new York Thanks to the rise in oil and gas prices, the US energy company Exxon Mobil has helped turn the tide. In the last quarter, Exxon posted its highest profit in seven years and the company ended the year with a profit of $23 billion. Exxon has thus clearly exceeded analysts’ expectations.
The result is in stark contrast to the previous year, when the Texan group had posted a record loss of more than $ 22 billion due to the economic consequences of the pandemic. Exxon’s stock price rose sharply in early Wall Street trading on Tuesday, likely due in part to announced $10 billion in share buybacks. With this means of price maintenance, the management artificially reduces the outstanding shares and thus increases the stock market price.
Exxon has had a difficult twelve months, not only because of the global corona crisis. The company, led by Darren Woods, needed to drastically cut costs. The energy company came under pressure from activist investors last year. They are pushing for a move away from fossil fuels and with it a new business model. As part of a broad-based restructuring, Woods wants to upgrade alternative energies and CO2 storage in a separate division.
Unlike most European oil and gas companies, Woods and his predecessors had long maintained a focus on fossil fuels and refused to invest in alternative energies such as wind and solar. This was mainly due to the fact that business with the pandemic was excellent in the USA in particular and that politicians under Donald Trump tended to scale back environmental regulations rather than push them forward.
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But then the activist investors from “Engine No 1” came into play: together with powerful asset managers such as Blackrock and Vanguard, they ensured at the last general meeting that Woods, who had been in office for five years, had to replace three of his twelve board members. The CEO is no longer dealing with familiar oil managers, but with alternative energy experts.
Exxon responds to pressure from activist investors
In this context, the announcements that the company’s own emission reduction targets will be achieved four years earlier than planned should also be seen. Zero emissions are now being targeted for 2050. Exxon plans to invest $15 billion to lower its own values and help customers reduce carbon emissions. According to the company, it is primarily focusing on CO2 storage, hydrogen and biofuels. In January, Exxon acquired a 49.9 percent stake in Norwegian biofuel company Biojet.
Exxon plans to organize its business into three major divisions starting April 1. Upstream, oil and gas production, is the first. Refinery and chemicals are merged, and the alternative energies including CO2 storage under the name “Low Carbon Solutions” form the third division. Woods thus significantly upgrades the business in connection with the energy transition.
>>Read more about Engine No 1’s activist investors here: From hedge fund king to eco-capitalist: Chris James is forcing Exxon to rethink
“Our new lean business structure is another example to further strengthen our competitive advantage and enhance our shareholder value,” said Woods. “We made great progress in 2021 and our plans for the future allow us to be leaders in cash flow, earnings growth, operational performance and the energy transition.”
Enormous progress has been made in the past year, especially in low carbon solutions. “We’re expanding rapidly in this space,” said one-time doubter Woods.
Recently, fossil fuels have also brought strong profits again. Due to the rapid recovery of the US economy and the crisis on the Ukrainian border, gas and oil prices have risen sharply. But in the medium term, other investors are demanding that the big oil companies have to rethink if they don’t want to oversleep their future.
With the change in the White House, Exxon CEO Woods is now also dealing with a supporter of climate change in Washington. US President Joe Biden has not yet been able to push through his trillion-dollar “Build-Back-Better” package. But there is broad support for climate action, which could perhaps make it through Parliament on a smaller scale.
More: Welcome to the boardroom, dear activists!
