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Exxon Flags Possible $30B Writedown After Third Straight Loss

ExxonMobil (NYSE: XOM) warned on Friday that it could write down North American natural gas assets with a carrying value of up to US$30 billion as it reported its third consecutive loss this year amid low oil demand and oil prices.

Exxon is currently re-assessing its portfolio to decide which assets with the highest potential to create value should be developed, the U.S. supermajor said in its Q3 earnings release.  

“Depending on the outcome of the planning process, including in particular any significant future changes to the corporation’s current development plans for its dry gas portfolio, long-lived assets with carrying values of approximately $25 billion to $30 billion could be at risk for significant impairment,” Exxon said, flagging the possibility of major writedowns.

Unlike other major oil corporations, Exxon hasn’t yet adjusted the value of its assets during the pandemic. In fact, Exxon hasn’t been doing much of that over the past decade at all.

Even Chevron took impairment charges in Q2 due to a lower commodity price outlook and write-offs in its Venezuela operations due to the U.S. sanctions.

Exxon expects to complete the re-assessment of its portfolio this quarter, so possible writedowns could be announced early next year. 

Today, Exxon announced its third consecutive loss in the three quarters so far this year. Exxon also said it would be reducing its capital program for 2021 by several billion U.S. dollars compared to this year.  

Exxon booked a loss of US$680 million for the third quarter, or US$0.15 per share assuming dilution. This compares to a loss of US$1.1 billion for the second quarter.  

Related: Oil Investments Are Drying Up As Crude Demand Falters

Exxon’s preliminary capital expenditure (capex) plan for 2021—to be reviewed this quarter—is expected to be between US$16 billion and US$19 billion, down from the 2020 target of US$23 billion announced in April.  

“We are on pace to achieve our 2020 cost-reduction targets and are progressing additional savings next year as we manage through this unprecedented down cycle,” chairman and CEO Darren Woods said.

Earlier this week, Exxon said it was keeping its quarterly fourth-quarter dividend flat at $0.87 per share—the first time in 38 years that the company has failed to increase the dividend that it has been paying for more than 100 years. The supermajor also announced 14,000 job cuts, or 15 percent of its workforce, including some 1,900 jobs in the United States.

By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh Salameh on October 31 2020 said:
    Like its European counterparts, ExxonMobil has no alternative but to drastically cut dividends and implement a multi-billion writedown of assets if it is to avoid being overwhelmed by its mushrooming outstanding debts.

    The global oil and gas industry is set to see its total annual revenues plunge by a whopping $1 trillion this year from $2.47 trillion in 2019 to $1.47 trillion this year. The projection for 2021 is $1.79 trillion. This means that the industry will have to focus all its resources on its core business, namely oil and gas.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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