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Saturday, September 02, 2006

Weekend Edition: Exxon, Conoco, Chevron, BP, And Shell: What If Oil Drops

Stocks: (XOM)(BP)(CVX)(RDS-A)(COP)

Three or four years ago, if you had told most Wall St analysts who cover the oil industry that crude would hit the mid-$70 dollar range, you would not get many believers. Now, pundits like Jim Rogers say it will go to over $100 and stay there for awhile.

Well, oil dropped again today on word that crude supplies rose 2.4 million barrels for the week ending August 25. Probably less than one in ten analysts will lay even money that prices will continue to decline. But the same might have been said about the increase if you look back far enough.

Profits at Big Oil, Inc. have been stupifying. One the strength of rising prices, Exxon's stock has gone from $54.50 this year to $69, a huge move for a company with a $410 billion market cap. Likewise, Chevron has gone from $53.76 to $65 over the last 12 months, a 21% increase. And, the stock has a 3.2% yield.

Of course, Conoco would not want to be left out. The stock has gone from about $57 to $64 this year. And, it has a 2.2% yield.

It is good to remember that it was not always thus. In late 2002, Conoco traded just above $20. Chevron traded just above $30 and so did Exxon.

The run in Big Oil profits is not likely to abate soon, but, when it does, these stocks could head back toward those 2002 levels. And, if oil supplies keep creeping up, the Big Five could certainly drop part of the way.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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