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The Day Exxon Mobil Became a T-Bill

NEW YORK (TheStreet) -- It ain't easy being Exxon Mobil (XOM).

Whether it's the attacks from President Obama on Big Oil and its excessive profits, or the global warming lobby, it's tough for the biggest of the Big Oil companies to find any love among its gas guzzling public.

The stock market is supposed to be a different story, though. Sadly, it isn't.

In fact, this latest quarterly report will go down as the earnings day on which Exxon Mobil became no better and no more sexy than a treasury bill as far as the market is concerned.

This should not be a surprise to anyone. In fact, in our earnings preview of Big Oil, TheStreet made several points about the malaise of the Big Oil stocks that have played out very near to plan:

  • Gargantuan profits buoyed by high crude oil prices mean nothing when overall production remains challenged
  • Improvement in refining profits quarter over quarter means little because the refining outlook just keeps bouncing around
  • Exxon, in particular, will continue to be beat up for its acquisition of XTO Energy. Exxon Mobil's overall production tilted even more heavily this quarter to price-challenged natural gas, not a trend that any investor is happy to see continue.
  • Big Oil stocks offer the safety of dividends, and just about all Exxon Mobil can do is increase its dividend: It did just that, boosting the quarterly payout by 21%. The move pushed to forward annual dividend yield to 2.67%, which still leaves it a peer laggard.
  • Overall production challenges will highlight the continuing existential crisis for the most profitable companies in the world, as the more expensive and far flung their global search for hydrocarbons becomes, the more it seems like a quixotic pursuit to investors as far as offering a stock market growth profile.
  • Every single one of those themes played out around Exxon Mobil's quarter this week, and was playing out again on Friday in Chevron's (CVX) lackluster report. It's not because we are geniuses that we got it right, but because Big Oil earnings have been telling more or less the same story for a few years now, and Exxon Mobil, in particular, is the poster child for the lack of growth and a lack of investor excitement that contradicts the amount of attention and headlines given to the global integrated oil sector.

    In a new book by New Yorker writer Steve Coll, Private Empire, the story of Exxon Mobil is told as a unique example of a company that has the influence of a sovereign nation. Coll was onto something: What this week's Exxon Mobil earnings show, at least as far as the market view of the company, is that it's best comparison is a treasury bill. If so, it makes a lot of sense that the best comparison for Exxon Mobil is a sovereign nation issuing "flight to safety" debt for investors.

    In fact, Deutsche Bank analyst Paul Sankey laid out this case for Exxon Mobil as the only case, in an interview with CNBC on Thursday:

    "What we are seeing is not much growth if any, and falling returns and you have to buy for cash return to shareholder. A liquidation strategy is the crux of the call. It's more of a trade versus t-bills and a better place than t-bills in a very low yield environment," Sankey said.

    This could be Exxon Mobil's new investor relations pitch: It had a better credit default swap rating than that of the U.S. government during the financial crisis. That's still the case today: Exxon Mobil's current CDS rating remains better than Uncle Sam's, and only Norway among sovereign nations can claim to best Exxon.

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