Not Interested owning Big Oil

There is serious risk for shareholders of big American oil companies such as Exxon Mobil (XOM) and Chevron (CVX).

I feel there is a tone of complacency amongst the management and to some extent, an adamancy of cutting costs or increasing debt with the main aim of maintaining their dividends at any cost.

In March 2020, S&P cut XOM’s credit rating from AA+ to AA. They also maintained its negative outlook on Exxon’s credit and have warned of another downgrade if the company doesn’t address its financial issues in the next 12-24 months.

On the day prior to both corporations reporting quarterly earnings, both stocks fell nearly 5% .

Well, there goes your annual dividend in one day’s of trading.

Finding solace in the bosom of a dividend at the behest of incurring loss of capital is a mistake many investors are increasingly making.

In XOM’s case, I can “see” the stock trading down to $33.

Conversely, I am bullish on the price of Oil but not the shares of U.S. oil majors.

#oil #crude #xom #exxon #cvx #chevron

by Rob Zdravevski
31 July 2020

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