President Donald Trump’s move to impose an import tariff of 25 percent on steel and 10 percent on aluminum, will significantly push back Exxon’s investment plans. The plan was to spend US$20 million to 2022 in order to expand chemical and oil refinery plants along the Gulf Coast. This plan would have been more easily facilitated by the lowered tax rates imposed recently.
This has caused Exxon to increase their annual earnings goal by 2025. Exxon plans to invest US$24 billion in capital expenditures this year, US$28 billion in 2019 and another US$30 billion between 2023 and 2025. Even though Exxon announced that the increase in spending will not boost production in the short term, the company hopes to increase oil production from 1 million barrels a day to 5 million barrels per day in 2025.
Following news of Exxon’s announcement that the increased expenditure would not boost production in the short term, Exxon shares fell to their lowest in two years. This comes in light of the fact that Exxon failed to announce the opportunity for investors to participate in large share buybacks.
Analysts are researching Exxon’s ability to rejuvenate its portfolio and how they will turn increased investments into higher profits, revenue and cash flow. Exxon’s operating margins, which is profit after expenses, decreased by 5.1 percent in 2017, significantly below industry median of 13.5 percent.
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