Could ExxonMobil Buy BP?
With chatter that BP or its assets may be on somebody’s shopping list, or that somebody may go fishing for Anadarko’s offshore assets, the obvious question: Which big oil company is most financially fit to do those kind of deals?
The answer, without question, based exclusively on its balance sheet: Exxon Mobil , whose balance sheet looks like a fortress:
As of a quarter ago, its net cash was $4.3 billion. That’s considerably below where it was in the same quarter in 2009 and 2008.
But keep in mind that last year the company paid out $26 billion in dividends and in stock repurchases.
Its return on capital was 19 percent.
Return on equity, 22.6 percent.
Compare that with Royal Dutch Shell :
Net debt of $28.8 billion.
Return on capital, 11.8 percent.
Return on equity, 16 percent.
Net debt of $36.6 billion
Return on capital, 9.1 percent.
Return on equity, 13.4 percent.
Net cash, $700 million
Return on capital, 15.5 percent.
Return on equity, $19.4 percent.
Herb’s Hook: Granted, debt of an acquirer is only part of the equation. But if any of these assets go into play, the gushing nature of ExxonMobil’s cash gives it a clear advantage.