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ExxonMobil's Spending Exceeds Cash Flow in 2009

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Rex W. Tillerson
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HOUSTON (Dow Jones), Mar. 1, 2010

Exxon Mobil Corp.'s spending exceeded its cash flow in 2009, drawing down one of the oil industry's largest treasure troves in a year of weak energy prices.

The Texas oil giant received $29.9 billion in cash from operations and asset sales last year while spending $53.12 billion in capital investments and money given to investors via dividends and share buybacks. Exxon's cash reserves -- padded by years of booming energy prices -- shrank to $10.7 billion at the end of 2009 from $31.4 billion at the close of 2008, according to an annual filing Friday with the Securities and Exchange Commission.

The drawdown underscores how the world's largest publicly owned oil company remained steadfast in the face of the deepest recession in decades, forging ahead with its longstanding policy of heavy capital investment mixed with high investor return.

Exxon and other giant oil companies maintain that continuing the gargantuan pace of investment is necessary to avoid a future energy crunch when the economy recovers. But if energy prices remain low, such a strategy may be difficult to sustain. Of course, Exxon remains a financially solid company and retained its top-notch debt rating throughout the financial downturn.

Exxon, the largest U.S. company by market capitalization, also outlined an increasingly tough operating environment for the oil company in its annual regulatory report, despite racking up $19.3 billion in profits.

It cited tough global economic conditions that tamped down fuel demand. But the company also cited an increased interest in energy efficiency as well as increased government support for alternative fuels as looming threats to competitiveness.

"Many governments are providing tax advantages and other subsidies and mandates to make alternative energy sources more competitive against oil and gas," it noted in its filing. "Governments are also promoting research into new technologies to reduce the cost and increase the scalability of alternative energy sources."

The company also highlighted the "very challenging" operating conditions for its refining segment. The global recession has beaten down demand for gasoline, diesel, jet fuel and other refined products and has crushed margins. Exxon cited previous years' strong margins that led companies to build too much refining capacity.

Copyright (c) 2010 Dow Jones & Company, Inc.

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