In a world of oil companies that are turning green to attract a new sort of investor, the world’s once most valuable public oil company, Exxon, is somewhat of an exception. Amid all the pandemic-driven spending cuts and production plan adjustments, the supermajor has continued to announce discoveries and has, in stark contrast to its peers, not made billion-dollar writedowns on assets even at the height of the crisis.  What’s Exxon’s game?

Exxon’s lack of writedowns has led to accusations that the company is adjusting its accounts in order to prevent such writedowns on assets when hard times come — accusations that were leveled even before the pandemic. Yet the company has defended itself pretty well, saying it has a conservative approach to evaluating new assets and does not adjust their value in response to short-term oil price trends. Some believe this is smart. Others find it suspicious.

Yet earlier this year, Exxon was forced to reconsider: in August, the company said it might have to write down the value of its oil and gas assets by as much as 20 percent if low oil prices persisted.

Asset valuation aside, another major target of criticism is Exxon’s apparent stubbornness in sticking to its core business while Shell, BP, Total, and Eni are pivoting towards renewable energy and planning to shrink their core business. It’s worth noting, though, that U.S. oil companies as a whole have been much more reluctant to embrace the green transition than their European peers.

To some, this is nothing but an attempt to attract a new segment of investors: those interested in so-called ESG investing, or environmental, social, and corporate governance investing. This is how one investor and adviser, Jim Collins from Portfolio Guru, put it: “The actions of European oil majors BP and Royal Dutch to ’embrace’ renewables are laughably transparent attempts to attract ESG investors to their beaten-down stocks.” 

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To be fair, BP’s stock actually shed 35 percent of its value when the company detailed a transition plan that is designed to see it become an energy company rather than an oil company, suggesting there are still plenty of non-ESG investors out there. Yet Collins is perhaps right that the European majors are looking for a new kind of investor. 

Exxon, meanwhile, announced yet another discovery in the impressively prolific Stabroek Block offshore Guyana, made the final investment decision on another project in the block, and said it would cut 1,600 jobs in Europe. Investors are worrying about Exxon’s dividend payments, while some, such as Jim Collins, are calling on the company to restart stock buybacks because, according to Collins, despite the oil price crash, the loss, and the share price plunge, it has enough cash to do it. And the stock, let’s be fair, is cheaper now. 

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Those in the renewable energy camp argue that Exxon is falling behind on the global energy transition. The oil investor camp, however, argues that the world will continue needing petrochemicals – including for the electric cars that are expected to wipe out a lot of demand for fuels – so Exxon just needs to boost its downstream operations. While both camps have valid arguments, the issue has become so partisan that it is rare for opposing groups to find common ground.

The good news for Exxon is that oil demand, although badly damaged, is already returning, and the world will continue consuming oil products for quite some time. In that sense, Exxon is right where it needs to be with its oil and gas plans. And if the European majors want to cut their production, that would only free up more market share for Exxon and the U.S. majors.

By Irina Slav for Oilprice.com

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