Exxon Mobil (NYSE:XOM) highlighted its 2010 financial and operating achievements at the company's analyst meeting on March 9. The company also discussed its macro view of the oil and natural gas markets and the company's plans for capital spending in 2011. Let's take a look at some highlights. (For background reading, see A Guide To Investing In Oil Markets.)
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Macro Demand for Oil
Exxon Mobil estimates that total demand for energy will grow by 35% by 2030, for a compound annual growth rate (CAGR) of 1.2% over the 2005 to 2030 time frame. Natural gas demand will have the fastest growth at a 2% CAGR rate, with oil growing at a 0.7% CAGR. (Learn more about this metric in Compound Annual Growth Rate: What You Should Know.)
Although demand for alternative sources of energy, like nuclear, solar, biomass and wind will grow at a 1.8% CAGR through 2030, fossil fuels will still provide the vast majority of all energy over the next few decades.
Demand for fuels used in transportation will help power this growth, and Exxon Mobil estimates that demand here will grow by 40% through 2030. This growth will be led by the less developed countries, while demand from the industrialized world will decline.
Exxon Mobil reported $30.5 billion in net income in 2010, a 57% increase over 2009. Most of this profit was earned in the upstream segment of the company. Despite this staggering profitability, these results were below the peak year of 2008, when oil prices reached over $140 per barrel.
Exxon Mobil reported average production of 4.45 million barrels of oil equivalent (BOE) per day in 2010, making the company the largest oil and gas producer in the world. BP (NYSE:BP) reported average production for 2010 of 3.8 million BOE per day.
Exxon Mobil is focused on its capital and reported a 22% return on capital employed in 2010. This is far above its peers in the industry. Royal Dutch Shell (NYSE:RDS.A) reported a return on average capital employed of 11.5% at the end of the fourth quarter of 2010.
Exxon Mobil's excess cash flow enabled the company to have an aggressive dividend and stock repurchase plan in 2010. The company paid out $8.5 billion in dividends and repurchased $11.2 billion in stock in 2010. (For more on repurchases, see A Breakdown of Stock Buybacks.)
XOM's 2011 Plans
Exxon Mobil is aggressively ramping up its capital spending through 2015 to bring enough supply on line to meet the anticipated demand for energy. The company plans to spend approximately $34 billion in 2011 and between $33 billion and $37 billion each year through 2015. In 2010, Exxon Mobil reported total capital expenditures of $32.2 billion. By comparison, Chevron (NYSE:CVX) spent $21.8 billion in capital in 2010, a slight decline from $22.2 billion in 2009. Exxon Mobil has been spending heavily over the last five years, and has 11 upstream projects scheduled to come on line from 2011 to 2013.
The Bottom Line
Exxon Mobil reported a large profit and excess cash flow in 2010, and plans to increase capital spending to supply energy to meet the higher demand expected over the long term.
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