Exxon Mobil Corporation (XOM) and Its Shareholders Are Learning a Tough Lesson

Source: ExxonMobil investor presentation.

Looking ahead, total production is expected to be down about 1% this year as the company allows some of its natural gas production to decline. However, the company’s investments in future production should yield a 2%-3% annual production growth through 2017. That’s not bad, but it does trail many of its peers.

Exxon Mobil Corporation (NYSE:XOM) is calling for its daily production level to grow by only about 600,000 barrels of oil equivalent per day by 2017. That’s about what Shell is expecting, though it’s starting at a slightly lower base. Meanwhile, Chevron Corporation (NYSE:CVX) expects to grow its production by a million barrels of oil equivalent per day, and it’s starting at a production base that’s half of Exxon’s.

The big difference here is that Exxon’s growth will be very focused on the returns it will generate, instead of growth for the sake of growth. That could mean that its production growth targets might be missed in the future if the returns aren’t there. So Exxon Mobil Corporation (NYSE:XOM) shareholders are learning a tough lesson: By not striving for growth at all costs, the company is in one sense struggling to find the production growth that meets its targets, which could cause earnings and therefore buyback activity to slip. However, this is a company focused on earning the best returns on capital it can, which is one reason it has grown to become one of the top energy companies in the world. So, when you think about it that way, it’s really not so bad after all.

The article ExxonMobil and Its Shareholders Are Learning a Tough Lesson originally appeared on Fool.com and is written by Matt DiLallo.

Fool contributor Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends Chevron.

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