Exxon to restructure - create Low Carbon Solutions division, move headquarters
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In a surprise release from Exxon (NYSE:XOM) just a day ahead of Q4 results, the Company provided the market with Management's plans for restructuring the business. Startup investor Engine No. 1 (0.02% owner) managed to install three board members in 2021, and they appear to be making quick work. Exxon will:
- Restructure into three business lines -- combining international and US upstream into "ExxonMobil Upstream Company", combining chemicals and refining into "ExxonMobil Product Solutions" and creating a new "ExxonMobil Low Carbon Solutions" division.
- Support the three operating units with one technology organization, and other centralized services.
- Relocate headquarters from the Company's ~300 acre campus in the middle of Dallas, to the Company's ~400 acre campus in Houston.
Few details were provided about the new low-carbon division, though presumably it will fold in existing carbon-capture projects within Exxon. What the restructuring means for cost savings targets, and investment plans will likely be the focus of investor questions on tomorrow's conference call. Though management is likely to defer strategic questions to the Company's capital markets day on March 2nd.
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Comments (170)
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w00t
01 Feb. 2022
Why the relocation of HQ?
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w00t
01 Feb. 2022
@PapaWhisky Nm... read it wrong... thanks
Johnny Skyhook
01 Feb. 2022
From DowJones today:"Exxon's capital spending plan for this year seems to highlight a growing acceptance that the so-called transition away from fossil fuels just won't work in the near-to-medium term, and instead the focus needs to be on reducing carbon emissions while also pumping lots of crude to meet strong demand. "
Username Already Taken
01 Feb. 2022
Not sure if this will work out the way the eco-activists want but EXXON has deep enough pockets to suffer a few fools. I’ll look to buy if this blows up in their face.
Solojif1
01 Feb. 2022
All so the US govt can soon charge US taxpayers a carbon tax on everything. Inflation isn’t enough for those greedy politicians. Now they can blow the carbon tax they collect on pet projects.
Mr Briggens
01 Feb. 2022
@Solojif1 Taxes are so 20th century.
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FactDistortion
01 Feb. 2022
@Solojif1 that’s the idea of taxing the most important molecule of life, taxing the subjects to death.
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arnold.bird
31 Jan. 2022
Why stay and take the pain.
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rockthemetals
31 Jan. 2022
Product Solutions business looks like a future spin move. Low Carbon Solutions business is to appease the ESG crowd. Selling the Dallas HQ and moving folks to The Woodlands will be a cost savings and makes a lot of sense with hybrid/remote working. I have to image that they a lot of empty cubes/offices at The Woodlands campus since March 2020.
Johnny Skyhook
31 Jan. 2022
It's hard for me to understand the constant negativity about the carbon storage plans. This is economically viable technology, it helps limit $XOM's reputational risk, and there are literally hundreds of gigatons of storage opportunities offshore Texas alone. Anyone who bothers to research it will find a bunch of technical information showing this is a way better thing for them to be doing than wind farms or other carbon offsets.
CoSyBob
31 Jan. 2022
@Johnny Skyhook Please explain how carbon storage is anything but a ridiculous sop to the anti-science landscape and ecology despoiling Leninists demonizing the molecule all life is built on ?
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arnold.bird
31 Jan. 2022
@Johnny Skyhook Where would the carbon come from? This seems like replacing one melting ice cube with another. If the carbon comes primarily from fossil fuel operations, then it’s going to be a shrinking business. I don’t think I’d be worried about reputation if I owned XOM. I’d be worried about the business and how it will be perceived as EV mile-share rises.
Johnny Skyhook
01 Feb. 2022
@arnold.bird From what I have read, $XOM's plan involves capturing CO2 from the 50 or so largest industrial emitters in the Houston area. There are countless storage opportunities in depleted offshore reservoirs:www.forbes.com/...This is nothing particularly new either. Exxon has been the world leader in CCUS since 1970, having already accounted for 40% of the world's captured and stored in the earth:energyfactor.exxonmobil.com/...By the way, there is considerable opposition from the green lobby to the idea because it permits the continuation of the oil industry:www.politico.com/...That is actually the great irony: the people making the most aggressive and negative comments against the green lobby apparently have zero clue that CCUS is a fossil based solution. The level of ignorance in this forum is astonishing.www.forbes.com/...However, on a technical basis, this is the most logical solution:www.bakerhughes.com/...As far as a shrinking industry, fossil energies cannot feasibly be replaced or entirely phased out for at least three decades. Reputational risk most certainly affects capital flows which has a direct impact on stock valuations for oil and gas companies -- and, when ignored, leads to such things as Engine 1.scholarship.kentlaw.iit.edu/...
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zsigmundik
31 Jan. 2022
Considering XOM announced they'd be spending $15B on low carbon between now and 2027 (in other terms, 1 of the next 7 years will be spent almost entirely on low carbon), this division split makes sense. At best, it shows the financials for a high PE multiple spin out. At worst, it shows where at the bottom of the ocean the capital was sunk.
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maxfloat100
31 Jan. 2022
When will Chevron follow suit & sell their HQ in San Ramon, CA (outside of San Fransico) & move to Houston? They could get big $$$ for that real estate.
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Westexr
31 Jan. 2022
@maxfloat100 Excellent idea. Also, their employees would save a lot with lower taxes, lower cost of living, and much lower housing cost. I know several folks that recently relocated from CA. They all paid cash for their house in Texas.
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eurdone88
31 Jan. 2022
It's a smokescreen to distract climate change activists.Just like all their other phony green initiatives.The only thing green they care about is money.It won't hurt their profits nor will it have much of an impact on the world.Prove me wrong, Exxon. I'd love you to, but I expect you won't.
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salemfinancial
31 Jan. 2022
@eurdone88 I hope you are correct and just eye candy for climate fools. It’s a fossil fuel company and the world needs their products.
Greens, follow Germany.
Greens, follow Germany.
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eurdone88
31 Jan. 2022
@TexasSlim
Why? I want them to realize the truth. Same as the climate change deniers.The way forward is a diversified enery grid, with less dependency on fossil fuels.Fossil fuels are necessary for clean energy manufacturing, so they're not going anywhere. That's the truth. There are liars and propagandists on both sides cashing in and deceiving people. The truth is found in between the extremist propaganda, like it usually is.
Why? I want them to realize the truth. Same as the climate change deniers.The way forward is a diversified enery grid, with less dependency on fossil fuels.Fossil fuels are necessary for clean energy manufacturing, so they're not going anywhere. That's the truth. There are liars and propagandists on both sides cashing in and deceiving people. The truth is found in between the extremist propaganda, like it usually is.
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Demba59
31 Jan. 2022
@
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LongTermActivist
31 Jan. 2022
It's in the best interest of shareholders that XOM maximise their potential in energy transition. Anyone that would rather have fat dividends is dangerous to the company
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eurdone88
31 Jan. 2022
@Evitzee
ESG companies outperform the market by like 100%.If Exxon diverted some of their wasteful fossil fuel uses into sustainable green energy manufacturing, it could bring in millions of new investors.The future for fossil fuels is in sustainable greener manufacturing, not watching people burn it up on the freeway!
ESG companies outperform the market by like 100%.If Exxon diverted some of their wasteful fossil fuel uses into sustainable green energy manufacturing, it could bring in millions of new investors.The future for fossil fuels is in sustainable greener manufacturing, not watching people burn it up on the freeway!
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Joe Brandon
01 Feb. 2022
@Evitzee we will soon find out that all of our investments are charity donations, democrat party donations, and big government payoffs
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CVE-is-in-beast-mode
31 Jan. 2022
Hold on to you hats … During the prior oil bull run from 2005-2014, XOM bought back 1.9 Billion shares dropping shares outstanding from 6.1 Billion to 4.2 Billion ... yearly dividend was $1.14 in 2005 and $2.70 in 2014 ... if we are yet again in the second inning of a similar 10 year run, XOM is going to kill it … imagine spending $10 Billion per year on buybacks … even at $100 that’s 100 million shares taken out … in 10 years 1 billion shares gone … imagine the dividend and stock price then!
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Bandon Dunes
31 Jan. 2022
Seems a bit strange to me that all this seemed to come out of the blue and was announced the day before an earnings announcement.
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Transformation64
31 Jan. 2022
@jblain never a good sign....usually means earnings will NOT be up to snuff. XOM does this all the time
billrla
31 Jan. 2022
So, high carbon solutions, low carbon solutions and chemicals. In other words, an oil company. Brilliant.
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Deep Time
31 Jan. 2022
@Ben Richards Only in reruns.
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Riskman
31 Jan. 2022
@Ben Richards That’s a good one!
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simonthecat
31 Jan. 2022
The last time oil was $90 (2014) the stock price of XOM was over $87... there is a lot of room to go up... I hope that earnings are fantastic and creates some positive spin for the energy sector (that is still cheap compared to 2014).
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small supernova
31 Jan. 2022
@simonthecat Maybe, but what was the 'reserve life' in 2014 vs 2022? XOM's biggest problem (along with other oil companies, especially the 'super majors') is to keep their 'reserve runway' stable, else their 'expiry date' draws ever closer.
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Johnny Skyhook
01 Feb. 2022
@small supernova Extended oil recovery can actually be achieved alongside CO2 sequestration using subsea separation and reinjection technology using water-alternating-gas and subsea centrifugal pumping systems. By placing the installations on the sea floor it frees up space topsides which provides a number of advantages. Additionally, the CO2 injected into the reservoir is then used to raise recovery from existing assets (without additional exploratory risk) and never released to the atmosphere. As a result, oil production goes up, and CO2 emissions go down, generating a positive effect on project economics.This is especially true when the carbon footprint is reduced even further by going all-electric on offshore facilities using produced gas for generation.I have commented extensively on these technologies, which are currently being deployed to Mero 3 in Brazil where Petrobras has developed its own technology that will likely be adapted elsewhere such as the GoM. I predict this will be an award-winning technology that helps transform the future of oil and gas production toward greater sustainability.
Craig Cooper
31 Jan. 2022
@ephud Oh get a hold of yourself. Their restructuring plans make sense and are long overdue. Given the current and future-trending ESG pressure, establishing a low carbon solutions department is a good move.
ephud
31 Jan. 2022
@Craig Cooper You're entitled to your opinion and I'm entitled to mine. I don't like watching folly and that's what it boils down too. I have a substantial position in XOM but I'm nauseous watching such waste.
Nostradamus' Calculation
31 Jan. 2022
@ephud check out the new CRGY--they look like they're positioning to suck up any "problematic" assets if you read the initial guidance
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Transformation64
31 Jan. 2022
ahhhha..listen to all these engine one haters...if xom performed better the past decade then engine one might not be on the board.
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martin redfearn
31 Jan. 2022
@Transformation64 twenty year cycle business. The next 10 will be opposite of the last 10
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Transformation64
31 Jan. 2022
@martin redfearn oh please the 30 year time horizon is antiquated and one of the reasons XOM has underperformed. PERMIAN is a direct answer to that ivory tower thinking....but they were late to the game