ExxonMobil (XOM 4.69%) is experiencing a few significant changes in the next few months. In this clip from Industry Focus: Energy, Motley Fool energy analysts Sean O'Reilly and Taylor Muckerman talk about how bullish they are about the company and why.
A full transcript follows the video.
This podcast was recorded on Dec. 15, 2016.
Sean O'Reilly: Bringing it back around to our Exxon-themed episode, talk to me about the new CEO.
Taylor Muckerman: Yeah, Darren Woods. He's been company president for a few months now. He was the natural successor, he's been groomed for this role. He has 14 years before he'll be forced to retire.
O'Reilly: I wasn't going to ask, but I was thinking it.
Muckerman: Yeah. He's 51, so he has some time there. Interestingly, he's from the downstream chemicals refining side of the business, which --
O'Reilly: Futuristic, high-margin.
Muckerman: Yeah, and it's been buoying the business lately. If high oil prices don't come back to what they were five to 10 years ago, like, if you see $60, $70 as the ceiling, then downstream is going to be very meaningful for this company moving forward.
O'Reilly: Correct me if I'm wrong, but that's what Saudi Arabia, with Saudi Aramco's IPO is looking at. They want to build up that part of Aramco's business.
Muckerman: Yeah, and then reduce their own dependence on oil for energy, and then dump all the oil that they're not using for that into the chemicals and refining business. Basically, everything you touch is impacted by the chemicals and refining business.
O'Reilly: Right, this laptop, this stuff --
Muckerman: Plastics, rubber. Granted, there are some new technologies out there where it's not necessary, but you'd better darn well believe that 80% of what you see in a bedroom or a kitchen or something ...
O'Reilly: It's like in The Graduate, when the dad is like, "Get into plastics!"
Muckerman: Yeah, "Plastics, plastics, plastics. I got one word for you," and he says it three times. It's not dead yet, and it was actually probably pretty prescient back then.
O'Reilly: Is that when he's floating in the pool?
Muckerman: No, that's when he runs outside behind the house during his graduation party, because he doesn't want to talk to anybody. When he's floating in the pool, he's not listening to anybody.
O'Reilly: That's right, and he's like, "You need to get a job, son." So, bringing it back around, I'm sure we have a few, at least, ExxonMobil shareholders listening.
Muckerman: Not least among them, Rex Tillerson, who owns over $200 million in shares.
O'Reilly: Right. We know you're listening, Rex! Are you feeling pretty good? Dividends looking good? Downstream?
Muckerman: Yeah. Dividends are good, downstream is carrying the load along with the chemical side of the business.
O'Reilly: Does this make you more bullish than you would have been a month ago? Do you know what I mean, more optimistic?
Muckerman: Well, yeah, because their former CEO is the potential secretary of state, so if anything gets repealed or eased in Russia sanctions-wise -- significant portion of Exxon's potential future production is based there. So if anything gets freed up, that will be a boon. The new CEO has worked with downstream most of his career, so I think that's positive for this company. And unlike previous CEOs, who pretty much all came from the upstream. So maybe bringing a slightly different viewpoint. But most people think it will be business as usual, at least right away.
O'Reilly: Well, and such a huge company, I mean, running ExxonMobil is like running a small country.
Muckerman: Yeah, he's not going to come in and make dramatic changes right away, and I doubt that he will in general. I wouldn't be surprised, though, to see him make an acquisition, like, his acquisition to get things running --
O'Reilly: Shoot the cannon.
Muckerman: "Here I am, world." That wouldn't surprise me. Probably not right away. But it's not like the market is overpriced right now.
