XOM - Exxon Mobil Corporation

NYSE - NYSE Delayed price. Currency in USD
68.80
-0.57 (-0.82%)
At close: 4:03PM EST

68.78 -0.02 (-0.03%)
After hours: 7:10PM EST

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Previous close69.37
Open69.02
Bid68.78 x 1800
Ask68.95 x 800
Day's range68.60 - 69.15
52-week range64.65 - 83.49
Volume10,916,190
Avg. volume10,993,730
Market cap291.1B
Beta (3Y monthly)0.98
PE ratio (TTM)20.05
EPS (TTM)3.43
Earnings date30 Jan 2020 - 3 Feb 2020
Forward dividend & yield3.48 (5.02%)
Ex-dividend date2019-11-08
1y target est79.02
  • Exxon’s Climate Trial Is Over, But the Legal War Is Just Beginning
    Bloomberg

    Exxon’s Climate Trial Is Over, But the Legal War Is Just Beginning

    (Bloomberg) -- When New York’s climate change lawsuit against Exxon Mobil went on trial last month in a Manhattan courtroom, the energy giant’s lead lawyer took great pains to emphasize that the state’s allegations weren’t really about climate change.After all, Theodore Wells said, Exxon was accused of hatching a cynical, arguably pedestrian scheme to mislead investors. The alleged securities fraud may have been intended to mask the impact global warming will have on Exxon’s finances, but it wasn’t a grand reckoning of its responsibility for the man-made phenomenon.The reason, of course, was that New York couldn’t find enough evidence to back up its initial contention that Exxon hid its knowledge of global warming. In the end, however, that may not matter: Regardless of who wins, there are states, municipalities and environmental groups lined up around the block, suing or planning to sue Exxon and other energy companies for being the main perpetrators of a planetary catastrophe.And while a victory for New York could be a public relations boon for plaintiffs in those pending cases, a win for Exxon is unlikely to stop their litigation—most of which is based on very different legal arguments.Just as the New York trial was getting underway last month, Massachusetts Attorney General Maura Healey hit Exxon with a new consumer lawsuit. Her complaint cut to the chase, accusing the company of withholding dire climate warnings from its own scientists for decades and duping the state’s consumers with bogus “green” gasoline ads, among other things.“It’s well past time for Exxon to tell the truth and be held accountable for the misrepresentations it has made to every investor, at every gas station, on every television, and online,” Healey said in a statement. Exxon has repeatedly denied any wrongdoing.Additionally, more than a dozen “public nuisance” lawsuits seek to hold energy companies responsible for billions of taxpayer dollars spent on acclimating to a warming world, or picking up the pieces following unprecedented hurricanes, floods and wildfires.Rhode Island filed such a complaint last year, while a dozen city governments from California, Washington, Colorado, Maryland and New York have also sued. In just the last few weeks, the mayor of Honolulu said his city would soon file a nuisance suit of its own, comparing the litigation to lawsuits against Big Tobacco that led to a $246 billion industry settlement. The Hawaiian island of Maui, it’s own county, has also said it plans to sue. Since the cost of slowing global warming (and acclimating to damage already done) could reach tens of trillions of dollars, the stakes in these cases—if they survive—may be significantly higher than those faced by cigarette makers.Patrick Parenteau, an environmental law professor at Vermont Law School, said the growing number of nuisance cases are supported by claims of a well-funded “campaign of deception” and Big Oil’s history of opposing legislation intended to address the problem.So far, nuisance cases have met with mixed success, as the companies fight to move them from state to federal courts, where they often get more favorable treatment. Last month, the U.S. Supreme Court let officials from Maryland, Rhode Island and Colorado press ahead with three state lawsuits that accuse more than a dozen oil and gas companies, including Exxon, of contributing to climate change.Local governments have won rulings in California, where a federal judge moved a climate change lawsuit by the City of Imperial Beach and San Mateo and Marin counties back to state court. (The companies have appealed.)Plaintiffs have lost nuisance cases as well. In a federal lawsuit filed in early 2018, New York City accused Exxon, Chevron, BP, Royal Dutch Shell and ConocoPhillips of promoting fossil fuel sales despite knowing the damage it poses to the planet. A U.S. district judge threw out the lawsuit, which was based on a state law, saying federal law governs carbon dioxide emissions. The city appealed, with arguments scheduled for Nov. 22.A spokesman for Shell said the company doesn’t “believe the courtroom is the right venue to address climate change.” None of the other defendant companies responded to emails seeking comment.Lawsuits filed by the cities of Oakland and San Francisco met the same fate when they were dismissed. Appeals are pending in those cases as well.“Unless governments take adequate action against climate change, which is highly unlikely, lawsuits will continue to pile up,” said Michael B. Gerrard, director at the Sabin Center for Climate Change Law at Columbia Law School. But states and cities seeking redress in the courts say it is the only avenue open to them. The federal government under President Donald Trump has spent the past three years trying to undo climate regulations put in place by President Barack Obama, including taking the U.S. out of the landmark Paris Agreement intended to reduce fossil fuel emissions globally.Hana Vizcarra, a staff attorney at Harvard Law School Environmental and Energy Law Program, said nuisance lawsuits are difficult to make because plaintiffs must “draw the line” from a company’s actions to the damage done. The continued fight over state jurisdiction will be crucial, she said.“If they survive the fights over venue, there will be a continued appetite to bring these cases,” Vizcarra said.Read More: How Exxon’s Climate Change Trial Became a Battle Over NumbersAs for the New York case, it’s now up to Supreme Court Justice Barry Ostrager, who presided over the non-jury trial. He is scheduled to hand down a verdict in the coming weeks. Whoever loses is almost certain to appeal.The trial turned on the two ways Exxon measured how much climate change—and specifically climate change-related laws—would affect its bottom line. According to the company, its so-called “proxy cost” was a public number representing how much fossil fuel prices would fall as those regulations diminished fossil fuel demand. The other number was an internal “greenhouse gas cost” associated with new extraction projects, such as fracking or oil sands, it said. New York said the proxy cost was at one point $80 a ton while the greenhouse gas cost was $40.New York said the two gauges were like keeping two sets of books—clear evidence that Exxon was lying to the investing public. The proxy cost made the company look like it was being fully transparent about its financial future, New York argued, but since Exxon used the lower cost when deciding whether to dig up more oil, it was a classic case of securities fraud, since investors were buying stock based in part on a lie.Exxon responded that New York’s case made no sense, since the greenhouse gas cost was narrowly focused, used to measure the viability of specific projects, and—most importantly—more optimistic. What, Exxon argued, would it gain by fooling itself? Read More: Why New York Doesn’t Need a Smoking Gun to Win the Exxon Climate TrialDuring the course of the trial, former Exxon CEO Rex Tillerson took the stand in what may have been the most dramatic point of the three week-proceeding. New York often elicited testimony intended to show that Exxon sought to defraud investors, a strategy that seemed to annoy Ostrager.The lawsuit was filed in part under New York’s powerful Martin Act, which doesn’t require a showing of intent. It only requires that New York show Exxon shareholders could have been misled by the company’s actions. As the trial ended, the state dropped counts based on common law fraud alleging that Exxon’s statements about its accounting were intended to defraud investors, and that investors relied on them when buying stock. The remaining two counts, brought under the Martin Act, require the judge find only that Exxon’s statements were sufficient to mislead to investors, regardless of whether Exxon meant to do so.Robert McTamaney, a New York-based corporate attorney, calls the Martin Act “an atrocity,” given how low the bar for victory can be. As for the nuisance lawsuits, he concurred that they may gain traction if they are allowed to proceed in state courts. Nevertheless, he said he believes the courts are the wrong place to settle the question of climate change.“The correct outcome, in my judgment, is to leave this area to the Congress and legislatures,” McTamaney said. “And in any event, it is a global problem which demands a global solution.”Others are intent on using the courts to make those responsible for the global crisis pay to fix it. New York’s lawsuit against Exxon, said Daniel Rohlf, a lawyer at Earthrise Law Center, is the first battle in a larger war. A professor at Lewis and Clark Law School in Portland, Oregon, Rohlf said a ruling against Exxon would have a big impact on pending litigation elsewhere.“It would send a loud and clear signal to both corporations and the public that carbon emissions aren’t free,” he said. “The time has come to account for those costs in the way we do business, and in the way we live.To contact the author of this story: Erik Larson in New York at elarson4@bloomberg.netTo contact the editor responsible for this story: David Rovella at drovella@bloomberg.netFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Bloomberg

    Warren Pledges Corporate Perjury Law to Fight Misinformation

    (Bloomberg) -- Elizabeth Warren unveiled a new policy proposal Tuesday to prosecute large corporations for perjury if they mislead the public and government regulators.The Democratic presidential candidate’s proposal takes aim at companies such as Exxon Mobil Corp., which she said had spent millions of dollars to spread misinformation about the effects of fossil fuels on climate change.If Warren’s idea becomes law, companies would be subject to as much as $250,000 in fines, and executives could face jail time if regulators determined they knowingly submitted false or misleading information to regulatory agencies. Her latest policy roll-out is part of a larger anti-corruption plan that she has made a centerpiece of her campaign.“If bad actors like Exxon break the rules and deliberately lie to government agencies, my plan will treat them the same way the law treats someone who lies in court – by subjecting them to potential prosecution for perjury,” Warren wrote in a Medium post on Tuesday.Exxon’s scientists work “in an open and transparent way,” the oil producer said in a statement. The Irving, Texas-based company “has supported climate science in partnership with government and academic institutions for nearly 40 years,” it said, citing dozens of peer-reviewed publications and work with Stanford University, the Massachusetts Institute of Technology, the U.S. government and the United Nations.A New York judge is currently presiding over a case in which the state’s attorney general’s office is accusing Exxon of making misleading statements about the financial effects of climate change policies. Last week, the state dropped two claims that formed part of the original case.Warren would also ban federal agencies and courts from considering research that has been financed by a specific industry and has not been peer-reviewed. Corporations would be required to disclose how their research was funded and make clear any financial relationships between the researchers and their corporate backers before being considered by federal agencies. Any conflicts of interest would exclude that research from the rulemaking process, she said.She also assailed tobacco companies for backing what she called misleading information on the health risks of smoking.Warren’s proposal comes a few weeks after she stepped up her criticism of major U.S. corporations, including Facebook Inc., Wells Fargo & Co., BP Plc and Walmart Inc. and singled out senior-level government officials who accepted jobs with them after working for the federal government.The Massachusetts senator has vowed to increase oversight of lobbying and to impose hiring restrictions for people who have worked in top government posts.(Updates with Exxon comment in fifth paragraph.)\--With assistance from Kevin Crowley.To contact the reporter on this story: Misyrlena Egkolfopoulou in Washington at megkolfopoul@bloomberg.netTo contact the editors responsible for this story: Wendy Benjaminson at wbenjaminson@bloomberg.net, Carlos Caminada, Joe CarrollFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • W&T Offshore (WTI) Q3 Earnings Beat on Higher Production
    Zacks

    W&T Offshore (WTI) Q3 Earnings Beat on Higher Production

    W&T Offshore's (WTI) third-quarter 2019 production rise is supported by the Mobile Bay acquisition, which added 74 million Boe of net proved reserves to its portfolio.

  • Exxon Mobil Falls 3%
    Investing.com

    Exxon Mobil Falls 3%

    Investing.com - Exxon Mobil (NYSE:XOM) fell by 3.03% to trade at $70.79 by 10:03 (15:03 GMT) on Friday on the NYSE exchange.

  • The 10 Highest Paying Jobs In Oil & Gas
    Oilprice.com

    The 10 Highest Paying Jobs In Oil & Gas

    Despite recent cost cuts and layoffs, the oil & gas industry remains one of the nation’s largest and best paying employers, offering the highest median wages of any S&P 500 Industry

  • Imperial Oil (IMO) Earnings and Sales Lag Estimates in Q3
    Zacks

    Imperial Oil (IMO) Earnings and Sales Lag Estimates in Q3

    Imperial Oil (IMO) returns C$512 million to its shareholders through dividends and share buybacks in the third quarter.

  • Oilprice.com

    Why Oil Companies Aren't Evil

    While oil companies in general and Exxon Mobil in particular are often depicted as the epitome of evil, the reality that most humans within them experience is very different

  • Second Failed Brazil Oil Auction Has Officials Attacking Rules
    Bloomberg

    Second Failed Brazil Oil Auction Has Officials Attacking Rules

    (Bloomberg) -- Brazil had its second failed oil auction in two days, prompting government officials and the head of the state-run producer to criticize bidding rules.One of five available blocks received a bid on Thursday, a day after two out of four blocks went unsold. Once again, most major oil companies stayed away. Brazil’s Economy Minister said the almost complete absence of foreign players left him “terrified,” and that it send a message that it’s difficult to do business in Brazil.“No one showed up,” Paulo Guedes told reporters in Brasilia. “We went through a lot of trouble and, in the end, we sold things to ourselves.”Fourteen companies had signed up to bid Wednesday for an area that’s estimated to hold as much as 20 billion barrels of oil. It was the largest auction of reserves since the end of the second Gulf War. In the end, it was mostly Petrobras doing the bidding: the state-run company won the largest block by offering the minimum with two Chinese partners and it won another block for which it was the sole bidder. Two more blocks didn’t attract any bids.Thursday bidding saw Petrobras and its Chinese partner scoop up a block at the minimum offer while four other blocks received no bids.“The amount that companies would need to commit upfront, with license fees and compensation to Petrobras, was too high,” Petroleo Brasileiro SA Chief Executive Officer Roberto Castello Branco said in an interview, while also citing regulatory uncertainties. “We haven’t given up on our partners; they’ve given up on us.”Brazil’s oil regulator said rules that give Petrobras pre-emptive bidding rights “inhibited” other companies from taking part.“It does not seem to be a good judgment to keep the regime as it is today,” Mines and Energy Minister Bento Albuquerque told reporters.The auctions were meant to be part of Brazil’s shift away from nationalistic oil policies, helping it inject of foreign cash to develop reserves. The government had estimated Wednesday’s auction -- comprising the so-called transfer of oil rights -- would raise about $25 billion in fees and another $25 billion in compensation for Petrobras, which has already invested in drilling and platforms. In the end, the total for licensing was $17 billion, and Petrobras will receive just a fraction of what it expected initially.The results hit Brazil’s currency and the share price for Petrobras, which fell more than 5% before finishing the day little changed. An analyst called the auction a “total disaster” for the government.Castello Branco said there were concerns among the oil majors about what decisions Pre-Sal Petroleo, an agency created to manage the government’s share of the country’s production, would make in the future.In the days prior to Wednesday’s auction, there were already signs that the outcome would be a disappointment for the government. BP Plc and Total SA said they wouldn’t bid, while Exxon Mobil Corp., which has built the largest offshore exploration portfolio in Brazil after Petrobras, expressed concern about the high costs.Seeing the oil majors that have long partnered with the company dropping out or wavering, Castello Branco said he called Petrobras Chief Financial Officer Andrea Marques de Almeida into his office as the day of the auction approached.“If we want to go it alone -- can we?” he asked. The reply: “We can.”Castello Branco said Petrobras can develop the giant Buzios deepwater field it won on its own without compromising financial discipline. The company has funds to pay for all the fees and still reduce debt this year. Petrobras ended the third quarter with a strong cash position, and it also has 34.1 billion reais ($8.3 billion) of credit with the government it can use to pay for the fees, Castello Branco said.The company was aiming for at least 30% of the Buzios field, not the 90% it ended up with, he said. Chinese partners only took a 10% stake.\--With assistance from Murilo Fagundes.To contact the reporter on this story: Sabrina Valle in Rio de Janeiro at svalle@bloomberg.netTo contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Tina DavisFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Brazil Oil Flop Continues for Second Day as Majors Abstain
    Bloomberg

    Brazil Oil Flop Continues for Second Day as Majors Abstain

    (Bloomberg) -- For the second day, state-controlled energy giant Petrobras led the sole bid as major foreign producers sat out an auction of Brazilian oil deposits.Petroleo Brasileiro SA, as the company is also called, made a successful joint bid with China National Oil & Gas Exploration & Development Co. for the Aram block in Thursday’s sale at the minimum price. The four other blocks in the auction in Rio de Janeiro received no bids.The disappointing results follow an auction on Wednesday where the likes of Exxon Mobil Corp. failed to make a bid, despite expressing interest in the process beforehand, leaving Petrobras and its Chinese partners to scoop up two of the four deposits on offer at the minimum price.The auctions of the so-called pre-salt blocks are a setback for the Jair Bolsonaro administration, which is looking to stimulate competition and reduce Petrobras’s dominance of the Brazilian oil industry. Petrobras will have to cover 90% of development costs for the giant Buzios field that was sold on Wednesday, the most expensive block ever sold by Brazil.“Things go from bad to worse in Brazil,” Welligence Energy Analytics said in an emailed statement. “The days of chasing pre-salt exploration acreage at any cost are over.”Thursday’s auction is the fourth this year. Brazil will now enter a phase of massive investment in the areas sold in recent years. The deposits are expected to make Brazil a top five oil producer, according to Decio Oddonne, the head of Brazil’s National Hydrocarbons Agency, or ANP.“We won’t be licensing pre-salt blocks forever,” he told reporters ahead of the latest auction. “This phase of billionaire blocks has come to a close.”To contact the reporters on this story: Sabrina Valle in Rio de Janeiro at svalle@bloomberg.net;Peter Millard in Rio de Janeiro at pmillard1@bloomberg.net;Luiza Ferraz in Rio de Janeiro at lferraz9@bloomberg.netTo contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Christine BuurmaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Brazil Needs Growth, Not Just Oil, to Attract Foreign Capital
    Bloomberg

    Brazil Needs Growth, Not Just Oil, to Attract Foreign Capital

    (Bloomberg) -- As the dust settles from Brazil’s disappointing oil field auction, currency traders could be forgiven for wondering where the real is headed next. The answer depends on how much you’re willing to bet that economic growth is finally about to blossom.The sale’s flop -- major producers including Exxon Mobil Corp. walked away without even lodging a bid -- frustrated investors because it slammed the door on what many had expected to be a lucrative source of foreign capital. Now that the fields have been sold, mostly to state oil producer Petroleo Brasileiro SA, there’s no ready signal that greenbacks are on their way.Granted, the real’s collapse on Wednesday reflected the closing of tactical positions aimed at making a quick buck, not massive stops by long-term investors. And there never had been clarity on how much money raised through the auctions would have come from abroad. While traders expected at least some inflows after the sale -- helping explain why one analyst termed it a “total disaster” -- few foresee the real plunging into a death spiral from here.Instead, traders are more likely to concentrate on what should be the single biggest factor when it comes to luring foreign money: economic growth. That’s where Brazil stands out from peers. Its most obvious rivals are anything but solid.Mexican policies under President Andres Manuel Lopez Obrador are far from clear, giving investors a reason to steer clear despite the nation’s relatively high interest rates. Argentina just elected a new leader who supports capital controls. Even Chile, once an island of stability in Latin America, has been shaken by weeks of violent protests (its peso slid to a 16-year low on Tuesday). Brazil, meantime, may be pointed in the right direction after the government managed to finally overhaul its bloated pension system and the central bank slashed interest rates to zero.Three new constitutional amendments delivered to Brazil’s Congress on Tuesday by President Jair Bolsonaro and Economic Minister Paulo Guedes may take time to pass, but encompass all that investors are seeking. Heading the administration’s agenda: reducing of the size of the government by improving rules to sell state-controlled companies and making the federal budget more flexible.Given an absolute lack of yield in the international markets, then, it’s probably just a matter of time for the foreign capital to start flowing.NOTE: Davison Santana is an FX strategist who writes for Bloomberg. The observations he makes are his own and not intended as investment adviceSome information comes from FX traders familiar with the transactions who asked not to be identified because they are not authorized to speak publiclyTo contact the reporter on this story: Davison Santana in Sao Paulo at dsantana6@bloomberg.netTo contact the editors responsible for this story: Carolina Wilson at cwilson166@bloomberg.net, Alec D.B. McCabeFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Bloomberg

    Exxon’s Expert Witness Knocks N.Y.’s ‘Circular’ Trial Claims

    (Bloomberg) -- Exxon Mobil Corp.’s expert witness -- a Harvard Law School professor -- challenged New York’s claim in a securities-fraud trial that investors lost as much as $1.6 billion after authorities accused the company of hiding the financial risks of climate change, calling the argument “a tad circular.”Allen Ferrell, who’s also a senior consultant at Compass Lexecon, said it was somewhat convenient for an authority to cite news about its own fraud investigation as the cause of a company’s losses.“You don’t shoot the arrow and then draw a bulls-eye around it,” Ferrell, the last witness in the three-week trial in Manhattan, said under questioning from Exxon’s lawyer, Daniel Toal.New York Attorney General Letitia James alleges Exxon intentionally misled investors about the way it planned for the expected future impact of climate change on its business. According to the complaint, investors lost between $476 million and $1.6 billion when the alleged scheme was exposed.The complaint points to three news events that allegedly resulted in Exxon’s stock dropping, including New York’s June 2017 claim that it uncovered evidence of a “sham.” The other news events used by New York to calculate the alleged losses relate to climate probes in 2016 by the California attorney general and the U.S. Securities and Exchange Commission.“The evidence will show that when the deception uncovered by the state’s investigation and related investigations was revealed, Exxon Mobil’s stock price fell, injuring investors who must now be made whole,“ New York said in a pre-trial memorandum.Irving, Texas-based Exxon says there weren’t any losses from the alleged scheme because there was no deception. Even so, Exxon’s stock did dip on the days of the three news events, and the state’s calculation of losses would become crucial if it wins the trial.New York claims former Exxon Chief Executive Officer Rex Tillerson spearheaded a plan to dupe investors into thinking it was applying a high “proxy cost” for carbon to its investment decisions, while secretly using a lower figure to evaluate projects including those in the Alberta oil sands. Tillerson last week testified the allegations were false.Ferrell’s testimony aimed to undermine two expert witnesses who had testified for the state: Eli Bartov, an accounting professor at New York University, and Peter Boukouzis, an assistant professor of business management at the University of Saint Katherine in San Marcos, California.Bartov previously testified that Exxon had inflated its stock by lying to concerned investors starting in 2014, while Boukouzis testified about the resulting stock drops tied to the news events.Ferrell said Bartov’s study of Exxon’s share-price movements hadn’t controlled for fluctuations in the energy industry, and that Boukouzis wrongfully cited two news-related stock movements that don’t qualify as statistically significant.What Bloomberg Intelligence SaysThe likeliest outcome, in our view, is Exxon agrees to disclose changes in future public filings and pays a nominal sum, but only after years of legal process.\-- Brandon Barnes, Senior Litigation AnalystFor a full report click hereDuring his cross-examination, Ferrell was asked to explain why he believed the three news events had no impact on the energy firm’s stock, as New York claims, particularly a Los Angeles Times story about the California probe that ran on Jan. 20, 2016.One reason, Ferrell said, is that the article cast doubt on Exxon’s historical public disclosures about climate change science rather than the narrower claims that emerged in New York’s lawsuit -- namely Exxon’s alleged misuse of the proxy cost for carbon.New York Justice Barry Ostrager, who will decide the case without a jury, interrupted the exchange with a question of his own.“What else would account for the decline of Exxon shares on Jan. 20?” he asked.Ferrell said he didn’t have an explanation for the price movements but testified later that there are numerous reasons why a stock can move on any given day.“As I said, there’s something circular about proving damages in a case by reference to the fact that you filed a case,” Ferrell said.Closing arguments are scheduled for Thursday.The case is People of the State of New York v. Exxon Mobil, 452044/2018, New York State Supreme Court (Manhattan).(Updates with judge’s question about stock movement.)To contact the reporter on this story: Erik Larson in New York at elarson4@bloomberg.netTo contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Joe Schneider, Steve StrothFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Brazil Oil Auction a ‘Total Disaster’ as Bidders Stay Away
    Bloomberg

    Brazil Oil Auction a ‘Total Disaster’ as Bidders Stay Away

    (Bloomberg) -- Brazil’s largest-ever auction of oil deposits flopped, sending the real tumbling, after state-controlled Petroleo Brasileiro SA did most of the bidding while other major oil companies stayed away.Petrobras, as the company is known, joined with China’s Cnooc Ltd. and China National Oil & Gas Exploration & Development Co. in submitting the winning bid for the giant Buzios field, the prize of the auction. Petrobras was the sole bidder for the Itapu block, and offered minimum amounts for both. Two others, Sepia and Atapu, received no bids. Exxon Mobil Corp. and other oil majors didn’t make any bids.The Brazilian real fell against the dollar as the outcome diminished expectations for how much of the U.S. currency will flow into the country to develop the massive offshore oilfields. Petrobras shares also initially slumped more than 5% -- the company holds a 90% stake in the winning Buzios group, meaning it will need to spend more than initially anticipated to develop the block.“Total disaster is the best way to describe this morning’s round,” said Ross Lubetkin, chief executive officer at Welligence Energy Analytics, a consultancy. “Not one major participating is a glaring failure. Meanwhile, the failure to license Sepia and Atapu means the government misses out on $9 billion in signature bonuses.”The auction was meant to be part of Brazil’s shift away from nationalistic oil policies and help it shake off some of the toughest years in the country’s history, after a wide-ranging corruption probe was followed by a devastating recession in 2015 and 2016. With the economy still struggling to grow, Brazil was looking to the sale to inject some badly needed cash into public coffers.With estimated total reserves of 20 billion barrels of oil, the areas being auctioned were expected to raise about $25 billion in government fees and another $25 billion in compensation for Petrobras, which has already invested in drilling and platforms.But the multibillion-dollar offering came at a time when oil producers are under mounting pressure from shareholders to show capital discipline, and their stocks have been falling since crude prices tumbled in late April.With the days of oil at $100 a barrel far in the rear view mirror, oil majors have been more strict in deploying capital and are no longer looking to expand proven reserves at any cost. While the Brazilian fields on offer Wednesday were a unique opportunity to get access to discovered resources, the high signing bonuses and uncertainty about compensation payments to Petrobras curbed interest.Brazilian officials said the almost 70 billion reais ($17 billion) in licensing fees from the two auction blocks that were awarded still amount to the largest ever collected by a government. But the compensation to Petrobras will fall to only a fraction of $25 billion, because its partners in Buzios hold just a 10% stake in the venture. The exact amount isn’t known yet.The auction was still a huge event for Brazil, oil regulator Decio Oddone said at a Rio press conference following the auction announcement. Energy Minister Bento Albuquerque called it a success and said it shows Brazil is on the right path. He added that the country will offer the two fields that went unsold again next year.“We will need to evaluate why oil majors didn’t participate,” Albuquerque told reporters Wednesday.The oil majors who held back could be waiting for another pre-salt oil auction Brazil is holding on Thursday, where five exploration blocks will be sold with cheaper signing bonuses because the areas involve exploration risk, with crude yet to be struck.“The lack of participation from other oil companies was a surprise, and they could be seeing better opportunities for tomorrow,” said Joao Carlos de Luca, an industry consultant and former chairman of Barra Energia.‘Very Expensive’The Buzios block alone represents one of the largest reserves of discovered crude to be sold since Iraq opened up after the second Gulf War. Despite the block’s size, Stephen Greenlee, Exxon Mobil Corp.’s president of exploration, said in an interview last month that Buzios was “very expensive.”One of the reasons why Buzios was so pricey: The field is already producing over 400,000 barrels a day of crude, roughly the same as departing OPEC member Ecuador, with four platforms that have cost Petrobras about $20 billion. While that’s a unique opportunity in the industry, it also means that the winners would have had to compensate the state-run oil producer with some combination of cash, crude and investments over the years.Petrobras was little changed at 4:48 p.m. in Sao Paulo after plunging as much as 5.2% right after the auction results were announced.“This will add extra pressure to their cash flow,” Marcelo de Assis, the head of Latin American upstream research at Wood Mackenzie Ltd., said of Petrobras. “They will spend about $7 billion above the $9 billion they got from the government” because they aren’t splitting future costs with more partners, he added. Petrobras received the $9 billion for settling the original Transfer of Rights contract.“We expected competition, there was none,” Petrobras CEO Roberto Castello Branco told reporters after the auction, declining to comment further.(Updates with minimum amounts bid in second paragraph.)\--With assistance from Julia Leite.To contact the reporters on this story: Sabrina Valle in Rio de Janeiro at svalle@bloomberg.net;Peter Millard in Rio de Janeiro at pmillard1@bloomberg.net;Luiza Ferraz in Rio de Janeiro at lferraz9@bloomberg.netTo contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Carlos Caminada, Steven FrankFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Brazil's Oil Flop Is a Warning for Majors and Aramco
    Bloomberg

    Brazil's Oil Flop Is a Warning for Majors and Aramco

    (Bloomberg Opinion) -- Royal Dutch Shell Plc made a big investment in offshore energy this week — wind energy, that is. The very next day, Brazil announced the results of a more traditional energy auction in the waters off its coast. They were not good.The country’s biggest-ever sale of oil deposits flopped on Wednesday morning. Only two out of four blocks were sold, and only one of those involved foreign bidders, with China’s CNOOC Ltd. and China National Oil and Gas Exploration and Development Co. taking all of 10% of the Buzios field. Petroleo Brasileiro SA took the other 90% and all of the Itapu block. Western oil majors, such as Shell or Exxon Mobil Corp., were nowhere to be seen.Offshore oil investment was all the rage among Big Oil during the supercycle, with capital expenditure almost quadrupling in the decade up to 2014. That is the problem. The majors poured money into large, multi-year projects prone to delays and, because of their often bespoke engineering, spiraling budgets. The result: tumbling return on capital and an inability to dial back investment quickly when the oil crash hit in 2014. Roughly 3,000 new offshore projects sanctioned between 2010 and 2014 have either barely generated any value for oil companies or are expected to generate none at all, according to a recent study published by Rystad Energy, a consultancy:More recent investments score better, mostly because the boom tailed off, with offshore capex falling by more than half between 2014 and 2018. That took the heat out of industry inflation; and, because of the bonfire of returns in the prior decade, oil majors got smarter about such things as standardizing offshore equipment design to cut costs and shorten schedules. The pace of new projects has picked up again after the slump. Exxon, for example, has effectively opened up an entire new offshore zone with its Guyanese fields.Still, one look at the stock prices of oilfield services firms, especially offshore-focused types such as Transocean Ltd. and Noble Corp. Plc, tells you this investment wave is nothing like the tsunami of yesteryear. Bad memories combined with unease about both near- and long-term oil demand make bold bets on big, multi-year offshore projects a tough sell with investors more interested in payouts. Even Exxon’s success in Guyana gets overshadowed by the fact that the company’s capex bill leaves it borrowing to pay its dividend. And Exxon, like Chevron Corp. and other majors, has swung more of its spending toward shorter-cycle onshore fracking in North America.Brazil’s brush-off is an ominous sign the investment discipline demanded by energy investors is choking off one of the world’s biggest sources of oil-supply growth. In its latest World Oil Outlook published this week, OPEC cited Brazil as being second only to the U.S. in terms of medium-term growth, and number one in terms of projected long-term non-OPEC growth. Bob Brackett, an analyst at Sanford C. Bernstein, published a report a couple of weeks ago pondering if global offshore oil supply would peak next year, perhaps for good.The implications are profound. There is a wide range of views on when global oil demand will slow or peak altogether. If it is later than sometime next decade, then the decline in offshore production that will inevitably follow a mass exodus from this part of the business could stoke another upcycle in prices. The Brazil auction suggests, however, that such possibilities play second fiddle to expectations on the part of many investors that oil has entered its twilight years.Such results are ominous for offshore services providers, of course, and for the countries involved. Brazil’s currency slumped Wednesday morning as the market digested the lack of foreign capital targeting the country’s choicest oil resources.Another country that should take note is Saudi Arabia. Like Brazil, it’s trying to tempt foreign buyers to pay up for a piece of its black gold. On the same morning, reports emerged that Saudi Arabian Oil Co. is seeking commitments from Chinese state-owned entities to invest in its IPO. Such strategic buyers do provide cash. But as Brazil could tell Aramco, turning to them also says a lot about the broader appetite for what you’re selling.To contact the author of this story: Liam Denning at ldenning1@bloomberg.netTo contact the editor responsible for this story: Mark Gongloff at mgongloff1@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

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    (Bloomberg Opinion) -- Early last month, Guyanese President David Granger was knees-down in a community garden brandishing a spade. Granger was there to plant a tree — it was National Tree Day — but also an idea. “Don’t let us get drunk. Let us remain sober,” he told the attentive audience.Guyana might find that a challenge. Next year, Exxon Mobil Corp. and its prospecting partners will start pumping oil from one of the world’s biggest recent finds: some 5 billion barrels of crude cached in the sandstone deep below the Caribbean floor. The windfall promises to change the energy landscape in the Western hemisphere. Guyana may never be the same. In five years, national output is expected to reach 750,000 barrels a day, making Guyana Latin America’s fourth-largest oil producer and perhaps the world’s largest per capita oil power, generating a barrel per person per day. Oil revenues are expected to climb from zero to almost $631 million by 2024, according to the International Monetary Fund. Income per capita will more than double by next year, topping $10,000. Overall, its economy is projected to grow by 86% next year — 14 times China’s projected growth rate.Metabolizing so much wealth so quickly — like drinking from a fire hose, as one engineer put it — would be intoxicating for even the sturdiest constitution. For this small, poor country troubled by ethnic strife, with shaky institutions and only the sketchiest plans to put such bounty to use, the system shock could be devastating.That’s where trees and sobriety come in. To unleash the potential of the coming oil boom, Guyana must accept that wealth and development are cultivated, not simply extracted. Such was the logic behind the Green State Development plan, a wonk’s bet that Guyana can pull off what no other developing nation with an oil bonanza has managed: marshal a massive energy windfall without drowning in riches.Resource curse, Dutch disease, the paradox of plenty: The name and address of the malediction vary. The outcome does not. Guyana has only to look to Venezuela, the failing petrostate next door that is home to the world’s largest reserves. After years of squandering oil rents on vanity politics and misguided social programs, Venezuela has seen oil output fall by more than half since mid-2018. To escape Venezuela’s fate and that of so many other ailing oil baronies, Guyana has to act now and decisively. The checklist is extensive.Don’t bring the oil onshore. Sure, such abstinence offends the instincts of the aspiring petrocrat. “It must be in the textbooks they read as children. Every minister of development wants to add value to oil,” said Rice University energy expert Francisco Monaldi. “That’s a big mistake.” Building a tangle of pipelines and refineries is exorbitant, brings marginal returns and makes the host country a magnet for corruption, Monaldi said. One of the headline scandals in Brazil’s Carwash corruption probe was a head-turning case of contract fraud on a grossly overpriced domestic refinery and petrochemical complex launched amid the euphoria over earlier big oil discoveries. Will Guyana heed the experts and forgo investing in iffy refineries? Or will they cave to the temptation once the crude starts flowing?Resist the local content temptation. Petro-populists typically try to make foreign operators buy a hefty portion of supplies from native providers. That sounds fair enough. But inexperienced domestic companies rarely have the enterprise or production capacity to deliver. Instead, local content becomes an open invitation to padded contracts, subterfuge and waste. Until now, Guyana has avoided the trap of skewing the market by promoting “local champions,” said Marcelo de Assis, head of Latin American upstream research for energy consultants Wood Mackenzie. If Guyana’s nationalist opposition has its way, however, the rules could change.Get the rules straight. How does a country with one-third of its population living in poverty and a ranking of 164th out of 228 nations in human development manage the haul from what’s likely to be the world’s most profitable new deepwater wells? The short answer: through policy transparency, reliable rules and regulatory acumen, all of which are in short supply. “What we see is a bottleneck, a lack of readiness for oil,” said Assis. “They are scrambling, which indicates that the public sector is not geared to act as a regulator.”  Forge a political pact. Guyana’s conflicted politics are no help. Rival coalitions have been quarreling since last December, when the Granger government lost a confidence vote. New elections are scheduled for early 2020, just as Guyana’s oil is set to flow. Clashing ideas are part of democracy. But with political tensions spilling into the courts and threatening to flare into a constitutional crisis, the risk of judicial delays leading to “legal loopholes and omissions in the oil framework” run high, according to the consultancy Verisk Maplecroft. The political turbulence is troubling news for the Guyanese and their multibillion-dollar stakeholders.Hire globally. With a population of 780,000, chronic brain drain and no track record in oil extraction, Guyana could use some ringers. Fortunately, the world is flush with savvy oil engineers, geologists and logisticians. But Guyana’s government has been slow to capitalize on global talent, including the nearly half-million-strong Guyanese diaspora. “I don’t understand what’s keeping them from hiring abroad,” said one foreign observer, who has advised the Guyanese government for years. “It’s baffling.”So is the recent ruling barring binational Guyanese from serving government: Four of Granger’s cabinet ministers with dual nationalities were forced to resign this year. Since some of the most highly trained Guyanese were educated abroad, such scruples amount to a nationalist own goal. The powerful private sector, led by Exxon and its partners, has no such qualms about recruiting expats. Guyana’s government should follow their lead.Don’t forget renewable energy. Guyana’s electricity currently depends on fossil fuels. With greenhouse gas emissions already reaching 2.6 tons per capita a year, rivaling those of its outsize neighbor Brazil, Guyana could make matters far worse under the coming oil boom. And since much of Guyana’s coastline sits at or below sea level, the deepening climate emergency poses an existential threat. Encouragingly, Guyanese seem to be starting their oil boom with few illusions about the fleeting bounty below their feet. The government wisely, if belatedly, set up a sovereign wealth fund to steward the money. Hence, the official encomiums to agriculture and forestry, and renewable energy, touted to fuel 100% of the power grid by 2040. That’s an admirable goal. Let’s hope Guyana has the temperance and the trees to stay the course.To contact the author of this story: Mac Margolis at mmargolis14@bloomberg.netTo contact the editor responsible for this story: James Gibney at jgibney5@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Mac Margolis is a Bloomberg Opinion columnist covering Latin and South America. He was a reporter for Newsweek and is the author of “The Last New World: The Conquest of the Amazon Frontier.”For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

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