Rating agency Moody’s said on May 28 that the credit risk of major oil producers has increased with recent events including Royal Dutch Shell Plc losing a Dutch climate lawsuit this week and Exxon Mobil Corp. losing a battle with shareholders.
Chevron Corp. also lost a vote to shareholders demanding it cut emissions further.
“These actions represent a substantial shift in the landscape for oil companies, which had previously prevailed in courts, and largely fend off significant shareholder votes, on climate related matters,” Moody's said.
Moody’s said it considered Exxon Mobil losing board members to an activist hedge fund over its energy transition strategy the most important development because it “likely presages similar results in future board elections at other U.S. oil companies.”
“The increasing potential for ever more stringent investor climate- and emissions-related investment thresholds are likely to lead to higher capital costs and diminished access to capital for oil companies that do not keep pace with investors’ expectations for transitioning to a low carbon business model.”
Recommended Reading
The Risks and Benefits of the IRA’s 45Q, 45Z
2024-01-29 - The Inflation Reduction Act sections 45Q and 45Z are incentives to invest in energy transition and renewable energy projects, but they involve legal considerations to account for.
Tax Credit’s Silence on Blue Hydrogen Adds Uncertainty
2024-01-31 - Proposed rules for the 45V hydrogen production tax credit leave blue hydrogen up in the air, but producers planning to use natural gas with carbon capture and storage have options.
Investors: Energy Transition is on Policy-driven Life Support
2024-03-20 - Injecting private capital into the energy transition is worrisome because some projects couldn’t survive without government incentives, panelists said at CERAWeek by S&P Global.
US Finalizes Big Reforms to Federal Oil, Gas Drilling
2024-04-12 - Under the new policy, drilling is limited in wildlife and cultural areas and oil and gas companies will pay higher bonding rates to cover the cost of plugging abandoned oil and gas wells, among other higher rates and costs.
New BOEM Regulations Raise Industry Decommissioning Obligations by $6.9B
2024-04-15 - Under new regulations, the Bureau of Ocean Energy Management estimates the oil and gas industry will be required to provide an additional $6.9 billion in new financial assurances to cover industry decommissioning costs.