 Good day, fellow investors. As promised, today I want to discuss Exxon. It is a binary bet on oil. What will happen with oil? Will there be growing demand over the next 10-20 years or declining demand? That's the answer we have to get from an investing perspective to put the risk and reward into perspective to take that 5% dividend yield that might grow to 7-10% if things really developed as Exxon is planning and then put that 5-10% into a long-term perspective from investing. So can you sleep well and invest in Exxon? That's the question we have to answer. So let's start with the analysis and then we'll conclude with the risk-reward perspective and whether there is something better. Let's start. Just before starting, this is what I do. I analyze businesses. I put them into long-term perspective. I look at the risk-reward and I write reports on that. If you fancy seeing what I do, seeing all my ideas, all my reports and looking for those investments with less long-term risk and a positive upside, please check my stock market research platform. When you see my portfolios, all my research, all the sectors that I research and I have been now researching the shipping sector, LNG, Exxon and Exxon is one part that I have to research to get a better perspective on the whole environment. What's the outlook? What are the risks and rewards? Let's start with Exxon. So let's start with the analysis. We'll discuss Exxon's investment performance over the past years, then Exxon's outlook on the future of oil, Bloomberg's outlook, McKinsey's, let's say, objective perspective. What to believe? What is going on with technology? Will oil be disrupted and in what magnitude? And then the risk and reward for XOM investors. So the stock did really well over the past 50 years, but performance has been choppy over the last 12 years. So there is an indication that something is not going right with Exxon and the focus a lot have is the 5% dividend yield. The 5% dividend yield would cover your investment over 20 years. So that's the perspective when you own Exxon. You have to think about 20 years and I think many are missing what can happen over the next 20 years and that's what we are going to discuss. In the last SEC filing, Exxon disclosed how they expect 50% lower net income in Q3 2019 due to lower oil prices. So that is a big hit and the stock is to multi-year low. So we have to see whether this is a structural issue, long-term issue, or it's just a cyclical issue like it was the case in 2009 and 2015 when afterwards the stock earnings dividends rebounded. So let's dig deeper. What we have to see is, okay, short-term demand for oil has been lower than expected and therefore lower prices even if Trump is doing whatever he can to keep oil prices higher with the mumbo-jumbo in the Middle East. But still, XOM was the largest company of the SAP 500 just seven years ago. Everybody was still betting on oil. Oil prices were high and now it's out of the top 10. It's actually in position 12. Chevron was also in the top 10. Now it's actually in position 50 or something. So things are changing. The market is focusing on other things and that's something very, very important that we have to also keep in mind. Does the dividend of 5% justify what's going on and what might happen? So let's look deeper and I think that as investors, as individual investors, we have to really the opportunity to focus on this. This is from the 1977 Letter to Shareholders and Buffett emphasizes how one of the lessons the management he has learned and unfortunately sometimes relearned is the importance of being in business where tailwinds prevail rather than headwinds. So we always want to invest with tailwinds prevailing because even if you make a mistake you'll do good. Now let's look at the outlooks from accents to Bloomberg's to McKinsey's on what will happen. If we look at accents, 75% of their cash flows is and will be spent into capital expenditures. So they're investing and if they do so, they are spending a lot of money, then they must be very, very bullish on oil and they actually are. They did really good with oil over the past 50 years. So that's their nature and this is also a big risk on accent. Will the manager management ever stop believing, stop being bullish on oil? Will they ever say okay now it's enough, let's just cash out, let's make this a cash cow for the long term, all their key or they will keep investing in growth. They see oil at 60 over the long term due to growing demand from emerging markets, from growing markets from China and cash flows growing from the current 40-40 something billion to 60 billion in 2025 thanks to the growth in the investments, thanks to suddenly higher returns on capital employed than it was the case on the investments in the previous three, four, five years. How are they going to do it? I don't know but they think they will do much better in the future. So they are betting on higher returns on investment upstream, Permian, hoping for great returns as they have increased the production plan 100% over the last years and they think it will lead to a lot of cash flows. But let's see this is $60 per barrel. What if oil is 40 and lower per barrel than Exxon will be in trouble, not in trouble but will not meet the expectations. So there is a lot of capex that goes in and you need 60 oil to justify that. Then they are investing in Guyana and they have a really, really heavy capex profile for the next two years. 63 to 65 billion upstream US tight oil, deep water. So not that much conventional and we have to see how will that do over the next 5, 10, 20 years. They are betting that the economies will have to grow, will grow the energy evolution that wind and solar, if you are looking at what they are betting in, wind and solar will be 2, 3%, 5% max of the energy mix in 2040. So this is what they are thinking, oil remaining strong, oil growing, gas growing, coal declining a little bit but wind and solar really, really marginal. Let's look at the opposite side of the medal, Bloomberg's outlook on the future of energy. And if I see this, this is the yearly sum of global irradiance, the sun, and then the countries that those who are bullish or on oil are betting, India, Indonesia, Malaysia, Philippines, look at the high levels of irradiation they have. They can produce a lot of energy from renewables from the sun, which is getting cheaper and cheaper. As soon as that switches from the currently still a little bit higher costs to lower costs, and that's what's going on, the technology is developing at extremely fast speeds, Exxon expects 3, 4, 5% of renewables in the energy mix, Bloomberg, new energy expects much, much different situations. Average global energy mix from Bloomberg over the years to 2040, 2045 will be around 50%. That will be extremely detrimental, that would be extremely detrimental on oil companies, especially as Exxon is investing. So this is the binary bet. Who is right? Bloomberg or Exxon? And then if we look at where Exxon is investing, as we said, shale oil, deep water, and you see that really those will be hit first on the normal supply if oil gets replaced by renewables. So that's Exxon. It is a very big bet on oil. And if we look at McKinsey, what to believe, then we have to see, okay, open control, what Exxon is also betting it, normal situation as is now. But if we look, if we get technology disruption over the next 5, 10, 15 years, the demand will peak earlier than expected. And therefore oil prices will probably go below 40. Just to note, if you go to Norway, there is 75% tax on profits from oil because it costs $5 per barrel to pump it out of the sea. So there are many tech factors that offer potential to disrupt oil, more efficient internal combustion engines, electric drive trains, shared mobility, wind and solar revolution, energy storage, and Bloomberg forecasts energy storage to increase 122 times by 2040. If the energy storage suddenly becomes more profitable, cheaper than oil, the shift will be extremely fast. And this is the risk when it comes to investing in Exxon. Further, what's the reality? What's going on? Will the technology be there or not? Well, you are betting against these guys if you are investing in Exxon. Amazon just announced they invested 700 million in revamp and they just said that they will meet the Paris Agreement 10 years early, peak carbon footprint neutral by 2040, and they have invested in 100,000 fully electric delivery vehicles over the next years. So the shift is happening. I look around more and more solar panels, more and more wind, and I think we are going to buy an electric car that will be the next one over the next years. And over the next decade, I somehow feel there will be a big shift, a fast shift, and that's the risk when it comes to investing. And that's a risk I don't like to take, especially not for a 5% dividend yield. Gas is a little bit more positive over the long term, so that might be more sustainable. And then study says that even gas plants are a high risk of being undercut by lower cost renewables. If we look at the costs, what it costs to build and operate a new gas plant and what it costs to create a combined cycle energy plant, you see that the cost of doing that will go even lower than operating an existing gas plant 2040, 2045, not even mentioning oil. So this is the risk and one should really keep that in mind. We also have from the IEA scenarios, normal scenarios under current policies, okay, things will continue as Exxon expects them, but these policies should be revised. And if we go into more sustainable or cheaper technology scenario that might happen, look at what Tesla is doing, then Exxon will be very, very hardly hit. So to conclude Exxon is a binary bet on oil. If things go well, Exxon will go 5%, 10% dividend, 10% dividend in 2024, 2025. But that is still very, very long from now. And is it justified? Is it worth it? Is the answer you have to give yourself? I don't think it is worth, I think Exxon has a lot of, let's say, goodwill from the past as it was the powerhouse in the environment. But things are really, really changing very, very fast. And we have seen that in the SAP 500 components, in their profits, they need a lot of money just to keep up doing and they are pushing for growth, more supply, more oil supply. It will always be volatile, but the long term structural trend is here. And you might have a few years of good times for Exxon, but when the tech cost of producing energy, of storing energy, renewable gets shift, when it suddenly is cheaper than oil, oil prices will have to go down, then the profitability of Exxon gets questionable. The capex has already been higher than the cash flow now for the dividend. So they have borrowed money to pay the dividend and for development. And that's a big risk. So I would say Exxon is a risk, even risk, even reward, binary bet on oil now. I don't like those things. I like lower long term risks and higher rewards. And if I would bet on economic growth in Asia on renewables, but even if oil doesn't happen or happens, then I would prefer something like copper, which I think is a much lower risk and much higher potential situation. And you can check my video on copper in the card above. And then you can also check again, as I said, everything, all my copper research, my portfolio, my copper zinc exposure in my portfolios, on my stock market research platform. Thank you for watching. Looking forward to your comments, click that like button to support the channel. And I'll see you in the next video discussing shipping and one very, very interesting LNG shipping stock that is not related to oil. Gas is a little bit more positive. So we'll see whether the risk reward in the area is better than for Exxon. Thank you and I'll see you in the next video.