Is Now the Time for Super Majors?

Though well-known, opportunities remain among the oil & gas super majors

Allen Good 24 August, 2010 | 9:58AM

Despite lacking the explosive growth of smaller E&P (exploration and production) firms, larger integrated firms can instead offer steady dividends and less risk. In times of market tumult, these firms often provide exposure to oil and natural gas with less volatility.

Of the many global integrated firms, the six largest are often referred to as the super majors. Though they are well-known names and commonly held in many portfolios, at certain times their valuations can become attractive enough to add to current holdings or initiate new positions. We believe this is currently the case with ExxonMobil, which trades well below our fair value estimate. We also view Chevron favourably. While not currently as undervalued as ExxonMobil, Chevron offers the highest exposure to oil production of any super major. A rise in oil prices could provide significant upside to our fair value estimate for Chevron.

Likewise, both Royal Dutch Shell and Total are trading close to our fair value estimate. However, the European firms offer significantly higher dividend yields than their American counterparts and may be appealing holdings in the current low-yield environment.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
BP PLC291.75 GBX-4.20
Chevron Corp100.00 USD-2.30
ConocoPhillips52.01 USD-1.92
Exxon Mobil Corp54.37 USD-2.49
Royal Dutch Shell PLC B1,387.60 GBX-3.85
Total SE38.38 EUR-2.74

About Author

Allen Good  Allen Good is a senior stock analyst covering the oil and gas industries.

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