Exxon Mobil's Problem Is Strategic, Not Pandemic

It’s been a week of milestones for Exxon Mobil Corp., and not in a good way. The oil major froze its dividend for the first time in 13 years and then, on Friday morning, announced its first quarterly loss in decades. Covid-19 plays a big part, obviously, but Exxon’s strategy is the big problem, particularly on its home turf.

As at the company’s March analyst day, CEO Darren Woods began with a familiar declaration of long-term growth trends for oil and gas. Even back then, this “straight line” view of global energy’s future looked questionable. Eight long weeks on, it looks divorced from reality; the very first analyst question gently raised that possibility, citing jet fuel in particular (which is critical). Exxon’s high-spending strategy implicitly demands a recovery in oil and gas prices, which makes it more like an exploration and production company than a major. While the company has slashed this year’s capex budget to $23 billion, that remains above the pre-Covid guidance for rival Chevron Corp.