Word: exxonmobils
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Dates: during 2000-2009
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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...
Questions about what ExxonMobil might do with its cash are unlikely to die down anytime soon. After all, the company's growth is slowing--Wall Street projects its five-year growth rate at 8%, vs. the industry's 14%--and its share price, after a dramatic run-up last year that pushed the company's market value past that of General Electric, is now off its peak by 16%, at a recent $54. Yet the cash hoard just keeps growing, rising $7 billion in the first quarter alone. "A lot of investors might think that share buybacks and dividends...
...socially sound can have a huge long-term impact. Underwriters such as Citigroup point to the World Bank--backed pipeline running from Chad's oil fields through Cameroon to the Atlantic. Extensive environmental-impact assessments were carried out before the work got the green light, and oil companies like ExxonMobil have provided compensation and health care to local people whose lives and livelihoods were disrupted. A trust fund designed to give all Chadians--not just a well-connected élite--a share of the profits is another improvement, even though green groups such as Friends of the Earth...