uploads///EPS Growth Rate Of Integrated Oil And Gas Companies

Should Investors Consider Britain-Based Integrated Energy Firms?


Nov. 12 2015, Published 10:03 a.m. ET

Earnings estimates

The earnings estimates indicate that Royal Dutch Shell (RDS.A) could post a quarter-over-quarter EPS (earnings per share) growth of about 54% compared to an average fall of 40% by ExxonMobil (XOM), Chevron (CVX), and BP (BP) in 4Q15. Royal Dutch Shell’s EPS fell by about 70% in 3Q15 over 3Q14. The YTD (year-to-date) fall in Royal Dutch Shell’s stock price is 26%, compared to falls of 11%, 18%, and 10% for ExxonMobil, Chevron, and BP, respectively. The chart below illustrates the EPS growth rate of integrated energy firms.

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Production mixes

  • Royal Dutch Shell operates with an almost equal production mix of 50% in natural gas and 48% in crude oil.
  • Chevron has a production mix of 33% in natural gas and 66% in crude oil.
  • BP has a production mix of 31% in natural gas and 61% in crude oil.
  • ExxonMobil operates with a production mix of about 46% in both commodities.
  • The weighted production mix of the US-based SPDR S&P Oil & Gas Exploration & Production ETF (XOP) is 32% in natural gas and 39% in crude oil.

Forward PE analysis

The next one-year period’s estimated PE (price-to-earnings) ratios of ExxonMobil, Chevron, BP, and Royal Dutch Shell are 20x, 21x, 14x, and 12x, respectively. The current PE ratios of ExxonMobil, Chevron, BP, and Royal Dutch Shell are 17x, 18x, 18.6x, and 7x, respectively. The forward PE ratios suggest that the Britain-based energy firms are relatively cheaper than their US peers. The PE ratio provides important supports and resistance points for underlying asset movement.


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