On Tuesday, ExxonMobil announced they expect over $5B in war-related Q2 profit. And wow was their messaging delicate.
The $5+B in incremental profit comes from commodity price and processing margin spikes resulting from the US-Israel-Iran War and its aftermath.
At the top of ExxonMobil’s newest regulatory filing, it was pretty clear how delicately the executive team wanted to tread here:
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This quarter includes factors associated with the ongoing situation in the Middle East and
related disruptions.
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“Ongoing situation…and related disruptions” is about as far as ExxonMobil wants to take this.
I’m reading _China’s Economy: What Everyone Needs to Know_ by Arthur Kroeber.
There’s heavy discussion of state-owned enterprises, and the extent to which corporate action is used to advance the central government’s aims.
It makes me think of the stakes the US federal government has taken in publicly traded companies here recently, with Intel, MP Materials, and USA Rare Earth as notable examples.
While these stakes are far from the state-owned element we find in China, they are steps along a continuum that points in the Chinese direction.
With the book heavily on my mind, I believe there are at least three reasons ExxonMobil wants to tread lightly here.
One, in general, corporate executives want to avoid offending President Trump. He’s quick to air his grievances publicly, and he can steer considerable public hostility in any direction he chooses.
Two, remember how poorly the word “uninvestable” played when CEO Darren Woods described the state of play in Venezuela while at the White House?
They’re already on shaky ground with the president. There would be no repeat provocation here.
Third, the federal government is taking stakes in companies even outside of times of financial calamity. That’s new.
Knowing they are already not meeting the president where he wants them to be in Venezuela, ExxonMobil’s executive team is likely sensitive to provoking this administration into taking a more active stake in the company and demanding change directly.
Every word in ExxonMobil’s public-facing communication is chosen with incredible care.
I of course can’t prove these are the motivating factors for the word choice here.
But based on my read, politics are playing a meaningful role here, and we’ll likely see a similar posture from most large energy enterprises as we work through Q2 earnings season.
