2 Oil Giants - have the investments been worthwhile?
It seems that over the past year or so, with today being some "icing on the cake," ExxonMobil (XOM) has been heavily criticized for its inability to increase output. Exxon's announcement today to taper CapEx spending for 2014 was accompanied by a prediction that production would be flat. This criticism and drop in share price should not come as a surprise since retail investors, institutional investors, fund managers, CNBC, and just about anybody on the planet only cares about one thing: top line and bottom line growth (at the expense of just about anything, I might add).
Chevron (CVX), on the other hand, hasn't been criticized quite as heavily, largely due to the extensive investments made over the past several years. The expectations have been that the billions in investments made by Chevron have the potential to really increase output.
The expectations that Chevron's output would increase are warranted to some extent. Over the past 4 years, assets have increased from $185B to $254B (an increase of 37%), while Exxon's assets have increased from $303B to $347B (an increase of 15%).
Chevron has invested MUCH more than Exxon. But has it been worth it?
Exxon's operating earnings over the past 4 years have clocked in at $40B, 54B, 50B, and 40B. For the most part, earnings haven't grown. But the same can be said of Chevron. Operating earnings have been $26B, 40B, 39B, and 28B - not much different from a growth perspective, even though Chevron made much heavier investments than Exxon.
I realize that much of these investments take years to unfold, but maybe it's time to question some of the investment decisions Chevron has made over the past 4 years - are investors really going to [ever] get a really good return on the billions that was spent on CapEx? Do investors have the knowledge to even answer that question? We're talking about dozens and dozens of multi-billion dollar projects, here.
If this topic interests you, you might want to check out this post, which also puts Exxon and Chevron toe-to-toe.