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Exxon’s $207 Billion Shares Cache More Valuable Than Shell, BP

Bloomberg

By Joe Carroll

Feb. 27 (Bloomberg) — Exxon Mobil Corp., the world’s biggest company, has amassed a $207 billion stockpile of its own shares that exceeds the market value of all but one of its publicly traded rivals.

The oil producer boosted the number of shares in its treasury by 406 million to 3.043 billion as of Dec. 31, according to a public filing today by the Irving, Texas-based company. Based on today’s closing share price, the holding is larger than the market capitalizations of Royal Dutch Shell PlcChevron Corp.BP Plc and Total SA.

Chief Executive Officer Rex Tillerson said in December that he wasn’t interested in acquiring other companies. Oil fields became overpriced when oil surged to an all-time high above $147 a barrel in July, and they hadn’t retreated in response to the collapse of energy markets, he said. The last time Exxon acquired another producer was the $87.7 billion all-stock deal for Mobil Corp. in 1999.

“It’s a fair conclusion to come to that those shares could be used as currency,”Justin Perucki, an analyst at Chicago- based Morningstar Inc., said in a telephone interview. “But the company’s sheer size means there’s very few entities out there they could buy that would move the needle.”

Exxon boosted its reserves by 4.8 percent last year to the equivalent of 22.8 billion barrels of oil, enough to sustain production for 16 years. The shares fell 15 percent last year for the biggest annual decline in 27 years as recessions in some of the world’s largest economies clipped fuel demand and prices slumped.

Stock and Cash

Among Exxon’s five largest publicly traded competitors, only PetroChina Co. is beyond the reach of Exxon’s stash of shares. The Beijing-based company has a market value of $271 billion, more than twice that of its next-biggest rival, the Hague-based Shell, according to data compiled by Bloomberg.

Exxon shares held in the company’s treasury at the end of 2008 accounted for 38 percent of the common stock, up from 33 percent a year earlier and 29 percent in December 2006, the filing said. The company had another $31.4 billion in cash and cash equivalent at the end of the fourth quarter, giving Exxon as much as $238 billion in shares and cash available for acquisitions.

Exxon probably will look outside the U.S. for acquisition targets as President Barack Obama’s plan to repeal tax breaks for energy ventures hurts the profitability of domestic producers, Perucki said.

“Anything in the U.S. is probably off the table, so they would probably look internationally,” said Perucki, whose has an $87 price target for Exxon shares.

‘Flywheel’ for Cash

Exxon, which pumps more oil than every member of OPEC except Saudi Arabia and Iran, plans to devote $7 billion during the current quarter to buybacks after $8 billion in such expenditures during the October-to-December period.

The company spent an average of $87 million a day on share purchases last year, 23 percent more than the $71 million in daily outlays for drilling rigs, oil platforms and refinery equipment.

Exxon has been criticized by U.S. legislators and consumer advocates for spending more money on buybacks and dividends than exploration and refinery expansions. Tillerson said in March 2008 that share purchases are intended to increase shareholder value.

Buybacks “are the flywheel for the use of our cash after funding our robust investment program and our dividend,” David Rosenthal, vice president of investor relations, said during a Jan. 30 conference call with analysts.

Exxon has been the best performer in the Dow Jones Industrial Average index of 30 blue-chip companies since the Sept. 15 bankruptcy filing by Lehman Brothers Holdings Inc. that heralded the collapse of worldwide credit markets.

Distant Second

Exxon, which traces its roots to the 1880s and John D. Rockefeller’s Standard Oil Trust, has a market value of $361 billion, according to data compiled by Bloomberg. Among U.S.- based companies, Wal-Mart Stores Inc. of Bentonville, Arkansas, is the next most valuable at $189 billion.

Exxon has outperformed the broader market during the past two recessions, according to data compiled by Bloomberg.

When the economy contracted in 1990-1991 contraction, Exxon rose 27 percent, assuming reinvestment of dividends, compared with a 7.2 percent increase by the S&P 500 and a 17 percent jump in oil prices. During the March-to-November 2001 recession, Exxon Mobil lost 6.6 percent of its value, compared with the S&P 500’s 7.3 percent decline and a 30 percent drop by crude.

To contact the reporter on this story: Joe Carroll in Chicago at[email protected].

Last Updated: February 27, 2009 17:02 EST

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