XOM

[Milo Christensen]

The evil Exxon Mobil reports it's second largest quarterly profit at 10+ billion dollars, but disappoints investors and it's shares drop more than 4% in active trading today. Four percent of XOM's market cap is about 20 billion dollars.

[TimH]

Thats just twisted.

[Andrew Craig-Bennett]

No the share price fell because 88% of all surviving Rockefeller descendants, mustering their 0.006% of Exxon-Mobil's share capital, summoned a Press conference and told XOM to mend its wicked ways and get with the environmental program.

(I did not make that up!)

[Canoez]

No the share price fell because 88% of all surviving Rockefeller descendants, mustering their 0.006% of Exxon-Mobil's share capital, summoned a Press conference and told XOM to mend its wicked ways and get with the environmental program.

(I did not make that up!)

I believe that the Rockefeller family members also chided current management on being too focused on short term goals and profits.

[Andrew Craig-Bennett]

Yes, you are quite right - I should have mentioned that.

[peb]

Why do we want XOM to do alternative energies? What makes us think they have the expertise in areas such as wind, solar, etc? It makes little sense to me. Let oil companies focus on oil, we still need a lot of it. Let oil companies spend their R&D and capital money on developing the more expensive oil in the world (oil sands, deep water, etc). Alternative energies should get developed by those companies which have the expertise. For example, GE continues to make dramatic improvement in wind-turbine technologies. What makes us think the XOM can add that much to this?
Strange logic indeed to say that oil companies should focus on something totally different. I guess we could tell GM and Ford to start focusing on healthcare, we need a lot of that.


The argument that XOM is not developing enough new oil may have some legitimacy.

[Canoez]

Why do we want XOM to do alternative energies? What makes us think they have the expertise in areas such as wind, solar, etc? It makes little sense to me. Let oil companies focus on oil, we still need a lot of it. Let oil companies spend their R&D and capital money on developing the more expensive oil in the world (oil sands, deep water, etc). Alternative energies should get developed by those companies which have the expertise. For example, GE continues to make dramatic improvement in wind-turbine technologies. What makes us think the XOM can add that much to this?
Strange logic indeed to say that oil companies should focus on something totally different. I guess we could tell GM and Ford to start focusing on healthcare, we need a lot of that.


The argument that XOM is not developing enough new oil may have some legitimacy.

Well, I think it's nice to let oil companies focus on oil, but let's be honest : There is a limited supply of the stuff in the ground. Kudos if they can get it all out of the ground cleanly and safely.

Still, in the long run, (particularly from an investor's point of view) if you don't develop alternatives to the oil (biofuels or whatever...) you will not continue to turn a profit in future. IIRC, there was some information published recently on how much money various "energy" companies were spending on the development of alternative energy sources. Exxon-Mobil was near the bottom of the list. Among others, BP and Shell have been working on alternative and green energy and marketing heavily on this basis.

Oil companies, like all companies involved in infrastructure and technology, need to continually change their focus and develop "the next best thing" or they will wither and die when they are overtaken by others who can adapt to this change better.

The only constant in life is change.

[peb]

Well, I think it's nice to let oil companies focus on oil, but let's be honest : There is a limited supply of the stuff in the ground. Kudos if they can get it all out of the ground cleanly and safely.

Still, in the long run, (particularly from an investor's point of view) if you don't develop alternatives to the oil (biofuels or whatever...) you will not continue to turn a profit in future. IIRC, there was some information published recently on how much money various "energy" companies were spending on the development of alternative energy sources. Exxon-Mobil was near the bottom of the list. Among others, BP and Shell have been working on alternative and green energy and marketing heavily on this basis.

Oil companies, like all companies involved in infrastructure and technology, need to continually change their focus and develop "the next best thing" or they will wither and die when they are overtaken by others who can adapt to this change better.

The only constant in life is change.
A few comments:
The limited stuff in the ground is actually quite large. Its not a matter of a shortage of oil, it is a matter of a shortage of cheap oil.

As an investor, I am less than impressed with BP and Shell's investments in alternative energy. It seems to be a lot more fluff than meat. At least that is the impression I had when researching the companies.

Yes all companies need to invest in infrastructure and technology to maintain their growth. But there is a long trail of companies who have tried to "change their focus and develop the next best thing" and have failed because they attempted to do something outside their area of expertise. I am very cautious investing that is trying to transform itself. History tells us it is a very dangerous proposition indeed, especially by a company that is not diverse in the first place.

XOM's return on capital is not that great. IMO, they literally cannot afford to divert very much profit away from oil. If they divert a significant portion of their huge profits to something new, inevitably their oil revenue will suffer.

The only constant in life is change. Yes, they have to adapt to the changing petroleum environment, ie not as much cheap and easy to get oil. This is where they need to be focused, both from a investor and a societal point of view.

[Canoez]

http://upload.wikimedia.org/wikipedia/en/thumb/4/41/Hubbert_world_2004.png/800px-

Some people think there isn't all that much oil left. (Basis: Hubbert projection)

http://content.answers.com/main/content/wp/en/2/2e/World_energy_consumption,_1970-2025,_EIA.png

This chart shows projected consumption (worldwide) I don't see this chart following the curve shape above.

[peb]

Th infamous peak oil graph. How about this one (and it probably grossly underestimates unconventional production):

http://www.eia.doe.gov/oiaf/ieo/images/figure_36.jpg

[Canoez]

:::Shrugs:::

I suppose that the point I was trying to make - and I'm sure that we could trade graphs and data all week long showing different points of view - is that the oil supply is limited. Production cannot go on forever. I don't think there is anyone who could successfully argue that it is an endless resource.

Also, the more difficult to obtain oil will not be available either cheaply or easily, so the production rate will more than likely decrease over time. The other consideration is that things like oil shale/sands and deep water production come at larger environmental risks.

With China, India and other parts of the developing world discovering some measure of economic success and buying petroleum powered products, it would seem that consumption will be on the up-swing.

Exxon-Mobil (and others) will need to find other sources for energy in the future to meet these increased demands.

[BETTY-B]

Why do we want XOM to do alternative energies? What makes us think they have the expertise in areas such as wind, solar, etc?

Another reason would be because they can afford the research.

DAN

[Roger Cumming]

Alternative energy sources which do not involve burning fossil fuels must be developed whether or not there is still oil in the ground to exploit. It is the burning of the oil that is ruining the planet.

Whether corporations such as exxon mobil should gain control of the new energy sources is a more urgent question. Can the country afford to allow something as crucial as its energy sources be controlled by a giant corporation and specifically one with a long history of criminal behavior starting in the 19th century?

[peb]

Another reason would be because they can afford the research.

DAN

No they can't. Not if we want them to develop more oil production. You can go through their financials and verify this yourself. They need to take their profits and invest it into the new oil reserves. They have a relatively low return on capital invested. Any significant diversion of their capital towards other business areas will inevitably lead to a decline in their oil production. There are better places to get capital for investing into alternative energies.

[BETTY-B]

No they can't. Not if we want them to develop more oil production. You can go through their financials and verify this yourself. They need to take their profits and invest it into the new oil reserves. They have a relatively low return on capital invested. Any significant diversion of their capital towards other business areas will inevitably lead to a decline in their oil production. There are better places to get capital for investing into alternative energies.

Are you high on glue? The head cheeses are billionaires! I know I could do some serious research if ten billionaires each gave me a measly one hundred million.

You are the guy that would eat the seeds rather than planting them arnt ya?

DAN

[Canoez]

You are the guy that would eat the seeds rather than planting them arnt ya?
DAN

Nail on the head.

As the oil gets harder to find, the relative price increase in oil will just go to offset the higher fees to find and develop the fields. Personally, I don't see a huge potential here for profit increases.

[peb]

Are you high on glue? The head cheeses are billionaires! I know I could do some serious research if ten billionaires each gave me a measly one hundred million.

You are the guy that would eat the seeds rather than planting them arnt ya?

DAN
Quite the opposite. When I plant corn seeds, I simply expect corn to grow. I own XOM stock, and I only own a stock after doing quite a bit of research and study. That company needs to invest its money in new oil production. If they diverted a significant portion of their profit towards alternative energies, it would start having and impact on their oil production in a relatively short time.

I will invest in other companies for alternative energies. Those that have a higher likelihood of success and those that will rely on it for their corporate survival (or at least corporate prosperity). Like I said, I consider it a major red flag if a company, of any size, tries to reinvent itself. It rarely works.

[Milo Christensen]

I think some of the folks posting to this thread miss the point. There has been considerable grumbling (to put it mildly) about what some erroneously see as the oil companies outrageous profits. The pension funds and mutual fund managers and those who are in the market to make money expected XOM to do better than 10.9 billion dollars, so they sold XOM and the stock went down yesterday. The investors felt it was better to take a hit than to hold on to stock in a company that only made $10.9 billion.

[peb]

I think some of the folks posting to this thread miss the point. There has been considerable grumbling (to put it mildly) about what some erroneously see as the oil companies outrageous profits. The pension funds and mutual fund managers and those who are in the market to make money expected XOM to do better than 10.9 billion dollars, so they sold XOM and the stock went down yesterday. The investors felt it was better to take a hit than to hold on to stock in a company that only made $10.9 billion.
I don't miss the point at all Milo. There was reason to be disappointed . I was simply responding to the bit about the rockefellars not liking XOM's alternative energy investments.

[Canoez]

On this point, I actually agree with Peb. We didn't miss the original point. The investors were killing the goose that laid the golden egg.

What we seem to disagree on is how many more golden eggs the goose has in her and whether the goose should be diversifying into silver eggs or perhaps fertilizer to avoid becoming roast goose. :D

[Milo Christensen]

. . . killing the goose that laid the golden egg. . . .

Yes, with Exxon Mobil paying about $100 billion a year or so in Federal taxes we do need to be careful.