Engine No. 1 Issues Message to ExxonMobil Shareholders
Engine #1's 19 May 2021 response to XOM is much larger than the 9000 characters that TheLayoff.com allows. The entire response to XOM claims can be read on BusinessWire.com at the following link.
https://www.businesswire.com/news/home/20210519005795/en/
May 19, 2021 01:22 PM Eastern Daylight Time (EXCERPT ONLY - SEE LINK FOR TEXT)
Source: Business Wire
SAN FRANCISCO--(BUSINESS WIRE)--Engine No. 1, which has nominated four highly qualified, independent director candidates to the Exxon Mobil Corporation (NYSE: XOM) (“ExxonMobil” or the “Company”) Board of Directors (the “Board”), today issued the following message to ExxonMobil shareholders.
Shareholders have a pivotal decision to make about the future of Exxon Mobil Corporation (“ExxonMobil” or the “Company”) at next week’s annual meeting of shareholders, and we want to make sure that every shareholder has the facts necessary to cast a fully informed vote. We therefore wish to address some important topics in the closing days of this effort, and we encourage shareholders to contact us with any additional questions or concerns if we can be helpful.
Clarifying the Facts
ExxonMobil has unfortunately attributed a number of quotes or suggestions to us that we never made. We address a few of the most important ones below.
Fictitious Quote “Engine No. 1 proposes that we radically reduce our investment in our industry-leading portfolio to levels that would endanger the cash flows needed to support the dividend and invest for the future.” (March 31, 2021 letter to investors)
What We Said Like many of ExxonMobil’s assertions, no citation is given because none exists. Here is what we said in our first letter: “We believe ExxonMobil needs a more disciplined and forward-thinking approach to capital allocation strategy, including a long-term commitment to only funding projects that can break-even at much more conservative oil and gas prices … We also believe that a long-term commitment to cutting unproductive capex and tightening project requirements for approval would likely increase free cash flow, strengthen the Company’s balance sheet, and secure its ability to cover its dividend.”
We also note that ExxonMobil put its own dividend in jeopardy through irresponsible spending on low return projects, and we believe ExxonMobil’s newfound capital allocation discipline will likely prove fleeting absent real Board change. As Institutional Shareholder Services (ISS) noted in its report, “In the same way that shareholders may have trouble believing XOM will demonstrate discipline or investment flexibility, they may have trouble believing that the reliability and growth of the dividend are the commitments that management makes them out to be.” (ISS, May 14, 2021). Glass Lewis also noted in its report that, “We believe Engine No. 1 has presented a compelling case that, without a more concerted response and well-developed strategy for confronting the business risks and challenges related to the global energy transition, Exxon’s returns, cash flow and dividend, and thus its shareholder value, are increasingly at threat.” (Glass Lewis, May 17, 2021)
Fictitious Quote “Carbon Capture is vaporware.” (May 5, 2021 investor presentation supplement).
What We Said While ExxonMobil claims we have criticized carbon capture, what we have objected to is using it as a prop to win shareholder votes. In our May investor presentation, we noted that “the IPCC and IEA have said that carbon capture is critical for a 2º degree pathway, but they have made clear that it is not a substitute for dramatically reducing conventional fossil fuel usage,” and thus, “even the most advanced carbon capture is highly unlikely to enable ExxonMobil to avoid transforming its business model over the long-term.”i We also noted that most of ExxonMobil’s carbon capture is not the type of advanced carbon capture required to address Scope 3 emissions but simple gas separation, and most of the emissions it captures are used for enhanced oil recovery, thus increasing total Scope 3 emissions.
While we have recognized the importance of legitimate efforts to advance carbon capture technology, it is true that we referred to ExxonMobil’s “plan” for a $100 billion advanced carbon capture project as “vaporware.” However, we think this is a fair way to characterize a project that has no funding, relies on a non-existent carbon tax that if enacted would dramatically reduce oil and gas demand and thus runs counter to every business decision made by ExxonMobil in its recent history, and appeared out of thin air during a proxy contest.