Exxon Signals Major Trouble Ahead for Oil Industry

If there is any lingering doubt that the oil industry is in big trouble, this latest financial report from the biggest publicly traded oil company, as detailed by the SRSrocco Report, should put to rest any delusion that, instead of worrying about peak oil, we should figure out how to take advantage of the ‘oil glut’.

The expansion of global economic activities and social complexities in the past six decades, thanks largely to oil, are rapidly drawing to a close.

exxonmobil-free-cash-flow-minus-dividends-share-repurchases

exxonmobil-long-term-debt-2006-2016

Here are the key highlights:

  • On track for an 85% decline in net income since the hey days of 2012. And that’s the good news.
  • Free cash flow declined from $24.4 billion to $1 billion for first 9 months of 2016 (down 95% YTD).
  • Taking into account dividend payouts and share buybacks, the company had a net $8.3 billion cash deficit. The company did not make any money in 2013 and 2014 either after dividends and buybacks. Just like those pre-IPO Silicon Valley unicorns, it is burning serious cash.
  • It generated no surplus cash flow in 2013 when the oil price was north of $100. The reasons are primarily out-of-control capital expenditures, dividend payouts and share buybacks.
  • It spent a staggering amount of cash on buybacks instead of capex (only 11% of buybacks).
  • Long term debt is shooting up, thanks to buybacks.
  • 20% of its oil reserves written off due to cost of extraction versus current prices.

The full report: End of the U.S. Major Oil Industry Era: Big Trouble At ExxonMobil

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