Exxon Mobil Likely To Get A New CEO As U.S. Gets A New Secretary Of State

-0.98%
Downside
116
Market
115
Trefis
XOM: Exxon Mobil logo
XOM
Exxon Mobil

At the time when the entire oil and gas industry is celebrating the production cut by the Organization of Petroleum Exporting Countries (OPEC) and a few Non-OPEC members, Exxon Mobil (NYSE:XOM) has other reasons to cheer. Rex W. Tillerson, the Chairman and Chief Executive Officer (CEO) of Exxon Mobil, has been nominated as the preferred candidate for the US Secretary of State by the US President-elect, Donald Trump. Tillerson is considered to be one of the most accomplished business executives globally with strong international relations. In addition, he shares Trump’s vision of restoring the country’s foreign relations and enhancing national security. Thus, Trump’s decision reiterates his intent to have a cabinet full of dynamic business leaders, who are well connected and are willing to get things done, rather than going with the conventional leaders.

Even though Trump aims to strengthen the US oil and gas industry by having enterprising individuals from the sector by his side, his plans may not come through so easily. Below are some of the factors that could prevent Rex Tillerson from coming onboard :

  • Strong Relations With Russia And The Middle East

Rex Tillerson’s strong relations with Russia and the Middle East are already attracting immense scrutiny from lawmakers. Tillerson has held influential positions in Russia and Yemen while managing the company’s operations in the two countries and has established himself as a smart negotiator who managed to finalize lucrative deals for his company during his tenure. One of his most remarkable deals was the multi-dollar agreement with the Russian state-owned oil company, Rosneft, for a drilling program in the Arctic’s Kara Sea. Though the partnership was later put on hold due to the US sanctions against Russia after the incursion and seizure of Crimea in Ukraine, it won Tillerson Russia’s Order of Friendship Award in 2013 on the grounds of “strengthening cooperation in the energy sector.” However, this award has now come under the scanner and is being viewed as an indication of Tillerson’s powerful ties with Russian President Vladimir Putin.

Relevant Articles
  1. Down 9% Since The Beginning of 2023, What Should You Expect From Exxon Mobil Stock?
  2. Will Exxon Mobil Stock Trade Higher Post Q2?
  3. What’s Happening With Exxon Mobil Stock?
  4. Exxon Mobil Stock Likely To Trade Lower Post Q4
  5. What To Expect From Exxon Mobil’s Stock Post Q2?
  6. Can Amazon Stock Add Two Exxon Mobils To Its Market Capitalization?

Though this is in line with Trump’s objectives of reviving foreign relations with Russia, a sizeable majority of opposition leaders are raising questions on Tillerson’s international ties. In fact, Exxon Mobil, which has notable operations in Russia, is also likely to be put under inspection. Furthermore, there are ongoing investigations over an alleged Russian interference in the US Presidential elections held in November 2016, and the subsequent election of Donald Trump as the US President. While the accusations are not easy to prove, this could cause a major hindrance in Tillerson winning opposition vote for the post.

  • Promoting A Liberal And Oil Centric Society

Some of the lawmakers are of the opinion that with Tillerson assuming office as the US Secretary of State, he might work towards eliminating the existing sanctions against Russia and other Middle East Countries, which would be a conflict of interest for the country and its security. Further, his policies could be inclined towards the oil and gas industry in general, and result in undue advantage to Exxon Mobil and other oil majors. In fact, the company’s stock rose almost 2% post Tillerson’s nomination by Trump, when actually the investors should have been wary of the CEO moving out. For this reason, there is a high probability that the opposition will keep a close check on the company’s operations, whether or not Tillerson gets the job.

XOM-Q&A-CEO

  • Lack Of Governmental Experience

Rex Tillerson, just like Donald Trump, has no experience at running a government body or state. Yet, Tillerson has an excellent track record of achievements to calm his critics. He joined Exxon Mobil in 1975 as a production engineer and with his consistent hard work and dedication went on to become the CEO of the world’s largest publicly traded energy company in January 2006. As a the face of the world’s largest oil and gas company, Tillerson is a well traveled, and well connected international executive. Though this could work in the government’s favor to cut attractive deals for the country, it is being viewed as a negative since most of the US leaders are unhappy with Trump’s ideology of improving foreign relations with Russia.

Having discussed the hurdles in Tillerson’s inclusion in Trump’s team, it is important to mention that Exxon Mobil has already initiated the transition process. The company has named Darren W. Woods, President and Director, as the potential successor to Rex Tillerson. Woods had already been chosen as the successor for Tillerson in December 2015, as the latter is due to retire in March 2017. However, with the latest development, the company has fast paced the transition process, which implies that the company is expecting Tillerson to win the job in January and is already making way for the new CEO for the company.

Although there are a number of hurdles that Tillerson and Trump will have to cross to get the former on the cabinet, one cannot rule out the possibility of this nomination becoming a reality.

Have more questions about Exxon Mobil (NYSE:XOM)? See the links below:

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com

2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Exxon Mobil

View Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap

More Trefis Research