It pains me to say anything nice about Exxon Mobile management. They are the most notorious climate change sceptics for instance, something I rank along with believing that the world was created in six days about 6000 years ago.
The belief might be politically convenient for Exxon, just as it might be politically convenient for some conservative politicians – but otherwise it dumb and possibly dangerous.
But – putting my politics aside I am going to say something really nice about Exxon. They look a lot smarter than me – and a lot smarter than most of the rest of us.
Remember the super-spike in oil. Remember how it was going to remain high forever. It was only a few months ago.
You would think that Exxon believed it too – and ramped up their capital expenditure to take advantage of the super-cycle boom to come.
You would think…
But you would be wrong.
Here are the capital expenditure numbers for the company by year in millions:
Now anyone who followed this industry knows that the cost of building new plants, pipes and drilling new holes skyrocketed during this period – so the physical amount of capex done by Exxon probably reduced during this period. It reduced whilst the cash flow from operations went from 21 billion to 52 billion.
Sure capex went up a little in the first nine months of this year but even that increase was disciplined.
The conclusion you have to come to is that Exxon did not drink the kool-aid. They were at the centre of one of the biggest booms out there – and they were not sucked in.
So – if you want to know who the smart money were – look no further.
PS. There is another hypothesis consistent with the data – one which paints Exxon in a very poor light. The alternative hypothesis is that they did little capex because they did not have worthwhile projects to do – that is that their reserves are stuffed. I see little evidence for that hypothesis but hope to entertain it in the comments.
However I should note that I know so little that it is entirely possible that the PS bear case is correct. Knowledgeable comments much appreciated.