Hess Corp. (HES), Chevron Corporation (CVX): Head Scratching Valuation

Not so super U.S. Supermajors
The problem with the Supermajors, compared to the likes of Hess Corp. (NYSE:HES), is they have massive asset portfolios that can make production growth almost impossible. The one bright spot for Chevron Corporation (NYSE:CVX)? It’s looking to follow in Hess’ footsteps by focusing its portfolio on the higher-margin E&P business. Chevron is reducing its downstream operations to better concentrate on the upstream side. Last quarter, over 90% of its $9.5 billion in capital expenditures went toward upstream operations.

Then there’s Exxon Mobil Corporation (NYSE:XOM). ExxonMobil is the world’s largest publicly traded integrated oil company, with a stupidly diverse product portfolio; 29% of revenues came from Africa in 2012, 22% Asia, 19% U.S., 17% Europe, 10% South America and Canada, and 3% Australia.

Despite the size of its portfolio, Exxon Mobil Corporation (NYSE:XOM) has struggled to grow production volumes consistently. Production volume has fallen in each of the last seven quarters, and first half 2013 production was down 3% year over year.

The other overhang for Exxon Mobil Corporation (NYSE:XOM) is its $40 billion mega-purchase of natural gas producer XTO Energy, which has yet to add any real benefits, in part due to low natural gas prices.

However, both the U.S. Supermajors do enjoy a triple A credit profile and solid balance sheets. Chevron Corporation (NYSE:CVX) has over $22 billion in cash, compared to just under $20 billion in debt, while Exxon Mobil Corporation (NYSE:XOM) has $4.6 billion in cash and $7.6 billion in debt.

Bottom line
I’m a fan of Hess Corp. (NYSE:HES)’ move to consolidate itself and become a leading E&P company in the fast-growing Bakken. Despite being up 40% year to date, the company still has room to move higher as it completes the disposal of retail/marketing assets, uses that cash to buy back shares, and starts focusing on the Bakken. Meanwhile, its larger counterparts, Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX), appear to be in a lull. But if rock solid dividends are your thing, then both could be worth taking a look at.

The article Not a Supermajor But Still a Super Investment originally appeared on Fool.com.

Marshall Hargrave owns shares of Hess.. The Motley Fool recommends Chevron. 

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