Twice over the past two weeks, ExxonMobil
XOM
has made headlines for all the wrong reasons.

Last week the utility NextEra Energy
NEE
surpassed the market capitalization of ExxonMobil to replace it as the largest U.S. energy company.

This week, there was another milestone. At some points over the past decade, ExxonMobil — the biggest of “Big Oil” in the U.S. — was worth as much as $225 billion more than Chevron
CVX
. That size advantage totally disappeared on October 8, 2020, when Chevron’s value closed the day higher than ExxonMobil’s.

If you look at the chart, it’s quite different than the story with NextEra. ExxonMobil’s value fell sharply this year, but NextEra has had a really good year. Chevron, on the other hand, has struggled with the Covid-19 pandemic along with other oil and gas producers. They just haven’t struggled as much as most others.

The past decade has been a tough one for oil producers everywhere, but Chevron has managed to hold its value for most of the decade. Both companies have long been favorites among dividend investors (and note that the chart doesn’t reflect the dividend income generated by these companies), but Chevron held up better and paid more income to investors.

Where did things go so wrong for ExxonMobil? I have often pointed to the company’s ill-timed $36 billion acquisition of natural gas producer XTO Energy in December

For a change, investors aren’t having to count on tech stocks to deliver the goods. The S&P 500 Index (SNPINDEX: ^GSPC) gained 27 points, up 0.8%, on Oct. 8. The Technology Select Sector SPDR ETF (NYSEMKT: XLK) gained 0.5%, while the Energy Select Sector SPDR ETF (NYSEMKT: XLE) surged 4.1% higher on another strong day for crude oil. IBM (NYSE: IBM) was the sole tech giant to have a big day, with shares gaining over 5% on news it was going to spin off part of its business.

Utility and real estate stocks, segments that usually do well in a recession but have underperformed in a 2020 that’s been anything but usual, also finished up today. Every stock in both sectors closed higher, with DTE Energy (NYSE: DTE) up 6.3% and Iron Mountain (NYSE: IRM) up 4%, leading the way.

Oil barrel and pumpjack paperweights on pile of cash.

Image source: Getty Images.

Is oil back? Investors are behaving that way

After falling sharply on supply/demand worries and the Friday announcement that President Donald Trump was diagnosed with COVID-19, West Texas Intermediate crude oil futures have surged from a low of $37 to today’s price above $41 per barrel.

Big Oil won big today, with Occidental Petroleum (NYSE: OXY) up 8.8% and Halliburton (NYSE: HAL) up 7.4%, two of the S&P’s biggest gainers. More than half of today’s biggest gainers in the index operate in the oil patch, including global giant ExxonMobil (NYSE: XOM), which added 5.3% and reclaimed its place as the biggest of the U.S. big oil companies, only a day after temporarily falling behind Chevron (NYSE: CVX) in market cap size.

Today’s move higher for the oil sector came on a combination of things behind crude oil’s move higher. To start, oil prices are moving up on worries about oil and refinery production in the

ExxonMobil has struggled amid a drop in crude price globally as well as the shift to renewable energy


BRUCE BENNETT

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US oil and gas giant ExxonMobil announced  Monday it would slash 1,600 jobs in Europe, more than 11 percent of its workforce in the region, as it struggles with the hit from the coronavirus downturn.

“The impact of Covid-19 on the demand for ExxonMobil’s products has increased the urgency of the ongoing efficiency work,” the Texas-based company,  said in a statement.

The company said the job cuts would happen by the end of next year but did not any additional details saying only that “Country-specific impacts will depend on the company’s local business footprint and market conditions.”

Facing decreased demand for crude caused by the coronavirus pandemic as well as the growing shift to green energy, ExxonMobil has seen its share value on Wall Street plummet by more than half this year.

Last week, the company was briefly overtaken in market capitalization by NextEra Energy, a green-era power company which owns two Florida electricity utilities.

ExxonMobil employs 75,000 workers worldwide, and 14,000 in Europe, said Europe is still key to its operations.

“However, significant actions are needed at this time to improve cost competitiveness and ensure the company manages through these unprecedented market conditions,” the company said.

Exxon is not alone in the energy industry in suffering from the Covid-19 crisis and the shifting market.

Anglo-Dutch group Royal Dutch Shell said last week it would axe 9,000 jobs, more than 10 percent of its workforce, by 2022 to reduce costs.

And Shell rival BP announced it would cut 15 percent of staff amounting to 10,000 jobs.

Oil services group Schlumberger said when announcing results in July it would lay off more than 21,000 employees equivalent to a quarter

If you had invested in Florida-based utility NextEra Energy
NEE
a decade ago, your total return, including dividends, would have been 600%. That is a phenomenal return for an energy company.

In contrast, if you had invested in ExxonMobil
XOM
a decade ago, you have seen the share value decline by half. Add in the dividends, and the total 10-year return in ExxonMobil is -25%.

The stark divergence in performance led to something that would have been unimaginable a decade ago. This week NextEra’s market capitalization surpassed ExxonMobil’s to become the largest U.S. energy company. By the end of the week, ExxonMobil’s value was back on top, but if the trends are any indication, that position will be temporary.

How did this happen?

ExxonMobil’s fall, more than anything, is a function of the ongoing Covid-19 pandemic. Although the company’s performance in the decade before 2020 was lackluster, the company was still worth just over $300 billion when the year began. Nine months later that value is $140 billion as the company grapples with the decline in energy demand brought on by the pandemic.

What did NextEra do right? As a disclaimer, I will note that NextEra has long been the #1 ranked stock pick in our Growth Portfolio at Utility Forecaster. As a result, I have written in great detail about the company. The following is a brief excerpt from an analysis I carried out that explains why NextEra has thrived.

Over the past 15 years, the world has moved to cleaner electricity. Arguably no company has navigated this transition in the U.S. better than NextEra. In the process, it became

In a sign of shifting fortunes in the energy business, green-oriented power company NextEra Energy on Friday sparred with petroleum giant Exxon Mobil for market capitalization supremacy.

NextEra, which owns two Florida electricity utilities and bills itself as the “world’s largest generator of renewable energy from the wind and sun,” finished Friday’s session with a market capitalization of $137.7 billion.

NextEra actually overtook ExxonMobil during the session, but finished at a level just under the oil giant’s market value of $139.4 billion. Chevron closed the day with a value of $132.9 billion.

Shares of NextEra have risen about 18 percent this year as policies to promote green energy and address climate change gain momentum and raise doubts about the longevity of petroleum.

A surge in market value by green-oriented NextEra Energy has put it ahead of Chevron and just under ExxonMobil A surge in market value by green-oriented NextEra Energy has put it ahead of Chevron and just under ExxonMobil Photo: GETTY IMAGES NORTH AMERICA / SPENCER PLATT

But NetEra Energy remains a much smaller company than ExxonMobil.

In 2019, NextEra reported profits of $3.8 billion on revenues of $19 billion and has around 14,000 employees.

During the same period, ExxonMobil reported profits of $14.3 billion on revenues of $265 billion. The oil giant has 75,000 workers.

ExxonMobil has lost more than half its market value in 2020 as oil prices have sunk amid the coronavirus downturn. The company was bumped from the prestigious Dow Jones index in August, reflecting the diminishing prestige of petroleum companies as policies to address climate change boost Tesla and other green companies.

Copyright AFP. All rights reserved.

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