Exxon, Chevron CEO Discusses Merger

Exxon XOM Chief Officer -2.65%

Mobil Corp and Chevron Corp

CVX -4.29%

Last year talked about a combination of oil giants, according to people familiar with the negotiations, to test for water that could be the largest corporate merger ever.

People said that Chevron chief executive Mike Wirth and Exxon CEO Darren Woods spoke soon after catching up on the coronovirus epidemic, reducing oil and gas demand and putting huge financial pressure on both companies. People said the discussions were preliminary and not ongoing, but may return in the future.

John D. by this deal. The two largest descendants of Rockefeller’s Standard Oil Monopoly would rejoin, which was disbanded by US regulators in 1911, and reopen the oil industry.

A combined company may have a market value of $ 350 billion. Exxon has a market value of $ 190 billion, while Chevron has $ 164 billion. Together, they are likely to create the world’s second-largest oil company by market capitalization and production, producing around 7 million barrels of oil and gas a day, based on pre-epidemic levels, Saudi Aramco K is the second only in both measures.

But the merger of the two largest US oil companies could pose regulatory and lethal challenges under the Biden administration. President Biden has said that climate change is one of the country’s biggest crises. In October, he said he would push the country forward for a “transition away from the oil industry”. He has not been vocal about antitrust cases, and the administration has yet to nominate the head of the Justice Department for that division.

One of those familiar with the talks said the parties might miss an opportunity to consume the agreement under former President Donald Trump, whose administration was considered more favorable to the industry.

Darren Woods, CEO Exxon Mobil Corp, at an industry conference 2018


Andrew Harrer / Bloomberg News

A handful of oil and gas deals were completed last year, including Chevron’s $ 5 billion acquisition of Noble Energy Inc. and ConocoPhillips’ nearly $ 10 billion acquisition of Concho Resource Inc., but something close to the scale of the San Ramon, California combination Neither. – Chevron and Irving, Texas-based Exxon.

Such a deal would be notable in the oil industry, except for the size of the mega-oil-mergers of the late 1990s and early 2000s, which included Exxon and Mobil and a combination of Chevron and Texaco Inc.

It may also be the largest corporate tie-up ever by virtue of its structure. The distinction currently relates to the purchase of German conglomerate Manzmann AG by Vodafone Airtouch plc in 2000 for approximately $ 181 billion according to Diodic.

Many investors, analysts and energy executives have called for consolidation in the troubled oil and gas industry, arguing that cost reductions and improved operational efficiencies will help companies during the epidemic-driven recession season and uncertainties in many countries Preparations will be made to reduce the future. Their dependence on fossil fuels to combat climate change.

In an interview on Friday discussing Chevron’s earnings, Mr. Wirth, who acts as Mr. Woods as the board chairman of his company, said consolidation could make the industry more efficient. He was speaking generally and not about a possible Exxon-Chevron merger.

“As for things on a larger scale, this has happened before,” Mr. Wirth said, referring to the 1990s and early 2000s. “Time will tell.”

Paul Sanke, an independent analyst who envisaged the merger of Chevron and Exxon in October, estimated at the time that the combined company would have a market capitalization of about $ 300 billion and $ 100 billion in debt. A merger allowed him to cut $ 15 billion in administrative expenses and $ 10 billion in annual capital expenditures.

The abundance of fossil fuels combined with advances in technology to use wind and solar energy has sent energy prices to crash worldwide. The WSJ describes how it all happened at once. Photo Illustration: Carlos Waters / WSJ

Exxon was America’s most valuable company seven years ago, with a market value of over $ 400 billion, almost double Chevron. But Excon has fallen from its heights after a series of strategic accidents, which were escalated by the epidemic. It has been accepted as a profit engine by tech giants like Apple Inc.

And Amazon.com Inc.

In recent years and for the first time removed from the Dow Jones Industrial Average since it was added in 1928 as Standard Oil in New Jersey.

Exxon shares declined nearly 29% compared to last year, while Chevron shares are down nearly 20%. Chevron topped Exxon in market capitalization in the fall.

Exxon endured one of its worst financial performances in 2020. It is expected to report losses for the fourth consecutive quarter for the first time in modern history on Tuesday and has already posted losses of more than $ 2 billion through the first three quarters of 2020.

Chevron has also struggled, reporting about $ 5.5 billion in losses to 2020 on Friday. But investors have expressed more confidence in Chevron, as it entered the recession with a stronger balance sheet – in part because it failed a $ 33 billion bid to buy Anadarko Petroleum Corp before the epidemic, sometimes – Sometimes it was scrapped by petroleum. Corp

In 2019.

According to S&P Global Intelligence Intelligence, Exxon has about $ 69 billion in debt in September, while Chevron has about $ 35 billion.

There has been a rapid rise in some investors about Exxon’s direction under Mr. Woods as the company faces a rapidly changing energy industry and a growing global consciousness for climate change. Some are also concerned that Exxon may have to cut its huge dividend due to its high debt level, which costs around $ 15 billion annually. Many individual investors rely on payments as a source of income.

Mr. Woods embarked on an ambitious plan in 2018 to spend $ 230 billion to pump one million barrels of oil and gas by 2025. In November, Exxon backed out of the plan and said it would cut billions of dollars from its capital spending every year by 2025 and focus only on investing in the most promising assets.

Meanwhile, the company’s crisis has helped attract the attention of active investors. One of them, Engine No. 1 LLC, has argued that the company should focus more on investing in clean energy while cutting costs elsewhere to preserve its dividend. The firm on Wednesday named four directors on Exxon’s board and called for it to make strategic changes to its business plan.

Exxon is also in talks with another activist, the DA Shaw Group, and announces one or more new board members, additional spending cuts and investments in new technologies to help reduce its carbon emissions Is preparing for

Rivals such as BP plc and Royal Dutch Shell plc have adopted bold strategies to remake their businesses as regulatory and investor pressure to reduce carbon emission reductions. Both have said they will invest heavily in renewable energy – a strategy that their investors have not yet rewarded.

Exxon and Chevron have not invested enough in renewable energy, instead opting to double oil and gas. Both companies have argued that the world will need large amounts of fossil fuels for decades to come, and that they can capitalize on the current low investment in oil production.

write to Christopher M. Matthews Christopher at [email protected], Emily Glazer at [email protected] and Car Lombardo at [email protected]

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