Carbon Tracker analyst links ExxonMobil's steep decline to foolish growth strategy advanced in Rex Tillerson era

A week ago, Reuters reported that ExxonMobil was "very close" to disclosing how many of its 75,000 employees were going to lose their jobs in the United States and Canada.

It came as the beleaguered fossil-fuel giant is expected to report a billion-dollar third-quarter operating loss on Friday (October 30).

ExxonMobil's share price has fallen by 54 percent this year, plunging to US$32.82 as of this writing.

And what was once the world's most valuable company has been removed from the Dow Jones index of large-cap stocks.

Today, a new report by the U.K.-based Carbon Tracker attributes ExxonMobil's fall to its decision to overinvest in high-cost assets in pursuit of growth.

"The consequential ballooning of its capital base and its operating costs were a major factor behind the collapse in its return on capital," wrote long-time oil analyst Paul Spedding.

ExxonMobil delivered returns in excess of its industry peers until 2007. The previous year, Rex Tillerson replaced Lee Raymond as CEO.

But from 2007 to 2014, during Tillerson's tenure, returns began declining. According to the Carbon Tracker report, shareholders lost money between 2014 and 2019, underperforming its oil-peer group.

"Carbon Tracker pointed out the risks to Exxon's aggressive development programme in a report in early 2014," Spedding wrote. "It showed that Exxon's bet on high cost, low return assets such as heavy oil (including tar sands) and LNG (Liquified [sic] Natural Gas) had already started to depress the group's return on capital.

"Its portfolio of future development projects was heavily skewed to such assets."

Between 2007 and 2019, dividends to ExxonMobil shareholders accounted for less than one percent per year, on average.

Chevron shareholders, on the other hand, enjoyed double the returns as those who held ExxonMobil stock over the same period.

Moreover, ExxonMobil's "unit development costs and oeprating costs more than doubled" between 2005 and 2019.

"With little change in oil prices, profits collapsed whilst the group's balance sheet value of its assets soared," Spedding wrote. "Return on capital had already collasped from around 30% in 2005 to 16% in 2014. By the end of 2019, it had fallen further to around 6%."

One subhead in the report captured the story this way: "Hero to zero - the story of Exxon's collapse".

On January 1, 2017, Darren Woods became ExxonMobil's latest CEO after Tillerson was appointed as the first secretary of state in Donald Trump's administration.