News: Axios Generate: Spotlight on Exxon — Flying electric taxis

Monday, February 1, 2021

Axios Generate: Spotlight on Exxon — Flying electric taxis — Biden's permitting moves

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By Ben Geman ·Feb 01, 2021

Good morning. Today's Smart Brevity count: 1,172 words, 4½ minutes.

🌎 Join me, and Axios' Mike Allen, tomorrow at 12:30pm ET for a virtual event on corporate America's climate impact, featuring Microsoft chief environmental officer Lucas Joppa and Rockefeller Foundation president Rajiv J. Shah. Register here.

🎤 Tomorrow also marks the 1988 release of Leonard Cohen's album "I'm Your Man," so the late poet has today's intro tune...

1 big thing: The intense glare on Exxon

Illustration of cracking oil barrel with fists and megaphone.

Illustration: Eniola Odetunde/Axios

There's a lot of drama swirling around Exxon these days, which means their fourth quarter earnings report tomorrow will be even more closely watched than usual.

Driving the news: On Sunday, the Wall Street Journal and then Reuters reported that the CEOs of Exxon and Chevron last year discussed a blockbuster merger between companies whose combined market cap is currently over $350 billion.

Both outlets report that the pandemic's heavy toll on the sector spurred the talks. Both report they're no longer active.
The execs "envisioned achieving synergies through massive cost cuts to help weather the downturn in energy markets," Reuters notes.
The WSJ, citing people familiar with the talks, reports that they "could come back in the future."
Exxon declined comment, while a Chevron spokesman told Axios: "We do not comment on market rumors or speculation."

Meanwhile, the forces on Exxon to do more on global warming are expected to grow further.

A separate Reuters report states: "More than 135 investors managing more than $2 trillion are forming a coalition to push Exxon Mobil Corp into making sweeping changes including refreshing its board and focusing more on energy transition."
A source pointed me to this page that briefly describes plans by the shareholder advocacy group As You Sow "to help form a coalition of stakeholders to weigh in on the actual (and rumored) shareholder activism at ExxonMobil to promote capital disciple and address climate change."
It repeats the $2 trillion figure. As You Sow did not provide comment Sunday.

Catch up fast: The brewing effort comes as Exxon is already under pressure from activist investors to shake up its board — including via the addition of clean energy experts — and to do more to control spending.

The big picture: The storylines are indicative of huge and overlapping forces acting on the oil industry right now, and Exxon in particular.

The pandemic has sapped demand and hit prices, though there's been substantial recovery from the depths of the crisis.
And, pressure on Big Oil from activists and shareholders — and now the Biden administration — to do more on climate change is mounting.

Between the lines: Those two forces are especially relevant right now for Exxon. Its financial performance was already uneven before the pandemic, and it has been less aggressive on climate than its European-based peers.

What we're watching: How much (if anything) Exxon is willing to say tomorrow about any of this.

Last week Exxon said that in the "coming weeks" it would update shareholders on plans to create "sustainable value" and commercialize emissions-cutting tech.

Bonus chart: The pandemic's toll on oil use

Reproduced from EIA; Chart: Axios Visuals

Newly released estimates from the Energy Information Administration offer the scope of how much the pandemic sapped oil demand, which fueled last spring's price collapse that's still battering the industry despite some recovery.

The big picture: EIA "estimates that the world consumed 92.2 million barrels per day (b/d) of petroleum and other liquid fuels in 2020, a 9% decline from the previous year and the largest decline in EIA's series that dates back to 1980," they said in a summary.

2. The early fallout from Biden's permitting moves

Bloomberg is shining a light on the early real-world effects of the Biden administration's new policies around oil-and-gas drilling permits on federal lands and waters.

Driving the news: They report that Interior Department officials are yanking about 70 permits issued without the high-level review required under a Jan. 20 department order in effect for 60 days.

The onshore permit holders were told Friday that they need to seek new approvals, and a spokesperson said the process will be "timely."
Bloomberg also reports that at least 33 drilling permits have been authorized under the new process for Gulf of Mexico wells.

Of note: The new permitting process is separate from last week's executive order that suspends new lease offerings in federal areas.

What they're saying: Goldman Sachs analysts, in a note, said investors in exploration and production (E&P) companies are concerned about Biden's overall posture.

"While comments this week from the Biden Administration were perceived as modestly more supportive towards ongoing activity on already-leased acreage, investors increasingly fear that federal land and broader policy concerns will be yet another overhang that restrains valuations on E&Ps even those not exposed to federal land."

A message from Chevron

Chevron is working toward a brighter future

It's only human to be there when it matters.

Last year, Chevron invested billions of dollars to bring affordable, reliable, ever-cleaner energy to people across America.

Find out more about how Chevron is working toward a brighter future.

3. Following up on GM's big target

Source: Giphy

Let's spend another moment with General Motors' new "aspiration" to end sales of internal combustion cars, SUVs and pickups by 2035, part of their vow to be "carbon neutral" by 2040.

What we're watching: If other automakers will start making similar announcements about a phaseout date (though this also isn't a bad time to note that none of this is binding).

"With the Biden Green Agenda on the horizon, we believe other automakers could follow GM's lead domestically with Tesla continuing to run away with market share in this EV arms race," Wedbush Securities analysts said in a note.

The intrigue: This New York Times piece nicely lays out another important motivation for GM, which are China's moves to aggressively electrify its auto market, the world's largest.

"G.M. and Volkswagen both sell more cars through joint ventures in China than in their home markets," they note.
"When it comes to global automakers' electric vehicle plans, all roads lead back to Beijing," Michael Dunne, a former GM official, tells NYT.

Go deeper: General Motors puts Trump in its rearview mirror

4. Wall Street thinks flying electric taxis will take off

Illustration of a Joby Aviation flying electric taxi

Photo: Joby Aviation

Axios' Joann Muller reports that the next big thing in transportation could be electric flying taxis — think of a drone crossed with a helicopter — that would ferry people and goods high above congested roadways.

Why it matters: Air taxis are billed as a cheaper, faster, cleaner mode of transportation, and an important link between remote areas and population centers.

But there are still technical and regulatory challenges to overcome — not to mention public skepticism.
While test flights could begin as soon as 2023, don't expect to see them flying in large numbers until the middle of the next decade.

Reality check: Flying taxis are approaching the "peak of inflated expectations" on Gartner's annual "hype cycle" for connected vehicles and smart mobility.

That puts them about where self-driving cars were five years ago — and we're still waiting for those to arrive.

Investors thrive on hype, though — which is why on Wall Street, flying taxis are taking off.

In 2020, air mobility companies raised $1.3 billion in private investment, up 80% from 2019, according to Pitchbook.
Several startups, including Silicon Valley-based Joby Aviation and Germany's Lilium, are expected to go public, the research firm says.
They and others are likely looking to capitalize on the frothy demand for public shares in EV companies and related mobility technologies, says Pitchbook analyst Asad Hussain.

Read more

5. Catch up fast: BP, Volvo, SPACs

Deals: "BP has agreed to sell a 20 per cent stake in an Oman gas block for $2.6bn to Thailand's national oil company PTT as part of the UK energy major's $25bn divestment programme." (Financial Times)

Batteries: "Volvo Group announced a new business area — Volvo Energy (initially within the Volvo Trucks) — that will be responsible of topics related to electrification." (InsideEVs)

More batteries: "Battery maker Microvast Inc. will go public via a merger with blank-check company Tuscan Holdings Corp. in a deal that values the combined company at $3 billion." (Bloomberg)