Hedge fund that beat ExxonMobil says it will have to cut oil production –

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Hedge fund that beat ExxonMobil says it will have to cut oil production – fr


Activist investors who cited the dangers of climate change to win a mind-boggling proxy battle against ExxonMobil this week said the supermajor should cut oil production, saying they will continue to pressure management to change strategy in response to the shareholder vote.

“They have to position themselves to be successful,” said Charlie Penner, who led the Engine No 1 hedge fund campaign against the company. “You would definitely think that would mean less oil and gas production in the future.”

Engine No 1, named after a fire station sign in San Francisco, launched its bold effort in December, appointing four directors to Exxon’s board of directors and warning of the “existential risk” posed by its commitment to fossil fuels.

The chutzpah spectacle pitted a hedge fund founded last year against the world’s most famous oil company, with colossal geopolitical clout and colossal financial clout.

One of Wall Street’s costliest proxy fights culminated in the unusual annual meeting on Wednesday, when ExxonMobil attempted what critics described as the corporate version of a Senate filibuster, delaying the close of the vote as he took an impromptu hour-long break before chief executive Darren Woods showed up. questions about the company’s strategy.

It was the first time that Exxon faced a contested shareholder vote of this nature.

“Like a lot of things we’ve seen in this campaign, the way they handled the meeting fell short of such an iconic company,” said Chris James, founder of Engine No 1, in an interview with the Financial Times. .

“Watching that meeting yesterday was a perfect example of how they don’t realize the world has changed. Everything was exposed.

Ultimately, Exxon announced that shareholders had elected two candidates for the No.1 engine after a preliminary vote count. The fund expects a third to be announced during the official vote count, possibly in the middle of next week.

The No.1 engine will closely monitor steering behavior, Penner said. Some analysts have suggested that Exxon management may simply ignore the fund’s new directors.

“I wouldn’t recommend it,” he says.

BlackRock and Vanguard, the two largest shareholders of Exxon, both backed some of the directors appointed by Engine No 1 – a rebuke to company management that environmental activists say ushered in a new era for the company. Wall Street’s approach to climate risk.

But the No.1 driver was clear his campaign was as much about Exxon’s financial underperformance in recent years as it was about the climate.

“Exxon thought it was ideological,” James said. But Engine No 1 was a “capitalist group, certainly not a nonprofit,” he added. “Our idea was that it would have a positive impact on the share price,” he said.

The hedge fund is not calling on Exxon to repeat the kind of move to renewables that BP has made.

“BP spent a billion dollars to buy half of a wind farm developed by Equinor, it is not a great business model and it has been punished by the market,” said Penner, referring to the recent deal. the British oil major with the Norwegian company.

Penner said the No.1 engine will give Exxon time to develop a new strategy – but as the world moves to cut carbon emissions, the changes will still be profound. An energy transition that went faster than expected had undermined Exxon’s assumptions about long-term demand for its oil, Penner said.

“What we’re saying is: plan a world where maybe the world doesn’t need your [oil] barrels, ”he says.

That would be a sharp start for a company currently producing oil and gas equivalent to nearly 4 million barrels per day, or more than 4% of the global total, and has made long-term plans for big new crude oil projects in the United States and off Guyana.

Exxon said it “welcomes new directors” and “will share our plans in detail with them and listen to their views.”

The success of Engine No. 1 has led to claims that a new era of shareholder activism may have begun. The fund has an approximate $ 50 million stake in a $ 250 billion company that, less than a decade ago, was the largest in the world in terms of market capitalization. Other companies are in his sights.

“Our ambitions are clearly broader than Exxon,” said James.

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