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Climate Activism Is Great News For Saudi Arabia And Russia

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Jun 04, 2021 (Baystreet.ca via COMTEX) -- Big Oil has lately come under a plethora of attacks from all directions, ranging from uncooperative financiers and investors amidst a global shift to renewable energy to hostile governments and hardline climate activists. But not all oil and gas players will be on the losing end of those attacks.

Some of the biggest names in the oil and business have recently suffered a trifecta of blows by climate activists and investors.

Exxon Mobil /zigman2/quotes/204455864/composite XOM +0.67% lost three board seats to Engine No. 1, an activist hedge, in a stunning proxy campaign. Engine No. 1 has told the Financial Times that Exxon will need to cut fossil fuel production in order for the company to position itself for long-term success. "What we're saying is, plan for a world where maybe the world doesn't need your barrels," Engine No.1 leader Charlie Penner has told FT.

No less than 61% of Chevron /zigman2/quotes/205871374/composite CVX +0.57% shareholders voted to further cut emissions at the company's annual investor meeting a week ago, rebuffing the company's board which had urged shareholders to reject it.

Meanwhile, a Dutch court has ordered Royal Dutch Shell /zigman2/quotes/205095589/composite RDS.A +0.59% to cut its greenhouse gas emissions harder and faster than it had previously planned. Never mind the fact that Shell already had pledged to cut GHG emissions by 20% by 2030 and to net-zero by 2050. The court in The Hague determined that wasn't good enough and has demanded a 45% cut by 2030 compared to 2019 levels.

However, not everybody in the oil sector is alarmed by the turn of events.

Indeed, OPEC and leading national oil companies (NOCs) are reveling in schadenfreude following Big Oil's latest woes, viewing it as a prime opportunity to grab more business and market share.

The boardroom and courtroom defeats of Exxon, Chevron, and Shell is sweet music in the ears of Saudi Arabia's national oil company Saudi Aramco (2222.SE), Russia's Gazprom (GAZP.MM) and Rosneft (ROSN.MM) as well as Abu Dhabi National Oil Co. who are looking to capitalize by filling the gap that will be left if these companies start cutting oil production in a bid to pacify investors.

"Oil and gas demand is far from peaking and supplies will be needed, but international oil companies will not be allowed to invest in this environment, meaning national oil companies have to step in," Amrita Sen from consultancy Energy Aspects has told Reuters.

Lowering emissions, not nixing fossil fuels

An overriding theme that has emerged is that Big Oil wants to focus not so much on curtailing oil and gas production but rather on mitigating the impact of its carbon and greenhouse gas emissions.

Big Oil chief executives from Exxon Mobil, Chevron Corp., Occidental Petroleum, /zigman2/quotes/207018272/composite OXY +2.44% and ConocoPhillips /zigman2/quotes/207605056/composite COP +0.69% have all spoken about the industry's transition to a lower carbon world, with OXY even branding itself a 'carbon management' company that wants to set the industry standard for the production of net-zero carbon oil.

According to Exxon Mobil CEO Darren Woods and Occidental Petroleum CEO Vicky Hollub, reducing carbon emissions from fossil fuels and not the actual use of fossil fuels offers the best way to combat climate change.

Interestingly, both CEOs stressed--on separate panels--that the world still needs oil and gas, and governments need to focus on mitigating global warming using technologies such as carbon capture and storage (CCS) instead of attacking fossil fuels.

Nevertheless, even the biggest hardliner of them all, Exxon Mobil, has markedly changed its tune from just a few years back.

During the company's 2021 Investor Day held on Wednesday, CEO Darren Woods outlined the company's energy transition strategy, including plans to trim production growth and boost cash flows in a bid to support a growing dividend. Exxon revealed that it plans to hold production flat from 2020 levels through 2025 at 3.7M boe/day, good for a 26% cut from the 5M boe/day estimate for 2025 it released just a year ago.

Still, Exxon plans to continue ramping up production at the Permian Basin and Guyana, with Permian production averaging 400K boe/day this year before rising to 700K boe/day by 2025. Exxon also sees Guyana quickly becoming a key cash cow but has indefinitely suspended other major projects such as the $30B Mozambique LNG export project.

/zigman2/quotes/204455864/composite
US : U.S.: NYSE
$ 58.22
+0.39 +0.67%
Volume: 16.86M
July 28, 2021 4:03p
P/E Ratio
N/A
Dividend Yield
5.98%
Market Cap
$244.83 billion
Rev. per Employee
$2.47M
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/zigman2/quotes/205871374/composite
US : U.S.: NYSE
$ 101.18
+0.57 +0.57%
Volume: 8.55M
July 28, 2021 4:03p
P/E Ratio
N/A
Dividend Yield
5.30%
Market Cap
$194.45 billion
Rev. per Employee
$1.98M
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US : U.S.: NYSE
$ 39.51
+0.23 +0.59%
Volume: 4.33M
July 28, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
2.87%
Market Cap
$150.24 billion
Rev. per Employee
$1.97M
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US : U.S.: NYSE
$ 26.90
+0.64 +2.44%
Volume: 11.77M
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P/E Ratio
N/A
Dividend Yield
0.15%
Market Cap
$24.51 billion
Rev. per Employee
$1.45M
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/zigman2/quotes/207605056/composite
US : U.S.: NYSE
$ 56.72
+0.39 +0.69%
Volume: 6.17M
July 28, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
3.03%
Market Cap
$76.01 billion
Rev. per Employee
$1.93M
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