The writer is a former partner at Jana Partners and the former head of shareholder activism at Engine No. 1 In the past month, two megadeals have been launched in the oil and gas industry: the announced acquisition of Pioneer Natural Resources by ExxonMobil and Chevron’s planned takeover of Hess. In the Pioneer deal, Exxon will become the dominant operator in the Permian Basin, the largest oilfield in the US.
This is why investors were open to change. They were under no illusion that Exxon would stop investing in oil and gas; in fact, in our first letter we noted — just as Exxon’s chief executive did in announcing the Pioneer deal — that oil and gas companies must spend to offset natural decline rates. We also argued, however, that Exxon should spend more intelligently to account for long-term demand uncertainty.