Chevron Corporation (CVX): Exxon Mobil Corporation (XOM) Is an Expert at Repurchasing Shares

Those opportunities could come from acquiring companies that are trading at a discount, and there are many, or simply by increasing its drilling budget. Believe it or not, Exxon really excels when it invests cash back into its business. Last year the company earned a 25.4% return on the capital deployed and has averaged just under a 25% return since 2008. For some context,  Chevron Corporation (NYSE:CVX)‘s returns over the same period were closer to 20%, while Royal Dutch Shell plc (ADR) (NYSE:RDS.A) managed only 15% returns. Given its success in deploying capital, how good is Exxon Mobil Corporation (NYSE:XOM) at growing its oil and gas production?

Here’s where those buybacks are a bit deceptive. An oil company should continually increase its oil and gas production, especially if prices are heading higher. Exxon’s production per share increased 48% over the past decade. However, in absolute terms its production is just up about 1% annually. When you think about it, despite not always buying back its stock at cheap prices, the buybacks did add tangible value to each investor’s shares.

The company is so good at buying back its own shares that it’s taken is share count down from 7 billion after the Exxon Mobil Corporation (NYSE:XOM) merger all the way down to the 4.5 billion it has outstanding today. The company did the same thing after issuing shares to buy XTO, as it’s taken its share count down by nearly half a billion since that merger.

Most companies are terrible at buying back their own stock. Exxon is not one of those companies.

However, can you imagine the cash flow the company would be producing today if it wasn’t buying back all those shares? It’s now lagging behind its peers in production growth because of all those buybacks. Has its disciplined approach caused it to fall behind? Stay tuned to Fool.com tomorrow for Part Two: Is the Exxon Mobil Corporation (NYSE:XOM) empire crumbling?

The article ExxonMobil Is an Expert at Repurchasing Shares originally appeared on Fool.com and is written by Matthew DiLallo.

Fool contributor Matt DiLallo owns shares of Apple and has options on Berkshire Hathaway and Apple. The Motley Fool recommends Apple, Berkshire Hathaway, and Chevron and owns shares of Apple and Berkshire Hathaway.

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