This column looks at media spin.
First, the backstory: ExxonMobil, the most profitable company in the history of mankind, made an $11.68 billion profit this quarter on the back of General Motors which lost $15.5 billion.
“America’s oil and natural gas industry earns less than many others…” That’s the televised gospel according to “the people who bring you oil and natural gas” (that would be API, the American Petroleum Institute).
Hello? Are they on the same planet you and I inhabit?
The API planet spins backwards!
Naturally they do have statistics to back up their claim, shown in their television ad in the form of a handy bar chart of earnings per dollar of sales in the First Quarter, 2008:
Beverage and Tobacco 17.8
Computer Products 13.7
All Manufacturing 7.6
Apparel and Leather 7.5
Oil and Natural Gas 7.4
[In the interest of full disclosure, I own some ExxonMobil stock.]
CEO Rex Tillerson announced that my company is, out of the largest profit in corporate history, paying one of the smaller dividends (~2%) in corporate history. On the other hand, Mr. Tillerson buys back shares like mine with all their extra cash and raised my dividend a whopping nickle while the investment he makes in production and exploration plummets.
That stock buyback at about $80 per share sucked up some $8 billion of the quarterly profit. They bought $30 billion in stock last year and have (so far) reduced the number of shares outstanding by about 400 million shares. I can see no reason that it helps me when Mr. Tillerson takes the stock out of play. It helps someone, though. At the current rate, ExxonMobil will buy back all of its shares and become a totally private company in just 14 more years.
Just to show I am not playing favorites, Royal Dutch Shell’s second-quarter earnings were nearly as high as Exxon’s with a profit of $11.56 billion. That was 33% higher than Shell’s profit of $8.67 billion in the same period last year. Shell is half the size of Exxon.
Wow. $11.68 plus $11.56 billion in three months. Profit. Just two companies.
Profit that usually goes to the shareholders.
API states it is the only national trade association that represents all aspects of Americas oil and natural gas industry. Their 400 corporate members are the producers, refiners, suppliers, pipeline operators and marine transporters, as well as service and supply companies. They represent the largest major oil company to the smallest of independents. They spin the news for companies like ExxonMobil, Royal Dutch Shell, Chevron, and more. By the way, Royal Dutch Shell has a stock buyback program. Chevron has a stock buyback program.
ExxonMobil did beat its own record for the highest profits ever by a U.S. company but the $2.22-per-share profit announced still led to a $3 decline in the share price.
I originally thought that Mr. Tillerson might have wished API had not spun the profit as such a small number.
That wasn’t right.
Mr. Tillerson, unlike every CEO in American history, wants his stock price to fall. The lower the price and higher the profits the more stock ExxonMobil can buy back.
See how well spinning backwards can work?