Oil Giant ExxonMobil: Profits Suffer as Energy Markets Shift
RICHMOND, Va. – Oil giant ExxonMobil is in a sharp decline that some are calling irreversible – in part due to deep changes in world energy markets.
Once among the largest companies in the world, Exxon's revenue peaked at nearly $500 billion, but last year, it was less than half that.
Tom Sanzillo, director of finance for the Institute for Energy Economics and Financial Analysis (IEEFA), says the reasons are complex, but one issue is that the company made a huge bet buying up Canadian oil sands.
Sanzillo explains these are expensive reserves to produce, and the company has had to admit they are not worth keeping on the books at current low prices.
"And they just wrote off 3.5 billion barrels of oil, which is almost 20 percent of their size,” he points out. “The company is getting smaller, not larger, and it's likely to continue."
Other analysts say the energy titan is diversified and strong enough to weather the bust.
But Sanzillo points out that the energy market shifts are bigger than a temporary downturn.
He points out ExxonMobil once funded climate change denial, but is now urging the Trump administration to stay in the Paris climate accord.
Exxon isn't alone, and Sanzillo says the company is holding its own better than some of the other huge petroleum companies that used to sit at the top of the global economy.
"In the late 80s, early 1990s, Standard and Poor's 500 Index – the top 10 companies, six or seven of them were oil companies,” he states. “Today, there's only one and that's Exxon, and it isn't doing very well."
Sanzillo says part of Exxon's problem is fracking – unconventional drilling is bringing so much oil and natural gas to market that it's driven down prices.
At the same time, he says, the OPEC countries are unable or unwilling to cut back production. And the position of all kinds of fossil fuels has been gradually eroding – so much that it's starting to impact investments.
"No fiduciary can claim to be doing their jobs without contemplating what their portfolio will look like with substantially diminished or no fossil fuels," he states.
ExxonMobil's stock price peaked near $104 a share in 2014. Now it's near $81 a share.