ExxonMobil (XOM) reported earnings on Oct. 31, and since then the oil giant has more than doubled the S&P 500′s return, having gained 4% to the benchmark’s 1.9% though yesterday’s close.
Agence France-Presse/Getty Images So it’s not as if Exxon needed any help. But help it got. Bloomberg explains:
Berkshire Hathaway Inc. reported a stake in Exxon Mobil Corp. valued at about $3.7 billion as Warren Buffett's company disclosed its largest new holding since adding International Business Machines Corp. (IBM) in 2011.
Buffett's company owned 40.1 million shares of Exxon on Sept. 30, Omaha, Nebraska-based Berkshire said today in a regulatory filing.
As with just about any Buffett purchases, shares of ExxonMobil have gotten a pop. They’ve gained 1.9% to $94.96, well above the S&P 500′s 0.3% gain. Exxon has also outpaced ConocoPhillips (COP), which has dropped 0.8% to $73.06 and Chevron (CVX), which has risen 0.4% to $119.99. BP (BP) is up 1.2% to $47.15.
On Wednesday, Oppenheimer’s Fadel Gheit and Robert Du Boff fretted about Exxon’s buyback plans:
XOM will spend $3B on share buybacks in 4Q13, and $15B in 2013, down from $20B in 2012. In the past 10 years, cash flow of $464B has funded $251B of CAPEX, $203B of buybacks, and $79B of dividends, with the shortfall funded from divestiture proceeds. We expect any future buybacks to be funded from additional borrowing and divestiture proceeds. Even if XOM is successful in boosting 2017 net production by 600 mboed above 2012 levels, the additional $5-$7B operating cash flow is insufficient to offset the cash shortfall. We estimate that a $10/b change in average crude prices would impact earnings and cash flow by $4.2B, and close to $5B after 2017.
I’m guessing Buffett isn’t worried.
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