 2013. Before looking at the financials and metrics, I will review recent events for the three companies.

Demand picking up

Chevron Corporation (NYSE:CVX) saw its total upstream and downstream earnings weaken and thus unable to keep up with its results from the previous quarter. Furthermore, its net oil and gas production also fell marginally in Q1 2013. This suggests weak pricing during the start of 2013. After being stuck with courtroom troubles on multiple fronts, Chevron Corporation (NYSE:CVX) has had a respite recently as it was awarded $96 million for its involvement in seven commercial claims filed from 1991 to 1993. Furthermore, Ukraine’s government has concluded negotiations with Chevron Corporation (NYSE:CVX) for a second shale gas project. Things bode well for the energy giant as demand for natural gas is also expected to pick up in the future.

LNG production ahead

Exxon Mobil Corporation (NYSE:XOM) has budgeted approximately $40 billion in capital spending, and has set itself a goal of replacing its reserves by 115% in order to keep up with its results. The company’s profits are highly dependent upon oil sales at the moment, but there are welcoming reports that the company is trying to diversify. As the oil sector becomes more saturated and it becomes more expensive to produce the commodity, reports of Exxon Mobil Corporation (NYSE:XOM) investing in LNG for the future have surfaced as well.

Most prominent is the report of its development of the world’s largest gas field in Qatar. While the company witnessed a drop in revenue worth $14 billion for 2012, the total revenue figures were well beyond any of its industry rivals, emphasizing that such massive size allows ExxonMobil to hold out even under difficult macroeconomic conditions.

Shedding assets

Royal Dutch Shell plc (ADR) (NYSE:RDS.A) expects to divest non-core assets worth $3 billion to increase its return on investment and profit margins in 2013. Furthermore, the company continues to have share buyback programs in place to add more value for its investors. Compared to Exxon Mobil Corporation (NYSE:XOM), Royal Dutch Shell plc (ADR) (NYSE:RDS.A) has invested greatly in the infrastructure development of natural gas, and due to the low global prices of this commodity, the margins derived from gas sales could be disappointing.

Most recently, Royal Dutch Shell plc (ADR) (NYSE:RDS.A) is being drawn into anti-competitive courtroom battles where the company might be involved in the manipulation of the crude oil futures market.

Competition

Indicator Chevron ExxonMobil Royal Dutch Shell Class B
Price/Earnings ttm 8.9 9.1 8.0
Price/Book 1.6 2.4 1.2
Net Income Growth (3 Yr Avg.) 35.7 32.5 28.6
Revenue Growth

(3 Yr Avg.)

12.1 15.8 19.1
Dividend Yield
, %
3.13% 2.61% 5.27%
Return on Equity 19.5 27.7 14.6
Current Price $118.52 $90.24 $66.52

Data from Morningstar and Financial Visualizations on June 27

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