Today we're going to talk about the two energy giants--$Exxon Mobil Corp (XOM.US) $和$Chevron Corp (CVX.US) $。

Both companies developed from the standard oil company of oil tycoon Rockefeller and witnessed a century of success in the oil industry. In the last century, Standard Oil was forced to split into seven oil companies (also known as "Seven Sisters of Oil") because of monopoly problems. up to now, four of the seven are still in business.Exxon Mobil Corp 、 Chevron Corp 、$Shell PLC (SHEL.US) $和$BP P.L.C. (BP.US) $。

The reason why we are talking about these two companies is because the performance of energy stocks is so outstanding. Since the beginning of this year, under the influence of repeated COVID-19 epidemic and geopolitical tensions, the energy crisis has swept the world, oil and gas prices have soared, and oil and gas stocks have continued to strengthen.The share prices of a number of companies continue to hit record highs, including Exxon Mobil Corp, Chevron Corp,$ConocoPhillips (COP.US) $、$Marathon crude Oil (MPC.US) $等。From the starting point of this round of rise-- late March 2020, Chevron Corp andExxon Mobil CorpIt has risen by about 260% so far.

It is difficult for us to predict how long this round of rise in the oil and gas sector will last, but as the shortage of energy supply is still heating up, natural gas prices continue to soar, oil prices are easy to rise and difficult to fall, and after the oil majors have made huge profits from oil prices, they do not choose to continue to invest to increase supply, but to maintain a prudent capital expenditure plan and return to shareholders through buybacks and dividends.The rising market of the oil and gas sector may not end in the short term.。

So, as far as Exxon Mobil Corp or Chevron Corp is concerned, which one has more potential? Why did Warren Buffett increase his position in Chevron Corp instead of Exxon Mobil Corp in the last three quarters?

Chevron Corp's performance is growing faster, and Exxon Mobil Corp's valuation is relatively lower.

From a business point of view, Exxon Mobil Corp implements the development strategy of upstream and downstream integration, that is, the integration of petroleum exploration and development, oil refining and chemical industry, and product wholesale and retail.The company's main business can be divided into three parts: upstream, downstream and chemicals.

The products of the upstream plate are mainly crude oil and natural gas; the products of the downstream plate are mainly gasoline, naphtha, diesel kerosene, aviation fuel, heavy oil and lubricants; and the chemical sector is mainly petrochemical products, polymers, general chemicals and plasticizers.

Exxon Mobil Corp's main income comes from the downstream, while the main profit comes from the upstream.

Chevron Corp is an integrated oil and gas company whose business involves multiple links of the value chain, including upstream (production), midstream (pipeline and storage) and downstream (refining and marketing) operations.Chevron Corp divides the business into two main parts: upstream and downstream.

Among them, the upstream business mainly includes the exploration, development and production of crude oil and natural gas, and the transportation, storage and marketing of products are also included in the upstream segment. Downstream operations mainly include refining crude oil into petroleum products and making renewable fuels.

Like Exxon Mobil Corp, Chevron Corp's income mainly comes from the downstream, while the main profit comes from the upstream.

Exxon Mobil Corp and Chevron Corp both have the safest balance sheets in the industry, earnings indicators and valuation indicators are attractive, and they also buy back shares and return money to shareholders.

In the first quarter of this year, Exxon Mobil Corp and Chevron Corp achieved revenue of US $87.734 billion and US $52.314 billion respectively, up 52.44% and 68.34% respectively over the same period last year. The net profit of homing was 5.48 billion and 6.259 billion respectively, an increase of 100.73% and 354.54% over the same period last year. Exxon Mobil Corp and Chevron Corp had free cash flow of $10.877 billion and $6.095 billion respectively in the first quarter.

In addition to performance growth, Chevron Corp's gross profit margin in the first quarter was 31.16 per cent, also higher than Exxon Mobil Corp's 22.56 per cent. Both companies have debt-to-EBITDA ratios well below 1, reflecting strong financial strength.

As of May 30, Exxon Mobil Corp's dividend yield was 3.59%, Chevron Corp's 3.05%; Exxon Mobil Corp's rolling price-to-earnings ratio was 16.18 times, Chevron Corp's 16.75 times. The two indicators are relatively close.

Based on free cash flow over the past 12 months, Chevron Corp's P/FCF is about 13 times, which is 10 times higher than Exxon Mobil Corp's, suggesting that Exxon Mobil Corp may be relatively undervalued.

Exxon Mobil Corp buyback is stronger, Chevron Corp dividend is more trench.

In terms of buybacks, Exxon Mobil Corp CEO said at the Q1 performance meeting that "the company returned US $5.8 billion to shareholders, of which about 2/3 was in the form of dividends and the rest was share buybacks, in line with previous plans." We previously said in a December update of the company's plan that we expected to buy back $10 billion of shares. This time, we announced an increase in the buyback plan.Total buybacks totaled $30 billion by 2023.」

Chevron Corp's future share buyback is not very clear, at present, the amount is far less than Exxon Mobil Corp's 30 billion US dollars.

When the second-quarter earnings report of 2021 was released, Chevron Corp announced that stock buybacks would resume from the third quarter of 2021, with annual buybacks of $20 billion to $3 billion in Chevron Corp shares. The repurchase guidelines were then raised twice, and in March this year, at the annual investor meeting, it was announced that the share repurchase guidelines would be raised to $50-10 billion a year. First quarter results meetingChevron Corp revealed that he will buy back a record $10 billion of shares by the end of this year.。

Assuming the buyback lasts until 2023, Chevron Corp's total buyback will reach $17.5 billion, compared with Exxon Mobil Corp's $30 billion, said Bill Zettler, an equity analyst. In the first quarter of 2022, however, Chevron Corp bought back only $1.3 billion of shares.So at the buyback level, Exxon Mobil Corp is even better.

In terms of dividends, Chevron Corp has exceeded Exxon Mobil Corp in the amount and increase of dividends in the past five years. Neither company has made any specific dividend commitments, saying only that an increase in dividends is part of company policy. Relatively speaking, Chevron Corp's dividend payout is more generous than Exxon Mobil Corp.

The stock god is partial to Chevron Corp, Goldman Sachs Group is optimistic about Exxon Mobil Corp

Buffett, the god of stocks, is particularly optimistic about oil stocks this year. In addition to building positions in Western Oil, he has also made a big increase in his holdings of Chevron Corp. These two oil stocks are among the top 10 heavy stocks of God, accounting for 9.26% of the investment portfolio.

Compared to ExxonMobil, the stock god prefers Chevron Corp. Actually,Buffett has continued to increase his position in Chevron Corp since the third quarter of last year, with the largest increase in the first quarter of this year. But for Exxon Mobil Corp, Buffett has not owned the stock since it was cleared in the fourth quarter of 2014.

Buffett said at the Berkshire Hathaway shareholders' meeting in 2021 that he did not see any problem in continuing to own Chevron Corp shares, and expected that even if the world turned more and more to renewable energy, Chevron Corp will continue to benefit society in the future.

It is understood that Chevron Corp has made progress in areas such as biofuels and carbon capture, which is expected to promote the transformation of his energy business.

Recently, Michael worth, CEO of Chevron Corp, said in a statement that the company plans to focus on reducing the carbon intensity of its business, with the goal of leading low-carbon-intensive oil, products and natural gas, and launching new products and solutions to reduce carbon emissions in major industries.

Goldman Sachs Group thinks that Chevron Corp is not as attractive as Exxon Mobil Corp for the following reasons:

"after the release of the first quarter of 2022, our neutral rating on Chevron Corp remained unchanged. As discussed earlier, although we maintain a bullish view on energy stocks and recognize that key US companies are an important part of energy stocks, we believeExxon Mobil Corp, who was rated as a buyer, has a more attractive value, with a total return of 26%, while Chevron Corp has a non-neutral rating of 6%.。

In addition, we also emphasize that in view of the fact thatChevron Corp has less downstream business than Exxon Mobil Corp.Chevron Corp's global refining capacity is 1.8 million barrels per day, while Exxon Mobil Corp's is 4.6 million barrels per day.Oil refining capacity the latter is more constructiveIn addition to Chevron Corp's relatively less oil refining capacityThe advantage of the company's upstream project over Exxon Mobil Corp is also relatively small.Exxon Mobil Corp offers attractive growth opportunities, such as in Guyana in the short term, as well as LNG projects including Golden Pass and Coral FLNG. "