Read emission tea leaves in big oil votes: Worley

Engineering giant Worley says the backlash that “big oil” faced over climate change in the past week is a clear sign that investors think that massive cuts to emissions are feasible.

Speaking at an investor day on Wednesday, chief executive Chris Ashton spoke of strategies and markets for the Sydney-based engineering company to work towards achieving net zero emissions. That is where emissions produced are offset by steps to reduce greenhouse gases.

The company has since last year actively focused on targeting this market, which includes helping energy companies examine renewable sources of power.

Worley this month won an engineering contract to help Shell build a 200 megawatt “green” electrolysis-based hydrogen plant, powered by an offshore wind farm, in the Netherlands. On Wednesday, it also announced the issue of a five-year €500 million bond linked to cutting certain emissions by the equivalent of 57,177 tonnes of carbon dioxide by 2025, with penalties applied for failing to hit that target.

But one query in Worley’s question and answer session, at the end of an almost two-hour online presentation, argued that the ideas raised so far to reach net zero emissions seemed far-fetched and might require the adoption of nuclear energy.

Mr Ashton, speaking from Houston, said that nuclear energy would probably have a role to play but Worley was not an investor in that sector. But he also disputed the idea of plans being far-fetched.

“If you look at some of the shareholder resolutions that have gone through with some of the majors in the last 10 days, that shareholder base doesn’t think it is far-fetched,” he said.

“So I think the flow of capital would actually probably counter the view that it’s not achievable.”

Chevron, Exxon

Two shareholder votes that took place late last month upended oil giants Chevron and Exxon Mobil.

Almost 60.7 per cent of votes at Chevron’s annual meeting were in favour of a proposal to reduce so-called scope three emissions – those that come from other organisations in a supply chain of a business. Chevron’s board had recommended against the proposal.

At Exxon Mobil, a small activist investment firm that has pushed for a greater focus on climate change wrangled two board seats.

Mr Ashton also backed the cost efficiency of renewable-power technology given rapid changes.

He said that solar and wind power were viewed as uneconomic only a relatively short time ago.

“Look at them now. They’re at parity or below the … levelised cost of electricity of traditional forms,” he said. “Levilised” refers to the long-time costs of energy production.

He said hitting net zero emissions by 2050 was complex and would require the collaboration of investors, supply chains and government.

“That’s the space that we play in and that’s the space that I’m pivoting the organisation,” he said.

Analysts quizzed Worley on why, if the new strategy would grow earnings, headcount had remained stable at about 48,400 globally.

Mr Ashton said the coronavirus pandemic had suppressed business and that “we’re just at the start” with Worley’s clients beginning to focus on sustainable projects.

Worley stuck with its guidance that underlying earnings before interest, tax and amortisation would improve in the second half from the first half’s $207 million. The first-half figure had been down from $366 million in the corresponding period, blamed on deferrals and site restrictions.

Mr Ashton said Worley’s backlog, a measure of revenue expected to be recorded under awarded contracts or work orders, had lifted from $13.5 billion last half to $14.1 billion as of the end of March.

Extracted from AFR

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