February 3, 2006
Exxon Can't Win
Exxon's last year, the most successful in American history, has earned the company heaps of negative attention and may be rewarded with tax penalty. Now Floyd Norris, of the NYT, and others are after the company because it is not investing enough in new development. The company is returning dividends to shareholders rather than investing in new sources of energy. Norris labels the development a "partial liquidation." Jim Kramer refers to the company with derision as a "bank."
This all sounds like management prudence to me. Exxon has limited development opportunities and will not pursue high risk ones just to be in the exploration business. Norris seems to want Exxon to risk its money for the public good, taking high risk gambles to enlarge energy supplies, rather than marshaling its funds (increasing its value) for its private shareholders.
Remember when we criticized oil companies for drilling too many "dry holes" rather than returning money to shareholders? We said then that it was management "hubris" that caused them to keep and waste money rather than return it to shareholders. Norris's arguments support Exxon management, not the reverse.
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