ExxonMobil Corp (NYSE:XOM) has come once again under investigation by Democratic New York Attorney General Eric Schneiderman, who is investigating why the U.S. giant is the only supermajor that has failed to write down the value of its assets since the crude prices crashed in 2014, The Wall Street Journal reported on Friday.
It was Schneiderman who launched last year a probe to determine whether Exxon accurately represented to its investors the troubles it could face because of climate change. Schneiderman's investigation had come after reports by the non-profit Inside Climate News and by the Los Angeles Times that Exxon had deliberately played down the impact of fossil fuels on climate, even though Exxon's own scientists were working closely with academic and government organizations to rectify the problem.
Although Exxon still posts profits, its earnings for the second quarter of this year, for example, tumbled 59 percent annually to US$1.7 billion, amid sharply lower commodity prices and weaker refining margins. Upstream earnings plunged by US$1.7 billion, to US$294 million. The U.S. upstream segment posted a loss of US$514 million, swelling from a loss of US$47 million for the second quarter last year.
"It is impossible to believe that no assets have been impaired," the WSJ quoted Paul Sankey, an oil analyst at Wolfe Research, as saying last month.
According to Sean Heinroth at A.T. Kearney, Exxon has always been conservative in recognizing the value of reserves, which generally leads to lower impairments. The group also usually rigidly interprets regulations, and if the top management believes the practices abide by the law, it sometimes pushes back against watchdogs, Heinroth told the WSJ.
Stating that the oil and gas prices have a history of volatility, Exxon said in its 2015 financial statement:
"In general, the Corporation does not view temporarily low prices or margins as a trigger event for conducting impairment tests."
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More