PLC said they were stepping back further from doing business with Russia, with Shell saying it will immediately halt all spot purchase of crude from the country and will phase out its other trading and business dealings.
A spokesman for BP said it won’t enter into new business with Russian entities or business involving Russian ports “unless essential for ensuring security of supply.”
The two made their moves ahead of what people familiar with the matter say is a plan by the Biden administration to ban Russian oil imports into the U.S. The Wall Street Journal reported an announcement on the issue is imminent. The administration’s deliberations about the ban have ramped up as lawmakers of both parties, including House Speaker
Nancy Pelosi,
called for action on the issue.The White House declined to comment.
Futures for Brent crude, the global oil benchmark, rose more than 5% early Tuesday. Oil prices for both measures were already up before the Journal report but rose further after.
Shell had previously said it would pull out of a number of joint ventures in the country. On Tuesday, it said it would also shut its service stations and aviation fuels and lubricants operations in Russia, and it won’t renew any Russian term contracts. It said it would find alternative supplies of oil as soon as possible, though it cautioned it could take weeks to fully make up the difference, leading to reduced production at some refineries.
Shell faced a backlash last week and over the weekend when it snapped up a cargo of Russian crude at a bargain price, after many other players had started to curtail their purchases, creating an informal embargo from some buyers in response to Russia’s invasion of Ukraine.
The company on Tuesday apologized for the purchase and said it would commit from its Russian oil purchases to humanitarian funds aimed at alleviating the crisis in Ukraine. Shell had previously said it would exit its joint ventures with Russian energy giant
Gazprom PJSC.
BP won’t charter Russian-owned or Russian-operated vessels where possible, the spokesman said. In cases where it already has, the company “will continue to monitor their safe passage and comply with all applicable sanctions and local restrictions.” The spokesman said the decisions were made in the middle of last week, calling the situation a “rapidly changing and complex area” that BP continues to review. Previously, BP said it would relinquish its nearly 20% stake in oil giant
Rosneft,
following pressure from the U.K. government.
Russia’s attack on Ukraine helped push the price of oil to over $100 a barrel for the first time since 2014. Here’s how rising oil costs could further boost inflation across the U.S. economy. Photo illustration: Todd Johnson
The U.S. and its allies left energy out of an array of economic sanctions imposed on Moscow in response to the invasion. Many refiners, though, went further, shunning Russian crude. Such self-sanctioning has taken a chunk out of global supplies, pushing prices for international benchmark Brent sharply higher. Traders say it is also causing a backup in Russia’s energy supply chain, prompting refiners to cut back production.
PARIS—French authorities blocked a yacht linked to
Igor Sechin,
the sanctioned chief executive of Russian oil producer
Rosneft,
from leaving port, as authorities around the world cast what they have promised would be a global dragnet of assets belonging to Russia’s oligarchs in response to Moscow’s invasion of Ukraine.
France had already apprehended a Russia-owned cargo ship, a rare at-sea interception made shortly after a first round of sanctions against several individuals, banks and other entities was unveiled. Since then, the U.S., the U.K. and the European Union have expanded their lists of sanctioned individuals, and have pledged to go after a group of ultrarich Russian businesspeople and officials who they accuse of benefiting from close ties to President
Vladimir Putin.
The U.S. Justice Department launched a new task force Wednesday to hunt down and seize the luxury real estate, private jets, yachts and other assets of sanctioned Russian oligarchs that officials say have been stashed around the globe. The task force is part of an international effort to raise the cost to the Kremlin and its supporters of pursuing the Ukraine invasion, officials said.
“To those bolstering the Russian regime through corruption and sanctions evasion: We will deprive you of safe haven and hold you accountable,” said Deputy Attorney General Lisa Monaco, whose office will run Task Force KleptoCapture.
France announced this week the creation of a similar task force to hunt down sanctioned Russian oligarchs and their families’ assets in the country. French Finance Minister
Bruno Le Maire
said the state was exploring ways not just to freeze assets but to seize them. “When we seize it, it means you lose the ownership of that apartment, that yacht, or that house,” Mr. Le Maire said, adding that the West was waging “all-out economic and financial war on Russia.”
In response,
Dmitry Medvedev,
deputy chair of the Security Council of Russia, tweeted: “Watch your tongue, gentlemen! And don’t forget that in human history, economic wars quite often turned into real ones.” Mr. Le Maire later said his use of the word “war” was inappropriate.
Mr. Sechin’s yacht represents an early trophy in the French effort. Mr. Sechin was sanctioned by the U.S. in 2014 after Russia annexed Crimea. He was more recently included on a list of rich and influential individuals the EU sanctioned.
Representatives for Mr. Sechin and Rosneft weren’t immediately available to comment. When Mr. Sechin was sanctioned in 2014 by the U.S., he said he considered the move an endorsement of his effectiveness at Rosneft.
Mr. Sechin was among a group of individuals sanctioned by the European Union.
Photo:
MAXIM SHEMETOV/REUTERS
The 280-foot Amore Vero, or “True Love” in Italian, was impounded overnight at a shipyard in La Ciotat, on France’s Mediterranean coast, French officials said. The yacht was undergoing repairs, but French authorities said it was making arrangements to sail urgently. French authorities said it belonged to a company majority owned by Mr. Sechin.
Delivered to its owner in 2013, the yacht was registered under the flag of the Cayman Islands. It arrived in La Ciotat on Jan. 3 and was due to remain there until April 1 for repairs, according to French authorities, who said the fact that the yacht was trying to leave French territorial waters prompted their action.
It wasn’t the first vessel France has stopped since sanctions rolled out after the invasion. France intercepted a Russia-bound cargo ship in the English Channel last weekend, saying the ship was subject to new EU sanctions. French authorities said they stopped the ship, a 400-foot commercial vessel named the Baltic Leader, en route to St. Petersburg, Russia, as part of a joint operation with American authorities.
The vessel, which was carrying vehicles, was named on the U.S. sanctions list for allegedly belonging to Promsvyazbank, a state-owned bank focusing on Russia’s defense sector. The bank is also on the EU sanctions list, and French officials said it owned the vessel. Representatives of the bank weren’t immediately available to comment.
France said it had worked with U.S. authorities.
The new U.S. team, which includes representatives from a number of federal law-enforcement agencies, will aim to enforce sweeping sanctions, export restrictions and other economic measures being levied as officials step up pressure on Russia to end its invasion of Ukraine. The U.S. and its European allies have been escalating sanctions against Russian elites, including Mr. Putin.
The Justice Department said the unit would seek to prosecute sanctions violators; target the use of cryptocurrency to evade sanctions; fight illegal efforts to undermine restrictions taken against Russian banks; and begin criminal cases or use civil forfeiture laws to seize property, including personal real estate, financial and commercial assets.
“We will leave no stone unturned in our efforts to investigate, arrest, and prosecute those whose criminal acts enable the Russian government to continue this unjust war,” Attorney General
had its most profitable year since 2014, reporting Friday that it earned $15.6 billion in net income in 2021, as commodity prices surged on the back of a global economic recovery.
The U.S. oil giant’s annual earnings were a dramatic turnaround from 2020, when Chevron lost $5.5 billion after the global pandemic routed demand for oil and gas. It reported a fourth-quarter profit of $5.1 billion Friday, up from a $665 million loss during the same period last year. Chevron also said it generated $21.1 billion in free cash flow in 2021, its most ever.
Chevron’s stock price reached its highest level ever Thursday, closing at more than $135 a share, as investors reacted to Chevron’s announcement that it would raise its quarterly dividend by 6%. But the company’s shares fell more than 4% Friday following the release of its fourth-quarter earnings, which were lower than analysts had expected.
Surging commodity prices have left investors wondering whether oil-and-gas companies will follow their historical impulse to increase drilling in pursuit of higher profits. Chevron is the first of the largest Western oil companies to report earnings, and analysts will look for tea leaves from Chevron’s management about whether the price signal has changed its calculus.
Chevron Chief Executive
Mike Wirth
said demand for gasoline is above pre-pandemic levels and that he expects further recovery in fossil markets in 2022. Despite that, he said Chevron will stick to disciplined spending.
“I don’t think we’re going to be tempted by the price of the day,” Mr. Wirth said on a call with analysts Friday.
Following years of dismal returns from oil-and-gas companies, investors have pressured producers to moderate growth and return more cash to shareholders. Chevron and peers have responded by changing how they allocate cash, leading to a jump in their share prices and declines in the cost of capital, according to
Rob Thummel,
a senior portfolio manager at TortoiseEcofin.
While that is good for investors in the company, there are mounting concerns that there isn’t enough investment in new fossil-fuel supply to meet growing demand.
“Producers and management teams will continue to deliver on what the market is asking them, which is to return capital to shareholders, ultimately making it harder to keep up with global demand for oil and gas,” said Mr. Thummel.
In 2012, the Netherlands experienced a 3.6 magnitude earthquake. It was caused by one of the world’s largest gas fields, known as Groningen, and it set off a chain of events that’s contributing to today’s sky-high energy prices. WSJ’s Shelby Holliday explains. Illustration: Sebastian Vega
U.S. oil prices reached their highest levels since 2014 in January and were trading at around $87 per barrel Thursday. More analysts are predicting that oil prices will top $100 per barrel in 2022, as global economies continue to recover and investment in oil and gas production remains relatively restrained.
Chevron has said it is sticking to a relatively modest budget and will return increasing amounts of cash to shareholders. Chevron’s dividend increase Thursday marked the 35th consecutive year the company has raised the payout. Chevron has also said it would buy back as much as $5 billion of its stock after buying back $1.4 billion in 2021.
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Late Thursday, a federal judge invalidated a U.S. oil and gas lease sale of 80 million acres in the Gulf of Mexico, saying the Department of Interior hadn’t adequately considered climate change impacts in its environmental analysis. Chevron was among the companies that had bid for tracts in the sale. Mr. Wirth called the decision disappointing on Friday.
Chevron said in December it would increase capital expenditures in 2022 to $15 billion, a 20% increase from the previous year but still well below pre-pandemic levels. Mr. Breber said the company will maintain that budget. Chevron has said it would spend between $15 billion and $17 billion through 2025 compared with previous plans to spend $19 billion to $22 billion a year before the pandemic.
Despite the lower spending levels, Chevron said it set a record for oil and gas production in 2021, producing 3.1 million barrels a day, a modest increase from last year’s levels. The company’s oil-and-gas production unit earned $7.3 billion in 2021, compared with a loss of $1.6 billion in 2020.
Chevron Chief Financial Officer
Pierre Breber
said the company can grow production despite its more disciplined spending because of structural cost savings Chevron implemented during the pandemic. Chevron has to grow to sustain the dividend, he said.
“We’re going to build back activity as the market recovers,” Mr. Breber said.
Phil Gresh,
an analyst at
JPMorgan Chase
& Co., said in a note to investors Friday that Chevron’s guidance that 2022 oil and gas production would be flat to slightly down was lower than expected. Mr. Breber said Chevron’s 2022 production would grow, excluding lost volumes from expiring contracts in Asia.
Write to Christopher M. Matthews at christopher.matthews@wsj.com
remade board of directors is debating whether to continue with several major oil and gas projects as the company reconsiders its investment strategy in a fast-changing energy landscape, according to people familiar with the matter.
Members of the board—which includes three directors successfully nominated by an activist investor in May and two other new members—have expressed concerns about certain projects, including a $30 billion liquefied natural gas development in Mozambique and another multibillion-dollar gas project in Vietnam, the people said.
Oil and gas prices are at multiyear highs, and the world is experiencing a shortage of fossil fuels as economies emerge from the pandemic. But it takes years for such energy megaprojects to produce additional supplies, and more years after that for the investments to pay off.
Exxon board members are weighing the fate of future projects as the company is facing pressure from investors to restrain fossil-fuel investment to limit carbon emissions and return more cash to shareholders. Environmentalists and some government officials are also pressuring the company to produce less oil and gas.
The discussions are taking place as part of a review of the oil company’s five-year spending plan, on which the board is set to vote at the end of this month, the people said. It isn’t clear whether the board will make a final call on the Mozambique or Vietnam projects during the current review, according to the people.
Both projects face potential political obstacles, and some Exxon board members have expressed concerns about whether they would return the billions in upfront investment they would require, some of the people said. The board meetings have been cordial, the people said.
Exxon said it doesn’t discuss internal board deliberations. “Any depiction of the board’s discussions as being less than constructive in tone or substance is wrong,” said Exxon spokesman Casey Norton.
As part of the review, Exxon is analyzing the expected carbon emissions from each project and how they would affect the company’s ability to meet pledges to reduce emissions, people familiar with the matter said. The annual projected emissions from the Mozambique and Vietnam projects were among the highest in Exxon’s planned pipeline of oil and gas projects, according to a pre-pandemic internal analysis by Exxon, which was reviewed by The Wall Street Journal.
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Mr. Norton said the analysis of projected carbon emissions the Journal reviewed was several years old and didn’t include the impact of Exxon’s most recent emission reduction plans and other post-Covid-19 changes.
The discussions over the projects represent a new dynamic for Exxon’s board, said people familiar with the matter.
Engine No. 1, the hedge fund that led a campaign that replaced three Exxon board members earlier this year, argued Exxon was investing in low-return projects and lacked a coherent strategy to chart a transition to lower-carbon fuels amid growing concerns about climate change.
The activist was successful in part because it was able to win support from some of the company’s largest investors, including
BlackRock Inc.
and Vanguard Group. The asset managers said one of the reasons they supported the Engine candidates was that Exxon’s board lacked energy expertise and independence.
Gregory Goff, participating in a 2017 conference, is among Exxon directors to question a large Mozambique project, according to people familiar with the matter.
Photo:
F. Carter Smith/Bloomberg News
Gregory Goff,
one of the Engine No. 1 nominees, is among the directors to raise doubts about the Mozambique project, people familiar with the matter said. Mr. Goff, the former chief executive of Andeavor, which was one the largest U.S. refiners before being purchased by
Marathon Petroleum Corp.
, has said that Exxon should consider more closely the risks presented by the project to assess whether it justifies investing, the people said.
The Mozambique project, called Rovuma, would tap vast reserves of natural gas off the coast of the southern African country, then chill them to a liquid state at an onshore plant to be exported around the world. It is one of the largest projects in Exxon’s portfolio, and its proximity to India could give Exxon an opportunity to export gas to a fast-growing market.
But Mozambique lacks infrastructure and is fighting an Islamic State-linked insurgency that has claimed more than 3,000 lives.
TotalEnergies
SE halted construction of a $20 billion gas project there in March after violence erupted near its construction site. Exxon spent $2.8 billion to acquire a stake in the Rovuma project but has delayed a final investment decision for several years. Exxon hasn’t disclosed an exact estimate of the project’s cost; Mozambique has estimated it at $27 billion to $33 billion.
In Vietnam, Exxon and its partners discovered a large gas field in 2011 in waters 50 miles off the coast but have yet to develop it. Gas from the field, known as Ca Voi Xanh or blue whale, would be sent through a pipeline to planned onshore power plants. Vietnamese officials have said the project would generate $20 billion in government revenue. The field is near contested waters claimed by China in the South China Sea, and analysts say China is actively disrupting Vietnam’s offshore oil-and-gas industry, adding geopolitical complications to the project.
Abandoning the projects would represent another setback to plans by Exxon Chief Executive
Darren Woods
to boost spending to increase production. Less than four years ago, Mr. Woods said the company would invest $230 billion to pump an additional one million barrels of oil and gas a day by 2025. Rovuma, in particular, was central to that strategy. The company has already pulled back parts of that strategy after the pandemic decimated demand for oil and gas last year, prompting it to undergo a belt tightening.
Exxon’s fortunes have improved this year along with rising oil and gas prices. Analysts expect Exxon to report more than $6 billion in quarterly profit later this month, after a loss of $680 million during the same period last year. The company has said it would give priority to using cash to pay down debt and fund dividends.
Exxon is planning to declare in coming weeks that it will increase its investment in a low-carbon unit it announced in February by billions of dollars, according to people familiar with the matter. It initially said it would invest $3 billion in the unit through 2025 to commercialize carbon capture and storage, hydrogen, biofuels and other technologies. Most of those businesses aren’t profitable, say analysts, and need significant public-policy support and technological advances to become so.
Exxon is also considering a pledge to reduce and offset the carbon emissions from its operations to zero by 2050, the Journal has reported. Mr. Woods previously called such net zero commitments a “beauty competition.”
Fossil-Fuel Challenges
WSJ coverage of the changing industry, selected by the editors
Write to Christopher M. Matthews at christopher.matthews@wsj.com and Emily Glazer at emily.glazer@wsj.com
BP and Chevron have made a landmark expansion into geothermal energy on Tuesday, betting on a new technology that could prove to be the world’s first scalable clean energy derived from a constant source: the natural heat of the earth,
The two major oil companies have headlined a $40 million funding round into a Canadian geothermal energy firm called Eavor. Based in Calgary, Eavor has pioneered a new form of technology that could feasibly be deployed in many places around the world.
The investment marks a key move into an area otherwise ignored by energy companies, which have largely looked to wind and solar projects in their efforts to diversify away from fossil fields.
It is the first investment into geothermal energy for BP
BP,
+1.45%
and a re-entry into the field for Chevron
CVX,
+0.58%,
which sold its geothermal assets in 2016.
Eavor has previously only accepted angel investment and venture capital. The $40 million injection will be used to further research and development to help scale the power system to be price-competitive.
Also read: Even with $1.1 trillion firepower, this fund is battling rivals to get its hands on green-energy opportunities
“We see Eavor’s potential to be complementary to our growing wind and solar portfolios,” said Felipe Arbelaez, BP’s senior vice president of zero carbon energy. “Technology such as Eavor’s has the potential to deliver geothermal power and heat and help unlock a low carbon future.”
Eavor has developed a new type of geothermal technology that, in very simple terms, creates an underground “radiator.”
The Eavor “Loop” consists of a closed-loop network of pipes installed typically 3 kilometers to 4 kilometers below the earth’s surface, originating and terminating in the same aboveground facility. The pipes are installed using advanced drilling techniques perfected in the oil patch.
Liquid travels in the pipes from the aboveground facility through the hot ambient underground environment, before naturally circulating back to the top of the loop. The hot liquid is then converted into electricity or transferred to a district heat grid.
A major advantage to this type of energy is that it is constant, providing a base load of electricity to a grid system without requiring challenging battery solutions of intermittent wind and solar power.
Shots from a virtual tour of Eavor’s full-scale prototype.
Photo courtesy of Eavor.
Unlike hydroelectricity, which relies on large sources of constant water flow, it is designed to be scaled, and Eavor envisions rigs installed under solar panel fields and in space-constrained regions like Singapore.
Geothermal energy has been around for decades, enjoying a boom period in the 1970s and 1980s before largely falling out of the spotlight in the 1990s. Relying on heat below the surface of the earth, it has long been an attractive proposition for oil-and-gas companies, which have core expertise in below-ground exploration and drilling.
The problem is that conventional geothermal technology relies on finding superhot water sources underground, making them expensive, risky, and rare bets. More recent advances have roots in the shale oil boom, and use fracking techniques to actually create the underground reservoirs needed to generate energy. But this can pose a problem from an environmental and sustainability standpoint.
Eavor’s solution doesn’t require the exploratory risk of traditional geothermal energy or disrupt the earth the way that fracking-style geothermal does.
Plus: Tesla and other car makers will be impacted by Boris Johnson’s new plan for electric vehicles. Here’s how
John Redfern, Eavor’s president and chief executive, told MarketWatch that the system’s predictability, established in field trials in partnership with Royal Dutch Shell
RDSA,
+1.25%,
is repeatable and scalable, making it much like wind and solar installations.
“We’re not an exploration game like traditional oil and gas or traditional geothermal. We’re a repeatable manufacturing process, and as such we don’t need the same rate of return,” Redfern said.
“Before we even build the system, unlike an oil well or traditional geothermal, we already know what the outputs can be. Once it is up and running, it is super predictable,” Redfern said. “Therefore, you can finance these things exactly like wind and solar, with a lot of debt at very low interest rates.”
spoke about combining the oil giants after the pandemic shook the world last year, according to people familiar with the talks, testing the waters for what could be one of the largest corporate mergers ever.
Chevron Chief Executive
Mike Wirth
and Exxon CEO
Darren Woods
discussed a merger following the outbreak of the new coronavirus, which decimated oil and gas demand and put enormous financial strain on both companies, the people said. The discussions were described as preliminary and aren’t ongoing but could come back in the future, the people said.
Such a deal would reunite the two largest descendants of
John D. Rockefeller’s
Standard Oil monopoly, which was broken up by U.S. regulators in 1911, and reshape the oil industry.
A combined company’s market value could top $350 billion. Exxon has a market value of $190 billion, while Chevron’s is $164 billion. Together, they would likely form the world’s second largest oil company by market capitalization and production, producing about 7 million barrels of oil and gas a day, based on pre-pandemic levels, second only in both measures to Saudi Aramco.
But a merger of the two largest American oil companies could encounter regulatory and antitrust challenges under the Biden administration. President Biden has said climate change is one of the biggest crises the country faces. In October, he said he would push the country to “transition away from the oil industry.” He hasn’t been as vocal about antitrust matters, and the administration has yet to nominate the Justice Department’s head of that division.
One of the people familiar with the talks said the sides may have missed an opportunity to consummate the deal under former President
Donald Trump,
whose administration was seen as more friendly to the industry.
Darren Woods, CEO Exxon Mobil Corp., at an industry conference in 2018
Photo:
Andrew Harrer/Bloomberg News
A handful of sizable oil and gas deals were completed last year, including Chevron’s $5 billion takeover of Noble Energy Inc. and
ConocoPhillips
COP -2.63%
’ roughly $10 billion takeover of Concho Resources Inc., but nothing close to the scale of combining San Ramon, Calif.-based Chevron and Irving, Texas-based Exxon.
Such a deal would significantly surpass in size the mega-oil-mergers of the late 1990s and early 2000s, which included the combination of Exxon and Mobil and Chevron and Texaco Inc.
It also could be the largest corporate tie-up ever, depending on its structure. That distinction currently belongs to the roughly $181 billion purchase of German conglomerate Mannesmann AG by Vodafone AirTouch Plc in 2000, according to Dealogic.
Many investors, analysts and energy executives have called for consolidation in the beleaguered oil-and-gas industry, arguing that cutting costs and improving operational efficiencies would help companies weather the pandemic-induced downturn and prepare for an uncertain future as many countries seek to reduce their dependence on fossil fuels to combat climate change.
In an interview discussing Chevron’s earnings Friday, Mr. Wirth, who like Mr. Woods also serves as his company’s board chairman, said that consolidation could make the industry more efficient. He was speaking generally and not about a possible Exxon-Chevron merger.
“As for larger scale things, it’s happened before,” Mr. Wirth said, referring to the 1990s and early-2000s megamergers. “Time will tell.”
Paul Sankey,
an independent analyst who hypothesized a merger of Chevron and Exxon in October, estimated at the time that the combined company would have a market capitalization of about $300 billion and $100 billion in debt. A merger would allow them to cut a combined $15 billion in administrative expenses and $10 billion in annual capital expenditures, he wrote.
An abundance of fossil fuels combined with advances in technology to harness wind and solar power has sent energy prices crashing around the world. WSJ explains how it all happened at once. Photo illustration: Carlos Waters/WSJ
Exxon was America’s most valuable company seven years ago, with a market value of more than $400 billion, nearly double Chevron’s. But Exxon has fallen from its heights following a series of strategic missteps, which were further exacerbated by the pandemic. It has been eclipsed as a profit engine by tech giants such as
Apple Inc.
AAPL -3.74%
and
Amazon.com Inc.,
AMZN -0.97%
in recent years and was removed from the Dow Jones Industrial Average last year for the first time since it was added as Standard Oil of New Jersey in 1928.
Exxon’s shares have fallen nearly 29% over the last year, while Chevron’s are down about 20%. Chevron briefly topped Exxon in market capitalization in the fall.
Exxon endured one of its worst financial performances ever in 2020. It is expected to report a fourth consecutive quarterly loss for the first time in modern history on Tuesday and already has posted more than $2 billion in losses through the first three quarters of 2020.
Chevron also has struggled, reporting nearly $5.5 billion in 2020 losses Friday. But investors have expressed more faith in Chevron because it entered the downturn with a stronger balance sheet—in part because it walked away from its $33 billion bid to buy Anadarko Petroleum Corp. before the pandemic, having been outbid by
Occidental Petroleum Corp.
OXY -4.25%
in 2019.
Exxon has about $69 billion in debt as of September, while Chevron has around $35 billion, according to S&P Global Market Intelligence.
Some investors have grown increasingly concerned about Exxon’s direction under Mr. Woods as the company faces a rapidly changing energy industry and growing global consciousness about climate change. Some are also worried that Exxon may have to cut its hefty dividend, which costs it about $15 billion annually, due to its high debt levels. Many individual investors count on the payments as a source of income.
Mr. Woods embarked on an ambitious plan in 2018 to spend $230 billion to pump an additional one million barrels of oil and gas a day by 2025. But before the pandemic, production was up only slightly and Exxon’s financial flexibility was diminished. In November, Exxon retreated from the plan and said it would cut billions of dollars from its capital spending every year through 2025 and focus on investing in only the most promising assets.
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Meanwhile, the company’s woes have helped draw the attention of activist investors. One of them, Engine No. 1 LLC, has argued that the company should focus more on investments in clean energy while cutting costs elsewhere to preserve its dividend. The firm nominated four directors to Exxon’s board Wednesday and called for it to make strategic changes to its business plan.
Exxon also has been in talks with another activist, D.E. Shaw Group, and is preparing to announce one or more new board members, additional spending cuts and investments in new technologies to help it reduce its carbon emissions.
Rivals such as
BP
BP -2.80%
PLC and
Royal Dutch Shell
RDS.A -3.53%
PLC have embarked on bold strategies to remake their business as regulatory and investor pressure to reduce carbon emissions mounts. Both have said they will invest heavily in renewable energy—a strategy that their investors so far haven’t rewarded.
Exxon and Chevron haven’t invested substantially in renewables, instead choosing to double down on oil and gas. Both companies have argued that the world will need vast amounts of fossil fuels for decades to come, and that they can capitalize on current underinvestment in oil production.
Write to Christopher M. Matthews at christopher.matthews@wsj.com, Emily Glazer at emily.glazer@wsj.com and Cara Lombardo at cara.lombardo@wsj.com