Why the skeptics are wrong about ExxonMobil

Welcome to Buy/Sell/Hold, Marker’s weekly newsletter that’s 100% business intelligence and 0% investment advice. Each week, our writers Steve LeVine and Rob Walker make sense of the most important developments in business right now — and give them a Buy for clever moves or positive trends, a Sell for mistakes or missed opportunities, or a Hold if they’re noteworthy but too early to call.

🛢️ ExxonMobil is far from finished 🛢️

The Buy/Sell/Hold Analysis

No matter how you spin it, ExxonMobil has been humbled: It’s accumulated $2.3 billion in losses this year, the worst performance in the company’s 150-year history. Its share price has dropped 38% in 2020, and it’s laying off about 14,000 employees. In August, Exxon — the last original member of the Dow Jones Industrial — was kicked off the index. And, for a short time, its market cap even dropped below that of Chevron, the California oil company that it has always viewed as a lesser rival.

All of this has got the vultures circling: Exxon — heir to the original Standard Oil begun in 1870 by John D. Rockefeller — is being uncustomarily stalked by hostile shareholders out for blood. They’re demanding that Exxon slash costs, stop seeking growth, and instead reserve what’s left to deliver better profits.

The critics are in large part right. Exxon has made a series of abjectly bad investments: Spending $41 billion to acquire XTO and its prime U.S. shale assets in 2009, just before natural gas prices went into a long-term dive, and buying into Russia’s Kara Sea just before the Russian invasion of Crimea forced it to pull out. Meanwhile, the gusher of U.S. shale oil has created a huge global glut, driving down oil prices just as other forces ­ — climate change regulations, the rise of electric cars, and changed driving habits — have driven down oil demand. Then there’s the Covid-19 pandemic, which temporarily pushed oil prices into negative territory.

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But critics go too far when they suggest that Exxon is headed for its demise. Exxon did overreach in Russia and U.S. shale, but it is also responsible for one of the biggest oil finds ever: the discovery of some 9 billion barrels of oil equivalent in the new petrostate of Guyana. It has also found oil in neighboring Suriname. Oil prices are up 38% over the last two months, providing Exxon some breathing room. On Tuesday, Goldman Sachs upgraded its rating of the company’s shares from neutral to a buy, targeting an approximately 20% rise in its stock price over the coming year. Goldman figures that once oil climbs above $59 a barrel, about $8 from where it is now, Exxon will be in the black.

In the meantime, no one should doubt Exxon’s conviction to what it does best. While rivals BP and Shell may be planning a long-term pivot into renewable energy businesses — which both have announced — ExxonMobil is a purist. It originated the model for the superlatively profitable oil business, is probably the most skilled operator on the planet, and is likely to stick with oil. For decades to come, the world will need petroleum — still the basis for civilization as we know it — and Exxon may very well end up the last supermajor standing.

Verdict: Buy

— Steve LeVine

😷 The 15 Objects That Defined 2020* 🧻

*For our final issue of 2020, we’re swapping out our usual Lightning Round for something more nostalgic: Rob Walker’s annual tradition of telling the story of a year in culture through objects — commercial stuff, material things, designed goods, products, and artifacts large and small — that cause us to see the world in a new way. Here are four objects, adapted from Rob’s full list of 15 objects (trust us, you’ll want to read them all):

1. Sweatpants

Zooming, cooking, caring for kids, or just trying to stay busy, the homebound population had little reason to dress up in 2020. By May, it became clear that comfy pants had become “the pandemic uniform,” with giants like Nike and the Gap as well as a swarm of indie brands scrambling for market share. Of course the casualization of the professional wardrobe has been going on for decades, but as Amanda Mull wrote in The Atlantic, sartorial “scolds” have long had it in for sweatpants in particular, labeling them a sign of personal defeat. So it’s remarkable that the garment made a comeback, but many would clearly be happy to see the sweats era wane, and give people an excuse to dress up again.

2. The Bookcase

The remote-work explosion made video calls a routine part of life for many professionals, quickly spawning leisure uses like Zoom quarantini happy hours — and turning homes into de facto TV studios. Inevitably, a whole subculture of judging others’ domestic environments popped up, exemplified by Twitter accounts like Room Rater and Bookcase Credibility. The bookcase, in fact, became a newly vital accessory — perhaps with embarrassing volumes removed — trying to project authority, curiosity, gravitas. And perhaps we can learn something about, say, Anthony Fauci by taking note of that Sicilian cookbook.

3. Plexiglass Barriers

In the before world, the only time we encountered plexiglass was at a sketchy liquor store or in a taxi. But when businesses were forced to close, “essential” ones such as supermarkets and drugstores scrambled to figure out how to protect employees and keep customers coming in safely. One answer was installing plexiglass barriers at every turn; by April, plexiglass makers were straining to meet demand — a new breed of plexiglass consultants had emerged — and it was clear that, as Marker reported, “transparent partitions will soon become as ubiquitous as trash bins.” And let’s face it: Do you even notice plexiglass anymore?

4. Carnival’s Mardi Gras Cruise Ship

A billion-dollar, 180,000-ton, 18-deck cruise ship boasting the world’s first at-sea roller coaster, the Mardi Gras was supposed to debut in November. While that has been postponed, along with the reopening of the cruise business in general, this grandiose testament to the engineering of leisure now seems like a perfect artifact of the “before times” — that carefree world where packing together with more than 6,000 strangers in the bars, restaurants, performance spaces of a cruise ship was a thing people did to relax. That of course was before a Covid-19 outbreak on another Carnival-owned vessel, Diamond Princess, infected hundreds and killed more than a dozen, making cruise ships synonymous to many with grim contagion scenarios. But now, perhaps, a gigantic and luxurious cruise ship may also be the ultimate emblem of the world we want back.

📈 The Number: $4.2 billion

That’s the amount MacKenzie Scott has donated to 384 different organizations over the past four months.

The first Amazon employee and former wife of founder Jeff Bezos, Scott ended up with about 19.5 million shares (roughly 4% of the company, valued at around $38 billion at the time) following the couple’s divorce in July 2019, and has quickly established herself as an original force in philanthropy. Notably, as Stephanie Clifford explained in a profile on Scott for Marker in October, her giving has come in the form of few-strings-attached grants, a break with the more technocratic strategies tech philanthropists favor. Apparently, she doesn’t even need a thank-you note, let alone reports back on benchmarks and goals.

This latest tranche of gifts — roughly $260 million given per week — followed that same pattern, and underscored another notable aspect of her giving: its speed. Instead of focusing on a long-term foundation, one charitable expert commented, “she’s disrupting the norms around billionaire philanthropy by moving quickly.” Almost as quickly as Amazon’s stock: It’s not known how many shares Scott has sold, but her original post-divorce stake would be worth more than $63 billion today.

— Rob Walker

📖 Marker Read of the Week: We did the work for you — revealing the five best business books of 2020, according to every other best-of-2020 list.

🔎 Marker’s New Fixation 🔎

The most iconic image of New Year’s Eve — the Times Square ball dropping above a freezing crowd — is going to be missing one key element this year: the crowd. For the first time since 1907, the ball will drop to a mostly empty Times Square this New Year’s Eve as a precaution against spreading the coronavirus. Likewise, the second most iconic image of the holiday — friends celebrating indoors with party hats and champagne — is off the table for those participating in shutdowns and quarantines. So what exactly is the point of a national holiday centered around partying into the early morning when the party is called off? Even without the merriment, New Year’s Eve is still my favorite holiday — a holiday that, like it or not, forces us to acknowledge the definitive end of one year and the fresh start of another. And since I’m not exactly breaking new ground admitting that this year was horrendous in 1,000 different ways, I’ll take any excuse to say good riddance to 2020 and to hope for something, anything better in 2021 — say, the beginning of mass immunization. So in addition to watching a socially distanced ball drop this year, take another moment to appreciate the drop of your wall calendar straight into the recycling can.

— Jean-Luc Bouchard, Senior Editor, Marker

❄️ We’ll be back in January! ❄️

Buy/Sell/Hold will return after the holidays to fill 2021 with plenty of business analysis, economic indicators, and opinions about Peloton. Happy holidays, from the crew at Marker!

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