green and sustainable business

ExxonMobil flush with bucks, gushes with confidence

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Ever since the then Exxon Co. devastated the Prince William Sound environment in Alaska and the livelihoods of thousands workers in that area following the Exxon Valdez oil spill 21 years ago, I have to admit the company leaves me cold. And that’s a polite way of putting it.

Each year at about this time I take a moment to consider developments surrounding the worst oil spill in U.S. history.

The tanker Exxon Valdez ran aground on Bligh Reef in Alaska’s Prince William Sound on March 24, 1989, spilling about 11 million gallons of crude oil. The spill spread oil on more than 1,200 miles of coastline, closed fisheries and killed thousands of marine mammals and hundreds of thousands of sea birds.

Tens of thousands of fishers, food processors and Native Americans lost their livelihoods. For those 33,000 people it’s not a question of whether the country is in or recovering from a recession: They’ve been in a recession for more than two decades and the company responsible for their plight for the most part got out of doing what it should have done long ago: Take responsibility for its action and help them. Instead this company, now called ExxonMobil, spent millions fighting to avoid doing the right thing and slithered out of paying a $2.5 billion damage award to Alaskan fishers and companies.

ExxonMobil has paid $287 million in compensatory damages from an original jury award that included $5 billion in punitive damages. That was later halved by an appeals court. Basically, it skated thanks to some big help from the Supreme Court.

This is the feckless company that recorded $36 billion in profits – yes profits and billion – in 2005, almost $40 billion in profits in 2006, nearly $41 billion in profits in 2007, and $45 billion in 2008. That’s record profits for any company in the world for four straight years. It slipped to “only” $19 billion in net income last year.

But don’t feel sorry: ExxonMobil, the world’s largest publicly traded oil and gas company, has barrels of money and plans $28 billion in capital spending this year and about $25-$30 billion each year thereafter though 2014.

In addition to the profits of $19 billion last year it generated cash flow of $28.4 billion. Flush with money and confidence, XOM says it is “well positioned for future growth” despite a volatile industry environment across a “range of market conditions.”

“Each of our three business segments, Upstream, Downstream and Chemical, outpaced our competitors,” Rex W. Tillerson, chairman and chief executive officer, said this month at the company’s annual presentation to investment analysts at the New York Stock Exchange.

That’s what a mountain of cash does: It provides “financial flexibility” to pursue a host of mostly oil-related and “geographically diverse” opportunities. Tillerson stressed the Irving, Texas, company “will not be distracted from our focus on maximizing long-term shareholder value.”

He blithely added that XOM’s capital spending plan is “largely unaffected” by the global recession. The company’s return on capital employed, which is calls a key indicator of “disciplined decision making and financial performance,” was 16.3 percent, or more than 50 percent higher than its nearest competitor.

ExxonMobil has a large inventory of projects in the hopper, and during the presentation it highlighted last year’s achievements and future plans, including:

– It replaced more than 133 percent of its 2009 production with proved reserves additions totaling 2 billion oil equivalent barrels, based on long-term pricing used by the company to make investment decisions. It was the 16th consecutive year the company replaced more than 100 percent of its production.

– The company added the equivalent of 3.9 billion barrels of oil to its resource base through by-the-bit additions, resource acquisitions and revisions to existing fields. Of the 3.9 billion barrels of oil equivalent increase to the resource base, 2.1 billion barrels were through by-the-bit additions resulting from exploration drilling that discovered new resources.

– Exploration plans for 2010 and 2011 will evaluate offshore plays in Southeast Asia, the Black Sea, Canada’s East Coast, the U.S. Gulf of Mexico, Libya, Brazil and Australia, and also onshore unconventional gas potential in North America, Europe and Indonesia.

– During 2009, eight major projects started operations and are projected to add the equivalent of 400,000 net barrels per day to ExxonMobil’s production in 2010. An additional 12 major projects are expected to start production between 2010 and 2012. Combined with other projects, the company expects its share of production from new projects to increase by 1.5 million oil-equivalent barrels per day by 2015.

– The company’s major projects portfolio contains more than 130 oil and gas projects that span all resource types and regions of the world. The net share of the resources represented by those projects is the equivalent of 24 billion barrels of oil.

– In 2010, ExxonMobil said it “will continue to progress its biofuels program and alliance with a leading biotech company, Synthetic Genomics Inc., to research and develop next-generation biofuels from photosynthetic algae.

The latter point was the lone mention of renewable energy or biofuel programs, which only underscores XOM’s present and future focus and imperatives. It was barely a nod to the environmental and alternative energy crowd.

Don’t let those slick and earnest-sounding TV commercials about XOM’s alternate fuel programs and activities distract: This company is all about crude oil, crude profits and shareholder returns. No surprise there; XOM is an oil company, not an energy company. That’s its undeniable and uncompromising DNA and spending $100 million on a biofuels plant is a mere drop in the barrel.

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Written by William DiBenedetto

29 March, 2010 at 9:42 am

One Response

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  1. I have to say, I absolutely love your blog. Maybe you could let me know how I can subscribing with it? I feel I should let you know I discovered your blog through MSN.

    striper fishing

    26 April, 2010 at 9:38 am

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