Energy giant Exxon Mobil Corp is facing its biggest crisis since the 1970s when the pandemic weighed on oil and gas demand.
Exxon Mobil Corp. warned that gas field write-offs could cost up to $ 30 billion as falling energy demand and prices sparked a historic streak of losses.
Exxon is facing one of its biggest crises since Saudi Arabia began nationalizing its oil fields in the 1970s. If the company accepts the full $ 30 billion depreciation, it will be the worst in more than a decade, according to Bloomberg.
The company lost $ 680 million, or 15 cents a share, in the third quarter, compared to a forecast loss of 25 percent per share in a Bloomberg poll of analysts. Shares fell 1.3% to $ 32.53 at 9:34 a.m. in New York, and fell more than 50% for the year.
This was in stark contrast to Chevron Corp., which posted a surprising profit as the company’s oil exploration and refining businesses exceeded analysts’ expectations. Chevron’s shares fell 0.4%. The European super majors Total SE, Royal Dutch Shell Plc and BP Plc also performed better than expected in the third quarter.
Dx Woods, Exxon’s chief executive officer, was blind to the economic fallout from the Covid-19 pandemic and abruptly dropped an ambitious reconstruction effort. His top priority was to receive a dividend that pays shareholders $ 3.7 billion every three months.
The layoffs and layoffs announced on Thursday affect 14,000 workers in the US and abroad. Pandemic lockdowns have dampened demand for oil, natural gas and chemicals, and has swayed Exxon’s finances. Prior to 2020, the company hadn’t posted a quarterly loss in at least three decades.
Woods’ turnaround efforts saw yet another success on Friday when the company said an internal assessment was underway to determine the future of its North American gas assets. Much of these fields were added to Exxon’s portfolio a decade ago with the acquisition of XTO Energy Inc. valued at $ 35 billion, when American gas prices were nearly double what they are now.
The company may suffer additional impairment losses on assets in Canada, including the massive Kearl oil sands complex in Alberta. Although the third quarter results exceeded expectations, the company is still struggling to generate enough cash to fund dividend payments and capital projects.
Exxon’s cash flow has all but evaporated, Wood’s aggressive rebuilding plan has stalled, and criticism of the company’s climate strategy is growing. The most immediate question for investors is how long will the $ 15 billion per year dividends survive?
What Bloomberg Intelligence Says
Exxon appears ready to wait for peers to decline before taking the necessary step to cut its dividend. Regardless of a recovery, the capital structure does not appear to be sustainable as the portfolio requires significant expenses to restore returns.
– Fernando Valle, energy analyst
Meanwhile, Chevron and BP made profits after cutting costs. Shell beat all analysts’ predictions and posted adjusted earnings of nearly $ 1 billion. The Anglo-Dutch giant also made a promise to fatten the dividend, which has fallen to less than half of its previous year’s level. also exceeded estimates.
Exxon stock trailed Chevron but outperformed Shell and BP. The decline has caused Exxon’s dividend yield to rise above 10%. This shows that investors are expecting the payout to be cut.
To defend the dividend and reassure investors, Woods is implementing a major internal cost-cutting effort. Exxon cut $ 10 billion in investments in April and announced on Friday that spending will decrease another $ 7 billion for 2021.
As if financial performance wasn’t enough to cause concern, Exxon is under pressure from critics to reset its climate strategy. European rivals have all committed to some form of carbon neutrality by mid-century, but earlier this month Woods underscored his trust in fossil fuels. Oil and gas will still make up about half of the global energy mix in 2040 and will be the most cost-effective route to development in poor countries, Woods told staff in the email.
(Updates stock prices in third and fourth paragraphs)
–With the support of Laura Hurst and Javier Blas.