Saturday, May 18, 2024

DE Shaw asks ExxonMobil to cut costs or risk dividend

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DE Shaw hedge fund has acquired a large stake in ExxonMobil and is pushing the oil company to cut costs, adding a source of shareholder pressure on management just days after another investment fund proposed a reshuffle of the boardroom.

New York-based DE Shaw, who in recent years has grown more prominent as an activist shareholder, told Exxon he was concerned the company’s spending could put its dividend at risk, sources close to the folder.

The hedge fund is also concerned that Exxon is underperforming rivals such as Chevron, which has been able to better weather the current industry crisis, the sources said.

Energy groups are struggling to cope with the fallout from the coronavirus pandemic and historically low oil prices.

DE Shaw’s move came just days after Engine No 1, a new investment fund, launched an activist campaign against Exxon, at one point the world’s largest oil company, and named four people as ‘she wanted to nominate for positions on the board of directors of the supermajor.


Number of consecutive years in which ExxonMobil has increased its dividend

Militant pressure has grown amid perceptions that Exxon stay married to a business model of increasing fossil fuel production, despite growing doubts about long-term oil demand and growing concerns about climate change.

Exxon cut spending after the pandemic combined with a Saudi-Russian price war to cause a historic crash in April, sending US oil prices negative and leaving producers across the country in shock.

He said last week that it would be to write up to $ 20 billion in assets in North America and Argentina, as it sought to account for the impact of falling prices on its business.

He also announced plans to cut spending further next year, to $ 16 billion to $ 19 billion, before dropping to $ 20 to $ 25 billion annually through 2025. He initially planned to spend $ 30 billion to $ 35 billion. dollars per year. It plans to lay off 14,000 workers, or around 15% of its workforce, by the end of 2022.

Despite the fallout, Exxon has pushed back pressure to sacrifice its dividend; 2020 marked the 37th consecutive year the company has increased the payment.

The exact size of DE Shaw’s stake in Exxon could not be known. The hedge fund has been active in the energy sector, taking a stake in natural gas producer EQT in 2017.

The DE Shaw stake and the pressure on Exxon were first reported by Bloomberg.

Engine No 1 owns $ 40 million in Exxon stock, and its campaign for corporate change has been supported by the California State Teachers’ Retirement System, the second-largest pension fund in the United States with a stake of $ 300 million in Exxon.

Engine # 1 issued a letter to Exxon’s board calling for a “much-needed change,” including an overhaul of executive compensation, greater discipline in capital allocation and a “strategic plan. for the creation of sustainable value ”, as well as new board members.

The fund said its proposals were aimed at helping the company “secure” its dividend.


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