Exxon’s Next Chief Will Lead a Weakened Empire
The New York Times confidently tells us.
With Saudi Aramco hoping to take over as the world’s biggest listed oil group and rival Shell coming up fast, Exxon’s days as Big Oil’s unparalleled heavyweight are numbered.
Hmmm. Let’s see the details of Saudi Aramco’s IPO and let it actually take place before we start writing off ExxonMobil, shall we? Are the reserves up for sale, for instance?
And Shell? On what measure are they catching up fast? Sure, their purchase of BG for a vastly inflated $70bn makes them the largest gas player, but 2015 saw them make $1.94bn profit against revenues of $265bn whereas ExxonMobil made $16.2bn from revenues of $259.5bn. ExxonMobil’s return on capital employed was 7.9%, Shell’s 1.9%. Granted, Shell employs 93,000 people and ExxonMobil a mere 73,500 but only people who get their information from the New York Times would see that as a good thing.
Shell is a sprawling behemoth which still needs to undergo some serious restructuring, and doesn’t seem to have much of a strategy other than to become the world’s biggest oil company by biting off more than it can chew. ExxonMobil, for all its size, remains a tightly-run ship.
The company’s market cap of around $380 billion is not much changed from a decade ago, and could soon be dwarfed by the state-owned Aramco, which analysts estimate could be worth up to $1 trillion if it goes ahead with an expected 2018 initial public offering.
Sure. But Aramco is being forced into this IPO because despite sitting on top of the world’s largest oil reserves they are woefully short of working capital. The privatised company might be larger than ExxonMobil, but we should remember that British Leyland was larger than Volkswagen.
Shell — now valued at more than $200 billion thanks to its 2015 acquisition of BG Group — may produce more barrels than Exxon by 2019.
Production is king? What is this, 2012? Perhaps the journos at the NYT have been left off the mailing list, but the majors stopped chasing production targets and switched to CAPEX reduction and profitability shortly after the oil price tanked in 2014.
Shell’s leader, Ben van Beurden, also wants to beat his larger rival in terms of total shareholder return.
Yes, we know Shell wants to “beat” ExxonMobil – that’s been their goal for years, although Lord knows why – but they’ve never been able to quite manage it. What’s different now?
The good news for Mr. Woods is that Exxon still dominates in one key respect: return on average capital employed.
Over the last five years, Exxon’s return on that measure has bested Shell’s by nearly 7 percentage points on average. That is one imperial feature that will take time to erode.
Well yes, that is good news, isn’t it? One is permitted to ask why the NYT is giving equal weight to the egotistical dreams of the Shell CEO versus ExxonMobil’s vastly superior financial performance.
Because those at the NYT are clueless and don’t like ExxonMobil, that’s why.