Exxon Mobil Corporation (XOM), Imperial Oil Limited (USA) (IMO), Chevron Corporation (CVX): LNG Is More Than a Sideshow

The Financials 

Building an LNG export facility is not cheap. Chevron Corporation (NYSE:CVX) is facing a price tag over $40 billion for a facility in Australia. The Chevron-Apache deal in Canada is clearly designed to take advantage of Chevron’s expansive balance sheet. The company has a market cap of around $250 billion and a total debt to equity ratio of 0.1, while Apache has a market cap of around $30 billion and a total debt to equity ratio of 0.4.

Chevron Corporation (NYSE:CVX)’s return on investment (ROI) of 17.1% shows that the company knows how to allocate its capital, and is a strong vote of confidence for its latest LNG plans. Apache’s low ROI of 6.3% tells a different story. In an effort to refocus the firm, Apache has decided to sell assets in the Gulf of Mexico. In the long run, working with Chevron should further improve Apache Corporation (NYSE:APA)’s returns.

In the Exxon Mobil-Imperial Oil deal, Exxon Mobil is the major financial backer. It has a market cap of around $420 billion, and a clean balance sheet with a total debt to equity ratio of 0.08. The company needs to put its capital to use or its ROI of 27.3% will start falling.

Imperial Oil Limited (USA) (NYSEMKT:IMO) is much smaller than Exxon Mobil Corporation (NYSE:XOM) with a market cap of around $35 billion and a total debt to equity ratio of 0.23. Its ROI of 18.0% places it in a better standing than Apache. It is important to remember that Imperial Oil is making a wise diversification move by increasing its access to the Asian markets.

Conclusion

Canadian LNG export facilities are great tools for investment-starved oil majors. For investors looking for stable dividend payers, Exxon Mobil and Chevron are both good options, though it is important to consider Chevron Corporation (NYSE:CVX)’s higher yield in light of its lower ROI. Imperial Oil and Apache are both smaller plays with greater potential for capital appreciation, but Imperial Oil Limited (USA) (NYSEMKT:IMO) is a more stable firm with direct backing from Exxon Mobil.

The article LNG Is More Than a Sideshow originally appeared on Fool.com and is written by Joshua Bondy.

Joshua Bondy has no position in any stocks mentioned. The Motley Fool recommends Chevron. The Motley Fool owns shares of Apache. Joshua is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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