ExxonMobil plays catch up in race to high-grade
Senior Vice President, Corporate Research
Latest articles by TomView Tom Ellacott's full profile
ExxonMobil has fallen behind in the race to high-grade. The Supermajor assembled a best-in-class growth pipeline during the downturn, but it has not tackled its legacy business with the same vigour.
Portfolio rationalisation is now a key focus. The plan is to sell US$15 billion of assets by 2021.
Is ExxonMobil’s US$15 billion disposal campaign ambitious enough?
The company plans to simplify operations through the sale of assets that lack materiality, growth potential and strategic fit. It estimates this will reduce the number of assets in its upstream portfolio by 20%. The programme will also free up capital, helping to boost free cash flow generation during a period of heavy investment.
But we think the Supermajor's highgrading could go much deeper to boost portfolio resilience.
Falling behind in the race to high-grade
ExxonMobil lags well behind its peers in the race to high-grade. Upstream asset sales were an order of magnitude lower than Shell between 2014 and 2018.
The drivers for a more aggressive approach are clear. ExxonMobil is behind the leading Majors on key upstream performance metrics, while it also needs to manage tighter near-term financials.
And high-grading continues to be a priority for the Majors. Chevron's target is US$5 to US$10 billion, but we have identified US$28 billion in potential upstream disposals in the company's portfolio– similarly, ExxonMobil can do much more. These disposal programmes present exciting opportunities for other players on the prowl for M&A.
Double the numbers
We think ExxonMobil has the potential to double its disposal target. A deep dive into the upstream portfolio reveals nearly US$50 billion of asset sales potential, spanning tail-end mature assets, non-core growth opportunities, lower-margin assets and needle-moving disposal wildcards.