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Exxon cutting back on oil + gas production - 5/23/2007 6:10:16 PM   
selfbnd411


Posts: 598
Joined: 7/23/2005
Status: offline 		MAY 28, 2007
Business Week
Pumping Cash, Not Oil
Exxon's risk-averse stock-buyback strategy is the new profit model

With gas prices hitting record highs, Exxon Mobil (XOM) Corp. ought to be drilling like mad and refining more of that black gold, right? As it turns out, the world's largest oil producer thinks it is smarter to use more of its resources to buy back stock. The indirect result: increased pain at the pump for consumers.

It's Big Oil's new formula for making money. Last year, Exxon pumped out $49 billion in operating cash flow on sales of $365 billion. It's the world's most profitable company, but Exxon is plowing a smaller percentage of its spare cash back into the business. Although capital expenditures have risen from $11 billion at the start of the decade to nearly $20 billion, that spending amounts to roughly 40% of cash flow, down from 50% in 2000. Meanwhile, overall production has barely budged since its megamerger in 1999.

...

"Economists tell us high prices should send the signal for Exxon to invest [in growing production]," says Tyson Slocum, director of the energy program at the consumer group Public Citizen. "But that's not happening. They're transferring that money from the wallets of consumers to shareholders."

http://www.businessweek.com/magazine/content/07_22/b4036057.htm?chan=top+news_top+news+index_businessweek+exclusives
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RE: Exxon cutting back on oil + gas production - 5/23/2007 7:12:15 PM   
dcnovice


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quote:

They're transferring that money from the wallets of consumers to shareholders."


Be fair: Isn't that transfer a corporation's main goal?

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RE: Exxon cutting back on oil + gas production - 5/23/2007 7:28:02 PM   
selfbnd411


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Status: offline 		Yes, but remember that corporations are the creations of the state.  A corporation is nothing more than the state giving special privileges to capital in order to allow it to function more efficiently.  These advantages include the ability to issue stock and for individuals to avoid personal libility for the actions of the corporation.

However, these advantages don't come without a cost: the state, having created the corporation, has a right to see that the corporation serves the public interest.  A perfect example of this can be found in the railroads in the 19th century.  Building a railroad required so much capital that no individual could do it, but individuals could band together to accomplish this in a corporation.  However, once the railroad industry matured they became "rapacious."  They raised rates and treated shippers unfairly, and Congress began to regulate them because it was not in the public interest for the corporation to be given so much power.

Now, Exxon, Chevron, and the other mega cap integrated oils are mature corporations.  Their duty is to their shareholders and to the public interest, because they are corporations--creations of the the state.  They are growing earnings and returning capital to their shareholders, but they are not doing it in a manner that serves the public interest.  They ought to be growing earnings and improving cash flow by investing in production, but instead, they're abusing their monopoly power over an inelastic commodity to grow earnings.

That's the problem; the state gave them a competitive advantage, but they're using it to distort the free market.  If the state had not allowed them to organize in massive corporations (but rather mid sized corporations), there would be more competitive pressure to produce.

< Message edited by selfbnd411 -- 5/23/2007 7:29:13 PM >

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RE: Exxon cutting back on oil + gas production - 5/23/2007 7:29:32 PM   
TheHeretic


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From: California, USA
Status: offline 		      Don't you read your Myspace bulletins?  They have to cut production.  Consumers are going to boycott their product.

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RE: Exxon cutting back on oil + gas production - 5/23/2007 7:31:30 PM   
selfbnd411


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quote:

ORIGINAL: TheHeretic

     Don't you read your Myspace bulletins?  They have to cut production.  Consumers are going to boycott their product.


I don't use myspace


But ya, that would actually work if this was a free market.  But it's not: you only have a choice of 5 or so massive corporations that produce a utility-product for which demand is inelastic.

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RE: Exxon cutting back on oil + gas production - 5/23/2007 7:33:41 PM   
Sanity


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Status: offline 		It really pisses you off that Exxon isn't drilling in the Arctic wilderness then? Or off the coasts of California and Florida? Or building a new refinery practically in your back yard...

Else, where would you like to see them "drilling like mad and refining more of that black gold".

Exactly where.

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RE: Exxon cutting back on oil + gas production - 5/23/2007 7:40:09 PM   
HydroMaster


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quote:

ORIGINAL: TheHeretic

     Don't you read your Myspace bulletins?  They have to cut production.  Consumers are going to boycott their product.

Actually the idea is too cut the demand before they have a chance to cut production.  This creates a surplus driving down the cost.  Remember the supply and demand concept?  High supply + low demand =low cost. 

Also, I'm not sure what sense of accomplishment you get by insulting everyone else here.  Does it make you feel better?  We're you abused as a child and feel a need to get retribution now?  Perhaps you were picked on in school?  Or maybe you just feel lionized by the anonymity that posting online gives you since you don't actually have to face the people you insult.  Please, by all means, share with us what makes you tick?  I'm sure  everyone is just dying to know how your mind works.


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RE: Exxon cutting back on oil + gas production - 5/23/2007 7:41:36 PM   
selfbnd411


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quote:

ORIGINAL: Sanity

It really pisses you off that Exxon isn't drilling in the Arctic wilderness then? Or off the coasts of California and Florida? Or building a new refinery practically in your back yard...

Else, where would you like to see them "drilling like mad and refining more of that black gold".

Exactly where.


Devon Energy scored a massive find in the Gulf of Mexico last year.  As the Business Week article points out, most of the E+P is being done by small corporations, and not the big integrated oils.

Look, the easy oil is gone.  What's left is harder to get and more capital-intensive to produce.  That's why this is scandalous--Exxon is cutting capital expenditures in order to buy back shares.  They should be increasing capex because their proven reserves are declining.  What you have, in effect, is an oil company with less and less oil!

This isn't a political issue as much as it is an economic issue.  Exxon and Chevron are massive, poorly managed corporations who are able to thrive and survive because they're the biggest boys on the block.  There isn't real competition.

I pay very close attention to this because I invest heavily in the oil sector.  My money is on the oil drillers--the oil is out there, but you can't just sink a hole anymore.  You need a Halliburton or a Nabors to help you get it out of the ground.  Or it's in extremely deep water, so you need a GlobalSantaFe or Transocean to drill for it.  I listen to their conference calls, and I can tell you that the major integrated oils are not interested in expanding production.

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RE: Exxon cutting back on oil + gas production - 5/23/2007 7:46:55 PM   
Sanity


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From: Nampa, Idaho USA
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quote:

ORIGINAL: HydroMaster
Actually the idea is too cut the demand before they have a chance to cut production.  This creates a surplus driving down the cost.  Remember the supply and demand concept?  High supply + low demand =low cost. 

Also, I'm not sure what sense of accomplishment you get by insulting everyone else here.  Does it make you feel better?  We're you abused as a child and feel a need to get retribution now?  Perhaps you were picked on in school?  Or maybe you just feel lionized by the anonymity that posting online gives you since you don't actually have to face the people you insult.  Please, by all means, share with us what makes you tick?  I'm sure  everyone is just dying to know how your mind works.


Are you talking about the same TheHeretic that lectures me just like a Sunday School Teacher if I show even the slightest bit of a mean streak???

Wow... he's actually a really nice guy. A little too nice, in my opinion... but since he's got you bullied to the point you're begging him to take it easy on you like this, how will you react if you ever get stuck debating someone that's truly nasty. Like, um... I don't know. I'm sure there's someone like that around here though...

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RE: Exxon cutting back on oil + gas production - 5/23/2007 7:47:03 PM   
TheHeretic


Posts: 19100
Joined: 3/25/2007
From: California, USA
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quote:

ORIGINAL: HydroMaster

I'm sure  everyone is just dying to know how your mind works.




        I doubt it.  It's spelled out in the first line of my profile if they do.  Planning to make me a thesis subject or something?

     Here's a hint...  One of the letters in BDSM stands for sadist....  I just LOVE needle play.

_____________________________

If you lose one sense, your other senses are enhanced.
That's why people with no sense of humor have such an inflated sense of self-importance.


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RE: Exxon cutting back on oil + gas production - 5/23/2007 7:52:12 PM   
HydroMaster


Posts: 4786
Joined: 9/24/2005
Status: offline
quote:

ORIGINAL: Sanity

quote:

ORIGINAL: HydroMaster
Actually the idea is too cut the demand before they have a chance to cut production.  This creates a surplus driving down the cost.  Remember the supply and demand concept?  High supply + low demand =low cost. 

Also, I'm not sure what sense of accomplishment you get by insulting everyone else here.  Does it make you feel better?  We're you abused as a child and feel a need to get retribution now?  Perhaps you were picked on in school?  Or maybe you just feel lionized by the anonymity that posting online gives you since you don't actually have to face the people you insult.  Please, by all means, share with us what makes you tick?  I'm sure  everyone is just dying to know how your mind works.


Are you talking about the same TheHeretic that lectures me just like a Sunday School Teacher if I show even the slightest bit of a mean streak???

Wow... he's actually a really nice guy. A little too nice, in my opinion... but since he's got you bullied to the point you're begging him to take it easy on you like this, how will you react if you ever get stuck debating someone that's truly nasty. Like, um... I don't know. I'm sure there's someone like that around here though...

If there was a debate I'd wouldn't be saying this to him.  It's just insults and harrassment.  If he would make a single helpful statement I'd be happy to consider it and possibly even agree with it. 


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I walk the lonely road,
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RE: Exxon cutting back on oil + gas production - 5/23/2007 7:53:54 PM   
MrRodgers


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Joined: 7/30/2005
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quote:

ORIGINAL: selfbnd411

Yes, but remember that corporations are the creations of the state.  A corporation is nothing more than the state giving special privileges to capital in order to allow it to function more efficiently.  These advantages include the ability to issue stock and for individuals to avoid personal libility for the actions of the corporation.

That's the problem; the state gave them a competitive advantage, but they're using it to distort the free market.  If the state had not allowed them to organize in massive corporations (but rather mid sized corporations), there would be more competitive pressure to produce.


Welcome to capitalism 101.

"Your experiment in the corporation...is the end of your experiment in democracy" Thomas Jefferson 1803
 
He was quite correct as for the following 150 years economically, we lived with corporate 'trusts' or monopolies and the last 40-50 years we have been living in a plutocracy.

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RE: Exxon cutting back on oil + gas production - 5/23/2007 7:55:47 PM   
b12345


Posts: 37
Joined: 3/27/2007
Status: offline 		Wonder if after the election the DOJ will start looking for violations of the Sherman anti-trust act. Trebile damages for 6 years of this oil business...It would almost solve the deficit if the Gov't could collect.

B. 

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RE: Exxon cutting back on oil + gas production - 5/23/2007 7:57:50 PM   
Sanity


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From: Nampa, Idaho USA
Status: offline
quote:

ORIGINAL: selfbnd411
...the major integrated oils are not interested in expanding production.

With an unfriendly Democrat Congress in America, and a Leftist nationalizing their investments in Venezuela, and Iran shaking a nuclear Saber, they would be fools to invest almost anywhere they look. What they're doing makes business sense, and I guess they just don't care what you think.

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RE: Exxon cutting back on oil + gas production - 5/23/2007 7:57:55 PM   
HydroMaster


Posts: 4786
Joined: 9/24/2005
Status: offline 		I wish, but the large companies are very careful about dividing their assest and such to stay within the anti-trust act's guidelines.  

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RE: Exxon cutting back on oil + gas production - 5/23/2007 8:04:52 PM   
servantforuse


Posts: 6363
Joined: 3/8/2006
Status: offline 		Corporations do not exist to serve the public interest. They exist to make a profit for the shareholders who own and invest in the company. I own shares of Conoco/Phillips and Exxon and hope both of these Companies continue to do well. Millions of everyday folks own shares in these companies and depend on them doing well to fund their retirement..I say go " Big Oil"

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RE: Exxon cutting back on oil + gas production - 5/23/2007 8:11:41 PM   
HydroMaster


Posts: 4786
Joined: 9/24/2005
Status: offline 		And screw the rest of us that can't afford to invest, right?  Usless people like teachers, social workers, nurses, and the like who are paying a full day's wages for a tank of gas.  There has to be a line drawn somewhere.  

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RE: Exxon cutting back on oil + gas production - 5/23/2007 8:17:33 PM   
selfbnd411


Posts: 598
Joined: 7/23/2005
Status: offline 		Serving the interests of shareholders and being a good corporate citizen are not mutually exclusive.  The article points out that XOM is not increasing earnings per share by producing more of a needed commodity.  It's doing so by using anticompetitive practices and by shrinking the float (fewer shares out there, so the price per share goes up).  How much of the company can XOM buy back, and once they're done with the buybacks, what's the driver going forward if they're not doing E+P?

I wouldn't own XOM, but COP is OK.  I prefer the drillers and oil infrastructure plays like Fluor, because I think Congress and/or public pressure will eventually force these guys to at least make token efforts to expand production.

And hydro, everyone can afford to invest!  I have a scottrade account, and I have a small IRA that I started when I was 22.  I've grown it from $4000 in 2000, to $10340 today.  It spent 5 yrs in a CD at 7% interest and the last 18 months in the stock market--my annualized return is 20%!

< Message edited by selfbnd411 -- 5/23/2007 8:19:14 PM >

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RE: Exxon cutting back on oil + gas production - 5/23/2007 8:17:41 PM   
servantforuse


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Joined: 3/8/2006
Status: offline 		Teachers, social workers and just about any one else who has ANY type of retirement plan where they work already own oil stocks as part of their investment plan. They might not know it. You might even own some . If th oil companies don't make money and people stop investing in them they go broke.

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RE: Exxon cutting back on oil + gas production - 5/23/2007 8:27:20 PM   
HydroMaster


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quote:

ORIGINAL: servantforuse

Teachers, social workers and just about any one else who has ANY type of retirement plan where they work already own oil stocks as part of their investment plan. They might not know it. You might even own some . If th oil companies don't make money and people stop investing in them they go broke.

Actually no we don't.   Retirement plans in our fields are crap and to have any worthwhile retirement you have to invest privately....which you can't afford to because you're getting paid $8.95/hr.  See the stupidity of it all?  And raising wages will do nothing for us because the oil companies will then raise prices saying they have to cover for the losses generated by raising their employees wages. 


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I walk the lonely road,
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