Exxon has finally broken with its tradition to never write down its assets. Exxon has announced massive writedowns of between $17 billion and $20 billion due to the pandemic and its effect on the oil industry.
The company also said that it will focus on its most lucrative projects and remove less lucrative ones from its development plan. The latter, all dry gas assets, will result in the $17-20 billion writedown.
“Leveraging the significant cost savings realized in 2020 that are on track to exceed announced reductions of $10 billion or 30 percent of capital spending and 15 percent of cash operating expenses,” Exxon said, adding, “Key to ongoing expense management are business line reorganizations and efficiencies that include global workforce reduction of 15 percent by year-end 2021.”
The supermajor said it planned to spend between $16 billion and $19 billion next year and then maintain an average annual rate of investments of between $20 billion and $25 billion. That’s down from a plan for annual spending of $30 billion for the period and suggests that Exxon expects a relatively quick recovery in oil and gas.
The supermajor will take advantage of this recovery by focusing on its operations in Guyana, the Permian, and Brazil, the company said. Chemicals will also be a priority area for Exxon in the near term.
Despite the challenges that the pandemic has created for the oil industry—and Exxon in particular—the company remained true to its policy of stable dividends, even amid a shortage of cash. In October, Exxon said it would maintain its dividend at $0.87 per quarter. At the time, an analyst from Raymond James warned that to keep the payout, Exxon would have to sell assets or take on more debt.
By Irina Slav for Oilprice.com
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