15-3 Buybacks 3

15-3 Buybacks 3 - Oil Giants splurge for Investors Many...

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Oil Giants splurge for Investors – Many Major Companies make Share Buybacks as High Prices leave Firms with Piles of Cash Source: Wall Street Journal, 29 October 2004 WITH OIL at nearly $51 a barrel, even after two straight days of declines, the oil giants have a prob- lem lots of companies only dream about: What to do with all the cash? The seven largest Western oil companies are ex- pected to generate $71.3 billion in free cash this year -- and that is after funding $78.1 billion in spending for new oil and natural-gas projects, according to John S. Herold Inc., an oil consulting firm. To put that in perspective, the new "seven sisters," a term for the largest Western oil companies, could band together and buy eBay Inc. at today's share prices and still have some $6 billion in pocket change. By itself, Exxon Mobil Corp., which will generate an estimated $22.5 billion in cash this year, could snap up Apple Computer Inc. Fortunately for investors, the oil companies aren't repeating their diversification campaigns of the 1970s, when Mobil Corp. bought Montgomery Ward and Occidental Petroleum Corp. acquired Iowa Beef Processors. Neither purchase worked out, and each oil giant ended up ditching its acquisition. Nor are the oil giants likely to use their cash to gob- ble each other up as they did a few years ago when they formed Exxon Mobil and ChevronTexaco Corp., and BP PLC swallowed Amoco Corp. Consolidation always is more attractive when an industry is getting hammered -- not when it is making record profits. And regulators, especially in Europe, are likely to
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This note was uploaded on 05/03/2010 for the course ACCT 202 taught by Professor Yang during the Spring '10 term at UPenn.

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15-3 Buybacks 3 - Oil Giants splurge for Investors Many...

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