It’s virtually as if the final decade by no means occurred for traders of Exxon Mobil Corp. shares.
Once the gold-standard of Big Oil, the inventory closed Monday at its lowest since October 2010, amid a droop in oil costs as a result of considerations about weak demand coupled with a glut. The S&P 500 additionally posted its worst one-day decline since October.
But for Exxon, which dropped out of the index’s prime 10 largest firms by market worth for the primary time final yr, the malaise runs deeper than the state of the crude market.
Chief Executive Officer Darren Woods is operating a counter-cyclical technique by investing closely in new oil and gasoline belongings, at a time when many traders are demanding vitality firms enhance returns for shareholders. Some shareholders are even demanding a plan to maneuver away from fossil fuels altogether.
Exxon is betting on a “windfall of money” to reach from its investments someday within the mid to late 2020s, mentioned Noah Barrett, a Denver-based vitality analyst at Janus Henderson, which manages $356 billion. “Right now there’s greater worth positioned on producing money stream in the present day.”
Exxon is ramping up capital spending to greater than $30 billion a yr, with out a laborious ceiling, because it develops offshore oil in Guyana, liquefied pure gasoline in Mozambique, chemical amenities in China and the U.S. Gulf Coast, in addition to a collection of refinery upgrades. Woods is satisfied the world will want oil and gasoline for the foreseeable future and sees a possibility for enlargement whereas rivals draw back from such long-term investments.
The short-term value of these investments is that Exxon can’t fund dividend payouts with money generated from operations, as a substitute resorting to asset gross sales and borrowing, in accordance with Jennifer Rowland, an analyst at Edward Jones & Co. Exxon is the “clear outlier” amongst Big Oil firms on that entrance, she mentioned. Exxon declined to remark.
Exxon’s present challenges stem largely from flag-planting offers made when commodity costs peaked throughout the previous decade. It spent $35 billion on U.S. shale gasoline producer XTO Energy Inc. in 2010 when shale oil promised outsize returns. It has invested $16 billion in Canadian oil sands since 2009, solely to take away a lot of these reserves from its books. Former CEO Rex Tillerson’s 2013 exploration pact signed with Russia was caught behind a wall of sanctions and later deserted.Source: www.worldoil.com
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