By Kevin crowley sure 10/30/2020
HOUSTON (Bloomberg) –Exxon Mobil has warned that it could take up to $ 30 billion in write-downs on natural gas fields as collapsing energy demand and prices have resulted in a series of historic losses .
Exxon is facing one of its biggest crises since Saudi Arabia began nationalizing its oil fields in the 1970s. If the company takes all of the $ 30 billion depreciation, it will be the worst industry for more than a decade, according to Bloomberg data.
The company lost $ 680 million, or 15 cents per share, in the third quarter, compared to expectations of a 25% loss per share in a Bloomberg survey of analysts. Shares fell 0.8% pre-trade and are down more than 50% for the year.
This was in stark contrast to Chevron Corp., which revealed a surprise profit, as the company’s petroleum production and refining divisions exceeded analysts’ expectations. The company’s shares rose 0.3%. European supermajors Total SE, Royal Dutch Shell Plc and BP Plc also performed better than expected in the third quarter.
Blinded by the economic fallout from the Covid-19 pandemic, Exxon CEO Darren Woods abruptly abandoned an ambitious reconstruction effort and imposed large-scale job cuts that are unprecedented in modern history. ‘Exxon. Its top priority has been to preserve a dividend that pays shareholders $ 3.7 billion every three months.
The layoffs and layoffs announced Thursday will affect 14,000 workers in the United States and abroad. Pandemic-induced lockdowns have crushed demand for oil, natural gas and chemicals, causing Exxon’s finances to fall. Prior to 2020, the company hadn’t posted a quarterly loss for at least three decades.
Woods’ turnaround effort took another blow 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 ten years ago with the $ 35 billion buyout of XTO Energy Inc.
The company could experience further asset write-downs in Canada, where operations include the massive Kearl oil sands complex in Alberta. While 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, Woods’ aggressive rebuilding plan has come to a halt, and criticism is mounting over the company’s climate strategy. The most immediate question for investors is how long the $ 15 billion in dividends per year survive.
Meanwhile, Chevron and BP made a profit after cutting costs. Shell beat all analysts’ forecasts, posting adjusted earnings of nearly $ 1 billion. The Anglo-Dutch giant has also suspended the promise to increase the dividend, which has fallen to less than half of its value a year ago. also exceeded estimates.
Exxon stock underperformed Chevron but outperformed Shell and BP. The drop pushed Exxon’s dividend yield to over 10%, a level that indicates investors expect the payout to be reduced.
To defend the dividend and appease investors, Woods is implementing a massive internal campaign to cut costs. Exxon cut capital spending by $ 10 billion in April and announced on Friday that 2021 spending would decrease by up to an additional $ 7 billion.
As if its financial performance weren’t enough to worry about, Exxon is under pressure from critics to reset its climate strategy. His European rivals all pledged to some form of carbon neutrality by mid-century, but earlier this month Woods underscored his faith in fossil fuels. Oil and gas will still make up about half of the global energy mix in 2040 and provide the most profitable development pathway in poor countries, Woods told employees in the email.