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| ExxonMobil (XOM) is Hoarding Cash and Stockholders are Paying the Price |
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| Written by Miranda Marquit | |
| Monday, 22 September 2008 | |
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Bloomberg reports that XOM's cash stockpile is contributing to share price drop. 
Photo: TheTruthAbout, Creative Commons, Flickr In a climate where we talk about a company's available capital and shake our heads at the poor capitalization of such companies as Fannie Mae and Freddie Mac, it seems a little strange to be pointing fingers at a company that has large amounts of cash. But that is just what is happening right now. Bloomberg points out that ExxonMobil (XOM) may have too much cash -- and it could be hurting stockholders: Exxon Mobil, whose market value of $410 billion is larger than any other company, earned a record $40.6 billion last year. At the same time, the company's capital spending as a percentage of sales was the lowest in the industry. Its stock is dropping despite $80 billion in buybacks since December 2005. The shares fell 73 cents to $78.88 today...
Exxon Mobil spent the equivalent of 57 percent of the cash generated in the past four quarters on buybacks, three times the ratio of other major U.S. oil producers, according to data compiled by Bloomberg. And Exxon plans to use its capital to buy more stock. Along with Chevron (CVX), Exxon is well-known for its frequent stock buyback programs. Besides, with the stock market showing definite bearish tendencies, it is no surprise that a number of companies (including Microsoft -- MSFT) are announcing stock buybacks today. Exxon's cash hoarding policy is something that is different from some of its Big Oil peers. While others are trying to find a way to increase reserves (through buying drilling equipment and acquiring exploration rights), XOM seems primarily interested in seeing how big its cash pile can grow. Using stock buybacks is just one way to do that. Rather than making investments that are turning out to be somewhat shaky right now or entering into joint ventures (XOM would probably be blocked if it attempted to acquire a rival), ExxonMobil is playing it conservative and trying to ensure the long-term stability of the company. And, of course, CEO Rex Tillerson has a strategy of only investing in oilfields that have the potential to yield 1 billion barrels of reserves. Obviously, with a limited resource, such a strategy is rather limiting. But it is clear that in the future things may have to change for XOM. Some larger diversification into alternative energy may be needed going forward in order to provide new areas for growth potential for a company that is in danger of stagnation. Disclosure: I do not own Big Oil stock. Site disclaimer. Big Oil 
CVX 
Corporate Accountability 
Miranda Marquit 
Stocks 
XOM 
Comments
(4)
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written by David Neubert , September 23, 2008
Part of the reason so many companies are using buyback instead of dividend increases it that they believe their good fortune is temporary. They don't want to commit to a dividend they will have to lower in the future.
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written by Miranda , September 23, 2008
You make a good point. And for Big Oil companies reluctant to invest in alternative energy, the days of good fortune are certainly numbered.
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written by Gary T. Petler , November 04, 2008
Energy Sense & Profits; What Executive in their right mind, would invest Corporate profits in Potential oil field exploration, or invest in furthering capacity of their refineries, when the Political winds in the United states sway almost monthly, as well as stacked against any effort to seek more petroleum in the U.S.
A perfect example is the statement by Barrack Obama, "that he was going to bankrupt the Coal producers" via new manditory requirements", this is certainly not encouraging news to U.S. Companies, at large.
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written by Gary T. Petler , November 12, 2008
America, is once again seeking independence, only this time from foreign oil. America must overcome its dependency from oil producing nations. We should immediately begin development of our own petroleum fields, as well as that of aggressive oil exploration in our Country. Too much valuable time has lapsed due to the continual in-fighting and posturing of our politicians, unfortunately, too many of our politicians have become self-serving empty suits and dresses, accomplishing little or nothing, aside from power and personal gain, at tax payer expense.
All of America must act decidedly and quickly, as we no longer have the luxury of time, we must immediately seek alternatives to our excessive appetite for foreign petroleum, so as to ensure our independence from others, as well as keeping our monies at home, since we are destroying our economy (trade deficit/balance of payments) due to our consumption of Oil from the Middle East and that of other oil producing Countries. America must wean itself from imported oil within Ten (10) years. America has within its borders, enough alternative product (i.e., Coal, Geothermal, Natural Gas, Shale, Solar, Tidal and Wind) to produce our own sources of energy for the next two hundred plus years, our immediate attention should be that of producing alternative transportation fuels, secondly that of producing our own Petrochemicals for the myriad of things (plastics and thousands of other items) we use in our daily lives, which for now, are driven by oil. We must continue our energy trade with Canada, as they are true trading partners in commerce, for they import, as well as export with the US. It is a fact, that the American citizens (the ones the politicians work for) as a whole, are fed up at beings pawns, lied to and taxed to the max. It is time for an all out concerted effort by America (in spite of the politicians) to develop existing and future sources of oil within our borders, for the short term. For much more information and facts, please visit http://www.quicktip.com and click on energy. Tag it:           | |
| Last Updated ( Monday, 29 September 2008 ) | |
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