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ExxonMobil (XOM) Lawsuit Against Activist Dismissed by US Judge

Zacks Equity Research
·3-min read

Exxon Mobil Corporation XOM faced a setback as a federal judge in Texas dismissed its lawsuit against activist investor Arjuna Capital. The oil giant had sought to prevent a shareholder proposal by Arjuna Capital that called for significant reductions in the company’s greenhouse gas emissions.

Judge Mark T. Pittman of the U.S. Court for the Northern District of Texas ruled that the case was moot because Arjuna Capital had withdrawn its proposal and promised not to submit similar proposals in the future. In his decision, Judge Pittman noted the persistence of shareholder activism in the United States but emphasized that the court requires a live case or controversy to establish jurisdiction.

In January, ExxonMobil filed a lawsuit against Arjuna Capital and another investor, Follow This, aiming to stop their non-binding resolution from being put to a vote by shareholders. The resolution called for XOM to expedite its plans to reduce carbon emissions, and provide detailed new plans, targets and timetables. Follow This, an organization based in the Netherlands, later joined Arjuna Capital in supporting the proposal.

Judge Pittman had dismissed Follow This from the lawsuit in May but allowed the case against Arjuna Capital to proceed. Arjuna then withdrew the proposal and sought dismissal of the lawsuit. The judge initially denied this motion, indicating that the withdrawal alone did not prevent similar future conduct. However, after Arjuna Capital’s formal promise to avoid submitting similar proposals, Judge Pittman concluded that ExxonMobil’s complaint was rendered moot.

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Arjuna Capital’s resolution had been part of a broader movement by investors to pressure major corporations into taking more aggressive action on climate change. The dismissal of ExxonMobil’s lawsuit underscores the complexities and challenges that companies face in responding to shareholder activism on environmental issues.

While ExxonMobil may view this legal outcome as a reprieve, the larger trend of environmentally-focused shareholder proposals is likely to continue, posing ongoing challenges for the oil industry.

Zacks Ranks & Stocks to Consider

ExxonMobil currently carries a Zacks Rank #3 (Hold).

Investors interested in the energy sector may look at some better-ranked stocks like Archrock Inc. AROC, Sunoco LP SUN and Matador Resources Company MTDR, each currently sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Archrock is an energy infrastructure company based in the United States with a focus on midstream natural gas compression. It provides natural gas contract compression services and generates stable fee-based revenues.

The Zacks Consensus Estimate for AROC’s 2024 and 2025 EPS is pegged at $1.07 and $1.23, respectively. The company has a Zacks Style Score of A for Growth. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 60 days.

Sunoco is a leading wholesale motor fuel distributor in the United States, boasting a vast distribution network spanning 40 states. With long-term contracts servicing more than 10,000 convenience stores, it distributes more than 10 fuel brands, ensuring a stable revenue stream. SUN currently has a Value Score of A.

The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is pegged at $7.29 and $7.17, respectively. The partnership has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days. The company has a Zacks Style Score of A for Value and Growth.

Matador Resources’ upstream operations are primarily concentrated in the Delaware Basin, which is among the United States' most prolific oil and gas regions. The company has demonstrated a consistent upward trend in total production since 2019.

The Zacks Consensus Estimate for MTDR’s 2024 and 2025 EPS is pegged at $7.89 and $9.36, respectively. The company has a Zacks Style Score of A for Momentum and B for Value. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past seven days.

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Exxon Mobil Corporation (XOM) : Free Stock Analysis Report

Sunoco LP (SUN) : Free Stock Analysis Report

Matador Resources Company (MTDR) : Free Stock Analysis Report

Archrock, Inc. (AROC) : Free Stock Analysis Report

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