Weekly Oil & Gas Notes: Exxon’s Proved Reserves And Petrobras’ Ratings Downgrade

+2.49%
Upside
112
Market
115
Trefis
XOM: Exxon Mobil logo
XOM
Exxon Mobil

Oil and gas stocks remained largely flat this week amid continued volatility in benchmark crude oil prices. Brent crude oil futures soared more than 5% in a single day during the week on positive signs of demand growth. The flash HSBC/Markit Purchasing Managers’ Index (PMI) for China – the world’s second largest oil consumer – edged up to a four-month high, signalling a pick up in demand. In addition, Saudi Arabia’s oil minister also said the same day that the demand for oil is growing and current price levels are not too far off the bottom. On the other hand, the Energy Information Administration (EIA) data showed that commercial crude oil inventories in the U.S. rose by 8.4 million barrels last week to over 434 million barrels. The price of the front-month Brent crude oil futures contract on the ICE increased by around 1.9% this week and is currently trading around $61 per barrel, while the NYSE Arca Oil & Gas Index (XOI) remained largely flat around the 1,380 level.

Below, we provide an update on some of the key events that occurred this week related to the oil and gas companies we cover.

Exxon’s Proved Reserves

Relevant Articles
  1. Down 9% Since The Beginning of 2023, What Should You Expect From Exxon Mobil Stock?
  2. Will Exxon Mobil Stock Trade Higher Post Q2?
  3. What’s Happening With Exxon Mobil Stock?
  4. Exxon Mobil Stock Likely To Trade Lower Post Q4
  5. What To Expect From Exxon Mobil’s Stock Post Q2?
  6. Can Amazon Stock Add Two Exxon Mobils To Its Market Capitalization?

ExxonMobil (NYSE:XOM) recently released its latest proved reserves stats. The company announced that it added proved oil and gas reserves of around 1.5 billion oil-equivalent barrels last year, 4% more than what it produced over the same period. The amount of proved hydrocarbon reserves is an extremely critical metric for oil and gas companies, as it directly impacts their sustainability and production growth outlook. At the end of last year, Exxon’s total proved hydrocarbon reserves stood at 25.3 billion barrels of oil equivalent, which comprised of 54% liquids – predominantly crude oil and natural gas liquids – and 46% natural gas. The company’s average reserve replacement ratio, which represents the amount of growth in net proved reserves relative to the total production in a given year, for the last 10 years has been around 123%. This speaks volumes of Exxon’s successful exploration program and the long-term sustainability of its core business. [1]

We currently have a $96 per share price estimate for ExxonMobil, which is around 10% above its current market price. The company’s share price decreased by around 1.4% this week.

See Our Complete Analysis For ExxonMobil

Petrobras’ Ratings Downgrade

Credit ratings firm, Moody’s, recently stripped Petrobras (NYSE:PBR) of its investment grade rating, lowering its credit rating by two notches from Baa3 to Ba2. The global credit ratings firm primarily attributed the change in its stance to corruption allegations and related investigations that have triggered the auditors, in this case PricewaterhouseCoopers (PwC), to delay the signing off on Petrobras’ annual financial statements. Moody’s believes that this delay, which already restricts the company’s access to the debt capital markets, could potentially lead to a call for accelerated repayment by its bondholders because of a covenant breach, which would significantly increase its financial risk. This is expected to increase the state-owned oil company’s cost of capital significantly and result in the lowering of its intrinsic value, which was also reflected in bond market activity soon after the announcement, as yield spreads on Petrobras’ international bonds widened by as much as 50 basis points. [2]

We currently have a $13/share price estimate for Petrobras, which we will soon update to reflect the change in the company’s cost of capital and our revised medium-term outlook for global crude oil prices. The company’s share price decreased by around 5.6% this week.

See Our Complete Analysis For Petrobras

View Interactive Institutional Research (Powered by Trefis):

Global Large CapU.S. Mid & Small CapEuropean Large & Mid Cap

More Trefis Research

Notes:
  1. ExxonMobil 2014 Reserve Replacement Totals 104 Percent, exxonmobil.com []
  2. Moody’s downgrades Petrobras’ ratings to Ba2; maintains review for downgrade, moodys.com []