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With the ever-present uncertainty of the fiscal cliff still haunting the United States, companies (excluding financial institutions) are sitting on a record $1.74 trillion in liquid assets. This collective rainy-day fund amounts to a whole lot of unrealized productivity in the face of economic headwinds, a lose-lose scenario for businesses. So, tired of sitting on their hands, some companies are putting on their fiscal-cliff blinders and moving ahead with huge investments planned for 2013.
The oil and gas industry is tremendously capital intensive, and the nature of the beast means multi-billion-dolllar capital expenditure plans from the supermajors. Last week, Chevron Corporation (NYSE:CVX) announced a $36.7 billion capital and exploratory budget for 2013. Nearly 25 percent, $8.9 billion, of that will be spent on on U.S. upstream and downstream operations, with the most notable developments in the deepwater Gulf of Mexico. International upstream investments, some $25.5 billion or nearly 70 percent of the budget, will be split between Nigeria, Kazakhstan, Angola, the Republic of Congo, and the massive Gorgon three-train LNG foundation in Australia.
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Also last week, ConocoPhillips (NYSE:COP) announced a 2013 capital budget of $15.8 billion. Approximately 60 percent of the budget has been allocated for North American projects, with drilling programs in the Gulf of Mexico and certain unconventional shale plays in the lower 48.
The Only Way to Grow is to Spend
Even with global economic growth floundering, uncertainty as thick as stew, and market participants on edge between recovery and collapse, oil and gas companies can’t afford to stop spending. Exxon Mobil (NYSE:XOM) indicates why that is in a recent energy industry forecast. Energy companies are one of the substrates that the global economy rests on — if the supermajors aren’t growing, every other industry on the planet is going to have a difficult time moving forward…
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