By John Licata
Stale is a word not typically associated with Exxon Mobil (XOM) but is an adjective I’m afraid represents the company rather well. XOM’s cash position has dropped from over $38bln in 2008 to $4.61bln as of the June 2013 quarter while the company’s debt to equity ratio has risen to the highest levels since late 2010 (0.117).
So could it make strategic sense for CEO Rex Tillerson to make XOM more debt heavy near-term to position for huge growth longer-term? That strategy has actually helped many major integrated oil companies in the past (see chart) and it could be the very logic that XOM must embrace to help pay for stock buybacks and all the recent dividend hikes.
Good timing
XOM’s paper, which is rated Aaa and AAA by Moody’s and Standard & Poor’s respectively, may be more secure than US Treasuries, so the timing could be very appropriate to raise cash, especially as Fed taper talks again start to make the rounds. Also, the company appears to be needing to find new ways
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