Exxon Mobil (NYSE:XOM) is a worldwide crude oil and natural gas exploration & production firm that also engages in the manufacture of petroleum products, as well as transportation and sale of crude oil, natural gas and petroleum products. It also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, as well as other specialty products. It also has interests in electric power generation facilities.
In my humble opinion, XOM is the most effectively managed company in the world. When others were overspending during the run-up in oil in mid-2008, XOM played a waiting game and acquired assets after the boom went bust. Now XOM is partnering with the Russian government to provide the technology for fracking in that country’s vast oil shale regions. Additionally, exploration contracts with Chile and Argentina also are close to being finalized.
While oil prices have fallen recently, a complete collapse from present levels appears unlikely, especially given a greater likelihood of more monetary easing worldwide.
With a dividend yield of 2.8% (equivalent to a 30-year Treasury), a trough multiple of 9.83 and a fortress balance sheet, I look for XOM to move to $85 by October expiration.
Based on XOM’s closing market price of $82.13 for June 14, 2012, and using a target price of $85, and a target date of Oct. 19, 2012, option strategies to consider include buying an October put butterfly, buying an October put condor, buying an October call spread, or using another options strategy that best fits your trading style and risk-return objectives.
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As of this writing, Tim Biggam did not hold a position in any of the aforementioned securities.