Chevron Corporation (CVX), EOG Resources Inc (EOG): Is Exxon Mobil Corporation (XOM)’s Reputation at Risk?

Still, shale drilling has not created amazing returns, either. EOG Resources Inc (NYSE:EOG) had 86% liquids production in 2012 in some of the most attractive acreages in the Eagle Ford and Bakken formation. yet the company’s return on capital employed for the year was only 9.4%. It will be awfully difficult for Exxon to maintain that reputation as a top capital allocator with returns like that.

What a Fool Believes

For a company in the oil business to continually crank out a 25% ROCE, it takes some very smart business decisions, but it also takes a little bit of luck for the projects to go off without a hitch. Exxon has hit a couple bumps in the road with Kashagan and XTO, but its other projects like Kearl oil sands and the Julia field in the Gulf of Mexico should boost those returns, but with costs for megaprojects increasing around the world, it will become more and more difficult for Exxon to maintain this pace.

The article Is Exxon’s Reputation at Risk? originally appeared on Fool.com and is written by Tyler Crowe.

Fool contributor Tyler Crowe has no position in any stocks mentioned. You can follow him at Fool.com under the handle TMFDirtyBird, on Google +, or on Twitter: @TylerCroweFool. The Motley Fool recommends Chevron.

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