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By Liz Hampton and Ernest Scheyder
HOUSTON, June 12 (Reuters) - Exxon Mobil Corp ispushing deeper into energy trading, building a global cadre ofexperienced traders and beefing up risk-management systems tolift profit, according to executive recruiters and peoplefamiliar with the business.
The development is a sea change for a company that has stoodout from rivals by limiting its past activity out of concern itwould be accused of market manipulation. Exxon now aims to tradearound more of its growing energy assets to get the best pricesfor its products and increase earnings, according to an employeefamiliar with the matter.
Expanded trading could add hundreds of millions of dollarsto annual earnings from its own buying and selling of crude andfuels, but also comes with problems, including higher risk.Exxon expects to add 1 million barrels per day of outputover the next several years as new oilfields and refineryexpansions kick in, giving it more assets to trade.
Exxon last year retained John Masek, a former trader atSwiss-based Glencore, the world's second largest buyerand seller of petroleum, to consult on gasoline trading. Earlierthis year, it poached four gasoline market specialists fromrefiner Phillips 66.
This month, Exxon hired former BHP Billiton Plctrader Nelson Lee as an international crude trader, the peoplefamiliar with the matter said. In 2014, Lee orchestrated BHP'sfirst-ever crude exports by maintaining the lightly refined oilmet criteria for an exportable product. The deals helped usherin the end to a U.S. prohibition on crude exports more than ayear later.
The company has also added crude, products and liquefiednatural gas specialists to London and Singapore offices. Itrecently hired Paul Butcher, a trader who has worked at BP Plc, Glencore and Vitol, to advise on North Seamarkets and accounting for trading transactions.
"Paul is known for being a very aggressive, old school crudetrader. Exxon would have never hired a risk taker of that scalein the old days. The fact that he is consulting them shows theyare considering changes in trading very seriously," said atrading house executive who knows Butcher.
Phillips 66 declined to comment on the employee departures.
Exxon spokesman Scott Silvestri referred questions about itstrading business and recent hiring to regulatory filings, whichnote the historical use of financial derivatives and geographicscale to manage commodity price risks.
Chief Executive Darren Woods wants to increase Exxon'sprofit and appetite for risk at a measured pace, according topeople who deal with Exxon. The U.S. operation runs from atrading floor at its Spring, Texas campus that has expanded toas many as 70 workers who will handle everything from Canadiancrude to gasoline, jet fuel and diesel.
"Trading has been a virtual four-letter word at Exxon," saidEhud Ronn, a University of Texas finance professor who studiesenergy and financial risk management. Exxon has drawn most topmanagers from engineering backgrounds, not financial services."A change in their trading policy would indeed betransformational."
Exxon has long lagged behind rivals BP Plc, ChevronCorp and Royal Dutch Shell Plc, which havecreated trading units that occasionally generate more profitthan their refining businesses.
Woods faces pressure from Exxon investors to lift sharesthat trade at the same price as 10 years ago. He promisedshareholders this year that he can double profit and increaseits oil and gas output by 25 percent by 2025.
The company's expanded focus on trading brings challengesincluding added risk from options, swaps and other derivatives,and developing risk-management and compensation systems for thelarger business. Exxon has focused on hedges that allow it toget the best prices for its products and protect it againstprice shifts as its cargoes move to markets.
Exxon has held talks with at least two developers ofrisk-management software, Enuit LLC and Allegro DevelopmentCorp, people familiar with the discussions said. Both offerpackages that manage logistics and measure financial exposure.The companies declined to comment on their discussions withExxon, according to spokespeople.
Exxon has also put company veteran managers in charge ofoverall trading and risk controls at its Spring, Texas, floor,one person familiar with its operations said, to avoid potentiallosses as it expands trading.
"We've heard whispers in the market about this for a fewyears, so it's great to see them finally hiring commercialtalent externally," said an executive recruiter familiar withsome of the recent hires but who was not directly involved.(Additional reporting by Ron Bousso and Dmitry Zhdannikov inLondon and Henning Gloystein in Singapore; Writing by GaryMcWilliams; Editing by Richard Pullin)
