Memo To: Rex Tillerson


It's not exactly business as usual at Exxon Mobil Corp.'s (XOM ) sprawling headquarters in Irving, Tex. Lots of folks are out for the holidays. But whether at the office or off in Colorado skiing, the managers of the free world's largest oil company are thinking about returning to work for a new CEO for the first time in 12 years. The legendary Lee F. Raymond is retiring. As Rex Tillerson prepares to take command, National Correspondent Mark Morrison conjures up a welcome-to-the-corner-office memo from Tillerson's staff:

Rex: we know you're not actually CEO until Jan. 1, but we thought you might appreciate a heads-up on a few things that are likely to turn up on your desk.

With you and Lee out for the holidays, it has been pretty quiet. But those darn politicians up in Alaska are making a big stink again. This is about Valdez -- but not the old lawsuit where they're trying to hold us up for billions more over the spill. No, this is about that pork-barrel project they're pushing that would construct a huge liquefied natural gas complex at Valdez to get the gas out of the North Slope. As you know, we want to build a pipeline through Canada to the Lower 48. That's far cheaper than the port idea, not to mention the fact that shipping the gas directly by pipe makes way more economic sense than converting it to liquid and loading it on ships.

The pols haven't a clue how much extra an LNG port would cost -- and they don't care. They're licking their chops about how much loot the scheme would generate for the Valdez economy -- and their political coffers. Plus, they're playing hardball: They actually sued us and BP (BP ) this week claiming we're conspiring to keep natural gas from U.S. markets.

Lee wants to tell the Alaskans where they can stick their LNG idea. But seriously, a better bet is to go head to head on the lawsuit -- the case is bogus -- and get our lobbyists working overtime to convince saner heads that the Valdez port crowd could kill the North Slope altogether. And you should get involved directly: Have a sit-down with Governor Frank H. Murkowski, where you can put your down-home Texas charm to good effect.

Hard to say if that'll work with those pesky Venezuelans, though. They're giving us a hard time on our oilfield down there and basically want to force us into a joint venture with the state oil company. Our contract is ironclad. And if we let Hugo Chávez get away with nullifying it, every bad guy around the world will be trying the same trick, and our contracts will mean nothing. Lee was livid about this, but we're going to have to find some way to salvage a relationship with the government down there.

Oh, Investor Relations just ducked in to express concern about the '05 earnings announcement. It's gonna be gangbusters. But analysts will want to know what we're going to do with all that money. Cash flow is running about 40% ahead this year, so we can continue buying back shares (through Q3 we've already done about $12 billion in buybacks) and boost the dividend again. But everybody's wondering whether we're going to spend more on exploration and development. Our cap-ex is only 25% to 30% of cash flow -- compared with 70% at ConocoPhillips (COP ), where they seem to think inflated oil prices will be around forever. We can tell the analysts that through boom and bust we've been consistently disciplined about spending to boost production and reserves -- and it's worked out pretty well. But will they listen?

The good news is that Lee has left you with virtually no debt and maybe $30 billion in cash and super earnings. The bad news is that this is one hard act to follow when you consider that Lee took our market cap from $76 billion in 1992 all the way up to more than $400 billion now. And the strange thing is, he was the king of cost-cutting who also managed to pull off the deal of all time by buying Mobil. Not only did he double oil reserves and triple revenues, he did it with 9,000 fewer employees than we had 12 years ago. Nice trick.

You'll be a legend, too, Rex, if you play your cards right. For 30 years you've handled the tough jobs for this company all over the world -- Yemen, Russia, Florham Park, N.J. -- and beat out all those other smart, aggressive guys to become numero uno. And good move signing up Lee for a year of consulting. World leaders treat him as a fellow head of state, and you'll be getting that treatment, too. Plus, you're only 53 and could have just as long a run as Lee.

We wish you a healthy, prosperous '06. And we're behind you 150%.

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