ExxonMobil could write down the value of its oil and gas assets as soon as this month, Wall Street analysts told Reuters on Friday.
Unlike many of its peers, Exxon hasn’t booked major writedowns since oil prices crashed earlier this year.
Where Occidental, BP, and Shell, have all adjusted the value of their assets, Exxon has not. In fact, it hasn’t been doing much of that over the past decade at all.
Last month, BP and Shell lowered their oil price forecasts, which led to up to US$17.5 billion impairment charge at BP and up to a US$22 billion charge at Shell.
Exxon has long explained the lack of huge writedowns – compared, for example, to Chevron’s US$11-billion impairment charge in Q4 2019 mostly in Appalachian natural gas – with the fact that it books the value of new oil and gas fields very conservatively and doesn’t adjust values to short-term price trends.
But as the future outlook of global oil demand and oil prices weakened after the crisis, analysts now see Exxon booking writedowns, although they refrained from estimating how much the potential impairment charges might be.
Cowen analyst Jason Gabelman told Reuters that the global oil sector was “clearly altering its view on the value of assets and we would not be surprised if Exxon followed suit.”
According to Jennifer Rowland, an oil and gas analyst with Edward Jones, Exxon could “start to lose credibility if they don’t take a writedown soon.”
On Thursday, Exxon warned in an SEC filing that it could be in for booking its second consecutive loss in Q2 as the oil price collapse and weak refining margins hit both the upstream and downstream divisions of the U.S. supermajor. Exxon sees the lower oil and natural gas prices decreasing its upstream operating profit by anywhere from US$2.5 billion to US$3.1 billion. In the downstream, a change in North American crude logistics differentials and weak refining margins are set to eat between US$800 million and US$1.2 billion of the operating profit.
By Tsvetana Paraskova for Oilprice.com
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