CALLXOM
Exxon: full-cycle economics improved and the multiple did not
The asset base got cheaper to run while the sector multiple stayed where it was.
The mechanism is full-cycle breakeven, which includes development capital rather than just operating cost. A lower full-cycle breakeven raises the price band over which the distribution is safe, which is what changes the equity's risk profile.
The project disclosure carries it. The latest phase was delivered under budget and ahead of schedule, and management gave a full-cycle breakeven for the block in the low thirties.
The position: long on Exxon, entry locked at publication and the exit dated rather than open-ended. The target is stated in the call block above and the horizon with it. Sized to the catalyst rather than to conviction, with the invalidation written into the kill-switch card instead of left implicit.
The main risk is that capital discipline breaks at the next price spike, which is what has happened in every prior cycle in this industry.
Discussion · 3
Dana KatzAUG 21
I hold the other side of this. The point about conversion rather than demand is the right one. Has anything in the last print changed the entry you would take?
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Omri ShakedAUG 21
I have been waiting for someone to make this argument. The utilisation assumption is where I disagree. Any view on how the read-across affects the rest of the group?
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Yael BrennerAUG 21
This lines up with what I saw in the filings. The channel data is what makes this hard to dismiss. Would you underwrite this without the catalyst date?
3