Exxon Mobil is no longer the world's largest oil company

Business Insider ^ | 05/14/2015 | JOHN MANFREDA, OILPRICE.COM

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PetroChina just surpassed Exxon Mobil to become the largest energy company in the world, on a market cap basis.

PetroChina was able to accomplish this despite Exxon’s growth of 1.5 billion barrels of oil equivalent (BOE) in reserves. These new reserves are located at the Permian Basin in West Texas and the Kearl Oil Sands project in Canada.

PetroChina’s primary operations are located in China. This may not seem like a major oil hub to the average investor, but China is actually the 5th largest oil producing country in the world.

Now the question becomes: can PetroChina retain its status as the world’s largest energy company?

Business Plans: Exxon vs PetroChina

PetroChina’s business plan consists of strengthening its role in China, while expanding its global operations, so it can become a multinational company with significant influence.

But PetroChina’s growth will have to come from abroad, as its domestic potential is nearing its limits. Large resources of domestic natural gas have been discovered off the South China Sea, but China will face geopolitical disputes over ownership of those resources from Vietnam. Leaving aside the high-costs of extraction, the territorial dispute will likely keep oil and gas from the South China Sea on the sidelines for quite a while. As a result, if PetroChina is to grow, it will have to expand its global foot print.

Low oil prices, however, present a challenge. Petrochina is currently looking to swap its high-cost Canadian assets with other international companies, in order to restructure itself in a leaner fashion. For now, PetroChina has not signaled any interest in acquiring other companies, suggesting the state-owned firm is pursuing efficiency rather than growth.

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Here Is Where PetroChina Really Beats Exxon
http://www.forbes.com/sites/kenrapoza/2015/04/12/when-it-comes-to-oil-petrochina-still-not-as-big-as-exxon/

Whenever the market capitalization of PetroChina approaches or passes that of ExxonMobil, it becomes a headline. This has been going on for the past three years. It happened in 2012. It happened again on Thursday. And then by Friday’s closing on the NYSE, Exxon’s market cap was $358.9 billion to PetroChina’s $352 billion. The Exxon vs. PetroChina story is part of the overall narrative of China catching up to, and even replacing, the U.S. in world dominance.

But while PetroChina is a staple investment in all large cap China investment funds, including the iShares FTSE China (FXI) exchange traded fund, it is not bigger than Exxon when it comes to what matters: oil and the technology to pull it out of the ground.

As an investment, PetroChina trades fairly close to Exxon in terms of price. It’s just 13.9x trailing earnings compared to Exxon’s multiple of 11.2x. Investors who want to be part of China’s thirst for oil and don’t have a problem investing in state run enterprises, will buy PTR outright. There is no competition for investors, as one has a stake in the U.S. and the other has a stake in China.

That said, the story of Exxon being beat by PetroChina is mainly a market-cap story, one at the volatile whims of the market that has nothing to do with the realities of either companies. The market values China more on Monday, values it less on Tuesday, and so on. The fundamentals at the two oil giants are different, and in this regard, Exxon has more assets and is therefore worth more that PetroChina.