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Exxon Planning Board, Other Changes Amid Activist Pressure

D.E. Shaw Group, Engine No. 1 LLC are the activist investors involved

Wall Street Journal

Exxon Mobil Corp. XOM 0.83% is preparing to make changes to its board and adopt further measures to reduce its carbon footprint as the beleaguered energy giant faces pressure from a pair of activist investors.

The company is discussing adding one or more new directors to the board and stepping up sustainability investments, people familiar with the matter said. Irving, Tex.-based Exxon, which has been reducing its overall capital spending, could also curtail it further.

Exxon is in talks with one of the activists, D.E. Shaw Group, which may end up supporting the moves, some of the people said. Meanwhile, the other, Engine No. 1 LLC, is moving forward with a planned proxy fight for four board seats, it said Wednesday.

Exact details couldn’t be learned and the talks with D.E. Shaw could still fall apart. Like other activists, D.E. Shaw sometimes employs nonbinding handshake agreements with the companies it targets to avert a proxy fight.

The company said in a statement in response to the Engine No. 1 move that it has engaged with the firm since mid-December and that its board-affairs committee will evaluate the nominees. “ExxonMobil will continue to update shareholders in the coming weeks on the company’s strategy to build long-term, sustainable value for shareholders,” the company said. “It will also provide updates on company performance and actions to address climate change, including initiatives to commercialize technologies which are key to reducing emissions and meeting societal goals consistent with the Paris Agreement.”

Exxon could announce the changes as soon as next week, possibly with its fourth-quarter earnings Tuesday, the people said, though there is no guarantee it will do so.

The company is expected to report its fourth straight quarterly loss, the longest such losing streak in its modern history.

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Prior to the pandemic, Exxon Chief Executive Darren Woods embarked on an ambitious strategy to spend more to increase production. The sharp drop in demand for fossil fuels since then triggered billions of dollars of losses for the company. In November, Exxon pulled back from Mr. Woods’ plan to boost its overall oil-and-gas production by one million barrels a day by 2025. The company said it would cut billions of dollars from its capital expenditures over the next five years and invest only in its best assets.

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Adding to the pressure, the Securities and Exchange Commission is investigating whether Exxon is overvaluing one of its most important oil-and-gas properties, The Wall Street Journal recently reported.

Investors have been pressuring Exxon to boost its lagging share price, and the activists have pushed for moves that include reducing capital expenditures and expanding in renewable energy. Exxon’s shares are down about 30% in the past year.

BlackRock Inc. Chief Executive Larry Fink this week asked companies to disclose more information on how they are moving to reduce greenhouse-gas emissions, adding another pressure point for Exxon given that the investing giant is one of its biggest shareholders.

Newly established Engine No. 1 said Wednesday it nominated four previously announced board candidates. It said in December it planned to make the nominations with the support of California State Teachers’ Retirement System, the big pension investor. Together they control less than 0.3% of Exxon, which has a market value of about $193 billion, so the outcome of their campaign will depend on whether they get buy-in from more significant investors.

Engine No. 1 and Exxon have held informal talks, but have so far failed to agree. That potentially sets up a drawn-out and expensive battle as the two sides campaign for shareholder support for their board candidates, culminating in a vote at the company’s annual meeting this spring.

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D.E. Shaw, a hedge fund best known for its quantitative trading, is an occasional activist, having picked fights at companies including at Emerson Electric Co. and Lowe’s Cos.

I wanted to post this given how critical Exxon is to Louisiana's economy - particularly the Baton Rouge/New Orleans area as well as southeast Texas. I think an argument can be made that Standard Oil's refinery (now Exxon) in Baton Rouge is responsible for putting the capital area on the map.

The company is getting a lot of pressure from activist investors that are trying to force the firm to back off of some of their core businesses.

This post was edited on 1/27/21 at 10:46 am