Houston Business Journal: “ExxonMobil Corp. needs to face the reality of low oil prices and climate change, according to shareholders from Arjuna Capital and As you Sow.”
“An unspecified number of shareholders took the unusual step of asking Irving-based Exxon (NYSE: XOM) to increase dividends or share buybacks because of the challenges the company faces. They are seeking an estimated $56 billion over the next decade that Exxon has allocated to high-cost, carbon intensive projects, including deep water and arctic drilling.
“It is unprecedented, but we believe there is no precedent for what is occurring now,” said Danielle Fugere, president of As You Sow, a nonprofit that promotes environmental and social responsibility.
The concern is that some Exxon projects won’t be profitable because of decreased demand, new carbon regulations and general concern over climate change. An estimated 39 percent of Exxon’s capital expenditures are on projects that break even at $95 a barrel, not the sub-$80 price it’s trading for this month.
That could lead to stranded assets, Fugere warns.
“Shareholders are concerned and continue to be concerned that the high-risk projects that Exxon is entering into will not be profitable going forward,” Fugere said. “We are asking the company to address that.”
Natasha Lamb, director of equity research and shareholder engagement for Arjuna Capital, said this marks the first time shareholders have demanded a return of capital because of climate change.
“At some point they need to realize that they are not a growth company. That they need to be a value company,” Lamb said. “There are physical limits to their business. There’s only so much oil in the ground and there’s only so much CO2 we can pump in the air. When management realizes that, they can start planning smartly for the future.”
A group of shareholders representing $3 trillion worth of shares sent letters to several major oil and gas companies in 2013, including Exxon, asking them to address the new reality of climate change. Exxon responded with a report that Fugere said doesn’t adequately address what’s occurring in the world.
Vehicles are more fuel efficient than ever, people are driving less, and more and more vehicles aren’t using any oil at all because they run on compressed natural gas or electricity.
“The energy market are fundamentally changing, and they want to know that their company is changing along with those factors,” Fugere said. “We don’t think they’re in line with reality.”
The challenge is getting Big Oil to buy into climate change.
The idea of pollution and climate change shouldn’t be political or us versus them, Lamb said.
“We all share this planet,” she said.”
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