When the economy is growing and your industry is thriving, quarterly earnings season is frequently a happy time for top executives and their IR teams. Wordsmiths can use the earnings releases to spin tales of dedication to execution and commitment to shareholder value. The conference calls, replete with huzzahs from analysts – ‘Great quarter, guys!’ – are a genial victory lap. Negatives are swept under the rug like so many dust balls.
It didn’t quite work out that way for one group of companies that did remarkably well last quarter: big oil. In the last week of April, the three largest US oil companies, ExxonMobil, Chevron and ConocoPhillips, reported monster earnings – $15 bn between them. And never has such stunning news landed more softly.
For the firms, the banner results simply couldn’t have come at a worse time. In Washington, even Congressional Republicans, many of whom often appear to be extensions of large oil companies, were agitated, calling for investigations into price gouging (whatever that is) and (horrors!) the need to conserve. That posed a challenge for CEOs and their IR teams: how could they let investors know just how well they were doing without making it seem they were doing too well?
Big oil’s trade group, the American Petroleum Institute, tried to shape the battlefield by launching preemptive strikes. It ran full-page newspaper ads noting that about 20 percent of all cash spent on gas is consumed by taxes, and that the industry generally earned about 8.5 cents for every dollar of sales. (Of course, when your quarterly sales are $89 bn, as ExxonMobil’s were in the first quarter, that adds up to an awful lot of cents.)
Several approaches were evident in the conference calls and earnings releases. Chevron CFO Steve Crowe couldn’t bring himself to utter the word ‘profits’. Instead, he used a different word. ‘The company reported results [emphasis added] of $4 bn, or $1.80 per diluted share,’ he said.
Others highlighted the lengths to which they were going to avoid reporting gigantic profits. ExxonMobil called the public’s attention to the $7 bn it distributed to shareholders in the quarter through stock buybacks and dividends. ConocoPhillips crowed in its earnings release that it had ‘reinvested 141 percent of its net income into the development of oil and gas resources and its global refining business.’
And in a bit of inspired stagecraft, one CEO did what any embattled powerful or famous person who feels the need to gin up a little public sympathy does: he went on The Today Show and confessed his weakness to Katie Couric and Matt Lauer. On the morning of May 3, there was Rex Tillerson, the newly installed CEO of ExxonMobil, humbly talking shop on one of the couches. The silver-haired executive took pains to emphasize that he understands the pain that high gas prices can cause. But he portrayed himself and ExxonMobil’s fortunate shareholders as mere victims of circumstance. ‘The profit we earn is what the market gives us,’ he said.
Daniel Gross writes the ‘Moneybox’ column for Slate.
