Exxon Mobil's results buy plenty of respect

Bashing Exxon Mobil is practically a sport, and more so when gasoline is near $4 a gallon and the oil giant is racking up record profits. It's enough to make consumers scream and politicians call for congressional hearings.

But at last week's annual meeting in Dallas, the company seemed to win the grudging respect of many critics. Even shareholders who petitioned for big changes, such as separating the jobs of chairman and CEO, were quick to say they were pleased with Exxon Mobil's performance and its leaders.

That's what happens when you earn more money than any public company for the past five years, including $40.6 billion in 2007. Such results, along with a soaring stock price, buy a lot of respect and admiration from shareholders.

One group even proposed banning certain shareholder proposals, because they're being used to harass management. The board opposed the idea, saying it welcomes outside input, even if some issues would be better aired elsewhere.

That kind of independent thinking sets Exxon Mobil apart.

Scorn the company if it makes you feel better, but Exxon Mobil is one of the best-run multinational corporations in any industry. It always generates huge numbers, and lots of them. I've selected some that offer insight into how Exxon Mobil views the world and the part it plays.

They won't soften the sting of higher energy prices, but they may make you feel better about the future -- or at least Exxon Mobil's future.

101% That's how much oil and gas production Exxon Mobil replaced with new reserves last year, even after Venezuela's land grab. This means it's finding, developing and buying as much energy as it's producing and selling. And it's done that for 14 years in a row, no small feat for a company that annually produces the equivalent of 1.5 billion barrels of oil and natural gas.

Chief Executive Rex Tillerson said that supplying those commodities is "the core of our business" and "a corporate social responsibility."

People often urge Exxon Mobil to throw its considerable weight into other things, from pushing for an end to the Iraq war to solving global warming and developing alternative fuels. But the company doesn't lose sight of priority No. 1.

"That is the first and foremost vital thing for us to continue to do -- to not fail to supply the energy the world has to have," Tillerson said.

60/40 Oil and natural gas provide about 60 percent of the energy used worldwide, and Exxon Mobil expects that share to hold through the middle of the century. Which means we'll need a lot more oil and gas, because worldwide demand for energy is projected to grow 40 percent by 2030, even with increases in energy efficiency.

People around the world are demanding a better quality of life, which starts with electricity and typically extends to cars, electronics and power tools. Alternative energy sources, such as wind, solar and biofuels, are expected to grow rapidly, but they start from such a small base that they're not expected to satisfy more than 2 percent of total demand.

"The world is going to have to use oil and natural gas, whether people like or not," Tillerson said, adding that developing countries will continue to insist on improving their living standards. "That's just a fact. And you can run, but you can't hide; that's what you're going to be using 25 years from now."

Purchases

Capex spending: $21 billion

Stock purchases: $28 billion

Exxon Mobil shells out a huge amount on capital spending and exploration, because it's the lifeblood of its business. (Last year's "capex" spending, almost $21 billion, was higher than the total revenue of 380 Fortune 500 companies.) But Exxon Mobil spent even more to buy back shares of its own stock in 2007.

That says a lot about the company's focus on boosting shareholder returns and the high-dollar climate that oil enjoys at the moment. But it also sheds light on Exxon Mobil's famous discipline in evaluating investments.

With so much cash flowing in, it would be natural to ramp up spending on assets and big oil projects. Except that Tillerson says the company hasn't made any changes in the way it evaluates investments.

Acquiring and developing big oil fields can have financial implications for decades, so the company doesn't want to be swayed by short-term price movements. Tillerson says a management committee considers scores of factors, including the deal's upside, cost structure, required technology, fiscal terms, commercial aspects, geopolitical situation and a set of economics.

"And we don't select them until we're confident they're going to generate a good return for shareholders," Tillerson said.

Capex spending has increased steadily in the past five years but nothing like the growth in income. So the company plows much of the extra cash into buying shares, effectively giving owners a bigger stake in the company's profits and holdings.

Revenue vs. manpower

Revenue: +65%

Employees: -8.5%

Other companies can only dream about this trend: In the past five years, Exxon Mobil's revenue has soared 65 percent, while its employee count has fallen by 8.5 percent.

The company uses a lot of subcontractors who are specialists, so that reduces the need for workers. It sold off some refineries in recent years, and they're labor-intensive. Technology advances also help workers do more.

And the oil industry always has huge employee-productivity numbers, because producers don't need more people to generate more revenue; higher oil prices do that.

In 2007, Exxon Mobil got an average of almost $55 in revenue from each barrel of oil and gas equivalent. In 2003, it received $26 a barrel.

In the past five years, Exxon Mobil's total production has stayed remarkably level at about 4.2 billion barrels of oil and gas equivalent. What's changed is the amount it's earning; that's up 83 percent since 2003.

Why doesn't the company boost production? It actually produces more barrels than it reports, because foreign partners get credit for a chunk of total volume.

But conspiracy theorists like to say that oil companies want to limit supplies so prices will go higher. Exxon Mobil says it simply applies a disciplined approach to investment decisions. It's not restricted by a lack of cash (obviously, given its stock purchases), but by the number of opportunities that are worth the billions required.

Exploration spending

United States: -0.6%

Asia Pacific

and Mideast: +300%

Higher oil prices are attributed primarily to growing demand in emerging countries, especially China, India and other parts of Asia. But Exxon Mobil is also moving its exploration dollars to those areas.

Last year, it spent almost $6.2 billion to develop assets in Asia and the Middle East, three times more than in 2003. Investments in the United States were $3.7 billion last year, down slightly from 2003 and the year before.

That would change if the U.S. adopts more liberal policies about drilling, and pressure is sure to grow as retail prices climb and constrict family budgets. But Exxon Mobil's spending also mirrors the growth in demand.

U.S. drivers are using less gasoline this year for the first time in almost two decades as they respond to higher prices. But in Asia, demand continues to grow, and that's not likely to change. A big part of the projected growth over the next 25 years will come from developing countries that are using more electricity.

And Exxon Mobil will be there, producing more oil and gas and selling it.