The company expects to double its earnings over the next six years from 2019 levels even as more spending is shifted to low-carbon businesses, the company said in a long-term plan released on Wednesday.
Three new members joined the company after a proxy battle earlier this year, and they appear to be making their mark on the new plan — particularly in the company’s low-carbon initiatives.
CEO Darren Woods said in an interview with Baron That new board members have brought new perspectives. “We have new people who come from a different background, and so we explore the issues in a different way,” he said.
Knowing how to set up work to achieve long-term goals, he said, “has always been a rich area of conversation.” “This year, looking at some of the new board members, we spent extra time talking about it.”
Some of the numbers in the release have already been discussed, including its plan to spend $20 billion to $25 billion annually on capital expenditures through 2027. This is a much smaller budget than Exxon’s previous plan to spend $30 billion to $35 billion, which it has reiterated recently In March 2020.
Investors urged the company to Slow down their growth and focus on more profitable projects. The company says that more than 90% of its investments will generate returns of more than 10%, even at oil prices below $35 a barrel. In addition, the company expects to reduce the intensity of greenhouse gas emissions in the upstream (production) division by 40% to 50% by 2030 from 2016 levels. “Intensity” in this case refers to the amount of gases per barrel of oil produced, not the absolute level for gases.
Exxon (stock symbol: XOM) plans to spend $15 billion on the low-carbon business through 2027, more than 10% of its total capital budget in the middle of its range – although lower than some of its European peers. French energy giant
(TTE), by comparison, plans to spend 25% of its capital budget on “new energies”.
However, Exxon’s commitment is four times greater than the company’s previous plan.
Woods says Exxon wants to develop its low-carbon business in the same way it does its traditional business — finding areas where it can outperform competitors. Among its areas of focus are carbon capture and biofuels. In some cases, he believes the government will need to set rules to make business possible. In carbon sequestration, for example, he believes a carbon tax will give market players an incentive to step up.
“So we put market forces into play and then leverage our core capabilities and competitive advantages to put us in a better position than other players in the industry,” he said. “That’s kind of the way we think about it.”
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