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Chevron, Exxon Earnings Preview: Oil Prices, Acquisitions to Fuel Upward Momentum

By Investing.com (Damian Nowiszewski)Stock MarketsOct 26, 2023 04:52AM ET
www.investing.com/analysis/chevron-exxon-earnings-preview-oil-prices-acquisitions-to-fuel-upward-momentum-200643063
Chevron, Exxon Earnings Preview: Oil Prices, Acquisitions to Fuel Upward Momentum
By Investing.com (Damian Nowiszewski)   |  Oct 26, 2023 04:52AM ET
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  • Tomorrow, energy giants Chevron and ExxonMobil will unveil their third-quarter financial reports.
  • Companies are strengthening their market presence by acquiring smaller competitors.
  • The oil giants' stocks have experienced prolonged consolidation for a while. Is a breakout finally on the horizon now?

Undoubtedly, the past few months have been exceptionally favorable for energy and mining companies, thanks to higher oil and natural gas prices compared to the period preceding the Ukraine conflict.

The substantial free funds accumulated during this time have presented new opportunities for industry giants Chevron Corp (NYSE:CVX) and ExxonMobil (NYSE:XOM), as the leading oil companies have recently unveiled plans for major acquisitions.

Chevron is in the process of acquiring Hess Corporation (NYSE:HES) for a whopping $53 billion, while ExxonMobil has already announced agreements to acquire Pioneer Natural Resources (NYSE:PXD) for a staggering $64.5 billion.

The last time we witnessed such substantial acquisition-driven moves in the U.S. mining sector was during the turn of the 20th century when Exxon and Mobil merged to form the conglomerate known as ExxonMobil.

What Do the Acquisitions Mean for the Oil Giants?

Chevron's acquisition of Hess Corporation will result in the takeover of a production capacity of up to 395,000 barrels of oil equivalent per day, primarily in the Bakken region and Guyana.

Meanwhile, ExxonMobil's acquisition of Pioneer Natural Resources primarily aims to consolidate and expand production in the Permian Basin, which is estimated to hold up to 16 billion barrels of oil.

Upon finalizing the deal, total production is expected to reach 1.33 million barrels, with the potential to rise to around 2 million barrels per day by 2027.

While long-term production growth is anticipated, the short-term strategy of acquisitions, at the expense of increasing their own production capacity, ensures that the supply remains stable and is not susceptible to fluctuations in global oil markets.

The companies' management has committed to consistently reinvesting increased revenues in alternative energy sources, fostering diversification and aligning with climate goals.

What to Expect From Chevron and ExxonMobil's Earnings?

Earnings per share and revenue forecasts for ExxonMobil and Chevron for the third quarter of this year are as follows:

ExxonMobil Earnings
ExxonMobil Earnings

Chevron Earnings
Chevron Earnings

Source: InvestingPro

While there has been a general decline in earnings per share (EPS) over the past year, the recent months have demonstrated a rebound, coinciding with the surge in oil prices in the global markets.

Notably, these companies have maintained a strong financial health ratio and exhibit a decent fair value upside. Barring any negative surprises, there is a substantial likelihood of growth and an upward breakout from the current consolidation phase.

Can the Stocks Break Out of Months-Long Consolidation Phase?

Chevron's stock price has been practically moving within a broad sideways trend since the beginning of 2020, having fallen into a narrower consolidation over the past six months.

Despite recent strong local declines, there is no confirmation of a breakout in one direction or the other, which would make it possible to determine the further trend at least in the short term.

Chevron Daily Chart
Chevron Daily Chart

In the event of an upward breakout, the next target for buyers will be the all-time highs located in the $190 area. On a breakdown, the stock could risk going as low as $142.

ExxonMobil is in a slightly better situation from the point of view of the continuation of the upward trend, as we are only dealing with a local consolidation, where the upper band defines the historical maxima in the area of $120 per share.

ExxonMobil Weekly Chart
ExxonMobil Weekly Chart

In this case, from a technical point of view, two scenarios also remain in play, of which, in the event of a possible correction, the next support levels should be sought already below $100 per share.

Assuming no clear correction in oil valuation, however, it is the increases that remain the main option.

***


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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple points of view and is highly risky and therefore, any investment decision and the associated risk remains with the investor.

Chevron, Exxon Earnings Preview: Oil Prices, Acquisitions to Fuel Upward Momentum
 

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Chevron, Exxon Earnings Preview: Oil Prices, Acquisitions to Fuel Upward Momentum

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Comments (1)
Rakhi Kulkarni
Rakhi Kulkarni Oct 27, 2023 11:27AM ET
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your analysis and forecast is so wrong
 
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