1. What do you think are the main factors that Exxon's management considers when deciding between reinvesting cash flow into new projects and paying cash back to investors?
2. In the third paragraph of Article 1, the author writes: "What to do with that money is a vital question for Exxon [...]." In that paragraph, what do you think does the author mean when they say: "capital expenditures will drive the trajectory of future returns?"

Thanks to increasing energy prices, oil producers hit a financial gusher last quarter. Exxon's cash flow from operations in the third quarter was $12.1 billion, the highest since the third quarter of 2014, when Brent crude oil was trading closer to $100 a barrel. Its peer Chevron reported $8.6 billion of cash flow from operations and record free cash flow on Friday What to do with that money is a vital question for Exxon, as it is for other producers. The first piece of the spending bucket-cash returns to shareholderswill determine which investors will stick around today, while the second piece, capital expenditures, will drive the trajectory of future returns. The former seems to be an easier one to figure: Investors simply want more of it. Canadian oil producer Suncor Energy's shares jumped 13% on Thursday after it said it would double its dividend and increase share buybacks. For its part, Exxon raised its quarterly dividend on Wednesday, maintaining its status as a dividend aristocrat. On Friday it announced the resumption of share buybacks starting next year, the company expects to repurchase up to $10 billion over a year or two. That is still modest compared with historical levels: In its heyday, Exxon used to return roughly $30 billion a year through buybacks. Exxon's return to repurchases next year might help narrow its valuation gap relative to Chevron, which raised its dividend sooner and beat Exxon on a buyback announcement. On average, Chevron has been commanding a price-to-forward-earnings multiple that is 12.3% higher than Exxon's over the last six months. In the third quarter, Exxon returned 45% of its free cash flow back to shareholders, while Chevron returned 48% through dividends and repurchases. Immediate cash returns are enticing, but long-term investors will want to pay attention to Exxon's future spending plans, which the company plans to unveil in December after a meeting with its reconstituted board (including those activist investor Engine No. 1 nominated in May). More cash returned to shareholders today means less available for spending tomorrow. On Friday's earnings call, Exxon stuck to its disciplined $20 billion to $25 billion annual capital spending guidance and increased its investment target for low-carbon projects, effectively committing 10% to 12.5% of its annual budget on such projects, which include some moonshot technologies such as hydrogen and carbon capture. That is a sizable step-up from the previous 2.4% to 3% range. It also means Exxon is ready to redirect substantial sums away from oil and gas production, which is a depletion business. The company was already behind some of its peers in long-term investments in recent years. More cash today is certainly music to investors' ears today, especially as oil companies are trading at deep discounts. Those in it for the longer haul will want to listen more closely. Page 1 of 2 2021 Factiva, Inc. All rights reserved. Thanks to increasing energy prices, oil producers hit a financial gusher last quarter. Exxon's cash flow from operations in the third quarter was $12.1 billion, the highest since the third quarter of 2014, when Brent crude oil was trading closer to $100 a barrel. Its peer Chevron reported $8.6 billion of cash flow from operations and record free cash flow on Friday What to do with that money is a vital question for Exxon, as it is for other producers. The first piece of the spending bucket-cash returns to shareholderswill determine which investors will stick around today, while the second piece, capital expenditures, will drive the trajectory of future returns. The former seems to be an easier one to figure: Investors simply want more of it. Canadian oil producer Suncor Energy's shares jumped 13% on Thursday after it said it would double its dividend and increase share buybacks. For its part, Exxon raised its quarterly dividend on Wednesday, maintaining its status as a dividend aristocrat. On Friday it announced the resumption of share buybacks starting next year, the company expects to repurchase up to $10 billion over a year or two. That is still modest compared with historical levels: In its heyday, Exxon used to return roughly $30 billion a year through buybacks. Exxon's return to repurchases next year might help narrow its valuation gap relative to Chevron, which raised its dividend sooner and beat Exxon on a buyback announcement. On average, Chevron has been commanding a price-to-forward-earnings multiple that is 12.3% higher than Exxon's over the last six months. In the third quarter, Exxon returned 45% of its free cash flow back to shareholders, while Chevron returned 48% through dividends and repurchases. Immediate cash returns are enticing, but long-term investors will want to pay attention to Exxon's future spending plans, which the company plans to unveil in December after a meeting with its reconstituted board (including those activist investor Engine No. 1 nominated in May). More cash returned to shareholders today means less available for spending tomorrow. On Friday's earnings call, Exxon stuck to its disciplined $20 billion to $25 billion annual capital spending guidance and increased its investment target for low-carbon projects, effectively committing 10% to 12.5% of its annual budget on such projects, which include some moonshot technologies such as hydrogen and carbon capture. That is a sizable step-up from the previous 2.4% to 3% range. It also means Exxon is ready to redirect substantial sums away from oil and gas production, which is a depletion business. The company was already behind some of its peers in long-term investments in recent years. More cash today is certainly music to investors' ears today, especially as oil companies are trading at deep discounts. Those in it for the longer haul will want to listen more closely. Page 1 of 2 2021 Factiva, Inc. All rights reserved