OIL: Exciting Guyana prospects needed to rescue Exxon’s shareholders – Analysts

Goldman and Sachs, which is headquartered in New York City, has established a reputation for being one of the largest investment banks in the world. It is also well known as the white knight of the financial services industry as it provides shareholders, investors and billion-dollar firms with advice on which stocks are best to buy and at what time.

One of the companies it monitors closely is ExxonMobil which is the operator of the Stabroek Block in Guyana that currently holds over eight billion barrels of oil equivalent resources.

When analysts at the bank recently checked the financial health of the company, they told the market that ExxonMobil’s shares should be sold as quickly as possible.     

Goldman and Sachs said that since 2017, the oil giant has seen a 50% decline in stock price and the degradation of its balance sheet as it had to borrow significantly to pay dividends.Forbes.com which reported on this matter yesterday was keen to note that investors have already been fleeing.

Adding insult to injury, the bi-weekly business magazine noted that Exxon was booted last week from the Dow Jones Industrial Average.

Dow Jones, or simply the Dow, is a stock market index that measures the stock performance of 30 large companies listed on stock exchanges in the United States.

Exxon is no longer part of that elite club. (https://www.forbes.com/sites/christopherhelman/2020/08/31/goldman-sachs-10-reasons-to-sell-exxonmobil-now/#70efa5c49803)

Taking these and other factors into consideration, analysts at the investment bank noted that there is really no compelling case to own an Exxon stock which is a message they have iterated to the market since February last. (https://www.cnbc.com/2020/02/03/goldman-downgrades-exxon-to-sell-says-theres-no-compelling-case-to-own-the-stock.html)

According to the said analysts, the only glimmer of hope for the giant remains Guyana. They said that Exxon’s deepwater discoveries offshore Guyana have been the most exciting part of its exploration programme in recent years.
In fact, the multinational has sold off many of its assets around the world just to focus on its Guyana operations, the crown jewel of its portfolio which industry experts note will bring its shareholders billions of dollars in return.

In spite of having in its hands, a deal that would be able to rescue it from the financial quicksand it has landed in, ExxonMobil continues to refuse Guyana its right to renegotiate the deal to give citizens what they deserve for the exploitation of their resource.

ExxonMobil Guyana President, Alistair Routledge

Just recently, the President of ExxonMobil Guyana, Alistair Routledge, was asked to provide his take on calls to review the Stabroek Block Production Sharing Agreement (PSA) so that Guyana could get more value for its oil.

Routledge was keen to note that ExxonMobil and the Government of Guyana have had very little discussion on this front.
He did note, however, that the PPP/C administration wants to have all the oil deals reviewed and not renegotiated. Out of respect for the sanctity of contracts, Routledge said it is important that only a review is done and not a renegotiation.

The Country Manager said, “…Internationally, contract sanctity is important to all companies. If we enter into contracts with governments and they change down the road, then it is very difficult for us to make commitments on projects that have typically 20 to 30 years investment. And how can we make those commitments if we are unsure if terms will change? So it is important for everyone to understand that sanctity is important.”

With this in mind, the official was asked to say what he believes to be the purpose of the review if not to have a re-negotiation of certain provisions that would give Guyana more return. This was asked in light of the heavy criticisms over the last five years that the Stabroek Block deal is in favour of the company and not Guyana.

Routledge was quick to note that he does not believe that the deal is lopsided, but rather, a representation of “aligned interests”. He said, too, that if the contract was “more challenging” for ExxonMobil “then to be honest, I don’t think in this environment, investment dollars would be coming to Guyana currently.”

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Comments

  • brandli62  On September 4, 2020 at 1:54 am

    This report makes it clear that Guyana is in a good position to negotiate a better agreement with Exxon. I have read reports suggesting the Guyanese oil might contribute in the future up to 30% of Exxon’s total worldwide production. The major sticking point is in my opinion the clause in the contract that allows Exxon to recover all its investments before a 50% revenue share agreement kicks in. Without careful audits and clear regulations, Exxon will use this clause to charge any costs, such as excess salary payments to top executives, and extend the time until a more equal revenue sharing can kick in. For example, if Exxon responds to demands to spend more money for training Guyanese staff, they will surely do so, since they know they will not be really footing the bill.

    • kamtanblog  On September 4, 2020 at 6:36 am

      Agree 100%
      David and Goliath senario !

      Suggestion…
      Nationalise exon …make all guyanese residents
      shareholders.
      USA is also heading for dictatorship with Potus
      Rass-Putin’s puppet !

      If u cannot “nationalise” u “privatise”
      End of capitalism socialism communism
      ideology…now history !

      Make every guyanese at home and in diaspora
      all shareholders/owners.

      Radicalism rules way forward.

      Kamtan UK guyanese to the core.

    • Winston  On September 4, 2020 at 7:31 am

      Did Routledge seriously use the word “sanctity” when referring to this Contract?

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