Should you buy ExxonMobil stock now?
In its recent report, Exxon Mobil provided some positive news to investors: a 3% increase in oil production, a return to profitability, and a continued high dividend. However, the IEA called on May 18 to stop drilling any new oil and gas fields in the world. Exxon sees no competition in solar and wind power.
Exxon Mobil (XOM) shares are up 46.6% since early 2021 and 67.5% in the past six months, boosted by a rebound in oil prices amid growing global economies following the COVID-19 pandemic and widespread mass vaccinations.
The optimism added by the recent quarterly report of Exxon Mobil for the first quarter, published on April 30 (the date marked with an arrow on the chart).
Exxon Mobil posted better results than Wall Street had anticipated, beating both earnings and earnings estimates.
The largest U.S. oil company earned $ 2.7 billion, while a quarter earlier, its losses amounted to $ 20.1 billion.
Exxon maintained its 2021 CAPEX program at $ 16- $ 19 billion while continuing to take enhanced measures to cut costs and maintain a high dividend payout of 5.9%.
Exxon Mobil Shares Down 2.8% On Tuesday.
On Tuesday, negative news for Exxon investors was the release of the International Energy Agency (IEA) report titled “Net Zero by 2050. A roadmap for the global energy sector”.
The IEA has changed its rhetoric, replacing simply “reducing the number of new oil and gas fields in the world” with “stopping new drilling” to meet the goals of preventing global warming by more than 1.7 degrees Celsius compared to the pre-industrial period.
The road to this goal is “difficult, but still achievable,” the report says, “but only if, as well as new coal mines or extensions” after 2021.
By 2050, according to the IEA scenario, fossil fuels will provide one-fifth of the world’s energy consumption, up from 4/5 today.
Chevron (CVX) also fell 4.2% on Tuesday.
Last month, President Joe Biden unveiled a 10-year climate program that seeks to cut U.S. greenhouse gas emissions by 50-52% by 2030, the most ambitious of its predecessors.
Activist firm Engine No. 1 and others call for pressure on Exxon to replace Woods’ CEO and board with executives who will better manage climate risks and guide the company towards lower carbon emissions in the future.
Commenting on negotiations with Engine No. 1, Woods said the firm is “not particularly interested in engaging and understanding” how Exxon can increase shareholder value as it transitions to a low-carbon future.
“Quite frankly, they are pushing us to scale back our investments, shut down businesses, switch to solar and wind power where we don’t have a competitive edge,” Woods said.
The voting of the board of directors will occur on May 26 at the annual meeting of shareholders of the company in 2021.
Although, according to the IEA plan, the global oil and gas industry will stop discovering new fields, the increase in production in existing ones may continue. Thus, the oil price may continue to rise in the medium term, which will positively affect the shares of Exxon and other oil and gas companies.
However, global long-term trends and forecasts show that demand in the oil and gas sector will decline over the years.
British Petroleum (B.P.) believes that if the global energy policy develops at much the same pace as today, oil demand will remain at 97-98 million barrels per day until 2030 and fall to 95 million barrels per day in 2040.
The latest IEA report suggests that countries are “heading” for a faster transition to lower emissions. In this case, a quick transition scenario can be realized, in which, according to B.P. estimates, oil demand will fall by 10% by 2030.
