Exxon Mobil Just Posted Its Worst Profits In Almost Thirty Years.
I write, the United States Senate is debating whether to confirm former
Exxon Mobil CEO Rex Tillerson as U.S. secretary of state. The vote is
expected February 1.
Earlier today, Exxon Mobil reported
its lowest profits in almost thirty years, raising the question of
whether Tillerson’s business leadership is as stellar as both the public
and elected officials tend to believe.
then-CEO Rex Tillerson, Exxon Mobil’s $7.84 billion in 2016 profits was
51% lower than its 2015 profits of $16.15 billion, which was 50% lower
than its $33 billion profits in 2014. In just the fourth quarter of
2016, Exxon Mobil’s $1.7 billion in profits was 40% less than it earned
during the same period in 2015. Adjusted for inflation, $7.84 billion
for 2016 represents Exxon’s lowest earnings since 1989, when profits
were $3.5 billion, or $6.77 billion in 2017 dollars.
January 1, Rex Tillerson retired as CEO of Exxon Mobil after being
nominated by Donald Trump to serve as secretary of state. He is leaving
Exxon Mobil in far worse condition then when he took over the company.
Tillerson’s nomination has become one of the most controversial and
broadly opposed, such that, on January 23, every Democrat on the Senate
Foreign Relations Committee voted against recommending his nomination to
the full Senate. The nomination passed out of the committee on a
straight party-line vote of eleven Republicans in favor to ten Democrats
among those who oppose Tillerson, there has been fairly universal
support for his business acumen. For example, when Connecticut Senator
Chris Murphy, a Democrat, said
“There is no doubt Rex Tillerson is a successful businessman and a very
smart person, but he has proven, many times, his willingness to put oil
profits before national interests and handing him the keys of US
foreign policy is a recipe for disaster.”
today’s earnings report should give Senators pause on this front as
well. Under Tillerson, Exxon Mobil’s profits collapsed by more than 80%,
from $39.5 billion when he became CEO in 2006 to $7.84 billion today.
has spent his entire professional career at Exxon, having been
recruited into the company straight out of college at the University of
Texas at Austin in 1975. He rose steadily through the ranks to become
CEO and Chairman of the Board in 2006. That year, Exxon Mobil earned
$39.5 billion in profits. Two years later, riding a wave of
record-breaking high oil prices, Exxon Mobil’s profits rose to $45.2
billion — the highest annual corporate profits ever recorded until
surpassed in 2015 by Apple.
oil prices crashed in 2009, and have yet to recover. While other
companies tried branching out into alternative fuels and renewable
energy, Exxon Mobil has stuck rigidly to oil and natural gas. As I
reported for Rolling Stone in 2013,
“Since 2002, Exxon Mobil, which took in $45 billion in profit last year
alone, put a grand total of $188 million into its alternative [energy]
investments, compared to the $250 million it dedicated to U.S.
advertising in the last two years alone.” In so doing, it has also seen
earnings steadily crater to today’s record lows.
the first time since the Great Depression, Standard & Poor’s
stripped Exxon Mobil of a AAA credit rating in April 2016, citing the
“reserve-replacement ratio” as the company’s greatest challenge — that
is, finding enough new oil reserves to replace that which it pumps from
Exxon Mobil reported having to write-off $2 billion worth of a
so-called “impairment charge” in natural gas assets primarily in the
U.S. Rocky Mountains, according to the company,
which, under current price conditions are not presently viable. Even
excluding the impairment charge, however, “both U.S. and international
upstream fell short of expectations,” Wells Fargo Senior Analyst Roger
Read said in a research note on Exxon Mobil’s earnings.
impairment was, nonetheless, a massive blow to the company’s
financials. Yet, it is likely not the worst financial problem the
company will face as a result of Tillerson’s leadership. As I report
this month for In These Times,
the U.S. Securities and Exchange Commission (SEC) is investigating
whether Exxon Mobil has been inflating the size of its oil reserves by
counting reserves as “booked” — meaning planned and accessible for
producing — when they should not be. In response, the company reported
in late October that it would likely need to “de-book” some 3.6 billion
barrels of tar sands oil in Canada and about 1 billion oil-equivalent
barrels in other North American fracking operations. This would mean
that with the stroke of a pen, Exxon Mobil could lose nearly 20 percent
of its booked reserves — the measure that most determines the value of
oil company stock.
The SEC investigation stems from a 2016 report by InsideClimate News
raising potential fraud concerns perpetrated by Exxon Mobil against the
public and its shareholders regarding what the company knew about
climate change and when, and what it did with that information. A
finalist for the 2016 Pulitzer Prize, the investigation uncovered that
Exxon’s own scientists confirmed in the 1970s that the burning of fossil
fuels harms the climate. The company then chose to publicly deny the
reality of climate change and finance the climate denialist movement
(findings Exxon Mobil disputes).
reports today, “Exxon expects to follow through with most of the 4.6
billion-barrel reserves reduction it warned investors about in October
because depressed prices made some fields unprofitable to drill, Vice
President Jeff Woodbury said during a webcast on Tuesday. The disclosure
will occur within the next two weeks, he said.”
Elizabeth Warren, Democrat of Massachusetts, said today from the Senate
Floor, “Handing American foreign policy over to a giant oil company is
not something we do in the United States.” Based purely on its
financials, it appears to be sage advice against both Exxon Mobil and