Oil giant ExxonMobil has been overtaken by Florida-based NextEra Energy, a big player in the wind and solar energy, as the most valuable US energy company by market value.
NextEra’s market capitalization has climbed to $145 billion compared with ExxonMobil’s $142 billion, another emblem of the Texas giant’s diminished status after it was bumped this year from the prestigious Dow Jones index after more than 90 years.
Peter McNally, an energy expert at research firm Third Bridge said he ascendance of NextEra and other renewable-oriented companies is not merely a passing trend.
He said in an interview that “I’ve seen fads in alternative energy come and go over the last decade, and I’m sure that people would debate the multiple investors are paying for the earnings generated,”.
“They’re in the right place at the right time.”
NextEra, which was founded in 1925 in Florida where it continues to supply power to five million households, has invested in solar and wind energy since the 1990s.
The firm is the biggest producer of wind energy in North America and among the biggest solar producers in the United States.
NextEra in 2019, reported $3.8 billion in profits on $19 billion in revenues. During the same period, ExxonMobil garnered $14.3 billion in profits on revenues of $265 billion.
ExxonMobil’s decline coincides with a lackluster outlook for oil prices in the wake of the coronavirus pandemic and the ensuing uncertainty over demand.
These dynamics have made ExxonMobil’s strategic decisions of recent years look especially bad.
The oil giant invested almost $80 billion between 2017 and 2019, including about a third on US shale investments expected to boost production by one million barrels per day by 2024. But those targets appear destined to lapse.
With the crash in oil prices, ExxonMobil has slashed its capital budget this year.
By contrast, NextEra has benefited from regulated electricity prices and stable use. About two-thirds of its revenues are tied to supplying electricity.
Andrew Bischof, an analyst at Morningstar said, between this consistent source of revenues and its expertise in wind, solar and energy storage, NextEra is “very well positioned for this transition to renewable generation and emission-free type world,”.
He added that “Investors definitely appreciate that type of carbon profile during this transition,”.