May 6, 2023 [NGI Natural Gas Intelligence] – ExxonMobil’s natural gas, crude, power and petroleum products trading as of June 1 will become “one centralized trading organization for the whole corporation,” able to stand with any global competitor, CEO Darren Woods said Friday.
The new Global Trading arm has been in the works in some form or fashion since 2018, Woods said during the first quarter conference call. Now, the pieces have fallen into place.
“Global Trading will bring together expertise from across the company in crude, products, natural gas, power, and marine-freight trading,” Woods said. “We plan to build on our record 2022 results, leveraging the unique insights we gain from participating across each of our value chains and all along their entire length, with a global operating footprint larger than any of our competitors.”
The energy trading revamp is part of an overall reorganization to expand the “value chains,” Woods explained. “The opportunity to trade along that value chain and generate insights and advantages along with value chain changes pretty dramatically.”
ExxonMobil until now has optimized trading between the refining and downstream business. Unlike its European-based peers BP plc and Shell plc, the company has been more conservative and not a player in speculative trading.
However, with its fingers in every energy commodity, the trading arm would be able to hold positions in the assets and in origination. ExxonMobil also wants to leverage its giant hold in the global markets to enhance its business.
‘Good View Of The Marketplace’
The new combination would “further integrate the value chains” to give the company a “really streamlined and good view of the marketplace,” Woods said.
“We think that this makes a lot of sense. We did a lot of work over the last couple of years to validate that the opportunity size was there, and what would be needed to get after that. And we’re now…putting the organization together, putting in the support systems, bringing in talent, developing the talent and growing the talent in that space…
“I would just think of it as a progression, a continuation with what we believe is a huge opportunity. We’re going to do that in a very thoughtful, controlled pace, but one that is very focused on significantly growing value proposition…around our footprint.”
Said Woods, “This is not about going out and taking speculative positions. This is about going out and optimizing, given the asset base that we have the value chains…and the opportunities that come with those insights and transacting…”
“This is really around trading on the value created through the transformation of molecules and developing products that people want and then moving those products around the world. And so that platform gives our traders a great base to optimize off of. That’s where we’ll see the value accrue.”
With the Global Trading arm, ExxonMobil would be able to “trade all along the entire length of the value chain,” Woods told analysts. “We can take advantage of the global footprint…and arbitrage between the markets.”
Woods emphasized that the global giant has been effectively trading in the energy space “for a long time. We just gave the trading organizations within the company some different objective statements. They’ve done really well in responding to that, bringing value to the bottom line.”
Human Resources (HR) chief Tracey Gunnlaugsson has been tapped to run the new trading business. She initially joined Exxon Shipping in 1991 as a U.S. merchant marine deck officer and became manager of the U.S. products supply operations in 2004. Gunnlaugsson previously served as Commercial Operations manager and as Pipelines and Distribution manager for Calgary subsidiary Imperial Oil Ltd. She also has served as manager of Product Optimization for the Americas.
Two more enterprise-wide organizations also “will be up and running” as of Monday (May 1), Woods said.
“Global Business Solutions will centralize a majority of our finance and procurement operations, enabling us to deliver simplified, corporate-wide processes. ExxonMobil Supply Chain will consolidate supply-chain activities globally.
“These organizations will focus on leveraging our scale to drive efficiencies, improve operating and financial results, and, importantly, deliver an improved experience for customers, vendors and our people.”
ExxonMobil in 1Q2023 delivered the highest first quarter earnings in its history, even as energy prices and refining margins moderated from the fourth quarter, the CEO noted.
“Compared to the first quarter of 2022 we added about 300,000 boe/d to global supply, primarily from a 40% increase in production from Guyana and the Permian Basin.”
ExxonMobil reportedly has been in talks to buy No. 1 Permian producer giant Pioneer Natural Resources Co. Woods, however, brushed aside the analyst questions.
CFO Kathy Mikells, who shared a microphone to discuss results, said the goal in the Permian this year is “focused on rebuilding the inventory of drilled but uncompleted wells, deploying technology to improve recovery rates, and expanding our processing capacity” to move Permian supply to the Gulf Coast.
“We expect to grow net Permian production for the full year by about 10% as we work to meet our net production target of about 1 million boe/d by the end of 2027,” Mikells said.
The CEO did, however, once again praise the Biden administration’s Inflation Reduction Act, which he said has helped expand the Low Carbon Solutions business. And again, he admonished Europe’s approach.
“In Europe…the policy approach remains far more prescriptive, and punitive,” Woods told analysts. “This is true whether we’re talking about the emissions reductions needed to put the world on a path to net zero, or the production needed to provide Europe with affordable and reliable energy.”
There was little discussion in the results or on the conference call about natural gas, but Woods noted that “lower demand from mild winter temperatures maintained the high inventories we’ve seen throughout this year.”
Profits jumped in the quarter to $11.4 billion ($2.79/share) from year-ago earnings of $5.5 billion ($1.28).
Upstream profits climbed to $6.5 billion ($2.79/share) from $4.5 billion. U.S. upstream earnings declined to $1.63 billion from $2.38 billion. The decrease came from lower prices, with crude and natural gas realizations down 10% and 23%, respectively,” the company noted.
Management said the company “remains on track to deliver $9 billion of structural cost savings by the end of 2023 relative to 2019, having achieved cumulative structural cost savings of $7.2 billion to date.”
As of year-end 2022, greenhouse gas emissions intensity of the operated assets has declined by more than 10%, ExxonMobil noted. Meanwhile, methane intensity was down by more than 50% relative to a 2016 baseline.