Exxon ceo’s solution on shares drill big, drill better 4 main gases in the atmosphere

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Woods’ solution, outlined in a Wednesday interview, is to invest heavily in mega-projects that he says are so low cost they’ll dominate oil and natural gas markets for decades to come. Share buybacks will come only if there’s excess cash, the chief executive officer said in an interview Wednesday, ahead of a speech on the company’s strategy at Exxon’s annual meeting on May 30.

Now his job is to persuade skeptical investors his plan will work, a hard sell so far. Since Woods’ became CEO in 2017, Exxon has fallen 9%, compared with an 18% gain for its biggest rival, Royal Dutch Shell. The CEO said he sees “a little bit of a disconnect” between the market’s short-term expectations and Exxon’s long-term planning. But he remains confident.

“Everyone, if they had the investment opportunities that we have, they would be progressing those investment opportunities,” Woods said in a broad-ranging discussion at Exxon’s Irving, Texas, headquarters. “I don’t think anybody would leave high-return projects on the table.”

Oil’s recent surge to $80/bbl has prompted competitors such as BP to buy back shares while others including Shell and Chevron have placed hard ceilings on capital expenditures as they seek to reward investors for sticking with them through the slump of 2014-2016.

The Exxon leader conceded that some of the company’s past investments have weighed on returns, but insisted the future is bright. “The difference in our strategy,” he said, is “the fact that we had the confidence to work hard at developing opportunities when the broader cycle was dropping.”

Woods puts this partly down to the company’s discipline in not investing in expensive projects when oil was selling for $100/bbl. “That led to less investment than maybe we normally would have, which when you come out of that market means you’ve got a portfolio that doesn’t have as many projects in it,” he said.

The five key development areas — oil offshore Guyana and Brazil, liquefied natural gas in Mozambique and Papua New Guinea, and shale in the U.S.’s Permian basin — should add about 1 MMbopd by 2025. But Exxon will only grow if the additional production can withstand oil prices as low as $40/bbl, Woods said.

The investment plan, first announced in March, was met with skepticism by investors, some of whom expected Exxon to return more money to shareholders rather than boost capital spending every year from now until 2025. Since then, Woods has mounted a charm offensive, insisting this is the right moment to put money at work in projects, rather than spending it buying back shares.

As such Exxon’s shares have struggled. After basking in a premium stock valuation for two decades, measured on a price-to-book value basis the shares last year traded at a discount to energy companies in the S&P 500 Index for the first time since 1997, according to data compiled by Bloomberg. The discount has deepened this year.

Woods, in fact, is breaking with tradition to become the first Exxon CEO to sit in on quarterly conference calls with analysts. But it’s not happening until next year. He’s planning to participate in the company’s fourth-quarter earnings call, typically in late January or early February, the company said in April.

At a time when there’s much uncertainty over the future of oil and gas given the rise of renewables, electric cars and policies to curb climate change, some equity investors are reluctant to invest in Big Oil, Tim Perry, global co-head of oil and gas investment banking at Credit Suisse Group AG.