9-22-08 by dugan
Why is Exxon’s stock down 16% since the beginning of this year? Because it’s sitting on a cash hoard of $39 billion, spending more on buying back its own stock than producing new energy. It won’t develop anything but gigantic new oilfields, so-called "elephant fields," and won’t drill without a guarantee of a 30% return. That’s the simplified bottom line of a report today by Bloomberg’s Joe Carroll. Exxon also refuses to develop any renewable energy, also because of the the 30% profit return. Seeking elephants, Exxon has become a mastodon. In hoarding profits, it paupers its future, and ours.
From the story:
Exxon Mobil, a descendant of the Standard Oil Trust that John D. Rockefeller built, has been stymied by its own standards, said Barry James, who manages $2 billion at James Investment Research in Xenia, Ohio.
Tillerson may be forced to change his strategy of only pursuing oil and gas fields of at least 1 billion barrels of reserves that he expects to generate returns on investment of at least 30 percent, James said.
The company ignored much of the Gulf of Mexico because of the lack of so-called elephant fields. Most discoveries in the Gulf have been too small to justify the expense of building platforms and pipelines to link them to onshore markets, Tillerson told investors and analysts in March.
Yet Exxon wants more U.S. coastal waters opened to drilling, even though it scorns the Gulf of Mexico and is just as unlikely to find elephant fields elsewhere in coastal waters.
And its execs argue that it can’t possibly do without billions in taxpayer subsidies, because it needs the money for capital spending and exploration. For the same reason, it wants to pay fewer royalties back to taxpayers. Yet, as Bloomberg notes, "the company’s capital spending as a percentage
of sales was the lowest in the industry."
With more than $150 billion in available cash and company-owned stock in its treasury, Exxon unfortunately won’t face the fate of the mastodon any time soon. But its refusal to invest in any future, oil or otherwise, makes it more culpable than other oil companies for the pain that petroleum costs are inflicting on a crippled economy.
That means it’s still up to Congress to withdraw oil company subsidies, raise royalty payments and put the money toward a different kind of energy future.