One on One with Rex Tillerson, Chairman and CEO of ExxonMobil
Wednesday, March 07, 2007
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SUSIE GHARIB: Shares of ExxonMobil rallied today, thanks to that jump in crude prices we told you about. Also today, the company's CEO told analysts here at the New York Stock Exchange he's prepared to walk away from ExxonMobil's oil project in Venezuela if it can't reach an ownership agreement with the government of Hugo Chavez. When I talked with Rex Tillerson earlier today, I asked him if the problems in Venezuela are likely to be repeated in other oil-rich countries.
REX TILLERSON, CEO, EXXON MOBIL: I wouldn't want quite what Venezuela is going through to what any other country might be deciding or evaluating. What I would say is that the current environment, the high-price environment, naturally causes a lot of countries resource owners to want to re-look at the terms of the contracts they've entered into and ask themselves whether they're still satisfied with that. Our view is that once a contract is entered into, we intend to live by that contract. We've made enormous investments under the terms of that contract and we expect that contract to be honored.
GHARIB: Mr. Tillerson, given what's going on with Venezuela, do you find that it's going to be more and more difficult for Exxon to keep on replacing its reserves?
TILLERSON: It's always been difficult for us to replace our reserves particularly because of our size. The current environment does present new challenges because of the share of the resources offered to us as we talk about new opportunities. So it requires us to -- to find new ways through technology, certainly enables a lot of ways that gives us access to opportunities that previously might not have been available.
GHARIB: You said today that there's a $15 to $20 risk premium in the price of oil. Do you see that decreasing any time soon?
TILLERSON: I think today you have to conclude that the market is saying we still think there is sine risk around the reliability of that supply and that's why the premium is still there. It's not going to change until the market's view of the reliability is changed. And that could come through a change in the geopolitical environment. I commented to someone the other day peace might break out in the world and that would probably have an impact on oil prices.
GHARIB: Where do you see oil prices going from here?
TILLERSON: Oil prices and oil as a commodity is going to behave like any other commodity. It's at the top of the cycle now because of the kinds of things we've been talking about. Any number of events, not just on the supply side, but on the demand side could change that balance as well.
GHARIB: You said today that ExxonMobil is planning more than 20 big new projects over the next few years. Given all the recent talk about a recession possibly this year, if there were to be a global economic slowdown, would that change Exxon's spending plans?
TILLERSON: Most of the investment decisions we're taking are to bring new supplies on anywhere from four to five to 10 years out into the future. So a near-term event has very little impact on our business plans, particularly our investment plans.
GHARIB: There has been a lot of concern about economies in Asia. Do you still see strong oil demand from China for example?
TILLERSON: China's economy continues to do well, continues to be very robust. That economic activity is going to require ever-growing energy needs. So barring some downturn in economic activity in China, I think you can expect that they're going to continue to be a major -- a major part of the demand component.
GHARIB: ExxonMobil has $33 billion in cash. Do you think the time is right to be looking at acquisitions?
TILLERSON: Well, I think the current business conditions are not particularly conducive to acquisitions today. We're still in a fairly -- very high-priced environment relative to the raw material. I think while we look -- you know, keep our eyes on a number of things out there, there's nothing today that I would say that we think would make a lot of sense.
GHARIB: Would an acquisition make sense as a cheaper way to gain access to reserves.
TILLERSON: Well, it depends on what you have to pay for it. When we look at -- in terms of some acquisitions that have been concluded over the last two or three years, those looked to have been bought at a fairly high price, at least to my way of thinking.
GHARIB: Is ExxonMobil in a position to be as aggressive in buying back stock as it was last year?
TILLERSON: Our current buy-back rate for this quarter is at $7 billion. I'm not going to indicate what it might be in the future quarters. We have never made it a habit of giving guidance but we did buy back $25 billion worth of shares last year. So we think that's still a good way to return value to the shareholder, along with our very consistent cash dividend.
GHARIB: Mr. Tillerson, you have been CEO and chairman for only 15 months and yet you've had record earnings, record stock market performance. What do you do for an encore? Can you improve on this performance?
TILLERSON: The current results obviously are being driven by this price environment and so we're positioned and we built ourselves as we pursue opportunities to deliver a very satisfactory return at the bottom of the cycle and then when we have from time to time a few years at the top of the cycle, we're going to be able to reward our shareholders handsomely and that's our commitment for the future.
GHARIB: Mr. Tillerson, thank you so much.
TILLERSON: Thank you. It's my pleasure.
