ExxonMobil’s new chief financial officer said the oil giant would continue a strategy of cutting debt, increasing spending and boosting dividends. How is ExxonMobil preparing for this?
Exxon Mobil has hired Kathryn Mikells as its new Chief Financial Officer. She is the first woman to hold the position since the company was founded in 1882.
According to finance head Kathryn Mikells, Exxon Mobil Corp. is trying to decrease its debt further, assessing sustainability-linked financing products, and preparing for future additional climate-related disclosure requirements.
“We’re really focused on paying down debt more, [and] as we reach 2022, we’ll walk it down a little more,” Ms. Mikells said in her first interview since joining the Irving, Texas-based oil-and-gas company in August.
Exxon Mobil’s CFO, Kathryn Mikells
Exxon Mobil Corporation photo
In reaction to the pandemic’s significant reductions in its operations, Exxon took on around $21 billion in additional debt in 2020. According to S&P Global Market Intelligence, the corporation has paid down billions this year, bringing its net debt down to $51.83 billion as of Sept. 30 from $68.57 billion at the end of December.
Exxon is also investing in its dividend, which increased by one cent to 88 cents per share this quarter, as well as buying back up to $10 billion in stock over the next 12 to 24 months. Ms. Mikells said, “We’re being rigorous in terms of how we think about capital allocation and attempting to find the correct balance.”
In the face of a bleak demand picture as the epidemic continues, Exxon said earlier this month that it will follow a cautious expenditure approach for the next five years. The corporation, which cut its capital spending budget in 2020, wants to spend between $20 billion and $25 billion per year on capital projects through 2027, a reduction of 17 percent to 33 percent from its pre-pandemic forecasts.
One of the CFO’s primary jobs is to determine how much to devote to the company’s different investments. “We undertake more extensive planning on a longer horizon basis than I’ve seen at other firms,” Ms. Mikells said, referring to Exxon’s future investment plans and carbon reduction objectives as far out as 2030. Exxon’s investment strategy remains mostly centered on fossil fuels, despite the fact that several of its competitors have started to invest in renewable assets.
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Since 2008, when she became CFO of United Airlines Holdings Inc., Ms. Mikells has worked as the finance chief of a number of corporations. She then rose through the ranks of finance at security business ADT Inc. and printer manufacturer Xerox Holdings Corp. before joining Diageo PLC in November 2015 as CFO. Ms. Mikells remarked, “There’s definitely a large learning curve that I need to climb up.”
Exxon has never had a chief financial officer. Instead, the financial responsibilities were split among the members of the management team. Andy Swiger was hired as the company’s main financial officer in 2013. After more than 40 years at Exxon, he retired this year.
Ms. Mikells has direct control of the investor relations department, which previously reported to the company’s management committee, as the company’s first formal CFO. “For the corporation, it seems a little different,” she said.
In her previous work at Diageo, the CEO placed a strong emphasis on talking with investors, and she emphasized that engagement with shareholders would be a priority for her at Exxon. “It’s one of the aspects of the work that I genuinely appreciate,” she remarked. This year, Exxon’s stock has increased by over 50%.
Ms. Mikells joined Exxon just as the business was under pressure from activist investor Engine No. 1, which requested board seats and changes to the company’s strategy in response to climate change concerns.
Exxon said on Dec. 6 that it plans to reach net-zero greenhouse-gas emissions in the Permian Basin of the United States by 2030, but it hasn’t established a company-wide target. Scope 3 emissions, or those from the company’s goods, are not included in the Permian Basin goal. The corporation is also pushing for a carbon tax or price.
Ms. Mikells said Exxon is considering whether to employ sustainability bonds or other comparable financing mechanisms. The corporation established a low-carbon business unit earlier this year and expects to spend $15 billion in technologies including carbon capture, algae, and biofuels, as well as initiatives to reduce emissions. Ms. Mikells said, “We look at all of the options in terms of how we may fund such initiatives.”
According to the CFO, the corporation is also planning for any new reporting requirements on its activities’ climate effect. Chairman Gary Gensler of the Securities and Exchange Commission urged the agency’s staff to explore whether such disclosures should be included in corporations’ annual reports this year, but no official recommendation has been made.
Ms. Mikells said, “We will surely be a firm that answers when we receive the original text of whatever the plan is.”
According to Jason Gabelman, an analyst at financial services company Cowen Inc., Exxon confronts a struggle recruiting shareholders who are unwilling to invest in petroleum stocks, making this a crucial assignment for Ms. Mikells. Mr. Gabelman said, “Exxon has to be more clear about where its profits and cash flow growth are coming from, and it needs to persuade the market that it will be conservative on investments.”
Money is a stumbling block in global climate change discussions. As experts warn that reducing global warming to 1.5 degrees Celsius would cost much more than previously estimated, the Wall Street Journal examines how the money may be spent and who would pay. Preston Jessee/Wall Street Journal
—This article was co-written by Christopher M. Matthews.
Nina Trentmann can be reached at nina.trentmann@wsj.com.
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Kathy Mikells is the new Chief Financial Officer of Exxon Mobil. She has been with the company for over 30 years and was previously CFO of BP. Mikells will be responsible for debt reduction, spending plans, and capital investment. Reference: kathy mikells bio.
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