Busted

Exxon faces the “Blockbuster Alarm” on oil — change or go extinct

Tuesday, April 27, 2021 by Robinhood Snacks | Disclosures

Shots fired... Exxon reportedly was just dealt a major warning by its activist investor, hedge fund Engine No. 1. Activist investors = Wall Street's aggro helicopter parents. Engine No. 1 said Exxon faces an “existential business risk” from tying its future to fossil fuels. Unlike Shell and BP, Exxon hasn't vowed to transition away from oil and gas, arguing they'll remain key.

  • Warned: Engine No. 1 thinks Exxon's lack of an energy transition plan jeopardizes its future (and its dividends) in a lower-carbon economy.
  • 110+ countries have pledged carbon neutrality by 2050. Major governments (including CA, Japan, and the UK) said they'll start banning sales of new gas vehicles in the 2030s.

Why you always in the news?... Exxon has been making headlines for its carbon capture efforts. Carbon capture = removing carbon dioxide from the air, then storing it underground. Exxon created a new biz unit to commercialize carbon capture, which it says will be a $2T market by 2040. Oil giants like Occidental and BHP have also invested in the carbon-vacuuming tech. But most of Exxon's $$$ comes from oil and gas... and Engine No. 1 doesn't love that:

  • Last week, Exxon pitched a $100B carbon capture project to help the Biden admin hit its new emissions-slashing target by 2030. The admin reportedly passed.
  • Engine No. 1 said Exxon “touts its efforts in areas like carbon capture,” but they've “delivered more advertising than results.” Burn.
THE TAKEAWAY

It's the "Blockbuster Alarm"... The call for an existential pivot to be made... before it's too late. Blockbuster clung to VHS and DVD rentals, even while streaming emerged as the future. Now it’s extinct, and Engine No.1 doesn’t want the same to happen to Exxon. If VHS tapes are oil, then streaming is clean energy. Governments will need clean energy (like wind and solar) to achieve their green goals. Engine No. 1 rang the "Blockbuster Alarm" to spur Exxon to go green.