No. of Recommendations: 14
At the 2018 Investor Day, XOM laid out it's future plans in a level of detail that hadn't happened before Darren Wood took over as CEO. He (correctly) judged that XOM was following the right strategies, but that they weren't understood on Wall Street. So, versus the past, he brought in only the top executives to present the plans. Plans that were developed in 2017. He said the emphasis would be on Guyana, the Permian, integrating the Permian with the downstream in a coordinated master plan, expansion in LNG, Brazil, focusing on advantaged petrochemicals, and reducing costs. He pointed out that XOM had already acquired attractive properties during prior years when they "leaned in" while the industry was pausing. Their plans were to continue to develop these attractive opportunities. Darren Woods was challenged "why are you doing this instead of buybacks like your competitors?" He said "Because they're better businesses than the ones we have now." The focus was on upgrading the company.
Woods was roundly criticized for continuing to invest in capex during the Saudi-Russia price war followed by the Pandemic which crushed demand. XOM went to extreme lengths to not cut the dividend. They cut way back on expenses - e.g. layoffs, employee matching on savings, executive bonuses, and stretching the balance sheet to the breaking point. They slowed, but continued, their capex in key projects. And, like OXY, thanks to the vaccines turning around the pandemic, they rode out the storms. It was a close call, but they stuck to their plans and made it out.
Since then, only Brazil has been a disappointment. All the others have met or exceeded plan targets. They have reduced annual expenses by $10 billion on the way to the promised $15 billion by 2027. They have completely reorganized the company along value chain operations while consolidating all support functions into single groups. All project management has been consolidated. Ditto research. Ditto all support functions. All teams now work together on major projects.
Now they stand, again, at the top of the industry. They're forecasting 10% annual growth rates in profits, and even more with the Pioneer acquisition.
People overlook the advances that have been made in XOM. They are prioritizing investment opportunities to only high return projects. Meanwhile BRK looks for opportunities.
I'm happy I hold both.
