Word: exxonmobil
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...question that oil watchers, policymakers and, of course, ExxonMobil shareholders are buzzing about. Will the company loosen its purse strings and go on a buying spree? Will it return all that cash to shareholders? Or will the company continue to salt away the dollars for a rainy day--and if so, for what specific purpose...
...company ExxonMobil's size routinely spends huge gobs of money. This year alone the company is expected to deploy some $16 billion on capital projects. Among other things, ExxonMobil is pushing heavily into the expanding market for liquid natural gas with a $7 billion gas-to-liquids foray in Qatar. But the company's projected capital spending is only $1 billion higher than last year, and even ceo Lee Raymond knows that some shareholders are frustrated that the company isn't being more aggressive about making investments. "When inevitably you ask me how we manage our cash, I will remind...
Raymond is no dummy. The oil industry is the classic boom-and-bust business, and managing the booms can be as tough as getting through the busts. In previous periods of high oil prices, there has been an ugly history of overspending on poorly conceived projects that quickly soured. ExxonMobil seems determined not to fall into that trap. The company has produced industry-leading returns in recent years by not zigzagging with every change in oil prices. (It's worth noting that ExxonMobil's earnings are less tied to high prices than are those of other major oil companies...
Other shareholders think they should spend more. ExxonMobil's older oil fields in North America are in natural decline, yet the company has not cranked up spending on newer fields abroad--while competitors like ChevronTexaco and ConocoPhillips have begun to do so. "I would love to see them make more investments, especially in some of the areas that have recently reopened, like Libya," says Ted Parrish, co-manager of the Henssler Equity fund, which counts ExxonMobil as its No. 1 holding. Other investors put it more bluntly: "Over time you may have to question whether they are being too disciplined...
...flip side: if the company can't find investment opportunities for all that cash, then why not hand it over to shareholders? ExxonMobil already gives its investors a hefty payout: last year it returned some $15 billion in the form of dividends and share buybacks. The company recently increased its dividend 7% and announced that it would accelerate its share buybacks by $1 billion a quarter, to $3.5 billion. At that rate, ExxonMobil could repurchase some $14 billion in stock by year-end. That's no small number, yet the company has the capacity to share even more...