ExxonMobil is doomed, says the NYT

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.

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14 thoughts on “ExxonMobil is doomed, says the NYT

  1. Lesson to be learnt byt the NYT (and I’m not holding my breath):

    Don’t talk crap about the oil business when a pro from same might come across your wibblings.

  2. “Shell — now valued at more than $200 billion thanks to its 2015 acquisition of BG Group…”

    The day before the deal was announced (April 7, 2015), Shell’s Class B shares closed at $65. Now they are trading below $57, down 13%. I guess the NYT is saying the BG deal wasn’t that disastrous because the market cap stayed above $200 billion after all.

    Exxon’s stock rose by 6% during the same period. A difference of 19 percentage points.

    Granted, Shell has outperformed Exxon this year. But it hasn’t been enough to reverse Shell’s relative underperformance in 2015, which, I suspect, was very much due to the BG deal.

  3. Observers of crappy journalism will note the use of the auxiliary verb.

    “Shell — now valued at more than $200 billion thanks to its 2015 acquisition of BG Group — may produce more barrels than Exxon by 2019.”

    See, may. Right there. That is like it could, might, possibly, wannabe and all the other shit predictions (carefully shrouded in doubt) the lame stream media churn out daily. Yes, it might indeed happen, but so too might the Saudis stop funding terrorism or perhaps a meteor may well plough into dear old Earth before then.

    You can see how the life of a journo is so hard, choosing what may or may not happen instead of f*cking simply reporting the news or dealing in facts. Shit writers unable to do more than speculate and express ‘opinions’ that are based on nothing but chats with the fellow-wankers they hang round the tea trolley with.

    The NYT is just another hopeful rag hoping the world will go their way.

  4. James,

    Do I detect a certain fanboism for Exxon here, Tim?

    To a point, yes. ExxonMobil has it’s problems and working there looks to be as stifling as hell in many respects, but their financial performance speaks for itself and they are way ahead of the other majors. And when ExxonMobil does something well, it does it very well indeed. They are the only oil company I’ve encountered which has a half-sensible travel and hotel policy, for example. I’m an admirer, but I’m not sure I’d like to work for them.

  5. So say a number of financial analysts as well.

    Anyhow my experience with them including travel and accommodation is that they are very good at the business but if there was ever a male equivalent of a Stepford Wife then EM male staff would have to come very close. They were about to launch their missing person protocol when I was “late” for a international check in, very womanly I thought.

  6. Bardon,

    but if there was ever a male equivalent of a Stepford Wife then EM male staff would have to come very close.

    Heh yes, an apt description.

    They were about to launch their missing person protocol when I was “late” for a international check in, very womanly I thought.

    Yeah, they’re known for not letting their expatriated employees drive about in certain countries of assignment when other oil companies either allow it or (in some cases) insist on it.

  7. Because those at the NYT are clueless and don’t like ExxonMobil, that’s why.

    Yeah, but give them a break. They have to deal not only with ExxonMobil’s performance, which is enough to make their heads explode, but also with the fact that the CEO is going to be Mr. Trump’s Secretary of State. The entire staff of the New York Times must have been given instructions to find bad things to say about ExxonMobil.

  8. The elephant in the room from a journalistic perspective is why the journalist did not refer to any of this emerging critical financial information on EM to improve upon the effectiveness of their supposed hatchet job.

    http://ieefa.org/ieefa-issues-red-flag-report-exxonmobil-%E2%80%A8core-financials-show-oil-giant-decline-institutional-investors-owe-shareholders-fiduciary-review/

    https://srsroccoreport.com/end-of-the-u-s-major-oil-industry-era-big-trouble-at-exxonmobil/

  9. “Yeah, they’re known for not letting their expatriated employees drive about in certain countries of assignment…”

    Some Japanese firms have that same policy with regard to their workers in Taiwan, which I have to say I think is an entirely sensible decision. I might drive around here, but I have had many years to adapt after surviving several traffic accidents in the early days. Were I in their shoes, there’s no way I’d let visiting senior engineers go driving around the streets of Taipei or Kaohsiung on their own.

  10. I relocated with an international contractor to Jakarta for a while, their rule was that they supplied you with English speaking drivers and we all vowed not to drive on our first weekend but that practice didn’t last long.

  11. I forgot that Shell had bought BG for shares as well as for cash, so Shell issued new equity in Feb. 2016 in exchange for BG shares. That boosted Shell’s market cap but not the price per share. The old shareholders took a hit and the new shareholders converted their BG shares into Shell at a premium to the market. Anyway, it should be added that Shell’s market cap was slightly above $200 billion right before the deal was announced in April 2015.

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