Exxon In ‘Bull's-Eye’ As Worst Year Since Reagan Limps to a Close

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Things haven’t been this bad for the world’s biggest oil stock since Ronald Reagan became president. Exxon Mobil Corp., down 22 percent for the year, is headed for its worst annual performance since 1981, when the U.S was in recession and a 20-year crude glut was just beginning. The decline comes as Exxon pursues one of the largest restructurings in its modern history, a seven-year, $200 billion push for oil in South America and natural gas in Mozambique and Papua New Guinea. With one of corporate America’s strongest balance sheets, the concern isn’t whether Exxon can fund the rebuild. The question from investors: What can you do for me in the meantime? The awkward answer may be "not much," at a time when oil prices are plummeting.
As rivals restrain growth and buy back stock, Exxon is the one “with the bull’s-eye on their back,” said Mark Stoeckle, who manages $2.6 billion including Exxon shares at Adams Express Co. “They weren’t terribly efficient in the last cycle. What do they do differently? This time it has to work.”  Royal Dutch Shell Plc, for instance, is down less than 10 percent for the year after stepping up its buyback program at the end of October, when oil prices were still high. The company said it will repurchase $2.5 billion of shares, compared with $2 billion in the previous tranche. Exxon has made no similar effort. Exxon has “the longest view of any company,” said Stoeckle, who supports Woods’s strategy. “Investors need to either ignore them or come to grips with the fact they’re going to do what they’re going to do, and stop complaining.” Exxon’s problems largely stem from flag-planting deals made at the peak of commodity prices over the past decade. Exxon spent $35 billion on U.S. shale gas producer XTO Energy Inc. in 2010 when the real money was to be found in shale oil. It invested $16 billion in Canadian oil sands since 2009, only to de-book much of the reserves. Meanwhile, former CEO Rex Tillerson’s 2013 exploration pact signed with Russia was caught behind a wall of sanctions and later abandoned.Year-on-year production has declined nine of the last 10 quarters and earnings have missed estimates four of the last six. Exxon’s production of 3.65 million barrels a day in the second quarter was the lowest in a decade.

 

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