No M&A 'In Sight' For Exxon, Barclays Says

Barclays' Paul Y. Cheng maintained an Equal-Weight rating for Exxon Mobil Corporation XOM, with a price target of $80, saying that management does not plan to take up any upstream company level M&A activity in the near future. Exxon Mobil mentioned that the buy-sell gap in the upstream segment was still too wide to justify large scale company level M&A, given its backlog of organic growth opportunities. Analyst Paul Cheng believes the absence of M&A prospects and Exxon Mobil's lower-than-expected capex guidance of $22 billion are likely to be viewed positively by shareholders. Referring to value destruction in the upstream segment as more and more companies lever their balance sheets or issued equity, Exxon Mobil stated that it aims to pursue small sized, asset focused deals. Exxon Mobil guided to lower-than-expected 4.0-4.2 million boe/d production through 2020. This is lower than the guidance of 4.3 million boe/d for 2017. Cheng believes that Exxon Mobil's shares are a safe option for the next 6-9 months. He added, however, that a potential recovery in the market in 2H18 could result in the shares lagging other big E&P stocks.