[Editor's note: A version of this story appears in the September 2020 issue of Oil and Gas Investor magazine. Subscribe to the magazine here.]

After 98 years the venerable Exxon Mobil Corp., the king of U.S. oil companies, was tossed out of the Dow Jones Industrial Average like a fallen billionaire out of a country club. “You’re not welcome here, anymore. You don’t meet our standards anymore. You’re not who you used to be.” The club of 30 high-flying American companies comprising the stock index oft used to reflect the health of the U.S. economy said don’t let the door hit you on the butt on the way out.

Exxon first joined the Dow in 1928 as Standard Oil Company of New Jersey, originally formed by 1880s industrialist John D. Rockefeller. More recently, in 2007, it owned the honor as the world’s largest oil company with a market cap of more than $500 billion, and in 2013 it briefly topped Apple as the largest company in the world.

Today it is the U.S.’ 33rd largest company with a market cap of $173 billion.

Still, Exxon is no slouch on the oil playing field. It remains a prominent oil and gas and chemicals producer worldwide—second in revenue behind Sinopec—but in the course of a year its stock has halved from $80 to $40. Hasn’t everyone’s in the sector?

Chevron Corp. remains on the Dow, the sole representative of the energy industry. Its market cap is $159 billion—below Exxon and 38th on the list—but its stock price is twice Exxon’s at $80, and the Dow weights price over cap.

What does Exxon’s exile after nearly a century say for the industry? Simply that the wolves of Wall Street find no upside in energy.

And who can blame them? In April, at the depth of the downturn, energy represented just 3% of S&P 500, almost an afterthought in a portfolio. And that’s all energy, not just oil and gas. In 2008, the energy sector reached 15% and couldn’t be ignored.

We’ve now concluded second-quarter conference calls in which domestic E&Ps painted bleak pictures of shut-ins and rig abandonment in defense of prices that fell like a dove in a hunter’s sights. Now the survivors are regrouping and replanning for an uncertain future on both the supply and demand sides of the equation, although it’s pretty clear where Wall Street investors stand.

But where most oil soothsayers foresee prices in the $40s and $50s for a protracted time, there is one voice in the fray with a rather more optimistic view of the macro landscape for oil and gas companies. Marshall Adkins, managing director and head of energy investment banking for Raymond James, thinks by this time next year the pendulum is going to swing back, fast and high.

Adkins gave his perspective as part of Hart Energy’s virtual DUG Midcontinent conference in August. He believes the supply and demand dynamics are going to flip-flop, with global demand quickly ramping back to 3% shy of where it was pre-COVID-19, and oil inventories evaporating rapidly in lieu of offline supply as rigs remain sidelined.

“I think we’re going to see global oil inventories fall below what I would call a normalized level sometime in early 2021, and it will take us years to get back to an oversupplied market without a meaningful increase in oil prices. And when I say meaningful, I’m not talking five or ten bucks, but oil prices doubling from where we are today over the next 12 to 18 months.”

Did Marshall just say $80 oil? “I think you’re going to exit this year above $50/ bbl. I think we’ll see oil in the $80s next year, depending on that pace of demand recovery. Triple digits is not out of the question in my mind. It really starts to accelerate in the back half of ’21.”


He also said OPEC will need to produce at full bore and the U.S. rig count will need to average 800 rigs again by year-end 2021 to make up for the projected global undersupply.

If prices do spike up as fast as they spiked down this year, that will leave E&Ps with a hard choice: ramp up to meet the call to produce or return cash to shareholders as Wall Street dictates. That outcome remains to be seen, but in either scenario the relevance of the oil and gas sector will be on full display. And who couldn’t use the oxygen?

And the granddaddy ExxonMobil? With guidance to produce 5 MMbbl/d by 2025—750,000 from Guyana and 750,000 from the Permian alone—at $100 oil that’s a tidy profit, no doubt boosting the stock price. And may the Dow sit in envy.

To see Marshall Adkins’ full remarks from Hart Energy’s virtual DUG Midcontinent, go to DUGMidcontinent.com. And you won’t want to miss the upcoming DUG Permian and Eagle Ford conference, also virtual, Sept. 29-30. Go to hartenergy-conferences.com/dug-permian-basin.