Painting by Numbers

德意志银行David T. Clark,Silvio Micheloto

　　Will an activist come into ExxonMobil? CEO responds “they better be big”… 　　There was a flurry of interest in ExxonMobil this week as CEO Rex Tillerson hosted lunch for major shareholders in NY. The key frustration as regards the poor relative performance of the stock regards financial strategy, and particularly a pro-cyclical stock buyback (high at the highs now being cut at the lows). But the conclusion from lunch was that for all shareholders complain about low dividend and excessive financial conservatism, nothing will change. The company is arguably at an inflection point where capex starts falling and volumes start growing, but we are worried about Q3 earnings, notably in Asian downstream. HOLD. CVX warned on Q3. Top pick Hess, buy CVX, Oxy, MRO. 　　Under-weight refining/Over-weight oily US E&P 　　Overall, for the big oils, there is noneof the drama we expect in refining earnings this quarter. Only ExxonMobil retains material refining exposure, and there we cut numbers fairly sharply. Chevron also warned on volumes in their interim update and they are falling behind their full year volume target (2.65mb/d guidance vs DB 2.63mb/d). Hess and Marathon may also have volume wobbles. Brent averaged over $110/bbl but perhaps more importantly for relative performance, WTI was clearly an upside surprise with a $106/bbl – the winner has been US oily E&P, although multiples are beginning to get extended, and we question whether the market is really discounting the risk to the downside over 2014 in WTI prices. We think that a strong WTI bear argument can be made, bullish Brent-WTI spread. Overall we expect the under-weight refining/over-weight oily US E&P trade to keep working through year end.