As of yesterday’s close, ExxonMobil Corporation (NYSE: XOM) had a market cap of $287.05 billion based on the 1.36% drop to $61.10.  Apple Inc. (NASDAQ: AAPL) has a market capitalization rate of $246.57 billion after its 1.05% drop to $270.97.

The infathomable difference here is rather extreme: ExxonMobil’s trailing 12-month sales are $301.5 billion versus $36.54 billion for Apple.  Microsoft’s trailing 12-month sales were $58.44 billion.  As far as the Fiscal 2011 estimates from Thomson Reuters ahead, these three rank as follows: almost $440 billion for ExxonMobil, $70.4 billion for Apple, and $67.22 billion for Microsoft.

There is a conundrum here in the energy sector, and one that may skew this, one that may right it, or one that could topple it.  XTO Energy Inc. (NYSE: XTO) is in the ‘pending acquisition’ file for ExxonMobil.  Its market cap is $25.34 billion, and the deal is supposed to be an all-stock transaction if approved and if completed.  Thereafter, this will add to the market capitalization rate of ExxonMobil by the appropriate amounts in the future at such date.

Back on May 27 when we noted the market cap switch where Apple had passed up Microsoft, ExxonMobil had closed at $61.46 versus a $61.10 close on Wednesday.  BP on the other hand was trading at $45.38.  BP trades at $29.67 per ADR based on Wednesday’s close.  The United States Oil (NYSE: USO) ETF is not the most accurately tracking ETF by a long shot, but it is the easiest comparison for equity-only  traders to compare.  The “USO” traded at $34.31 on May 27, and it trades at $34.24 on Wednesday’s closing bell.

So what gives?  If Exxon trades almost any lower than the current price a year out, then Apple merely has to hit the one-year consensus price target (Thomson Reuters) of about $314.00 to be the number one pole position to come in with a $285+ billion market cap.  Exxon’s $287 billion market cap would be challenged.

Of course there is that pending XTO deal which throws a wrench in the machine.  That new $25 billion makes this conundrum something less likely.  XTO is exiting the S&P 500 Index at the close of trading this coming Friday.  If that occurs after all final-final approvals, then these market capitalization rates are going to look much wider apart than they do today.  If Exxon’s market cap grows in addition due to share appreciation it will be even more skewed back in Big Oil’s favor.

It should be pointed out the Thomson Reuters lists ExxonMobil’s average analyst price target at $79.00 for one-year out, and its 52-week trading range is $58.46 to $78.64.  Exxon has already been right at its analyst target, and Apple is effectively close to its 52-week and all-time highs.  The notion that Apple is within this close of striking distance today is almost hard to fathom when you consider that Apple’s stock was at $134.01 a year ago.

JON C. OGG

Sponsor: 5 best investments for 2010 – The next nine months represent a bold new era for investors.

That may change soon. Cheniere Energy, Inc. (AMEX: LNG), through its subsidiary Cheniere Energy Partners, L.P. (AMEX: CQP), has begun a project to add liquefaction to its Sabine Pass LNG receiving terminal in Cameron Parish, Louisiana. Earlier this year Cheniere received permission from the US Department of Energy to re-export imported LNG cargoes to a total of 500 billion cubic feet over two years. Construction of another export facility in Alaska is being studied by Apache Corp. (NYSE: APA).

The booming production of natural gas in the shale gas plays of Texas, Louisiana, and Arkansas have stalled the expected demand for LNG in the US. Devon Energy Corp. (NYSE: DVN), Chesapeake Energy, Corp. (NYSE: CHK), and XTO Energy Corp. (NYSE: XTO), which is about to be acquired by Exxon Mobil Corp. (NYSE: XOM), are among the largest natural gas producers in the region. Cheniere expects to liquefy about 1 billion cubic feet of gas per day at two trains (plants). The company could build a total of four trains at Sabine Pass, giving it a total liquefaction capacity of 2 billion cubic feet/day.

Cheniere’s Sabine Pass terminal has a sendout capacity of 4 billion cubic feet/day and an LNG storage capacity of 16.9 billion cubic feet. Pipelines already exist to connect the terminal to the land-based natural gas transportation system. This infrastructure, designed to regasify LNG and ship the gas to the mainland, could be transformed into a bi-directional operation by adding liquefaction capacity at a cost equal to the cost of expanding an existing LNG train.

Another North American LNG export terminal is on the drawing board about 400 miles north of Vancouver, British Columbia. The Kitimat LNG project is majority owned by a subsidiary of Apache Corp. and is expected to liquefy about 700 million cubic feet/day of western Canadian natural gas beginning in 2014.

Apache owns rights to what the company believes is more than 10 trillion cubic feet of natural gas in northeast British Columbia. Without this export terminal and a 300-mile long pipeline to haul the gas to Kitimat, that gas is stranded. The company is funding the front-end engineering and design work for the Kitimat facility now and expects to make a final decision next year. The estimated cost of the LNG facility is about $2.9 billion.

As Cheniere noted, the LNG import business in the US has not developed as hoped, mainly due to the explosive growth in the shale gas plays. The gas producers should line up solidly behind Cheniere because having an export market for all that gas will help boost and stabilize prices. Or so the thinking goes.

That the US is likely to become a significant exporter of natural gas just a few years after it was expected to become a significant importer is quite a reversal. But if shale gas development and extraction continues on its current pace both Cheniere and Apache will have a head start on a potentially lucrative new business.

Paul Ausick

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Reuters:   Some Yahoo! (YHOO )email accounts were hacked in China and Taiwan.

Reuters:   Japan export orders hit a six-year high.

Reuters:   OPEC is undecided on what it will do if oil moves from $70 to $80.

Reuters:   Exxon Mobil (XOM) says that XTO will not help its earnings for years.

Reuters:   The Fed’s Fisher says the US recovery in on solid ground.

WSJ:   The government will shut down facilities which have driven one of the great bond rallies which has helped investors put money into risky offerings.

WSJ:   An insider trading charge against a Deutsche Bank employee will test the limits of the SEC’s powers.

WSJ:   BP (BP) will make investment that could revive the Iraq oil industry.

WSJ:   AT&T (T) is trying to improve its 3G network as Verizon (VZ) is likely to sell the Apple (AAPL) iPhone.

WSJ:   Redwood Trust is trying to offer bond backed by mortgages and without federal help.

WSJ:   Google (GOOG) says it ran into China’s “great firewall.”

WSJ:   The Bank of Ireland will raise money to shore up its financials.

WSJ:   Toyota (TM) is building its quality effort.

WSJ:   Bharti will buy Zain for $9 billion.

WSJ:   The launch of the Apple (AAPL) iPad will keep software developers focused on the App store.

WSJ:   Obama will open the Gulf to more oil drilling.

WSJ:   China will launch a trial plan for short selling and buying on margin.

WSJ:   Commercial real estate prices are making a modest comeback.

WSJ:   BHP-Billiton (BHP) replaced year-long ore prices deals with ones of shorter duration.

WSJ:   Nissan’s electric car will sell for about $32,000.

WSJ:   Johnson & Johnson (JNJ) got an offer for its breast cancer unit.

WSJ:   Intel (INTC) launched a new chip for big servers.

WSJ:   McDonald’s (MCD) will double its stores in China to 2000 by 2013.

NYT:   The use of cholesterol drugs in healthy people may have risks.

NYT:   Oil prices are high enough to help exploration but low enough to help the economy.

NYT:   Biotech stocks were hurt by a court decision invalidating two gene patents.

NYT:   Ford (F) is gaining ground is Asia by selling smaller cars.

NYT:   Microsoft (MSFT), Google (GOOG) and other large internet companies are trying to keep information they have private from the federal government.

NYT:   The cost of Greek bonds was effected by fears that its deficit crisis is not over.

NYT:   Yahoo! (YHOO) is hiring journalists to offer more original content.

NYT:   Volcker is optimistic about financial reform this year.

FT:   Banks will take advantage for new iron ore trading rules that could raise swaps to $200  billion by 2020 from $300 million this year..

FT:   The Primerica spin-off could net Citigroup (C) $250 million.

FT:   China was invited to join the International Energy Agency

FT:   The head of Kraft (KFT) got a 41% pay increase.

Bloomberg: Ireland’s banks will need $43 billion in new capital.

Bloomberg:   Greece may have to pay $17 billion more interest compared to German bond levels if rates had stayed at pre-crisis levels.

Bloomberg:   Google (GOOG) is being hurt by lower growth, regulatory scrutiny, and shifts in ad spending.

Douglas A. McIntyre

BJ Services Company (NYSE: BJS) and the pending acquisition by Baker Hughes Inc. (NYSE: BHI) has yet to face approval as the companies this week announced “The DOJ has raised issues with regard to the overlap between the stimulation/sand control businesses of Baker Hughes and BJ Services in the U.S. Gulf of Mexico.”

As far as what Exxon Mobil said in its filing:

• The applicable waiting period provided under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, with respect to the pending merger by which XTO Energy Inc. will become a wholly-owned subsidiary of Exxon Mobil Corporation, expired on March 15, 2010, without the issuance of a second request.   The Dutch Competition Authority provided a regulatory clearance of the pending merger on March 9, 2010.  Closing of the transaction remains subject to approval by the shareholders of XTO Energy and the satisfaction (or, to the extent permitted by applicable law, waiver) of the other conditions provided in the merger agreement among the parties.

We have gone as far as predicting that Exxon Mobil would hike its dividend in 2010, but the merger here may get in the way of that notion if you consider how much stock it has repiurchased.

The acquisition by Schlumberger Ltd. (NYSE: SLB) of Smith International Inc. (NYSE: SII) is the newest of the three mergers and has yet to hear any formal decisions.  Still, it seems that the energy patch is ripe for a new wave of M&A.

It seemed that during the private equity boom that mergers only brought on more mergers.  This is true regardless of private equity.  The notion that this expiration period has passed is a strong signal that cross mergers between oil and gas for larger economies of scale are going to be approved.  If Exxon Mobil, the #1 by far on our 24/7 Wall St. Real-Time 500 by market cap, can get approval to buy a large gas producer then any other major domestic fully integrated or exploration & production player can too.

JON C. OGG

The companies on the 24/7 Wall St. Worst Places for Women to Work list have no women on their boards and no women in senior management.  Any company on the list would have to: 1) completely lack sensitivity to the issues of women in the work place, or 2) have enough misgivings about women to insure that all the people who have any meaningful place in running their companies have to be men. It is hard to say whether these companies are “female-free” at the top tiers because of misogyny or dull-wittedness.  The practice of equal opportunity is missing at all of these companies.

Our analysis makes an assumption, but we believe it is a fair one. A company with no women on its board or in senior management is extremely unlikely to be concerned about the issue of disparity in pay by gender  and is likely to perform worse than the national census average in terms of what it pays its non-executive female management and its women rank-and-file employees.

24/7 Wall St.’s 1o Worst Places For Women To Work:
1. Phillip Morris (PM) is one of the largest tobacco companies in the world and has nearly 75,000 employees. Women are often assigned to run human resources and corporate communications departments at companies where men dominate the management, and PM is no exception. The highest ranking corporate executive is Daniele Regorda, vice president of human resources. Phillip Morris claims that the company is “always striving to broaden the diversity of our workforce and are continuously working to identify, hire and retain the best qualified individuals, wherever they are located or whatever their background.” No wonder they call him the Marlboro Man. Nine board members, zero women.

2. Icahn Enterprises (IEP) is a diversified holding company with around 47,000 employees. Billionaire investor Carl Icahn is the firm’s chairman. Women looking for executive positions at the company can contact Icahn Enterprises, 767 Fifth Avenue, 47th Floor, New York, NY, 10153. Icahn can afford a female board member.

3. Virgin Media (VMED) is in the mobile telephone and broadcast business, and has 13,380 employees. Virgin is based in the UK and is part of the Richard Branson collection of companies. Branson is a media star among global corporate chiefs. The firm has 11 directors, all of which are, you guessed it, men. The senior female member of the Virgin Media management is Elisa Nardi, Chief People Officer, or head of human resources.

4. Liberty Media (LINTA) has a $7.7 billion dollar market value.  This part of cable and content king John Malone’s empire has about 19,000 employees and holds a number of satellite broadcast and content assets including assets in QVC, Starz, and Expedia. The company has nine directors including Malone. No women executives are listed at the corporation’s website.

5. L-3 (LLL) Holdings provides military technology and employs 66,000 people. It is the sixth largest defense company in the United States. L-3 as nine directors. There are no women in executive management but the head of employee benefits and general counsel are both women. It is almost impossible to understand why the federal government would sanction this.

6. EOG Resources (EOG) is an oil and natural gas company with 2,100 employees and a $23 billion market cap, which makes it one of the most valuable firms in its sector. The head of human resources and administration and the head of accounting are women.

7. Cameron International (CAM) provides equipment for the national gas and oil industries. The company has 17,000 employees, eight board members, no women in positions of major responsibility. Seven senior executives are listed in the proxy–all male. Also, all board members but one are over 60–a sort of reverse age discrimination.

8. National Oilwell Varco (NOV) is an oilfield services company which provides mechanical components for oil and gas drilling projects. About 40,000 employees. Eight directors, none of which are women.

9. Emcor (EME) is an electrical and mechanical construction and facilities services company with 28,000 employees. The only female corporate executive is the head of corporate communications, and she is not considered “senior management” as the SEC defines the term.

10. XTO Energy (XTO) has 3,100 employees and a market cap of $27 billion. The firm prides itself on its ability to find and import oil and natural gas.  Apparently, they aren’t quite as concerned about scavenging for corporate gender diversity.

Honorable mention: Shaw Group (SHAW) is a diversified manufacturing company has nearly 28,000 employees. Its market cap at $3 billion is relative small. They have no female officers or directors either.

Douglas A. McIntyre

Valero Energy Corp. (NYSE: VLO) has been an awful performer of late, almost without regard to which direction oil prices are headed.   Marathon Oil Corporation (NYSE: MRO) and Hess Corporation (NYSE: HES) may have at least some of the same woes, but their stocks have held up far better and both are close to 52-week highs.  In fact, Marathon and Hess may even be improperly painted with the same brush in most comparative data if you look at how these companies have performed.  That really leaves Valero, and at $18.16 its 52-week trading range is $15.29 to $26.20.  As Valero is more and more of a refining pure-play each year, you can look at what Chevron was saying about its business and interpolate the same concerns at Valero.

The hardest part of the rising oil prices is that for refineries they actually have a hard time passing down the cost increases.  This is one of those issues that most of the people down on the retail level have a hard time fathoming because so many believe that oil prices are quasi-dictated by the oil companies.  It turns out that despite there being an inadequate refining capacity, these refineries just are not able to operate at the profit margins of before.  This is part of the reason why you see so many weak refining capacity figures at the weekly oil inventory reports on Wednesday… and last week was back under the 80% mark again.  Chevron noted that the refining margins were the lowest of the year in the fourth quarter.

The unfortunate side of this is that these stocks are all headed lower on the news, even if you try to attribute it just to the lower oil prices this morning. Right before the open we have the following indications:

• Chevron -1.9% at $79.40
• Exxon down 0.8% at $69.73
• XTO down 0.8% at $47.78
• ConocoPhillips down 1.2% at $52.92
• Valero down 2.5% at $18.03
• Marathon down 1.5% at $32.21
• Hess down 1.45% at $64.21

Without more refining capacity, our dependence upon foreign energy won’t go away.  If refining is not as profitable as it should be, then who is going to go through the ten-year process of permitting and opening more refineries?

JON C. OGG
DECEMBER 12, 2010

Cramer also called the deal announced today where Chesapeake Energy Corporation (NYSE: CHK) where Total SA (NYSE: TOT) will pay $2.25 billion for a 25% stake in Chesapeake’s Texas Barnett Shale.  Cramer believes this is no surprise after the recently announced deal for XTO Energy (NYSE: XTO) by Exxon Mobil Corp. (NYSE: XOM).  Other natural gas and crude E&P players Cramer touted were Devon Energy Corporation (NYSE: DVN), Southwestern Energy Co. (NYSE: SWN), Apache Corp. (NYSE: APA), Continental Resources Inc. (NYSE: CLR), and Range Resources Corp. (NYSE: RRC).  Cramer even said he still likes Linn Energy, LLC (NASDAQ: LINE) except it is up 70% and probably shouldn’t be chased.  On the integrated oil players, Cramer noted Chevron Corp. (NYSE: CVX) and Marathon Oil Corporation (NYSE: MRO) were the stocks he briefly noted.

Cramer featured a speculative stock pick for making engines that run on natural gas and alternative energies is Westport Innovations Inc. (NASDAQ: WPRT). The company lost money and is partnership-dependent, funding investments and may need to raise capital.  But the CEO, David Demers said “We need a new fuel” and the company has very deep partnerships with Cummins Inc. (NYSE: CMI) and with Volvo.  Westport makes engines for buses, class-A trucks, garbage trucks and more.  Cramer said he’d stick with this one as a fair trade, but still maintains that it is a speculative stock.

Clean Energy Fuels Corp. (NASDAQ: CLNE) was briefly mentioned as the stock play for natural gas fuel stations.  This was not mentioned for very long, but this is the T. Boone Pickens play for powering trucks on compressed natural gas.

On the natural gas plays, Cramer noted how natural gas needs more lobbying, is 30% cleaner than oil, and is 40% cleaner than coal.  He also noted how there is already 100 years worth of natural gas power already in the ground.

We have been checking the calls of many pundits for 2010 stock picking, and not just in oil and gas.  This weekend we ran a pick list covering every major financial site’s stock picks for 2010.  We have also featured the best of the DJIA 30 stocks with the most implied analyst upside for 2010.

I would like to personally invite you to join in with the thousands of readers on our free daily email distribution list from 24/7 Wall St. to hear about ongoing day trader and options trader alerts, analyst upgrades and downgrades, stock and market rumors, Buffett and guru investor news, M&A and IPOs, and more.

Jon C. Ogg
January 4, 2010

AOL Inc. (NYSE: AOL) Started as Equal-Weight at Barclays.
Computer Science Corp. (NYSE: CSC) Started as Outperform at Oppenheimer.
IAMGOLD (NYSE: IAG) Raised to Buy at UBS.
IMAX (NASDAQ: IMAX) Cut to Hold at Morgan Joseph.
Manpower Inc. (NYSE: MAN) Raised to Buy at BofA/Merrill Lynch.
Suntech Power Holdings Co. Ltd. (NYSE: STP) Started as Neutral at Baird.
TD AMERTITRADE (NASDAQ: AMTD) Raised to Outperform at KBW.
XTO Energy Inc. (NYSE: XTO) Cut to Hold at KeyBanc.

JON C. OGG

How this merger plays itself out could have substantial impacts on Chevron Corporation (NYSE: CVX), BP Plc (NYSE: BP) and Royal Dutch Shell (NYSE: RDS-A) in the oil patch.  It has broad implications on other natural gas players as well if you look at Chesapeake Energy Corporation (NYSE: CHK) stock.  Its shares rose about 6% on Monday after the deal was announced, and if shares hold the gains today they will have risen for three more consecutive days after that 6% gain.  It would not even be fair to show some of the smaller speculative stocks that gained since Monday.  We have tried to lay out the alternative risks here which could come up against this merger other than just the obvious risks of shareholders merely wanting more or the basic regulatory risks.

There are probably many shareholder who want more for the company than the premium Exxon Mobil is offering.  The $49.00 (or $51) buyout price compared to what is now a $28.64 to $49.10 trading range of the last 52-week period.  One problem may be that the stock traded in the $60′s and $70′s back in 2008 during the energy bubble, and the natural gas bulls will be able to argue indefinitely that the spread between natural gas and oil cannot endure perpetually.  This price does not even make (or barely makes) the investors whole who purchased shares after the first big sell-off in summer of 2008.

Thomson Reuters lists the average price targets from analysts as over $54 as a mean target and $52 as a median target.  That alone won’t give holders wanting more any shot of forcing a higher price, but these average price targets are often referred to later on down the road.  The argument can simply b made that analysts believe the company was worth more than the merger price even before the merger was announced.

Another issue to consider is whether XTO holders even want to be Exxon Mobil shareholders.  With a market cap of $326 billion today, some feel that the law of large numbers in mage-cap stocks over $100 billion in value acts as a drag because it takes too much money in supply and demand of shares to push the needle higher.  At $68.75 today, Exxon Mobil’s 52-week trading range is $61.86 to $83.24 and this stock ran into trouble at every point above $90.00 even when oil was well north of $100.00 per barrel.  Admittedly, this issue alone is not enough to block a transaction on the surface.

Exxon Mobil shareholders probably have very little say on this deal as most companies are able to do the deals as they please.  But Exxon Mobil shares did take a 4.3% hit on the day this was announced.  A further vote against the prices might be that Exxon Mobil shares slid on Tuesday and Wednesday.  If today’s 0.4% gain to $68.75 holds, then it will break that losing streak but will still represent a loss of 5.6%.  If that negative share performance continues, then holders might start to get a better argument against the deal in both companies.

A piece from the Deal Journal at WSJ.com yesterday also noted that the all-stock buyout of this sort in companies with high P/E ratios is among the least successful type of deals.  That alone won’t offer an exit or a reason to block the deal, but it gives ambitious suit-blocking holders another leg to stand on.

Another issue which has come up after the fact and that is part of the merger exit language is whether or not Congress passes an “anti-fracking law”… This would make hydraulic fracturing (fracking) taking gas from shale either illegal or would make it an economic impossibility.

The Shareholders Foundation, Inc. announced in a press release today that a lawsuit was filed in Tarrant County District Court on behalf of XTO Energy investors who purchased shares before December 14, 2009 over breach of fiduciary duty by the board of directors of XTO Energy Inc.  Part of the allegations are that management and directors agreed to sell the company through an unfair process and that XTO Energy is worth more due to “likely future global warming regulations” that could curtail carbon emissions.

It seems that other class action suits and “investigation into sale terms” announcements have already been made.  While these class action suits rarely generate outright wins for holders, these sometimes can prevail clearly for holders.

The big wild card comes from Washington D.C.  This has implications in the Federal Trade Commission and possibly in the Department of Justice, and frankly it would seem that there could be a host of energy-specific regulatory bodies and issues at the state and local levels of government that either would want conditions or want concessions in a deal of this size.  Everyone knew that the merger rubber-stamps ran like clockwork under the Bush administration, but how the Obama administration handles large corporate mergers is still an unknown.  Add in the political issue of policing “energy bandits” by the left , and the ‘potentiality’ may be more of a risk than just a possibility.

This next issue is probably a part-two under the regulatory front, but Zacks.com issued a note this week stating its belief that the Exxon-XTO deal “will definitely prompt its peers” to move forward with similar deals.  Those were listed as Chevron Corporation (NYSE: CVX), BP Plc (NYSE: BP) and Royal Dutch Shell (NYSE: RDS-A).  If this occurs, you have to wonder if all of the regulatory bodies want this much of the oil and natural gas supply tied up in even tighter hands.  You can likely find studies which claim that fewer participants in energy lead to lower prices as you can those which claim that the big mergers allowed in the 1990′s and 2000′s led to higher prices.

A part-three on the regulatory front might be a stretch, but still worth consideration.  Equipment and services providers will possibly find themselves in a boom or bust scenario if there is a wave of mergers between giant oil players and giant natural gas players.  Sure, there are already large oil and gas players.  The question is how large these companies can be and what they can do to squeeze the suppliers.  Those suppliers might not find much sympathy from politicians nor from the public, but in theory suppliers and business partners can ultimately claim that larger and larger clients can begin to change their business models in an unfair manner.

The way to tell how the day-to-day swings either for or against this merger will go is in the arbitrage spread of the deal.  This morning there was only about a 3.5% spread between the shares.  Those betting on the deal by being long XTO and short Exxon Mobil will clean up as far as ‘annualized returns’ if this can close in a timely fashion without and delays or moves to block the deal.  But those making the same bet may find themselves in pain if any of these risks or concerns become probabilities rather than possibilities.

So far we have only laid out the risks.  There is of course the flip-side of this stance as far as the benefits and the alternatives that can be found.  To appease holders, Exxon Mobil can always take out its checkbook and offer more money.  It could change the deal and offer holders the all-stock terms in a cash and stock or even an all-cash offer.  On the regulatory front, you’d think the companies both at least indirectly got someone to inquire with regulatory bodies (as usually occurs).  There is also an argument that can be made that this secures more domestic energy in the hands of a US-based player in the quest for energy independence.

It will be interesting to see how this merger pans out.  More importantly, it will be interesting to see how this merger impacts the merger desires of other larger and smaller players in the oil and gas sector.

JON C. OGG
DECEMBER 17, 2009