A recent Economist piece covering the jaw-dropping profits earned by the Super-Major Oil Companies shines an unflattering light on this industry’s approach to both supporting independence and building shareholder value (https://econ.st/40LXXmx). In a nutshell, the 5 Super Majors earned $150 billion in profits last year with over half of that amount being used to buy back stock. Just what does a “buy-back” mean? It means that the highest and best use for cash in these companies is to reduce the float of stock. In other words, plowing profits back into the business pencils out as an inferior priority. And, this is what companies in declining industries do. It’s what Blockbuster Video did. Ditto Gannett (newspapers), Sears & Roebuck, and more. Those are classic financial management behaviors in a declining industry.
Yet, unlike all those industries, the oil industry is wildly profitable. But evidently, management doesn’t see its core business as an attractive avenue for deploying cash. In a nutshell, they are setting the course toward shrinking the industry. There are, however, smaller & more nimble E&Ps who are growing. They are at the heart of the surge in the rig counts in the Reeves/Delaware sectors.
We at First Keystone aim to support all those companies, big and small, who are investing capital into the greater Delaware Basin and we are accommodating that growth by offering for sale or lease industrial buildings located in Pecos, Texas.
The opinions expressed above reflect only those of the author and do not represent those of the First Keystone Pecos Industrial Park organization. First Keystone welcomes responsible fact-based discourses on these topics.