Jan 20, 2021 Letters
I noticed that recent overseas news reports have been awash with favourable developments for ExxonMobil. It could not come at a better time for the struggling company, which of late has been looked upon as a budding sweetheart by the people who matter, because they influence these things so much.
Some of the bigger and more prestigious investment houses on Wall Street came out with good tidings for Exxon. According to a Bloomberg news item on January 13th, Goldman Sachs, JP Morgan Chase, and Morgan Stanley, among others have given the company their nod and seal of approval. It comes in the form of an upgrade to the coveted ‘Buy’ rating and recommendation from analysts attached to those banks. In Wall Street idiom, a ‘Buy’ rating is a highly favoured dispensation that is not given out casually these days, but only after meticulous analysis and assessment of a company’s prospects. For a considerable period of time, Exxon was in the doghouse with its underperformance and low valuations, when key metrics were applied. One analyst, Phil Gresh, from JP Morgan Chase noted that this is the first time in seven years that he is upgrading the company’s stock. Seven years is a lifetime on Wall Street, which exists on the better be delivered banquet of the here and now, as in the short-term of quarterly returns. Mr. Gresh further noted that the company’s “capital discipline is improving” after years of wasteful spending. I do not require a world of wisdom to appreciate that Guyana is on the receiving and losing side of that new “capital discipline.”
As if to confirm, Mr. Gresh went on to point out that Exxon has a substantial asset base “that ought to be dramatically whittled down as the macro improves.” Again, I direct my gaze and Exxon’s emphasis to right here. Continuing with the JP Morgan analyst’s comments in rationalizing his upgrade he said that “This would have the dual benefit of reducing debt and accelerating XOM’s organic ROIC improvement from higher margin investments like Guyana.” For the uninitiated, XOM is the ticker symbol for Exxon and ROIC is the much watched ‘Return on Invested Capital. I almost feel as though I am back in my old home. But closer to this home, and I revert to the lingo of this land, for there it is: mouth open, story jump out. Guyana is key and pivotal to Exxon’s present and future, through the company’s low risk and high return environment and horizon here.
I say what is well known locally: Guyana is cheap oil, the cheapest for Exxon, when compared to its other global holdings, and those of its competitors, which gives it a heavy edge. A little probing and understanding that goes beyond the jargon reveals a lot that has hamstrung this country, and which now transforms Exxon into the darling of those that once shunned it. Yet, even as I share this, it must be pointed out that Exxon’s expected turning the corner and long-awaited success both come at the expense of this country, and the hopes of its people.
For I interpret Exxon’s hailed “capital discipline” as some elements in the noose with which its strangles this society. Further, “organic ROIC improvement” is on our backs and to our pain. What is good for Exxon and its shareholders is bad-really bad-for Guyana. Wall Street analysts have scant interest in host country divisions, or political conversion and corruption, or the dirty end of the stick that wounds Guyanese. They do not waste time over which political figures sold out and collected, and that they are part of the great game that assures Exxon’s success; or that the underpinnings of possible dissension and instability have been sown.
Editor, what matters is that Exxon is poised to rush to the top, displacing Chevron in the hearts of those who count, and who have just given it a much needed and timely boost, that is priceless. Meanwhile, Guyana pays a hard price, and Guyanese look at their government and opposition leaders, and wonder how much of a price they have been paid to go along with what pillages the prospects of this place.
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