Big Oil, Small Spending

In Business Week magazine we read that in recent years, major oil companies used their profits to buy back shares rather than using them to invest in new exploration and drilling. Capital expenditures as a percentage of revenues at the five largest players remained relatively unchanged between 2000 and 2007. Thus, Big Oil is struggling to increase its output.

By contrast, the 129 publicly traded energy companies, excluding the five biggest ones, more than doubled their overall spending last year. Those 124 companies increased production in 2007 by 16% while the largest five companies saw production decline.

While the majors play catchup on production, investors may find better opportunities in small to mid-sized energy companies.

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