Thanks for another excellent column. I clearly remembered that many Wall Street analysts put out sell rating on XOM in 2020, One of their main arguments was that XOM spent too much on CapEx, which was also a point raised Engine #1 in the spring of 2021. The idea that investing counter-cyclically seemed to be lost to those analysts. One deep impression your articles have given to me is to look at the ROCE of an energy company. According to this chart published on Seek Alpha, the ROCE of XOM on twelve-trailing-month basis was already 36.7% as of the end of 3Q2022 (https://static.seekingalpha.com/uploads/2022/11/8/48844541-16679307177203414_origin.png). XOM's counter-cyclical investment is one of the important factor for such a high ROCE. But given your experience, how high do you think XOM's ROCE can go?
Are you saying that in this scenario demand is flat because MORE CANNOT BE SUPPLIED. In this scenario, PRICE WILL BE USED TO RATION SUPPLY? Thank you for sharing your thoughts.
*****
What do you need to believe that terminal value for the top two ROCE quartiles should not be zero?
(1) Oil and natural gas demand will be higher in 2030 versus 2019, with a reasonable downside case of flat demand driven by a lack of supply growth
Excellent piece. I’m very bullish on energy and commodities for the next 5 or 10 years. I hope more people begin to realize if you aren’t in support of all energy and especially fossil fuels you are basically against human flourishing.
Hi Arjun,
Thanks for another excellent column. I clearly remembered that many Wall Street analysts put out sell rating on XOM in 2020, One of their main arguments was that XOM spent too much on CapEx, which was also a point raised Engine #1 in the spring of 2021. The idea that investing counter-cyclically seemed to be lost to those analysts. One deep impression your articles have given to me is to look at the ROCE of an energy company. According to this chart published on Seek Alpha, the ROCE of XOM on twelve-trailing-month basis was already 36.7% as of the end of 3Q2022 (https://static.seekingalpha.com/uploads/2022/11/8/48844541-16679307177203414_origin.png). XOM's counter-cyclical investment is one of the important factor for such a high ROCE. But given your experience, how high do you think XOM's ROCE can go?
Thanks Arjun.
Are you saying that in this scenario demand is flat because MORE CANNOT BE SUPPLIED. In this scenario, PRICE WILL BE USED TO RATION SUPPLY? Thank you for sharing your thoughts.
*****
What do you need to believe that terminal value for the top two ROCE quartiles should not be zero?
(1) Oil and natural gas demand will be higher in 2030 versus 2019, with a reasonable downside case of flat demand driven by a lack of supply growth
Excellent piece. I’m very bullish on energy and commodities for the next 5 or 10 years. I hope more people begin to realize if you aren’t in support of all energy and especially fossil fuels you are basically against human flourishing.