Wall Street is losing confidence in ExxonMobil, as investors develop a bad case of “the heebie jeebies” over the world’s largest oil company, writes Tom Sanzillo of the Institute for Energy Economics and Financial Analysis in a recent blog post.
“Exxon has lost cachet among institutional investors,” Sanzillo writes, citing the Wall Street Journal, with the result that “most portfolios hold a smaller proportion of Exxon stock than its relative size in the S&P 500 index.” That downsizing, the Journal adds, “underscores investor concern over Exxon’s strategy.”
“Hot on the heels of its huge write-down of its Canadian oil sands reserves,” and with long-time CEO Rex Tillerson now serving as U.S. secretary of state with all ties to his former company supposedly cut, Exxon and its new chief, Darren Woods, are under intense scrutiny, the IEEFA director of finance writes.
The company brought in US$250 billion in revenue last year, but Sanzillo collates commentaries on its prospects that range from “never more out of favour with analysts in its modern history” (Bloomberg), to “alarming” (an observer cited by the New York Times).
Under Tillerson, Exxon came late to the U.S. shale boom, buying in at the top of the market. In four of the last five years, the company’s production has dropped. Now, writes Sanzillo, Woods “would have us believe there is a brave new world in which oil development can be profitable with prices as low as US$40 per barrel. We’re skeptical of that assertion, even with the oil industry’s vast technical prowess. Nor are we bullish on natural gas prices.
“In fact, we think Exxon investors may well be scraping their shoes for quite some time of what the bull left behind on the Canadian oil sands write-down.”