Exxon Mobil (NYSE:XOM) plans to spend approximately $185 billion in capital over the next five years on the company's oil and gas properties across the globe. This spending plan is underpinned by the company's positive macro view on the growth in energy demand over the next few decades. (To know more about oil and gas, read Oil And Gas Industry Primer.)

Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

Five-Year Capital Plan
Exxon Mobil has budgeted approximately $37 billion per year through 2016, with the funds spent on dozens of major projects in both the international and domestic segments. Exxon Mobil's previous guidance on capital spending, which was established at the analyst meeting held in March 2011, was in a range from $33 billion to $37 billion per year.

This projected level of spending by Exxon Mobil is among the highest of any other oil and gas company. Chevron Corporation (NYSE:CVX) recently set a $32.7 billion capital budget for 2012, and estimates that this capital will help increase production 20% by 2017.

Royal Dutch Shell (NYSE:RDS-A, RDS-B) plans to spend approximately $30 billion in capital on various projects in 2012, with the majority of the upstream budget funds spent in Australia and North America.

Petrobras Brasileiro (NYSE:PBR) has a larger five-year capital spending plan and has budgeted $224 billion in spending from 2011 to 2015. The company will spend most of these funds domestically, and focus on the considerable offshore discoveries made over the last few years.

Capital Spending Trend
An examination of Exxon Mobil's capital budgets since 2009 shows a rapid escalation in spending across the company's portfolio. Exxon Mobil reported capital spending of $27.1 billion and $32.2 billion in 2009 and 2010, respectively. In 2011, spending increased again and reached $36.7 billion for the year.

Exxon Mobil has also shifted capital away from the company's international segment as it has become more involved in unconventional resource plays in the United States. In 2011, the company spent 32% of its upstream capital budget on domestic properties, compared to only 17% in 2009.

Macro View
Exxon Mobil increased its capital budget through 2016 based partly on the company's macro view of energy demand going forward. The company estimates that demand for all forms of energy will grow 40% by 2040. Natural gas will experience the greatest growth over that time, and increase at an annual rate of 1.6%. Demand for crude oil will grow at a slower rate, with the company estimating an annual growth rate of 0.7%.

Exxon Mobil estimates that this demand growth will be led by the developing economies, with Asian-Pacific countries providing 60% of the expected growth through 2040.

Despite the huge amount of capital spending planned in 2012, Exxon Mobil expects 2012 oil and gas production to fall by 3% over last year. The company estimates that production will grow from 1 to 2% annually through 2016.

Exxon Mobil's liquids production will grow faster and increase by 2 to 3% annually over the next five years. Natural gas production will grow slower and increase at a 0.5 to 1% annual rate as Exxon Mobil allocates more capital over the next five years to crude oil and liquids areas.

The Bottom Line
Although Exxon Mobil plans to spend an enormous sum of money over the next five years on its oil and gas properties, the company's production growth will be anemic over that time. This raises the question of whether the company is spending too much money buying back stock and not enough on developing its large resource base. (For additional reading, check out A Guide To Investing In Oil Markets.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Stock Analysis

    3 Resilient Oil Stocks for a Down Market

    Stuck on oil? Take a look at these six stocks—three that present risk vs. three that offer some resiliency.
  2. Economics

    Keep an Eye on These Emerging Economies

    Emerging markets have been hammered lately, but these three countries (and their large and young populations) are worth monitoring.
  3. Stock Analysis

    Is Pepsi (PEP) Still a Safe Bet?

    PepsiCo has long been known as one of the most resilient stocks throughout the broader market. Is this still the case today?
  4. Investing

    The ABCs of Bond ETF Distributions

    How do bond exchange traded fund (ETF) distributions work? It’s a question I get a lot. First, let’s explain what we mean by distributions.
  5. Investing

    Top Investment Banks In The Energy Industry

    Many global Investment banks are highly involved in the energy industry, but there are also some smaller banks and boutiques that are strong players.
  6. Stock Analysis

    3 Stocks that Are Top Bets for Retirement

    These three stocks are resilient, fundamentally sound and also pay generous dividends.
  7. Investing News

    Are Stocks Cheap Now? Nope. And Here's Why

    Are stocks cheap right now? Be wary of those who are telling you what you want to hear. Here's why.
  8. Investing News

    4 Value Stocks Worth Your Immediate Attention

    Here are four stocks that offer good value and will likely outperform the majority of stocks throughout the broader market over the next several years.
  9. Investing News

    These 3 High-Quality Stocks Are Dividend Royalty

    Here are three resilient, dividend-paying companies that may mitigate some worry in an uncertain investing environment.
  10. Stock Analysis

    An Auto Stock Alternative to Ford and GM

    If you're not sure where Ford and General Motors are going, you might want to look at this auto investment option instead.
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    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 >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    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 >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!