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Rex Tillerson as Secretary of State: Will Oil Industry Gain?
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ExxonMobil Corp. (XOM - Free Report) Chairman and chief executive officer (CEO) Rex Tillerson is among the top contenders to become secretary of state in Donald Trump's administration, multiple sources familiar with the selection process said. Considering Tillerson’s lack of government or diplomatic experience, the choice appears to be a gamble and an unexpected move as Trump assembles his Cabinet.
The President-elect's spokesperson confirmed that Trump met with the ‘oil man’ at Trump Tower in New York City on Saturday morning – the second such meeting in less than a week – and as news of the visit leaked it sparked a frenzy of speculation that he had been offered, and probably would accept, the position.
Former Massachusetts Governor Mitt Romney, retired General and former CIA director David Petraeus and former New York Mayor Rudy Giuliani are also on the shortlist, though Tillerson appears to be the clear frontrunner.
A formal announcement is expected this week or next. If Tillerson is selected, he would be the first oil executive and the second Texan to be in charge of U.S.'s international diplomacy.
Impressive Resume
A native of Wichita Falls, TX, 64-year old Rex Tillerson joined ExxonMobil as an engineer in 1975 and worked his way up through the ranks to become President and join the Board of Directors in 2004. Two years later, he was elected chairman and CEO, following the retirement of Lee Raymond.
Heading ExxonMobil for a decade, Tillerson oversees an operation that has made more than $200 billion in profit over his tenure, generated $34 billion in net income in 2015, and paid more than $80 billion in taxes. No doubt, Trump has hailed Tillerson – ranked #25 on Forbes list of “The World’s Most Powerful People” – as a “world-class player” who had built a “tremendous company with great style.”
But May Face Senate Scrutiny on Russia Ties, Potential Conflicts of Interest
Despite President-elect Trump’s backing, Tillerson can expect bipartisan resistance during confirmation hearings in the U.S. Senate – mostly over his ties to Russian President Vladimir Putin.
The Russian Conundrum: While he has cut deals around the world in the decade leading ExxonMobil, Tillerson’s proximity to Putin and his company’s links to Russia could be problematic. Washington’s ties with Moscow soured in 2014 over Russia’s incursion and subsequent seizure of Crimea in Ukraine.
In charge of ExxonMobil's Russian operations in the 90's, Tillerson got to know Putin pretty well as the later worked for President Boris Yeltsin’s KGB. Under Tillerson, ExxonMobil has signed several agreements with Russia’s state-owned oil giant, Rosneft. When the U.S. and the European Union imposed sanctions on Russia over Moscow’s invasion of Crimea and ExxonMobil’s work with Rosneft was hindered, the millionaire oil titan spoke out against them. In 2013, Tillerson was bestowed with the Order of Friendship, one of Russia's highest civilian honors.
Many observers believe that the oil executive’s relationship with Russia could lead to trouble winning Senate confirmation.
Potential Conflicts of Interest: Rex Tillerson also holds 2.5 million shares of ExxonMobil’s stock, another intensely sensitive aspect of his four decade-old corporate connection -- which could lead to conflict of interest allegations for the nation’s top would-be diplomat. Worryingly, about 1.8 million of these shares are not vested and cannot be sold now.
Climate Change Stance: While Tillerson is not viewed as a climate change sceptic, publicly acknowledging the threat “real” and “serious,” environmental activists fear that he might use his position to silence global initiatives and the right of state attorney generals to scrutinize the fossil fuel companies for climate change. As it is, ExxonMobil is being investigated for allegedly misleading investors on climate change.
How Will Tillerson’s Appointment Affect Oil & Gas Firms?
First Scott Pruitt and now Rex Tillerson.
Last week, the climate action advocates went into a tizzy after President-elect Donald Trump nominated Oklahoma Attorney General Scott Pruitt – having a history of suing the Environmental Protection Agency (‘EPA’) over its restrictions on power plants – to head the agency.
The anti-fossil fuel crowd was in for more shock after reports confirmed Rex Tillerson as Trump’s top choice for secretary of state. However, the oil industry veteran is not quite the ‘bogeyman’ he is portrayed to be. A long advocate of a carbon tax as a way of addressing climate change concerns, Tillerson’s stand on climate change is opposed to that of Trump’s who supports the fossil fuel industry and is least concerned about climate change. In fact, ExxonMobil endorsed the Paris Climate Accord concluded by the Obama administration this year, which Trump is threatening to rip up.
While not much is known about where Tillerson stands on foreign policy, oil industry will hope that his long history of doing business in Russia will help in turning around the U.S.-Russian relationship that is now at its lowest point since the end of the Cold War. Many major energy firms (given below) would benefit from such an initiative.
Let's take a closer look at how a friendlier Russia will play out for big energy companies:
As discussed above, ExxonMobil, through its massive Rosneft deals, could be the biggest winner.
British major BP plc (BP - Free Report) is the highest stakeholder with just under 20% interest in Russian energy giant Rosneft, which is responsible for a third of BP’s output. In case of Western sanctions against Russia are lifted, the London-based group will gain big time.
Oilfield service providers like Halliburton Co. (HAL - Free Report) , Baker Hughes Inc. – a Zacks Rank #2 (Buy) company – and Weatherford International Ltd. are all established players in Russia and any relaxation of trade embargo against the country over its actions in Ukraine may help their investments. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Rex Tillerson as Secretary of State: Will Oil Industry Gain?
ExxonMobil Corp. (XOM - Free Report) Chairman and chief executive officer (CEO) Rex Tillerson is among the top contenders to become secretary of state in Donald Trump's administration, multiple sources familiar with the selection process said. Considering Tillerson’s lack of government or diplomatic experience, the choice appears to be a gamble and an unexpected move as Trump assembles his Cabinet.
The President-elect's spokesperson confirmed that Trump met with the ‘oil man’ at Trump Tower in New York City on Saturday morning – the second such meeting in less than a week – and as news of the visit leaked it sparked a frenzy of speculation that he had been offered, and probably would accept, the position.
Former Massachusetts Governor Mitt Romney, retired General and former CIA director David Petraeus and former New York Mayor Rudy Giuliani are also on the shortlist, though Tillerson appears to be the clear frontrunner.
A formal announcement is expected this week or next. If Tillerson is selected, he would be the first oil executive and the second Texan to be in charge of U.S.'s international diplomacy.
Impressive Resume
A native of Wichita Falls, TX, 64-year old Rex Tillerson joined ExxonMobil as an engineer in 1975 and worked his way up through the ranks to become President and join the Board of Directors in 2004. Two years later, he was elected chairman and CEO, following the retirement of Lee Raymond.
Heading ExxonMobil for a decade, Tillerson oversees an operation that has made more than $200 billion in profit over his tenure, generated $34 billion in net income in 2015, and paid more than $80 billion in taxes. No doubt, Trump has hailed Tillerson – ranked #25 on Forbes list of “The World’s Most Powerful People” – as a “world-class player” who had built a “tremendous company with great style.”
But May Face Senate Scrutiny on Russia Ties, Potential Conflicts of Interest
Despite President-elect Trump’s backing, Tillerson can expect bipartisan resistance during confirmation hearings in the U.S. Senate – mostly over his ties to Russian President Vladimir Putin.
The Russian Conundrum: While he has cut deals around the world in the decade leading ExxonMobil, Tillerson’s proximity to Putin and his company’s links to Russia could be problematic. Washington’s ties with Moscow soured in 2014 over Russia’s incursion and subsequent seizure of Crimea in Ukraine.
In charge of ExxonMobil's Russian operations in the 90's, Tillerson got to know Putin pretty well as the later worked for President Boris Yeltsin’s KGB. Under Tillerson, ExxonMobil has signed several agreements with Russia’s state-owned oil giant, Rosneft. When the U.S. and the European Union imposed sanctions on Russia over Moscow’s invasion of Crimea and ExxonMobil’s work with Rosneft was hindered, the millionaire oil titan spoke out against them. In 2013, Tillerson was bestowed with the Order of Friendship, one of Russia's highest civilian honors.
Many observers believe that the oil executive’s relationship with Russia could lead to trouble winning Senate confirmation.
Potential Conflicts of Interest: Rex Tillerson also holds 2.5 million shares of ExxonMobil’s stock, another intensely sensitive aspect of his four decade-old corporate connection -- which could lead to conflict of interest allegations for the nation’s top would-be diplomat. Worryingly, about 1.8 million of these shares are not vested and cannot be sold now.
Climate Change Stance: While Tillerson is not viewed as a climate change sceptic, publicly acknowledging the threat “real” and “serious,” environmental activists fear that he might use his position to silence global initiatives and the right of state attorney generals to scrutinize the fossil fuel companies for climate change. As it is, ExxonMobil is being investigated for allegedly misleading investors on climate change.
How Will Tillerson’s Appointment Affect Oil & Gas Firms?
First Scott Pruitt and now Rex Tillerson.
Last week, the climate action advocates went into a tizzy after President-elect Donald Trump nominated Oklahoma Attorney General Scott Pruitt – having a history of suing the Environmental Protection Agency (‘EPA’) over its restrictions on power plants – to head the agency.
The anti-fossil fuel crowd was in for more shock after reports confirmed Rex Tillerson as Trump’s top choice for secretary of state. However, the oil industry veteran is not quite the ‘bogeyman’ he is portrayed to be. A long advocate of a carbon tax as a way of addressing climate change concerns, Tillerson’s stand on climate change is opposed to that of Trump’s who supports the fossil fuel industry and is least concerned about climate change. In fact, ExxonMobil endorsed the Paris Climate Accord concluded by the Obama administration this year, which Trump is threatening to rip up.
While not much is known about where Tillerson stands on foreign policy, oil industry will hope that his long history of doing business in Russia will help in turning around the U.S.-Russian relationship that is now at its lowest point since the end of the Cold War. Many major energy firms (given below) would benefit from such an initiative.
Let's take a closer look at how a friendlier Russia will play out for big energy companies:
As discussed above, ExxonMobil, through its massive Rosneft deals, could be the biggest winner.
British major BP plc (BP - Free Report) is the highest stakeholder with just under 20% interest in Russian energy giant Rosneft, which is responsible for a third of BP’s output. In case of Western sanctions against Russia are lifted, the London-based group will gain big time.
Oilfield service providers like Halliburton Co. (HAL - Free Report) , Baker Hughes Inc. – a Zacks Rank #2 (Buy) company – and Weatherford International Ltd. are all established players in Russia and any relaxation of trade embargo against the country over its actions in Ukraine may help their investments. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Confidential: Zacks' Best Investment Ideas
Would you like to see a hand-picked "all-star" selection of investment ideas from the man who heads up Zacks' trading and investing services? Steve Reitmeister knows when key trades are about to be triggered and which of our experts has the hottest hand. Click for his selected trades right now >>