(Bloomberg) — Chevron Corp. overtook Exxon Mobil Corp. as the largest oil company in America by market value, the first time the Texas-based giant has been dethroned since it began as Standard Oil more than a century ago.

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The reordering of the oil giants says more about Exxon than Chevron.

The company has been struggling to generate enough cash to pay for capital expenditures, leaving it reliant on debt and putting pressure on its $15 billion-a-year dividend. It pursued a series of expensive projects that promised growth after years of stagnating production. Those became a drag on its cash flow when the pandemic hit. Chevron has meanwhile fared relatively well, having emerged with the strongest balance sheet among its Big Oil peers.

Even so, both Exxon and Chevron are receding into the rear-view mirror of NextEra Energy Inc. The world’s biggest producer of wind and solar power has now surpassed the oil majors, leading a spectacular rally in power stocks as much of the world shuns fossil fuels to fight climate change.



chart: NextEra's market value now exceeds Chevron, Exxon


© Bloomberg
NextEra’s market value now exceeds Chevron, Exxon

NextEra ended Wednesday with a market capitalization of $145.5 billion, topping Exxon’s $141.6 billion. Last month, the power giant eclipsed Chevron, now valued at $142 billion.

Exxon’s shares have tumbled more than 50% this year, and its second-quarter loss was its worst of the modern era. In August, it was ejected from the Dow Jones Industrial Average.

Chevron, meanwhile, has fared relatively well amid a Covid-fueled downturn, having emerged with the strongest balance sheet among its Big Oil peers. It was able to complete its $5 billion acquisition of Noble Energy Inc. last week.

READ: Exxon’s Humbling Fall From Oil Juggernaut to Mediocre Company

NextEra has emerged as the world’s most valuable utility, largely by betting big

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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