ExxonMobil declared a third straight loss quarterly loss on Friday as it pared down capital expenditure for next year and sent a grim signal of “significant” impairments in the months ahead.
It recorded a net loss of $680 million in the third quarter, a stark contrast to the $3.2 billion profit posted in the same period of 2019.
The oil supermajor said it would scale back capital spending – already substantially reduced this year – by up to one third next year and that assets with values of up to $30 billion could be written down as it implements a portfolio review in the coming months.
The writedowns might be applicable to its North American gas portfolio, Exxon said, including the assets it acquired in 2009 when it took over XTO Energy for $41 billion – a transaction for which ExxonMobil is deemed to have massively overpaid.
“We remain confident in our long-term strategy and the fundamentals of our business, and are taking the necessary actions to preserve value while protecting the balance sheet and dividend. We are on pace to achieve our 2020 cost-reduction targets,” said Darren Woods, Exxon chief executive officer.
Exxon is looking to cut capital expenditure to $23 billion this year, one third lower than it had initially planned, and reduce operating costs by 15 per cent. It however said the cuts would persist into next year with capex anticipated to drop as low as $16 billion in 2021.
It announced on Thursday plans to trim its labour force by 15 per cent or more than 14,000 jobs by the end of this year.
“This is austerity on steroids. What Greece was going through about eight years ago — that, for a private sector company, is what Exxon is doing now,” said Pavel Molchanov, an analyst at Raymond James.
Revenues of $46 billion were down by around 30 per cent in the same period of 2019. Upstream production tapered by 6 per cent to 3.7 million barrels per day. Exxon said output would likely stay broadly flat next year.
Chevron, ExxonMobil rival, posted a $207 million loss on Friday for the same period relative to a $2.6 billion profit in the corresponding period of last year as the global energy industry reels from an oil crash spurred by the novel coronavirus.
Chevron Chief Executive Officer Mike Wirth said the damage to demand induced by the pandemic continued to weigh on the sector. “The world’s economy continues to operate below pre-pandemic levels, impacting demand for our products,” he added.
Chevron has attempted to cut costs, previously announcing plans to retrench up to 15 per cent of its staff. Its capital spending was down by nearly 50 per cent in the third quarter.
Exxon said it planned for a market recovery as declining investment and development across the industry shrinks supply and demand in the years ahead, thereby supporting further dividend payout
“In that plan we will be able to maintain the dividend. If we get into some situation where we’re back in a world like we’ve been in in the second and third quarters, obviously all bets are off,” said Andrew Swiger, senior vice-president, on a call with analysts.