No More Gushers for ExxonMobil

…It’s not just ExxonMobil. Oil-field-services provider Baker Hughes keeps a monthly tally of how many rigs are active around the world, and the rig count peaked at 6,227 in December 1981. In April of this year it was just 2,836. But ExxonMobil is the most cautious of the lot. Slightly smaller rival Shell spent 25% more on capital and exploration in 2006, and the other oil majors spent more than ExxonMobil relative to their size. The Dallas-based industry leader still reports that its oil and gas reserves are growing. But recent gains have been modest, and most have been in natural gas, not the crude that is refined into gasoline.


ExxonMobil’s official mantra is that “we are doing all we can to bring more petroleum products to market to meet growing energy needs.” The numbers say otherwise, and this is a company where numbers speak louder than words. The number that matters most is return on capital employed–that is, net profits divided by what’s been invested in oil rigs, pipelines, refineries, etc. ExxonMobil’s ratio, 32.2% last year, is consistently the industry’s best. When ExxonMobil gives more money to shareholders than it spends on capital and exploration, that means its executives can’t find enough new projects that they think will generate 30%-plus returns.

Getting their hands on oil fields is the biggest issue. “They can see the opportunities,” says veteran oil analyst Fadel Gheit of Oppenheimer & Co., “but they don’t have access to them.” Only 7% of the world’s estimated oil and gas reserves are in countries that allow companies like ExxonMobil free rein, according to consulting firm PFC Energy. Fully 65% are in the hands of state-owned companies such as Saudi Aramco, and the rest are in the likes of Russia and Venezuela, where Western companies can get a foothold one day but lose it the next.

Time