Over a year has passed since Rex Tillerson vacated his position as CEO of Exxon Mobil, but the oil and gas giant is still struggling with financial blunders made during his tenure.
Tillerson departed Exxon Mobil in 2016 for a short-lived stint as U.S. secretary of state, concluding over 40 years with the company — the last ten of which he served as CEO. However, Tillerson’s leadership does not appear, by many measures, to have boosted Exxon’s financial standing. In fact, a number of misplaced bets he green-lighted have resulted in the company enduring billions in lost profits and a credit downgrade.
Exxon was once ranked as the biggest company in the world by measure of its market value. It was one of only three companies to hold the widely coveted triple-A credit rating. The fossil fuel giant churned out a profit of $45 billion in 2008 — a record-breaking amount at that time for an American corporation.
However, Exxon’s shrunken market value has now plummeted it to tenth place. S&P Global Ratings stripped it of its credit rating in 2016. In what was a huge drop in profit from its peak almost ten years ago, the company raked in less than $20 billion in 2017. Beset with weak production, Exxon was overpassed by Royal Dutch Shell in 2018 as the oil giant generating the most cash.
What happened? Experts point to a number of failed bets during Tillerson’s reign.
Most notably, Tillerson spent big on exploration in the Russian Arctic and Canada’s oil sands, hoping to make lucrative return on investments. Unfortunately for the future secretary of state, these costly efforts have largely failed. Despite promises to churn out more oil and gas, Exxon’s output of around four million barrels a day is not any higher than it was when it merged with Mobil Corp. in 1999.
“There’s no question that, over the past handful of years, Exxon has been a relative underperformer,” Hank Smith, the co-chief investment officer of the Haverford Trust, said in a statement to Reuters. “It’s been frustrating.”
Under the new leadership of CEO Darren Woods, Exxon plans to return to its old financial glory by sticking to what it does best: measured investments in projects that generate money at low oil prices. Embedded in Woods’ eight-year plan is an ambitious goal to double Exxon’s 2017 earnings.
But many investors may have already lost faith in the company’s ability to bounce back.
Speaking to a room full of investors and analysts at the New York Stock Exchange in March, Woods announced a strategy to spend over $230 billion in order to double profits and increase production by an another one million barrels of oil and gas a day. However, Exxon’s stock price decreased following his ambitious speech, a clear indication shareholders were not sold on his plan. (RELATED: Exxon Leaves ALEC As Both Go Their Separate Ways On Climate Change Policies)
“Most investors like Exxon, but they like other companies better,” Mark Stoeckle, chief executive of Adams Funds, explained in a statement to The Wall Street Journal. “The market is not willing to reward Exxon for spending today in hopes that it will bring good returns tomorrow.”
Tillerson left Exxon in late 2016 to become President Donald Trump’s secretary of state. His latest job role did not last long. After serving for a little over a year, Trump dismissed Tillerson in favor of CIA Director Mike Pompeo. His time as secretary of state was one of the shortest in recent memory.
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