October 27, 2016 Read More →

ExxonMobil: ‘Pivotal Period’ for Investors

Hannah Hess for E&E Greenwire:

Critics of Exxon Mobil Corp. are touting a new study citing a 45 percent drop in company revenue over the past five years and lagging stock prices as evidence of a potentially irreversible decline, impacted by a global shift away from fossil fuels.

Exxon, the world’s largest publicly traded international oil and gas company, has been subpoenaed by attorneys general in Massachusetts and New York for information on what and when company officials knew about the risks of climate change, and whether the oil giant misled investors and the public about those risks.

The Securities and Exchange Commission is also investigating Exxon, reportedly on how the company appraises its assets (E&ENews PM, Sept. 20).

A report released today by the nonprofit Institute for Energy Economics and Financial Analysis said climate challenges, financial stress and ongoing investigations mean now is a “pivotal period” for Exxon and its investors.

Report author Tom Sanzillo, former deputy comptroller for the state of New York, said investors need to ask Exxon, “How does the company account for the risk from climate change in its valuation of proven reserves?”

CEO Rex Tillerson told an industry group in London last week that Exxon “shares the view that addressing climate change is serious and warrants thoughtful action,” according to a report by Climate Central, and that the company supports and has long used a proxy cost of carbon.

The report criticizes Exxon for a business model that relies on continuous growth in demand for oil and natural gas, noting its overall long-term outlook for robust demand is contradicted by its own analysis of energy intensity declines in every country in the world between now and 2040.

Companies in the information technology, financial and telecommunications sectors are growing at a faster pace than Exxon, Sanzillo suggests, with steady increases in shareholder payouts masking declining cash balances and a fall since 2012 in Exxon’s annual average net income. Sanzillo also pointed to a decline in capital spending on long-term projects.

“The company is emblematic of the once dominant energy industry that now takes a back seat to other sectors of the global economy,” Sanzillo said.

Exxon’s stock performance has lagged from 2014 to early 2016 due to a fall in crude oil prices. Its return on assets, however, is still the best in the industry.

The report urges institutional investors, in particular, to question Exxon’s financial and management strategies.

Full article ($): Report questions Exxon’s financial standing

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