Money is rotating from big refiners and integrated oil companies into oil drilling and servicing firms. The move could be in its early innings, and the recent drilling gains alongside refiner losses are working in that direction. x.com 

Oil majors such as Shell, BP, ExxonMobil and Chevron deserve their multiples because they have consistently generated 10%+ returns across complete energy cycles. They are integrated, now diversified, and control a key commodity for decades ahead. Investors will do fine if they hold for the long term. x.com 

Exxon's stock is pricing the screen, not its sworn 8-K disclosure that Q2 earnings will be about $5 billion above Q1. The July 7 filing attributes $3.5-3.9 billion to higher crude and $3.3-4.1 billion to refining and chemicals, less about $1 billion of war disruption. Yet Exxon closed at $145.09, ten dollars below its war peak. x.com  x.com 

Chevron already has producing Venezuelan ventures, but expanded agreements still need drilling, dependable power, crews and equipment before more barrels can be sold. Its three ventures were producing about 280,000 barrels a day at the July earnings call, and production had grown 15% year to date by September. Keep holding Chevron, but past gains do not justify buying more at any price. x.com  x.com  x.com  x.com 

Oil refiners look too late to chase because they are over-earning, and margins will likely compress down the line. Refiners ran as Chinese utilization fell about 40% and 40% of Russian capacity went offline because of the war, pushing product-versus-crude margins to all-time highs of $80-100. Oil services names such as SLB look better placed to benefit. x.com 

BP has further to go as new CEO Meg O'Neill resets it into a traditional oil and gas major focused on returns and cash flow. Renewable spending is being cut by $5-10 billion while oil and gas investment rises 20% to $10 billion a year. BP plans $20 billion of asset sales by 2027 and aims to cut debt from $22 billion to $14-18 billion, pausing buybacks. Continued instability in the Strait of Hormuz adds support, though the climate pullback faces ESG pushback. x.com 

Refiners such as Valero and PBF look past their best, because higher oil prices are no longer necessarily bullish for them. Per a client, refiners are running at 95% and still can't build finished-product inventories. These look like as-good-as-it-gets earnings, and prices look ahead to demand deconstruction: high prices force alternatives and faster cost-cutting. Capacity scarcity still supports valuations, as with AI stocks, but price controls always backfire. x.com  x.com  x.com 

Valero faces structural obsolescence as battery and solar costs fall and transportation shifts from diesel to EVs, a risk the market misses by overweighting the news and the present. Its stock swung from $120 in 2018 to $40 in 2020 to $422 now. Valero and solar maker LONGi sit at opposite ends of who will power future transportation, with opposite present circumstances and opposite structural paths given the evolution of costs. x.com  x.com 

Marathon Petroleum's earnings are impressive at $17 a share, and Q3 should be better. The open question is whether it can reach $25 a share and sustain that for a few quarters. x.com 

With the 10-year Treasury yield touching 5%, cash generation and price strength matter more, favoring developed-market large caps that pair the highest free-cash-flow yields with strong momentum. General Motors leads with an 18.8% FCF yield, followed by BP at 13.6%, Marathon Petroleum at 11.6% with a top momentum score of 100, DHL at 11.4% and Shell at 11.3%. Verizon, AT&T, Suncor, Valero and Equinor complete the list with yields of 8.9% to 10.1% and momentum scores from 80 to 100. x.com