Exxon Mobil (NYSE:XOM) reported its typical spectacular earnings report for the fourth quarter of 2008, but gave few clues as to the evolution of its capital spending in 2009.
The company earned $7.8 billion in the fourth quarter of 2008, or $1.55 per share. While this number was down year over year and sequentially, it is clearly a profit that most companies can only dream of. The report also engendered some political heat about how much profit "big oil" is making during hard times, but it is refreshing to see an American company standing on its feet rather than begging Washington for a bailout. (Oil and gas investments can provide unmatched deduction potential for accredited investors, learn more in Drilling For Big Tax Breaks.)
IN PICTURES: Top 10 Solutions For A Big Tax Bill
Exxon spent $26.1 billion in capital spending in 2008. This was up strongly from the $20.8 billion in 2007. A closer examination shows that it spent 75% of this on the upstream to explore and develop oil and natural gas projects.
|Exxon Capital Spending (billions)|
|U.S.||$ 3.3||$ 2.2|
What was noticeably absent from the report was any talk of what the company hopes to spend in 2009. The company has always said that it plans to spend $125 billion over the next five years on capital spending - that's an average of $25 billion a year.
Rex Tillerson, the CEO of Exxon Mobil, told reporters in an American Petroleum Institute meeting in October 2008 that the drop in oil prices had not impacted the company's spending plan. "Nothing that we had in our plans has been affected by this change in prices. We were never planning on $100, $150 oil. The credit crisis also has little impact on Exxon Mobil because obviously we carry very low debt." Of course, oil prices in October were much higher than today, and Exxon Mobil is notable for its extreme capital discipline.
It was difficult to get any further info from the quarterly earnings call, because unlike its peers, the senior management of Exxon Mobil does not participate in the call. The company is planning an analyst meeting in March 2009, and may have further announcements at that time. (These events offer the average investor a chance to hear management respond to analysts' hard-hitting questions, see Conference Call Basics.)
Competitor Marathon Oil (NYSE:MRO) just announced it would cut capital spending in 2009 by 25%. The cuts would come mostly from a delay in developing some projects in the Canadian Oil Sands.
Like its fellow integrated oil peers, Exxon had difficulty growing its production in the fourth quarter of 2008. Its reported production was down 3% year over year, but after excluding OPEC quota cuts and lower entitlement volumes, production declined 1%. The full year was worse, with reported production down 6%, and 3% after the exclusions noted above.
Tony Hayward, the CEO of BP Inc. (NYSE:BP), recently suggested that one way out of the problem that the large integrated oil companies have with growing production and reserves is to merge with national oil companies (NOC). This would allow the companies to integrate their technological edges with large undeveloped reserves that the NOCs control.
Other integrated companies have had problems with their production growths. For example, Chevron (NYSE:CVX) reported during its recent conference call that it would have difficulty meeting its goal of a 3% compound annual growth rate in production from 2005-2010.
Exxon Mobil reported great earnings for the fourth quarter of 2008, but gave precious few clues as to whether it will adjust its mammoth capital spending plan of $125 billion over five years. It also was plagued with the problem of growing its production, so though this behemoth is still making money, it might be wise to investigate further before jumping on this stock.
Stock AnalysisHere are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
InvestingThe further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
Fundamental AnalysisOptions market trading data can provide important insights about the direction of stocks and the overall market. Here’s how to track it.
Stock AnalysisCan these two oil stocks buck the trend?
Investing NewsAlcoa plans to split into two companies. Is this a bullish catalyst for investors?
Stock AnalysisIf you want to buck the bear market trend by going long on consumer stocks, these three might be your best bets.
Investing NewsA rate hike would certainly alter the investment scene, but would it be for the better or worse?
Investing NewsWith market volatility high, you may think it is time to run for corporate bonds instead of stocks. Before you do take a deeper look into which is better.
Mutual Funds & ETFsInstead of selling your stocks to get gains, consider a short selling strategy, specifically one that uses short ETFs that help manage the risk.
Investing BasicsDiversifying with international stocks can benefit most portfolios, but beware of country risk.
When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>