Isaac Toussie Discusses Underpinning of His Rationale For Oil Investment

A company’s cash flow is an important element in assessing the viability of a company. Isaac Toussie, an oil investor, is a strong proponent of that fact that big oil companies serve as a strong investment option because of their steady and predictable cash flows. Companies like Exxon, Chevron and BP are all stellar examples of how big oil companies have maintained stable cash flows despite the state of the economy at any time.

Exxon is one of the prime examples of how a big oil company has maintained a steady cash flow in a dire economic situation. Despite the fact that a recession looming, oil prices have only risen, leading to more cash on hand. Cash flows have continued to stream in due to the necessity and integral nature of the oil industry. Looking at Exxon’s cash flow statement, net operating cash flows have grown over 220% in 2021. Oil prices in 2022 have maintained their high level, indicating that net cash flow statistics will remain steady in the near future, despite electronic vehicle advances.

Toussie stated that with steady cash flows and high profits, debt can be lowered. Moreover, since profits have continued to increase this past year, Exxon and the like have been able to pay off larger amounts of debt then companies in other industries. This is a consistent trend in the oil industry. Exxon has been decreasing its total debt from year to year to maintain stability and profitability. This is evidenced by Exxon’s debt to equity ratio, which is a key metric in analyzing a company’s debt level relative to its size. As of June 2022, Exxon’s debt to equity ratio is roughly .26, which indicates that Exxon is using mostly equity to fund operations (Exxon Chart). If profits continue to rise, the level of debt that Exxon maintains becomes even less relevant, only making an investment in big oil more appealing.

 This article is presented for informational purposes only and should not be relied upon as financial or other advice.