by GHK Lall
I refer to the article titled, “Steep rise in oil reserve seen as upping pressure for revamping of Exxon deal” (Stabroek News, January 28). As a Guyanese I agree; there can be none-should not be any-who sees things differently. And yet, as I say so, I am prompted to cast a bucket of chilled water on those hopes; they are well-meaning, but forlorn and sure to fall on unfavorable ground.
There is agreement that the reserves have increased significantly. I am optimistic that there will be further additions to those reserves, as it is becoming clearer and clearer that Guyana sits upon an oil lake, several of them, as will come to light in due course. That is the good news, and should be greeted accordingly, by all patriotic-minded Guyanese. The calls from well-intentioned minds and lips have some substance to them: revamp (the newest coinage in the growing local oil lexicon) the deal, being uppermost. I cannot find any fault with that, and no one should.
But as I keep maintaining and insisting that contract (deal being the current euphemism), which is the twisting serrated dagger of countless contentions, is off the table. It will only be negotiated according to Exxon’s strategic visions and calendar. As much as I, and the rest of us, would love to see some movement in a positive direction for Guyana on the contract, I think that that is a forlorn hope, one which will be dashed. Having said that, I still believe that Guyanese leaders can nibble away at some of the peripherals (provisions not so central to the contract) with a view to obtaining some financial relief, a better bargain for the Guyanese people. I submit that Exxon may earn some limited goodwill and come out looking somewhat magnanimous in the process, and less of a feared capitalist predator. I think it can afford that, and it should find ways to be flexible, if only for this relationship to appear less one-sided and to keep the baying wolves in the domestic hearth a shade quieter. Distract them with something: a gnarled bone here, a ragged scrap there. For that is about the most that it can be at this time.
I tender this because there is a new and sharp reality that Exxon has to face publicly before this week is out, which is the focus and thrust of this writing. There is an article in MarketWatch dated January 27th, titled “Exxon, Chevron earnings bring worries about oil prices to the forefront.” My interest is mainly on Exxon in this, so Chevron is ignored, and, also, brace for a flurry of numbers.
According to MarketWatch yesterday, Exxon share price “was poised to end at their lowest since October 2010.” Coronavirus and weaker demand were among the culprits blamed. Also, it is a corporate lifetime, that period of close to 10 years, and executives have lost their heads for less than this. Earnings for the Q4 of 2019 are expected by Wall Street analysts to be almost halved to around 75 cents a share, while profits for the same period is forecasted to be down to 46 cents a share, which is 65 percent lower than the corresponding period in 2018. Though oil earning and profits can be choppy, these are still recognized as huge numbers on the red side of financial statements. In other authoritative corners — academics, company executives, and fund managers, among others — the earnings per share estimate is more pessimistic at 58 cents a share.
Whether 75 or 58 cents EPS for Q4 of 2019, the news is not good. It is not good for company managers or major investors and shareholders. And as I know (even while knowing Guyanese bury their heads in the mud and pretend and prefer ignorance), quarterly earnings are part of the bread and butter of corporate existence, Wall Street sentiment, hedge fund strategic visions, and shareholder expectations. It is impractical and unrealistic, but this has been the norm for decades now. It is simply a fact of life in this sophisticated, volatile, and unforgiving playing field.
With this as context, I humbly submit that, even if Exxon were of a cooperating mind in reference its contract and Guyana, it would be most disinclined to “revamp” or revisit and renegotiate any aspect of the contract at this time. The timing would be wrong. Investors and shareholders are looking for returns; billions (US$) would have to be given up quarter over quarter, even if only on paper. So, to add (take away from the bottom line) a billion here or another there for impoverished, disadvantaged Guyana, through renegotiating the contract is neither in the cards nor could be placed on the table of consideration. Just not feasible or favorable at this point.
As a Guyanese, I must suppress emotion and passion and sentiment on this. I have to be clinical and coldly call matters as I see them. I wish it were otherwise, but it is just not so. Hence, I regret that the oil contract—including the so-called, not immaterial, peripherals that I referenced earlier—is going to have to stay as it is for the near and intermediate future. I recognize that this will not be well-received, but it has to be said, if only to keep our feet on the ground and manage expectations as to what could be.
Mr. GHK Lall is a Guyanese author, columnist and former financial analyst on Wall Street.