Exxon Mobil CEO Nixes Special Dividend

On the heels of a 23 percent earnings surge in 2005, the energy giant could be on the hunt to acquire a gas producer, according to analysts.
Stephen TaubMarch 9, 2006

What does Exxon Mobil plan to do with its huge, fast-growing cache of cash? Don’t bet on the energy giant’s issuing of a special dividend.

Instead, The Financial Times reported that comments made by new chairman and chief executive Rex Tillerson at his first presentation to analysts in New York City raised investor expectations that the energy giant might do some acquisitions.

To be sure, Tillerson said the company would continue to buy back stock and pay a dividend, according to the FT’s account. But he indicated that he doesn’t believe in issuing a special dividend.

“It’s not evident that [a special dividend] does anything for the long-term investor,” the CEO reportedly said. He added that such one-off measures appeared only to “scratch the immediate gratification itch” of shareholders.

In 2005, Exxon Mobil’s earnings swelled 23 percent, to $10.3 billion, and generated nearly $45 billion in operating cash. The FT pointed out that since the company is expanding its portfolio of natural gas projects, it may make a move on BG, the U.K.-based gas producer. Analysts believe Royal Dutch Shell and Repsol of Spain are good strategic fits, according to the newspaper.

Tillerson declined to comment on the likelihood of any deal soon, according to the story. But he stressed that it would need to be “substantial” to make a difference to Exxon’s portfolio. “For us, it’s got to be large [and] in line with our core business holdings today,” he reportedly told analysts.

Tillerson also said he would lift annual capital spending by about 13 percent, to an average of $20 billion, between 2007 and 2010, according to Reuters.