Transition Plan Analysis (TPA) Level 1

Despite differing views on climate change, it cannot escape anyone’s attention that the climate crisis has triggered a technology revolution in the way we create energy which poses an existential threat to companies which that rely on the outgoing technology for a substantial part of their earnings. Additionally, while you may or may not agree with the climate science, others do and are introducing policy that again threatens demand/revenues.

This note attempts to deconstruct the risk to Exxon’s revenue/earnings into these two threats – energy transition and policy response. It also reviews management’s reaction to these.

The note discusses:

  • Exxon’s risk to the reduction of demand for its product due to consumer choices
  • The risk generated by mismatch between demand & supply durations.
  • The ability for Exxon’s legacy business to survive in a lower product demand environment.
  • The potential for its low-carbon strategy to offset the loss of market cap (share price) that will happen as the demand for its legacy products inevitably shrink.

The relationship between investors and management needs to be a collaborative one, where both parties bring their combined expertise to navigate this tricky transition.  This TPA level 1 note aims to help engagement teams to focus on the pinch points by asking the right questions of management.  For greater investment detail please refer to our level 2 note.

For any questions on the material within, feel free to email Neil at