The Guardian: Exxon Mobil should return profits to investors, not build more reserves

Exxon Mobil has been left pondering an age-old investment question – when to re-invest profits and when to return them to investors – after a shareholder proposal, which asks the company to return capital to shareholders rather than break ground on high-cost high-carbon projects in the face of global climate change, was filed by Arjuna Capital and As You Sow. The answer boils down to where you can secure the greatest value. If companies invest in new projects for ever-lower returns, those investments are value destroying. At a certain point, companies must face the fact that they are no longer growth companies, but mature, value companies that pay steady dividends.

There are two physical constraints determining the growth of oil companies — there is only so much easy-access oil and our atmosphere can absorb only so much carbon. The first constraint is hurting business now; industry return on invested capital is at a 40-year low despite a sustained period of high gas prices. Unconventional oil, which is harder to extract, is simply too expensive.

Continue reading this article at The Guardian.