This week will be a public trial by fire for new Exxon Mobil Corp. Chief Executive Officer Darren Woods.
Presiding over his first of the oil company's annual meetings since predecessor Rex Tillerson left to become U.S. secretary of state, Woods is expected to be tested today on everything from climate change to his own paycheck. Analysts and investors will be watching to see whether he proves as adept as his mentor in striking a welcoming tone with restive activists while gently disagreeing with just about everything they say.
"He represents a continuation of what Mr. Tillerson was doing, and so far we've seen no strategic shift," said Brian Youngberg, an analyst at Edward Jones & Co. In St. Louis with a "hold" rating on Exxon's stock. That's comforting "for long-term holders who own Exxon for the dividend and not much else."
Woods faces a vote on a resolution requiring Exxon to provide a detailed analysis of whether the energy giant can prosper under strict greenhouse-gas limits. Backers of the measure, which are as diverse as the California Public Employees' Retirement System and the Church of England's investment fund, are striving to improve upon the 38 percent support a similar proposal received from shareholders last year. Exxon opposes the resolution because it says it already discloses enough data.
For Exxon, the shareholder-centered event it stages every May in a Dallas symphony hall has become a donnybrook over the environment and corporate governance. Activist groups have shifted in recent years from rowdy bullhorn protests on the sidewalks outside to delivering measured shareholder appeals inside the meeting hall arguing for more prudent financial stewardship.
Woods, an electrical engineer by training who's spent his entire career at Exxon, will be confronted by investors demanding that Exxon cut new spending on oil fields and hand the cash over to shareholders in dividends instead. And less than five months after his promotion to the jobs of chairman and chief executive officer, Woods and the board he leads will face rising opposition to his $16.8 million pay package and the way it was calculated.
Activist shareholders are hitting Exxon, which produces about 2 percent of the world's crude oil, with a version of the climate-change accounting proposal for a second-straight year. Despite the company's steadfast opposition, the measure attracted more investor support than any of the four other environmental proposals put to a vote last year. This year there are almost 90 Exxon investors planning to support the measure, according to data compiled by investor-advocacy group Ceres.
"Exxon's business is extremely vulnerable to changes in climate regulation and consumer demand," said New York State Comptroller Thomas DiNapoli, a lead sponsor of the climate-impact resolution. The company "puts itself and its long-term investors at risk by failing to acknowledge this reality."
Shares fell 45 cents, or 0.6 percent, to close Tuesday at $81.10 in New York trading.
Exxon says its current disclosures, which include forecasts of how caps on carbon emissions will affect long-term petroleum demand, are sufficient.
Even with the strictest scenarios envisioned under the 2015 Paris Agreement, global population growth and economic expansion will require vast quantities of oil and natural gas to fuel power plants, vehicles and industrial society, Exxon said in a May 19 letter to shareholders. The Paris accord calls on nations to prevent worldwide temperatures from rising more than 2 degrees Celsius from preindustrial levels by lowering fossil-fuel pollution.
"The world will continue to require significant quantities of hydrocarbons for which Exxon Mobil is well-situated to compete," according to the letter. "Substantial upstream oil and gas investment will be required through 2040, even assuming a 2-degree Celsius scenario."
Thus far, this annual-meeting season has been bruising for oil producers seeking to beat back activists on the climate and compensation fronts.
A majority of investors in Occidental Petroleum Corp. broke with company leaders and approved a climate-impact proposal on May 12 that was almost identical to the Exxon resolution. Calpers, representing California state retirees, and other backers persuaded fellow investors to validate the resolution by 58 percent, compared with a 40 percent yes vote in 2016.
Business on 05/31/2017