Investing in Energy: A Primer on the Economics of the Energy Industry

Liquidity—Cash Is Still King

IOCs often have several back-up lines of credit under pre-arranged bank agreements. In many cases, these back-up lines are unused. During the bull run years where crude prices increased to $147 per barrel, many IOCs utilized the opportunity to build significant cash balances. As one might expect, this strategy paid dividends in many ways. ExxonMobil reported cash balances of near $35 billion at the end of fiscal year 2007. Other IOCs reported impressive cash balances in excess of $5 billion. These war chests enabled many IOCs to weather the economic downturn of early 2009 when crude prices collapsed. Two years later, these companies were ready to strategically deploy these cash balances and take advantage of other ...