By Liz Hampton, Ernest Scheyder and Dmitry Zhdannikov
HOUSTON/LONDON (Reuters) – Exxon Mobil Corp
Exxon last year retained John Masek, a former trader at Swiss-based Glencore
This month, Exxon hired former BHP Billiton Plc
The company has also added crude, products and liquefied natural gas specialists to London and Singapore offices. It recently hired Paul Butcher, a trader who has worked at BP Plc
“Paul is known for being a very aggressive, old school crude trader. Exxon would have never hired a risk taker of that scale in the old days. The fact that he is consulting them shows they are considering changes in trading very seriously,” said a trading house executive who knows Butcher.
Phillips 66 declined to comment on the employee departures.
Exxon spokesman Scott Silvestri referred questions about its trading business and recent hiring to regulatory filings, which note the historical use of financial derivatives and geographic scale to manage commodity price risks.
Chief Executive Darren Woods wants to increase Exxon’s profit and appetite for risk at a measured pace, according to people who deal with Exxon. The U.S. operation runs from a trading floor at its Spring, Texas campus that has expanded to as many as 70 workers who will handle everything from Canadian crude to gasoline, jet fuel and diesel.
“Trading has been a virtual four-letter word at Exxon,” said Ehud Ronn, a University of Texas finance professor who studies energy and financial risk management. Exxon has drawn most top managers from engineering backgrounds, not financial services. “A change in their trading policy would indeed be transformational.”
Exxon has long lagged behind rivals BP Plc
During the oil price downturn of 2015-2016, companies like Shell
Shell for example trades more than 8 million barrels per day or 8 percent of global production, twice the size of its own or Exxon’s output. The huge figures come partially thanks to trading barrels of third parties, which Exxon currently does on a very limited scale.
Exxon would also normally hedge only cargoes going from one region to another and where crude is priced according to different benchmarks. BP and Shell would normally hedge all cargoes as well as taking sometimes a pure speculative position on the paper market to make profit, according to traders working for the firms.
“Exxon still doesn’t plan to begin speculative paper trading,” said one source familiar with Exxon’s thinking.
Woods faces pressure from Exxon investors to lift shares that trade at the same price as 10 years ago. He promised shareholders this year that he can double profit and increase its oil and gas output by 25 percent by 2025.
The company’s expanded focus on trading brings challenges including added risk from options, swaps and other derivatives, and developing risk-management and compensation systems for the larger business.
Exxon has held talks with at least two developers of risk-management software, Enuit LLC and Allegro Development Corp, people familiar with the discussions said. Both offer packages that manage logistics and measure financial exposure. The companies declined to comment on their discussions with Exxon, according to spokespeople.
Exxon has also put company veteran managers in charge of overall trading and risk controls at its Spring, Texas, floor, one person familiar with its operations said, to avoid potential losses as it expands trading.
“We’ve heard whispers in the market about this for a few years, so it’s great to see them finally hiring commercial talent externally,” said an executive recruiter familiar with some of the recent hires but who was not directly involved.
(Additional reporting by Ron Bousso in London and Henning Gloystein in Singapore; Writing by Gary McWilliams; Editing by Richard Pullin/Adrian Croft)