Exxon Gains as U.S. Becomes Net Gas Exporter, Fair Value $93

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Market
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Exxon Mobil

ExxonMobil Corporation (NYSE:XOM) and other oil and gas refining companies are positioned to benefit greatly from an emerging market – exporting gasoline from the United States. The world’s largest economy has been a net importer of gasoline since the 1960s. However, the 21st century has brought with it both a deep recession and more fuel efficiency. These factors explain why the United States has recently become a net exporter of gasoline. The world’s largest oil companies with significant presence in the US, like Exxon and competitors BP (NYSE:BP), and Chevron (NYSE:CVX), have the infrastructure to benefit from this new trend.

Trefis currently has a $93 price estimate for ExxonMobil, which constitutes about a 15% premium over the current market price. ExxonMobil derives most of its value from crude oil and natural gas liquid production. Refined products comprise about 12% of the company’s share price.
See Full Analysis of ExxonMobil Here

Plunging Domestic Demand

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The United States has traditionally consumed all the gas it produced and then imported more gas from abroad to fill the gap. But this trend has reversed recently. Starting in late 2008, shortly after the onset of the economic downturn, the US started exporting gas. [1] Demand in the US has fallen about 10% over the past several years. In 2007 it reached its peak of 9.6 million barrels a day but has since dropped to about 8.8 million barrels a day.

New Opportunities Abroad

Demand may be dwindling within the United States, but demand in emerging economies such as Chile, Mexico, and Brazil remains quite strong. These countries lack the sophisticated capital required to refine enough gasoline to meet their needs. Companies like Exxon, BP, Shell, and Chevron have the capacity to satisfy the demand in these foreign countries.

The current Trefis estimated price for ExxonMobil is already higher than the current market price. If the company is able to capitalize on this newfound opportunity to export gasoline to growing economies abroad, its valuation may rise even higher.

Use the widget above to make your own forecast and calculations on ExxonMobil’s gasoline exporting opportunities.

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Notes:
  1. Gasoline: The Next Big U.S. Export, CNNMoney []