Barnett Shale

Exxon shareholder propositions voted down

Exxon Mobil Corp. shareholders voted down all shareholder proposals presented at the company's annual meeting today in Dallas, including a measure calling for the company to expressly prohibit discrimination based on sexual orientation. That proposal, which had drawn increased scrutiny from activists in recent weeks, drew the support of 20 percent of shares voted. Shareholder proposals calling for increased disclosures of environmental impacts, including greenhouse gas emissions, were supported by 30 percent or fewer shares cast.

The meeting included an extended response by CEO Rex Tillerson to supporters of the greenhouse gas measure, which asked the nation's biggest energy company to set specific goals for reducing emissions and addressing risks from climate change. "We view climate change as a serious issue. It does present serious risks," Tillerson said. But he maintained that climate models are limited in their "ability to understand all the feedback loops" affecting global temperatures, calling the effort "one of the grand challenges" facing scientists today. At the same time, he said, "there is no ready replacement" for fossil fuels to meet growing energy demand around the world.

The Rev. Michael Crosby, a Franciscan friar from Milwaukee, challenged Tillerson to accept that as carbon dioxide levels in the atmosphere have exceeded 350 parts per billion, it represents a threat "that needs to be addressed right now." Climate researchers recently noted that the average CO2 concentration in the atmosphere topped 400 ppb. But Tillerson said there is "nothing magical" about the 350 ppb threshold, even though it represents a "base case" that should be pursued by policymakers. "But to suggest that 350 vs. 450 is a known outcome," he said, overstates the ability of climate models to predict the impact on temperatures. "We do not see a viable pathway" to reducing CO2 concentration to 350 "without a devastating impact" on living standards around the world, Tillerson said.

Exxon's 2010 acquisition of Fort Worth-based XTO Energy came up in Tillerson's response to a shareholder's question about why Exxon has not outperformed its peers in the past five years. The company's presentation included a graphic showing that returns to shareholders shares outpaced both the broader U.S. market as well as competitors over 20-year and 10-year periods.

Tillerson said Exxon has made unprecedented investments since 2008, some of which will take years to pay off. According to the company, it has spent $162 billion in the past five years, including $40 billion in 2012 alone, on capital projects. And, he said, "the XTO merger had an effect" when U.S. natural gas prices fell to decade-low levels last year. While Exxon expected gas prices to fall from their peak in 2008, "they stayed low much longer than we expected" because the recession hurt demand and smaller producers continued to develop new supplies.

"Maybe we were off a year or two" in the timing of the $41 billion deal, he said. But that's not significant in the perspective of a longer view over 30 to 40 years, he said.

Among other corporate business, a shareholder resolution calling for all directors standing for election to garner a majority of votes cast drew the most support, with 45 percent, followed by 35 support who supported a measure to separate the posts of chairman and chief executive officer. 

Other measures and their votes in favor included requiring the company to prepare a formal report on the risks of natural gas development (30 percent), set greenhouse gas emissions goals (27 percent), disclose all lobbying memberships and payments (25 percent), limit the number of boards Exxon directors can serve on (6 percent) and prohibit contributions to influence an election (6 percent).

A non-binding "say on pay" measure that expresses shareholder approval of executive compensation gathered just under 71 percent. Exxon CEO Rex Tillerson, addressing the vote in a session after the vote with reporters, said that was less than the 76 percent a year earlier but just slightly more than two years earlier. Tillerson said the change from 2012's vote likely represented one large institutional shareholder and indicates that more than 70 percent of shareholders are satisfied with the company's pay levels.

-- Jim Fuquay

All quiet at Exxon Mobil annual meeting

As Exxon Mobil prepares to commence its annual shareholders meeting starting at 9 a.m. this morning, there was a conspicuous absence of protesters around the Morton H. Meyerson Symphony Center in downtown Dallas. That's a marked departure from the usual crowd voicing disapproval of the XL Keystone pipeline, environmental and other corporate governance issues that typically go with being the world's largest publicly traded oil company. CEO Rex Tillerson isn't expected to make any news at the meeting, but meets with reporters for a question-and-answer session following the event.

-- Jim Fuquay

Mexico oil and gas development an opportunity, Exxon CEO says

Mexico will eventually open its domestic oil production to foreign companies, Exxon Mobil CEO Rex Tillerson told a Dallas audience today. While the nationalization of Mexico's oil industry in 1938 is still celebrated there, Tillerson said that there is "growing recognition that change is needed" and outside producers should be allowed to help develop resources. "That will happen out if necessity" Tillerson said. Exxon's interest would depend on Mexico's "terms and conditions" of that participation, he said.
-- Jim Fuquay

Exxon CEO Tillerson sees pay rise to $40.3 million

Rex Tillerson, chairman and CEO of Irving-based Exxon Mobil Corp., received a 15 percent pay raise in 2012 as his total compensation rose to $40.3 million, the company said in a regulatory filing Friday. Tillerson’s pay package was only partly cash: a salary of $2.57 million, a $4.59 million bonus, and $447,425 in other compensation. The biggest element was $19.6 million in restricted stock, half of which vests in five years and half in 10 years or until retirement, whichever is later, according to the disclosure, called a proxy filing.

Another large element was a $13 million increase in the present value of Tillerson’s pension. An increase in the interest rate used to calculate a lump sum payout of his pension accounted for about half the increase, and the past year’s gains in his salary, bonus and tenure at the company account for the rest. As of the end of 2012, Tillerson held rights to nearly 1.6 million Exxon shares that had not yet vested, worth $136 million at the time.

There are eight shareholder proposals that will be voted upon at the company’s annual meeting, set for May 29 in Dallas. Among the proposals are calls to split the company’s chairmanship and CEO positions, to disclose lobbying activities and political contributions, and to expressly prohibit hiring discrimination based on sexual orientation. Proposals also call for additional measures to measure the risks of natural gas development and to reduce the company’s greenhouse gas emissions. The company said it opposed all those measures.

-- Jim Fuquay

Bigger operators safer in Pennsylvania, Wall Street Journal finds

The Wall Street Journal crunched the numbers for safety and environmental violations in Pennsylvania portions of the Marcellus Shale and concluded that larger producers generally have better records than smaller producers. It leads its report with the example of Royal Dutch Shell's violation rate of 13 percent per inspection in 2010, compared to a 63 percent rate at East Resources right before the independent sold its Marcellus assets to Shell in 2010. In another example, the newspaper said that following its acquisition by Exxon Mobil, XTO Energy's rate of safety violations "has fallen by half, even though drilling takes place in the same counties, often with the same personnel." (Anyone who has read Steve Coll's recent history of Exxon, Private Empire, will not be surprised, considering Coll's account of the zero-accidents mentality Exxon developed after the Exxon Valdez spill in Alaska.)

Bigger isn't always better. Fort Worth-based Range Resources, an early developer of the field, had a better-than-average record among mid-sized producers, the Journal reported. All operators improved their records in the past two years, according to the newspaper's analysis of state records. For example, Shell has since lowered its violation rate to 5 percent in 2012.

You'll probably run into the Journal's pay wall, but a link to the story is here.

-- Jim Fuquay

Exxon sees 2013 production down 1 percent

Exxon Mobil expects production to decline by about 1 percent this year due to weaker output of natural gas, the Associated Press reported. "Over the next five years, however, the oil and gas giant expects production to rise by 2 percent to 3 percent per year," AP said the Irving-based company forecast during its annual meeting with financial analysts. "CEO Rex Tillerson says global energy demand will grow 35 percent by 2040 with oil and gas accounting for more than coal, nuclear or other sources," AP reported.

-- Jim Fuquay

Exxon Mobil says shale boosted reserves in 2012

Irving-based Exxon Mobil said it added the equivalent of 1.8 billion barrels of crude oil and natural gas to its proved reserves last year. About 750 million barrels came from the Bakken and Woodford shales, Exxon said. The world's largest non-state oil company said it ended the year with proved reserves of 25.2 billion barrels equivalent, divided roughly evenly between liquids and natural gas.

Reuters has a story here.

-- Jim Fuquay

Exxon fourth-quarter earnings rise

Exxon Mobil Corp. earned $9.95 billion in the fourth quarter, a 6 percent gain despite lower profits on its upstream oil and gas operations because of lower prices. Higher earnings on refining contributed the gains. Earnings amounted to $2.20 a share, topping financial analysts' consensus estimate of $2 profit margins. Revenue was down 5 percent to $115 billion, in line with Wall Street expectations. The Irving-based company's shares (ticker: XOM) were down slightly in early trading.

Exxon's oil and gas production slipped 5.2 percent from the fourth quarter of 2011. Excluding the impacts of entitlement volumes, which involve revenue sharing with foreign governments, OPEC quota effects and divestments, production decreased 2.1 percent, Exxon said.

-- Jim Fuquay

ExxonMobil will develop Canada's Hebron field

Irving-based Exxon Mobil Corp. expects to recover more than 700 million barrels of oil, up from previous estimates, from the Hebron field offshore Newfoundland and Labrador, which it said Friday it will develop. Exxon and its partners expect to spend $14 billion on the project, scheduled to come online in late 2017. It will build a reinforced concrete platform in about 300 feet of water and designed for daily production of 150,000 barrels, Exxon said.

"Hebron is one of several large-scale oil developments that ExxonMobil will bring on stream in the next five years," said Neil W. Duffin, president of ExxonMobil Development Co. "ExxonMobil will employ its expertise in Arctic development and project execution to develop this world-class resource in challenging operating conditions."  ExxonMobil Canada Properties holds 36 percent equity in the project, with partners Chevron Canada Ltd. (26.7 percent), Suncor Energy (22.7 percent), Statoil Canada (9.7 percent) and Nalcor Energy Oil and Gas (4.9 percent).

-- Jim Fuquay

ExxonMobil sets top managment salaries, bonuses

ExxonMobil CEO Rex Tillerson is in line for a $4.587 million bonus for 2012, according to a regulatory filing made Tuesday by the Irving-based energy giant. That's up from a bonus of $4.368 million in 2011, according to the company's 2012 proxy filing earlier this year. His salary also will rise in 2013, to $2.717 million from $2.387 million this year. The company said its compensation committee set a ceiling of $266 million in bonuses in 2012 under its short-term incentive program. The company also said it set a ceiling of 11 million shares available under its 2003 incentive program of performance stock awards in the form of restricted stock.  Tillerson was granted 225,000 shares under that program.

-- Jim Fuquay