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Oct 7, 2020

Chevron overtakes Exxon Mobil as America's largest oil company

Canada’s energy transformation 'will be driven by capital' as institutional investors decide who gets funded: Jim Leech

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Chevron Corp. overtook Exxon Mobil Corp. as the largest oil company in America by market value, the first time the Texas-based giant has been dethroned since it began as Standard Oil more than a century ago.

But both companies are receding into the rear-view mirror of NextEra Energy Inc. The world’s biggest producer of wind and solar power has now surpassed the oil majors amid an energy transition that’s embracing renewables at the expense of fossils fuels.

NextEra ended Wednesday with a market capitalization of US$145.5 billion, topping Exxon’s US$141.6 billion. Last month, the power giant eclipsed Chevron, now valued at US$142 billion.

Chevron is faring relatively well amid the Covid-led oil downturn, having emerged with the strongest balance sheet among its Big Oil peers. It was able to complete its US$5 billion acquisition of Noble Energy Inc. last week.

Exxon, by contrast, is struggling to generate enough cash to pay for capital expenditures, leaving it reliant on debt and putting pressure on its US$15 billion-a-year dividend. The company pursued a series of expensive projects that promised growth after years of stagnating production, but which became a drag on its cash flow when the pandemic hit. So far this year, Exxon’s shares have tumbled more than 50 per cent and its second-quarter loss was its worst of the modern era. In August, it was ejected from the Dow Jones Industrial Average.

NextEra has emerged as the world’s most valuable utility, largely by betting big on renewables, especially wind. Its shares have surged more than 20 per cent this year and it’s expanding aggressively, with plans to grow its renewables portfolio to 30 gigawatts, enough to power 22.5 million homes.

“People believe that renewable energy is a growth story and that oil and gas is a declining story,” said Jigar Shah, co-founder of the green financier Generate.

Investors have endorsed NextEra’s clean-energy strategy, with renewable energy becoming both mainstream and desirable. At least a dozen U.S. states have policies that will eventually mandate completely clean power grids, and Democratic presidential nominee Joe Biden has proposed a green electrical system in the U.S. within 15 years.

“It’s not a niche investment anymore,” said Kit Konolige, a utilities analyst with Bloomberg Intelligence. “It’s a big industry.”