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Rex Tillerson’s Exxon: Always Prepared

The CEO is a company vet who's steeped in oil but sees natural gas playing a major role in the future

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Dow LeaderboardExxonMobil (NYSE: XOM) CEO Rex Tillerson is probably the most prototypical oil man since J.R. Ewing ruled the rigs in the 1980s TV series Dallas. But unlike the scheming, double-dealing J.R., the plain-spoken (and often stubborn) Tillerson credits the Boy Scouts for making him the leader he is today.

Although mention of Tillerson’s Boy Scout roots likely would elicit a loud guffaw from Big Oil’s myriad enemies, it’s clear that his career track has been shaped by that organization’s motto: “Be Prepared.”

Preparation seems to be coded into the former Eagle Scout’s DNA. A born Texan who earned a BS in civil engineering from the University of Texas-Austin, Tillerson’s first job out of school was as a production engineer at Exxon in 1975. He’s been at the company ever since.

Upper management started to take notice of Tillerson during the oil boom of the early 1990s when he was heading the highly lucrative exploration and production — E&P or “upstream” — operations in the Texas-Oklahoma Belt. From there, he gained international experience in Yemen and in 1998, became president of Exxon Neftegas, which conducts E&P in Russia.

After Exxon and Mobil merged in 1999, the mercurial Lee Raymond became chairman of the combined company. Almost at once, Raymond began to groom Tillerson as his eventual heir. Tillerson became president of ExxonMobil in 2004 and was elevated to chairman and CEO in January 2006. Since then, XOM stock has soared 73%, compared with a 22% gain in the Dow over that same time frame.

Less than 30 months into his reign, however, Tillerson was targeted with a “no confidence” vote from shareholders — despite the company’s eye-popping performance. ExxonMobil’s earnings topped $40 billion in 2007, and XOM stock rose nearly 70% between Jan.1, 2006, and May 28, 2008 — the date of Tillerson’s second shareholder’s meeting as chairman and CEO.

Despite the company’s financial performance, the descendants of oil tycoon John D. Rockefeller believed passionately that the company was on the wrong track and needed to focus more on green energy and solving problems with the environment. That put Tillerson, who believes the switch from oil to renewable energy is a century away, into the Rockefeller family’s crosshairs.

The family proposed a management shakeup that would strip Tillerson of his job as chairman and appoint an outsider to keep him on a short leash. Tillerson obviously prevailed among shareholders and kept both jobs. And the win helped him pursue the nearly $35 billion purchase of natural gas producer XTO Energy in 2011 — a deal that likely will define Tillerson’s tenure at the helm of ExxonMobil.

The XTO acquisition — and the emergence of hydraulic fracturing (fracking) technology — has positioned ExxonMobil to take advantage of abundant natural gas supplies that once were too expensive to reach. Although a natural gas supply glut has depressed prices now, Tillerson believes this approach will pay off big for shareholders in the long run.

Article printed from InvestorPlace Media,

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