Exxon Mobil Corp. announced a reorganization Jan. 31 that will put its low-carbon solutions segment on equal footing with its oil and gas exploration and production unit, but investment analysts expressed more interest in hearing about cost reduction and shareholder returns.
"This new business has made exceptional progress building a large inventory of new business opportunities with a focus on carbon capture, hydrogen and biofuels," Chairman, President and CEO Darren Woods said on a Feb. 1 earnings conference call. "We're applying the same capabilities and expertise developed over decades to progress in our net-zero ambitions and grow our low-carbon solutions business."
Still, the bulk of Exxon's earnings in the fourth quarter of 2021 came from upstream oil and gas operations. The corporation earned $8.9 billion in the fourth quarter of 2021 and $23 billion for the full year, reversing a $22.4 billion loss in 2020 on the strength of higher oil and natural gas prices.
Exxon said it will probably increase the $15 billion originally budgeted for low-carbon activities through 2027 by about $1 billion.
"We expect most investors anticipated" that Exxon would continue to slowly increase spending on low-carbon solutions, Truist Securities Inc. oil and gas analyst Neal Dingmann told clients before the call.
Investors pushed Exxon shares up 6.5% to $80.89 in heavy trading by midday after the supermajor announced plans to buy back $10 billion worth of stock over the next two years. The company said in its earnings release that it paid down $20 billion of debt in 2021 and captured $1.9 billion in structural savings, putting it on pace to cut expenses by more than $6 billion from 2019 levels by 2023.
Even with the reorganization, Exxon is still behind European peers such as BP PLC or Shell PLC, said Mike Coffin, the head of oil, gas and mining research at Carbon Tracker, in an interview. Carbon Tracker is a London-based think tank that examines the impact of the energy transition on financial markets.
"It's a step in the right direction, but there's a long way to go," Coffin said. "Ultimately, their core business is still very much oil and gas production. They're not like some of the European majors who acknowledge the oil and gas, production will fall this decade. I have yet to see that acknowledgment from Exxon."
Exxon said it expects to reach its 2025 goal of a 15% to 20% reduction in greenhouse gas intensity from its own operations four years ahead of schedule. It added a new goal for net-zero carbon emissions: Achieving this benchmark from its own operations in the Permian Basin shale oil play in Texas by 2030.
Exxon expects to make a final investment decision soon on carbon capture and storage projects in Wyoming and Rotterdam, Netherlands, Woods said. It has 14 companies participating in the development of a carbon capture hub in Houston that would remove 100 million tonnes of CO2 per year by 2040.
"We're very early in this process," Woods said. "I mean, this is a very dynamic space. If you think back a couple of years ago, hydrogen and carbon capture, and frankly even biofuels, were struggling to be in the mix in terms of potential solutions. I think people recognize the importance they're going to play going forward."