Dec 1, 2020

Axios Generate

Good morning! Today's Smart Brevity count: 1,118 words, 4½ minutes

🚨Situational awareness: "OPEC and allies led by Russia postponed talks on oil output policy for 2021 to Thursday, as key players still disagreed on how much oil they should pump amid weak demand due to the coronavirus pandemic." (Reuters)

🗓️Join Axios tomorrow at 12:30pm ET for a virtual event on plastic waste and the future of recycling. Register here.

🎶And at this moment in 1991, P.M. Dawn was atop Billboard's singles charts with a reminder that marionette strings are dangerous things...

1 big thing: Oil major's big reckoning

Illustration: Sarah Grillo/Axios

Raise your hand if you're an oil major that's got it all figured out, what with the pandemic, cloudy demand and price outlooks, and the unknown path through a world getting a bit more serious about climate.

Why it matters: There don't seem to be any takers.

  • Not ExxonMobil, which yesterday afternoon showed the latest signs of its struggle to position itself as it announced large write-offs and a big rethink of long-term spending.
  • But not the European majors either, despite their strategy for diversifying more quickly than their U.S. counterparts into renewables and other investments outside their (still dominant) fossil products.

Driving the news: Let's start with Exxon. It's slashing planned capital and exploration spending to $20 billion-$25 billion annually through 2025, compared to $30 billion-$35 billion planned before COVID-19.

  • Exxon also said it's planning a write-down of $17 billion-$20 billion on natural gas assets in the U.S., Canada and Argentina.
  • The Wall Street Journal reported last week that Exxon has substantially lowered its oil price outlook over the next decade.

The big picture: Bloomberg's unsparing lede: "Exxon Mobil Corp. is about to incur the biggest writedown in its modern history as the giant U.S. oil and gas producer reels from this year’s collapse in energy prices."

  • While the pandemic has worsened Exxon's struggles, it didn't create them, as the company has been dealing for years with some big bets that haven't paid off — including its $31 billion 2010 deal for the big gas producer XTO Energy.

Yes, but: Exxon said yesterday that it hopes to double its earnings by 2027, and that in the nearer-term, the business environment in Q4 is showing signs of improvement.

  • The company said it's focusing on development of priority assets in Guyana, Brazil, the Permian Basin and its chemicals division.
  • The moves will boost Exxon's "earnings power and cash generation" and ability to "manage future commodity price cycles," CEO Darren Woods said.

The intrigue: That brings us to Europe and a good Financial Times look at the strategies of the multinational oil-and-gas giants headquartered there like Shell and BP.

  • The story notes the lagging stock performance of those companies compared to large renewables companies like wind giant Orsted.
  • I won't try and capture their whole piece — titled "Can Europe's oil groups win back investors?" — but one important point is that even as Europe's oil giants pivot, their ability to execute in the renewables space is uncertain.

The bottom line: Overall, the FT reports, there's a realization that "even if oil executives manage to transform their businesses, they cannot guarantee significant earnings and returns in the next decade."

2. BlackRock's new climate tool

Illustration: Rebecca Zisser/Axios

Axios' Amy Harder reports: Investors will be able to see what impact a warming world and the transition to cleaner energy sources could have on their portfolios in a tool BlackRock unveiled Tuesday.

Why it matters: The move by BlackRock, the world's biggest money manager, is one of the most concrete signs investors are getting more serious about acting on risks they’ve been saying for years they’re worried about.

What's new: A lot of disparate data already exists about the impacts of climate change, but BlackRock is integrating the data into its risk management platform, Aladdin, to make it more actionable, according to Mary-Catherine Lader, the platform’s top sustainability official.

  • Aladdin is used by many of the world’s largest pension funds, asset managers, insurers and other institutional investors.
  • Investors won’t be required to use this new component, but Lader says making more data readily available will empower investors to take more climate action.

What they're saying: "It's climate risk going mainstream," said Trevor Houser, partner at the Rhodium Group, a consulting and research firm whose data BlackRock is using for a portion of its new platform.

The intrigue: Lader's boss is Brian Deese, President-elect Joe Biden’s pick for his top economic adviser.

  • Deese has been BlackRock’s global head of sustainable investing for the last few years after holding top climate positions in the Obama administration.

Yes, but: With Deese's appointment, BlackRock is coming under renewed criticism from some progressive climate activists.

Read more

3. Pondering Biden's OIRA

Bloomberg Law has some reporting on names rumored to land a low(ish) profile but very important role in the Biden White House: head of the Office of Information and Regulatory Affairs.

What they're saying: Their story, citing congressional aides and academics, says names in the mix include...

  • "Richard Revesz at New York University; Michael Fitzpatrick, who served in OIRA under Obama and Clinton; Cary Coglianese at the University of Pennsylvania; and Michael Greenstone at the University of Chicago."
  • The position requires Senate confirmation.

Why it matters: OIRA works with agencies across the government to shape federal regulations.

  • That will be important for the slow, legally fraught work of unwinding Trump-era rules and crafting new regulations on energy and climate change.
  • Bloomberg Law reports that OIRA's "coordinating role" will be vital for President-elect Joe Biden because he plans to "leverage every federal agency" to address climate, racial justice, the economic downturn, and COVID-19.
4. The EV SPAC train rolls on

Source: Giphy

The Lion Electric, an electric truck and bus company, is going public via a merger with the special purpose acquisition company (SPAC) Northern Genesis Acquisition.

Why it matters: It's the latest in what's becoming a big collection of EV and EV-adjacent companies forgoing traditional IPOs and instead going the SPAC route.

By the numbers: The market capitalization of the combined company will be almost $2 billion, per the announcement.

  • And the deal also provides Lion with over $500 new funding aimed at scaling up its manufacturing capacity and battery development, they said.

Go deeper: EV bus and truck maker The Lion Electric to take SPAC route to public markets (TechCrunch)

5. What the market thinks of Nikola's GM deal
Data: FactSet Chart: Axios Visuals

Nikola Corp.'s stock plummeted yesterday on the news that GM was no longer taking an equity stake in the electric and fuel cell truck company or planning to build its now-kaput Badger pickup.

Yes, but: Nikola will still use GM tech for their planned semitrucks under the scaled-back deal, and some analysts still see an upside.

  • Business Insider reports that JPMorgan analysts see some potential for Nikola, which has hit a rough patch after a high-flying market debut in June.
  • "We think this is a positive outcome for Nikola over the medium to longer term, since the company can now focus on the core Class 8 truck initiative and avoid the distraction and capex associated with the Badger pickup," JPMorgan said in a note, per BI.
6. Catch up fast: FERC, Cali deal, LNG

Policy: The Senate last night approved two nominees — Republican Mark Christie and Democrat Allison Clements — to FERC, restoring it to its full five commissioners.

  • Why it matters: FERC oversees electricity markets, interstate natural gas and power transmission, LNG facilities and more.
  • What we're watching: Biden is likely to tap one of the two sitting Democrats — Clements or Richard Glick — to chair the powerful independent agency.

Emissions: "Ford Motor Co is urging major automakers to consider backing a framework deal with California on vehicle emissions in a bid to reach industry consensus before President-elect Joe Biden takes office, according to a letter seen by Reuters on Monday." (Reuters)

People: "Tellurian CEO Meg Gentle has departed the US LNG export developer and been replaced, the company said Nov. 30, as it struggles to secure sufficient commercial support to sanction its proposed Driftwood LNG terminal in Louisiana." (S&P Global Platts)