Investors await Exxon plans for Russia, succession
Background:
It is very difficult for our oil majors because of their size to show significant growth which could have a future negative impact on our market. #msg-2542242
Yukos-Exxon Affair:
YUKOS—the issue of buying seats in the Duma. YUKOS is accused of not limiting its lobbying to “one-time” deals, but generously “sponsoring” various parties to cobble together its own Duma “faction.” Other oligarchs do similar things, but not on the same scale as YUKOS. http://www.gateway2russia.com/st/art_164082.php
The Russian president and the former secret police members who now dominate his staff struck at Khodorkovsky when it became clear that the billionaire was preparing to spend $100 million to win a large bloc of seats in Duma elections next month and eventually to run for the presidency himself. http://seattlepi.nwsource.com/opinion/147219_hoagland7.html
Exxon Mobil originally meant to buy a controlling interest in Yukos, only later did they back down to 40%.
Therefore the merger in its original intent would have given Exxon Mobil, a foreign entity, seats in Duma. #msg-1874322
This would be like having a representative of Russian business in the U.S. congress voting on or blocking key legislation relating to the national interest. #msg-1778703
The sovereignty of Russia was being challenged by Yukos and Exxon Mobil in a way Putin could not ignore.
After the Yukos-Exxon attempt to gain seats in Duma, Russia said no exploration for Exxon, Chevron.
MOSCOW -- The Russian Cabinet has annulled a tender for the Far East Sakhalin-3 oil fields won by a consortium led by Exxon Mobil Corp. and ChevronTexaco Corp. and said it wouldn't issue a license for its development, according to a statement released today. - Jan. 30, 2004 http://www.chron.com/cs/CDA/ssistory.mpl/business/2379142
Saudi like Russia has also dealt a cruel blow to U.S. majors.
SAUDI ARABIA -- Saudi Arabia opened the door on Sunday to fresh natural gas exploration, securing $800 million worth of Russian, Chinese and European investment that it said would forge new political and economic alliances, no U.S. majors. – March 7, 2004 #msg-2542242
In hindering the ability of the majors to show significant growth a producing country could possibly do damage to not only the share price of the companies but our economy thus we end up with some anxious investors. -Am
Investors await Exxon plans for Russia, succession Reuters, 03.08.04, 2:36 PM ET
By Joseph A. Giannone
NEW YORK, March 8 (Reuters) - Investors like Exxon Mobil Corp. (nyse: XOM - news - people) because it's big, profitable -- and boring.
But when the world's largest listed oil company hosts its annual New York analyst meeting on Wednesday, Wall Street wants to hear about change: how Exxon plans to expand in Russia, boost its natural gas business and exactly when Chairman and Chief Executive Lee Raymond, 65, will yield the reins to newly anointed President Rex Tillerson.
Last year was the company's best ever, reaping $21.5 billion of profit amid soaring energy prices. Yet production volumes have slipped since the 1999 merger of Exxon and Mobil and investors worry about the oil major finding enough new resources to sustain growth while still delivering high-octane returns.
The key to this challenge is management, but analysts say they don't know enough about the next generation.
"Tillerson is a bit of an unknown," Sanford C. Bernstein analyst Neil McMahon said. "They haven't done a good job of telegraphing their succession plans."
Exxon two weeks ago promoted Tillerson, the global head of energy production and development, in a signal the 51-year old engineer could be the next CEO.
Until last year, Tillerson and refining chief Edward Gallante, another candidate, were kept largely in the background. Now the duo will be expected to continue Raymond's remarkable 11-year run.
CHALLENGES
"As with other oil companies, they are facing a lack of opportunities. Going forward, Tillerson will be spearheading the move into Russia, which is the only real option open for them," McMahon said.
Russia is seen as the only part of the world left where western oil majors can find major new resources outside the control of the Organization of Petroleum Exporting Countries.
Analyst note that Tillerson rose through the ranks during a 19-year career almost tailored for the challenges ahead. The Texas native managed U.S. gas production and developments in Alaska, led operations in Yemen and oversaw business development in Russia.
For example, he led talks in the 1990s leading to the $12 billion Sakhalin I project joint venture. Exxon also has been active promoting legal reforms to make Russia's energy industry more attractive to major foreign investment.
Exxon last year tried to take a step further by seeking a major stake in Yukos Sibneft <YUKO.RTS>, Russia's largest oil company, but takeover talks fell apart after Yukos boss Mikhail Khodorkovsky was jailed on fraud charges.
Still, Tillerson is expected to carry out the strategies he's helped develop over the past four years. In a recent interview he told Reuters the key to sustaining Exxon's outperformance is not straying from the play book.
"I think it's staying with our investment discipline, not allowing that discipline to erode and keeping our standards high and not compromising those things with which we've been successful thus far," he said. "That's pretty much what's produced the results we're delivering today."
So while analysts aren't expecting any strategy shifts this week, they want to hear when Raymond plans to retire. Prolonged silence could undermine confidence in the post-Raymond era.
Associated Press MOSCOW -- The Russian Cabinet has annulled a tender for the Far East Sakhalin-3 oil fields won by a consortium led by Exxon Mobil Corp. and ChevronTexaco Corp. and said it wouldn't issue a license for its development, according to a statement released today. The consortium, which also included Russia's state-owned Rosneft oil company, won the tender in 1993, but the government license was never issued in the absence of a legal framework for production-sharing agreements, known as PSAs. The Russian government has since passed laws making PSAs unfeasible. But during the U.S.-Russian energy summit last September, Exxon Mobil said it would pursue licensing terms under the existing Russian legislation. However, Deputy Prime Minister Viktor Khristenko said Thursday that the government had annulled the 1993 tender and decided that there are "currently no grounds for issuing licenses for the oil fields either on PSA terms or regular tax regime," according to a statement posted on the Cabinet's Web site. If the government decided that the development of Sakhalin-3 was necessary, it would conduct a new tender, Khristenko added. A spokesman for Exxon Mobil said the company was "extremely disapointed" by the Russian cabinet's decision. "In our view, it would be a violation of our rights and send a very negative signal to the foreign investment community," said Bob Davis, an Exxon Mobil spokesman in Houston. "The tender we extended was properly conducted, and we would expect our property rights to be respected." Davis said he did not know what the company would do to appeal the decision. Exxon Mobil has invested about $60 million so far to acquire seismic and other information and survey sites for exploratory wells in three blocks at the Sakhalin-3 oil and gas field, Davis said. Two projects off Sakhalin Island are already underway. Exxon Mobil is leading the Sakhalin-1 venture, and Royal Dutch/Shell Group is leading the Sakhalin-2 project. Exxon Mobil doesn't believe the decision will affect Sakhalin-1, which is expected to begin producing oil by the end of 2005, Davis said. The company estimates the potential of that project at 5.2 billion barrels of oil.
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