Re: Exxon's new reserves

At one point when I was a Chevron employee the CEO decided to put most of the company's capital to work purchasing overseas reserves--and to support further in-house exploration largely only if it had a record of success, and then primarily as a means of supporting his purchases. Those were dark days for us research geophysicists. Fortunately a few of those in-house exploration efforts were highly successful.

The operative belief at the time was that the company could buy more cheaply than it could find. And buying other companies, as Exxon did Mobil and as BP did Amoco and as Chevron did Gulf and Texaco, etc., can be an effective way of acquiring reserves.

The companies aren't there to save the world despite what their advertising may claim. The CEO's argument went--as was common in US business in those days--that the company was there to produce not oil but a return on investment for shareholders. He berated managers who told him their job was to find oil. "The job of every employee is to enhance return on investment!" That's capitalism.

But for many of us that objective was far too abstract, and we fought it. (I.e., we weren't above tilting at windmills.)

The CEO as autocrat will make of his company whatever he wants. If he wants it to be a purchaser rather than an explorer, then that's what it will be--at least, as long as his board tolerates him. That's capitalism.

Don

  ----- Original Message -----
  From: Glenn Morton<mailto:glennmorton@entouch.net>
  To: 'Sarah Berel-Harrop'<mailto:sec@hal-pc.org> ; asa@calvin.edu<mailto:asa@calvin.edu>
  Sent: Tuesday, February 22, 2005 5:53 PM
  Subject: RE: Exxon's new reserves

> -----Original Message-----
> From: asa-owner@lists.calvin.edu<mailto:asa-owner@lists.calvin.edu>
> [mailto:asa-owner@lists.calvin.edu] On Behalf Of Sarah Berel-Harrop
> Sent: Tuesday, February 22, 2005 7:28 PM
> To: asa@calvin.edu<mailto:asa@calvin.edu>
> Subject: Re: Exxon's new reserves
>
> I mentioned this to a gentleman in my office, and he noted
> that a significant portion are purchased reserves. I don't
> know where he got that information, but if true, those
> reserves that were purchased don't represent a net
> increase to world oil supply. Maybe a trivial point, but.

  I am not sure I would agree with that assessment of Exxon, however, your
  point is not trivial at all. When companies merge or buy reserves, they
  do not add to the world oil supply. Much reserve growth in many
  companies are purchased and that means we are appearing to solve the
  reserves growth problem without actually solving it.
Received on Wed Feb 23 05:22:40 2005