Saturday, August 02, 2008

Exxon's Record Capital and Exploration Spending


With all of the media and Congressional focus on Exxon's record profits in the second quarter, what gets neglected (along with Exxon's record income tax payments) is the record amount of spending by Exxon on "capital and exploration," coming in at $7 billion in the second quarter 2008 (data here), the highest amount ever spent by Exxon in a single quarter.

"ExxonMobil increased investments across all business lines to help meet global demand for crude oil, natural gas and finished products. Capital and exploration project spending increased to $7.0 billion in the second quarter, up 38% from last year. For the first half of 2008, spending on capital and exploration projects was $12.5 billion."

If the trend continues, Exxon will spend about $25 billion this year on capital and exploration, the highest amount in history (see top chart above). Where are the media reports on Exxon's "record capital and exploration spending?"

The bottom chart above shows some of Exxon's financial results for the first half of 2008, comparing profits, income taxes paid, and capital and exploration expenditures. Note that Exxon has spent more so far this year on income taxes ($20b) and capital expenditures ($12.5b) combined ($32.50) than it made in profits ($22.5b) this year.

Further, note that Exxon's tax rate so far this year is 47%, based on earnings before tax (EBT) of $42.4b and income tax payments of $19.8b, up from last year's rate through the first half of 42.5%. Why doesn't that significant tax hike for Exxon get reported?

12 Comments:

At 8/02/2008 10:43 AM, Blogger Walt G. said...

I can't help but look at the profits on the chart and get jealous. And that’s not because of how much money Exxon has made. I work for GM. You could flip that chart upside down and you would have our dire financial situation. I think what people are forgetting is that companies are supposed to make money, so how can making more money possibly be bad? Is there really an amount of profit that is “just right”?

If you don’t like it, you can cut back on buying gas, or buy Exxon stock. That’s not as cruel as it sounds—that’s the reality that has to be dealt with. We certainly don’t need price fixing that will lead to shortages, or windfall profits taxes that we will just end up paying. Maybe I am just an optimist, but I believe that people will adjust and everything will be fine.

 
At 8/02/2008 11:54 AM, Anonymous peter said...

Hey bud...
How about bang for buck, EXXON may pay a lot in taxes but a perk you never talk about is that they get the worlds greatest military to help them get no bid contracts in Iraq with the tax dollars they pay. That is people dying and killing so they can dig for oil in the mideast to make more profits so i shed no tears and feel they should pay even more in taxes.

 
At 8/02/2008 11:59 AM, Blogger Jeff Lehner said...

You're the best man. Great resource you're providing.

 
At 8/02/2008 12:27 PM, Blogger juandos said...

Oh! oh! kostard alert!

More of that discredited 'blood for oil', peter?

Are you channeling Keith Olbermann?

 
At 8/02/2008 12:35 PM, Anonymous QT said...

Walt g.,

Saw those results from GM the other day. Have to admire your ability to be positive and keep your focus. Having worked for Nortel, I understand it can be difficult.

It appears as though the economy and the housing market may be past the worst. The American economy has turned out to be more robust than the media/politicians would have us believe.

I really doubt that oil prices will stay in the clouds forever. It wasn't the end of oil in the 1970s either and this time around, we have avoided the mistake of wage & price controls. Sure, we have a few misguided politicians suggesting ideas like windfall profit taxes but it doesn't look like they can get this passed (thank God).

A recession feels different. The phone stops ringing and business just stops. We are not seeing that where I am.

Best wishes :)

 
At 8/02/2008 1:10 PM, Blogger juandos said...

What else is Exxon returning?

Todd Keister writting in the American Thinker, "Thank you, Big Oil" noted that Exxon's "record profits in 2006 returned more than $111 Billion in equity to their millions of stockholders, which likely include yourself if you receive pension benefits or have a 401k, IRA, or other investment account"...

Al Smith penning an opinion piece in the Milwaukee Journal Sentinal, "Hands off my ‘excessive profits’" says: "According to a September 2007 study on oil company ownership conducted by Sonecon LLC, an economic advisory firm, the great majority of our oil and natural gas companies are owned almost entirely by Americans whose median income falls under $70,000.

This ownership takes the form of stock purchased by individual investors (23%), IRAs (14%), mutual funds (29.5%), pension funds (27%) and other institutional investors (5%). Energy company corporate managers hold only 1.5% of the total ownership of the companies they oversee.

Put another way, if you have money in a mutual fund or an IRA — and 100 million of your fellow citizens do — then you’re being deliberately targeted by political demagogues preaching class warfare during this campaign season. How does it feel to be branded as an enemy of the people making undeserved “excessive profits” while common folk struggle?
"...

 
At 8/02/2008 3:58 PM, Anonymous QT said...

Juandos,

Hillary Clinton also makes her living like most lawyers and politicians by "not inventing anything". Perhaps, we should be deferring to her expert knowledge on this subject.:)

 
At 8/03/2008 11:10 AM, Blogger juandos said...

Good Morning qt:

Hmmm, "we should be deferring to her expert knowledge on this subject.:)"...

Good point...

Yes indeed, Hillary has had Chavez like moments too...

 
At 8/03/2008 12:19 PM, Anonymous Anonymous said...

Further, note that Exxon's tax rate so far this year is 47%, based on earnings before tax (EBT) of $42.4b and income tax payments of $19.8b, up from last year's rate through the first half of 42.5%. Why doesn't that significant tax hike for Exxon get reported?

Because XOM pays income taxes to foreign governments based on the price of oil not at a set statutory rate. The higher the price of oil, the higher the income taxes as a percent of the price of oil. Not so in the US.

A more interesting chart would be one which conceptualizes data in context. XOM spends less on capital and exploration, less on actual production of barrels of equivalent oil and more on stockholders (dividends and stock buybacks) as a percentage of revenues than ever before.

Carpe Diem is not the only one capable of conflating data for ideological purposes.

 
At 8/03/2008 3:47 PM, Blogger juandos said...

Apparently you are sincere anon @ 12:19 PM in NOT getting the point...

Why should Exxon, its shareholders, or its customers have that much wealth extorted from them in the first place?

Why should all that wealth be wasted on inane government spending for nanny state programs that accomplish nothing?

 
At 8/03/2008 7:35 PM, Anonymous Anonymous said...

Something for you to review Carpe Diem. You don't need to employ a grad student.

EIA Table B12 Composition of Income Taxes for FRS respondent companies.

As of 2006, US oil and gas companies paid a total of $24 billion in US federal income taxes and a total of $81 billion in foreign income taxes on a consolidated pre-tax income of $217 billion.

Back of the envelope calculation using the US tax/foreign tax ratio, XOM's Q2.08 pre-tax income of $21 billion would indicate payment to the Treasury of $2.3 billion. A far cry from $10 billion.

_______________________________
juandos, unless you have something to add to the discussion, stfu!

 
At 8/04/2008 11:48 AM, Blogger juandos said...

Thanks again anon @ 7:35 PM for again letting everyone know you can't read and your arithmetic is on par with your reading skills...

That last line of your's is indicative of your panic...

 

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