Jeff Ubben Considers “Meaningful Stake” In Exxon, May Seek Board Spot

Exxon Mobil is considering adding Inclusive Capital’s legendary activist Jeff Ubben to its board of directors in what could be a step toward helping beaten down Exxon stock unlock significant value, Bloomberg reported on Thursday evening. In addition, Inclusive is considering taking a “meaningful stake” in the company if he is appointed to the board.

Ubben is having “ongoing” and “constructive” talks with the board, according to the report. Other shareholders, including D.E. Shaw which have agitated in the recent past for Exxon – which over the weekend was reported to have considered a merger with Cheveron – to do something to push its stock price higher, are supportive of Ubben’s inclusion to the board (for obvious reasons). A decision on Ubben’s inclusion to the board could be made “in coming weeks”, the report says. 

Ubben left ValueAct last year to start his own firm that is focused on investments in social and environmental issues. Ubben may be eyeing Exxon not only due to the company’s ripe yield, but also as an opportunity to help guide Exxon out of the fossil fuel era, and to transition it for inclusion into the ESG frenzy.

Other activists have been busy in the name, too. “D.E. Shaw has written the company urging it to cut costs in order to preserve its dividend and called on the company to take steps to improve its environmental reputation” and Engine No. 1 investments has nominated 4 directors to the company’s board. 

Recall, just days ago, Exxon reported its first loss in 40 years but vowed to preserve its dividend, which currently sits at 7.3% as of Thursday’s close. 

For the fourth quarter, Exxon posted a previously disclosed $19.3 billion writedown of U.S. natural gas and other assets, capping the first annual loss for the Western world’s largest oil company in at least four decades. However, excluding the historic impairment, Exxon returned to profit in the fourth quarter, earning 3 cents per share, above the 0.02 consensus estimate, and ending a run of three consecutive quarterly losses.

As Bloomberg notes, Exxon is gradually emerging from the wreckage of 2020 facing the worst crisis in its modern history, its stock a far cry from where it traded just a year ago. In addition to growing criticism of its environmental record, financial performance has eroded to the point where its fabled dividend, the third-largest in the S&P 500 Index, is under pressure. Exxon extended the $3.7 billion payout for another quarter last week but hasn’t increased it since early 2019 and is relying on borrowed cash to sustain it.

That said, the company did go all-in on its defense of its massive dividend, with Bloomberg noting that “gone is any wiggle room on its statement: the company is pledging investors that even if oil prices average $50 a barrel (Brent basis) in 2021 and refining margins are horrendous, it would make enough money to cover both shareholders payouts and spending in projects.”

Perhaps sensing that Exxon was ripe for activist involvement, in late 2020 most major bank upgraded the stock to a buy after holding it at neutral or sell since the covid crisis.