Exxon stumbles

[dspp]

Some of the biggest bets taken by his predecessor Rex Tillerson, now the U.S. secretary of state, have resulted in billions of dollars in write-downs amid falling production and a stock price that has long lagged peers. ....

.... Rivals including Royal Dutch Shell (RDSa.L) and Chevron (CVX.N), by contrast, have capped or cut their spending after finishing expansion projects. Exxon shares are down 18 percent since Woods took over in January 2017. Shell is up 2 percent and Chevron is down about 3 percent during the same period.

....“There’s no question that, over the past handful of years, Exxon has been a relative underperformer,” said Hank Smith, co-chief investment officer of the Haverford Trust, which has held Exxon’s shares for two decades and recently added Royal Dutch Shell to its portfolio. “It’s been frustrating.”

‘EPIC FAIL’
Weak results from production have this year cost Exxon its standing as the oil major generating the most cash, a distinction that now goes to Shell.

https://www.reuters.com/article/us-exxo ... SKCN1GJ0IE

if Exxon does not get real about renewables, and it has a very deep-rooted anti-renewables culture, it will not survive transition imho.

- dspp

[Dod101]

I have no idea when the article quoted by dspp was written but it is very misleading in one quote as follows

'Rivals including Royal Dutch Shell (RDSa.L) and Chevron (CVX.N), by contrast, have capped or cut their spending after finishing expansion projects. Exxon shares are down 18 percent since Woods took over in January 2017. Shell is up 2 percent and Chevron is down about 3 percent during the same period.'

In January 2017, Shell was quoted at around £23.60. Friday evening last it was at £10.80. Last time Shell was any where near £23.60 was about a year ago. Sounds as if this is rather old news.

Dod

[dspp]

I have no idea when the article quoted by dspp was written but it is very misleading in one quote as follows

'Rivals including Royal Dutch Shell (RDSa.L) and Chevron (CVX.N), by contrast, have capped or cut their spending after finishing expansion projects. Exxon shares are down 18 percent since Woods took over in January 2017. Shell is up 2 percent and Chevron is down about 3 percent during the same period.'

In January 2017, Shell was quoted at around £23.60. Friday evening last it was at £10.80. Last time Shell was any where near £23.60 was about a year ago. Sounds as if this is rather old news.

Dod

Dod,

- a very good point: MARCH 7, 2018 / 6:05 AM / 2 YEARS AGO
- funnily enough it was in a Reuters feed from Friday
- but nevertheless I suspect that Exxon is not as culturally in tune with the energy transition as some of its peer group

regards, dspp

[Dod101]

Thanks dspp. I should maybe have added that I do not know whether the date would have altered the argument or not since I know very little of Exxon.

Shell is currently bad enough!

Dod

[xxnjr]

Exxon, uniquely I believe, tend to invest through the cycle, evidenced by the 3 soon to be 4 drill ships they have running in Guyana which will probably add 750K to 1m bbls gross on the Stabroek block (subject to no Guy.gov shenanigans). They have also been spending heavily in the Permian (cubed developments/central processing facilities/pipelines to Gulf Coast petrochemicals complex all as one integrated value chain). Not much of the latter could be slowed down this year as it's more like a mega project. Next year Permian spend will take a hit. Long term it may all pay off assuming Permian works. Presume, as mentioned above, at some point Exxon/Chevron will buy proven and profitable wind and solar companies? Agree on Shell being well run. Total also seem to be doing reasonably OK with Patrick P steering the ship.

[dspp]

Exxon, uniquely I believe, tend to invest through the cycle, evidenced by the 3 soon to be 4 drill ships they have running in Guyana which will probably add 750K to 1m bbls gross on the Stabroek block (subject to no Guy.gov shenanigans). They have also been spending heavily in the Permian (cubed developments/central processing facilities/pipelines to Gulf Coast petrochemicals complex all as one integrated value chain). Not much of the latter could be slowed down this year as it's more like a mega project. Next year Permian spend will take a hit. Long term it may all pay off assuming Permian works. Presume, as mentioned above, at some point Exxon/Chevron will buy proven and profitable wind and solar companies? Agree on Shell being well run. Total also seem to be doing reasonably OK with Patrick P steering the ship.

Presume, as mentioned above, at some point Exxon/Chevron will buy proven and profitable wind and solar companies?

Setting aside the major cultural differences between ExxonMobil on the one hand, and Shell and BP on the other, there are some issues I see:

1. The proposal to "just buy wind & solar companies" has been made before. In particular BAe and Rolls-Royce at one point were in wind and decided to step back, with the aim of buying back in later on. Unfortunately for them, now that the desirability of making the switch is more obvious the mkt cap of BAE is £16bn, Rolls is £5bn, and that of Vestas is £19bn. The same strategy was mooted in automotive by the legacy dino-juice companies, who now find they have lower mkt caps than Tesla (and - very relevantly - I now think Tesla have more charging points worldwide than (say) Shell or BP or Exxon have gas stations). The later they try to switch the worse this problem becomes.

2. The vertically integrated petroleum majors are multiple things. They are early-stage design engineering; they are project developers; they are operators (very akin to manufacturers); and they are distribution/retail/marketing organisations. In contrast the wind and solar fields are more horizontally organised. That means the petro-majors would have to simultaneously throw away their organisational structures, processes, and people at the same time as switching domain. The incumbent fossil-utilities have a similar problem by the way. So what competences do they have, or what other advantages do they bring, except for existing financial capex strength which is of course dependent on their continued fossil revenues and which can be substituted by the capital markets ?

3. There may be no natural monopoly in the new world of fairly highly distributed renewable generation and storage. (https://slipstreaminc.org/sites/default ... nopoly.pdf). I have previously posted about this before, at a personal level of my own household - if I were to add a battery of a few kWh I would be able to go 'off-grid' for almost the entire year cutting loose from gas entirely, and only needing a small elec top-up for a few months in winter. If one repeats that thought-experiment at a global scale the role of the traditional energy companies becomes just the provision of a timing signal to the grid, with very weak pricing power and no brand advantage.

These discussions have gone back and forwards in both Shell and BP for decades (I know from personal experience, right back to the early 1990s, where Shell Group Planning told us all to "shut up") and I have watched the parallel discussions going on in the major utilities (RWE, EON, EDP, EDF, SSE, Vattenfall, etc). The only one I have seen act decisively and successfully to transition was Dong rebuilding itself to become Orsted. They can't all do that, as there is not enough space for them all to transition as well as the new players who are building organically. Many of them will have to adopt managed decline strategies, which done right can be very profitable. Who will go which way I do not know, and ExxonMobil could surprise, but observing its past culture I feel they are more likely to cling to oil.

regards, dspp