MOSCOW (MRC) -- Exxon Mobil Corp reported a USD1.1 billion second-quarter loss on sharply lower energy demand and prices from the COVID-19 pandemic, and confirmed plans to make deeper spending cuts, reported Reuters.
It was Exxon's first back-to-back quarterly loss in at least 36 years, but was small in comparison to rivals who took giant charges last quarter. The top US oil producer took no asset write downs during the quarter, and got a 44-cent-a-share boost to earnings by increasing the value of inventories.
Chevron Corp, Total, Royal Dutch Shell , and Eni each wrote down their oil and gas properties last quarter by several billion dollars apiece, while BP signaled an up to USD17.5 billion hit.
Exxon slashed capital spending 30% this year to around USD23 billion, and Senior Vice President Neil Chapman said it expects to spend less than USD19 billion in next year. That would be the lowest spending for the company since at least 2005.
It plans both capital and operating expense cuts to defend its dividend, Chapman said on a call with analysts, adding that investors "come to view that dividend as a source of stability in their income."
It will not take on more debt and sees spending cuts as short term "to manage the current situation," Chapman said.
Prior to the pandemic, Chief Executive Darren Woods pursued an ambitious spending plan to boost oil output and turn around sagging profits on a bet that a growing global middle class would demand more of its products.
The plan to significantly raise production and boost cash by selling assets has faltered, leading Exxon to preserve an 8% shareholder dividend.
Exxon has identified an "undertaking a comprehensive evaluation," of its global businesses, it said, without providing details.
Exxon's oil and gas production business fell to a loss and its refining unit was hit by lower demand and weaker prices.
The US oil major reported a loss of USD1.08 billion, or 26 cents per share, compared with a profit of USD3.13 billion, or 73 cents per share, a year earlier. Excluding inventory adjustments, the loss would have been USD3 billion, it said.
On that adjusted basis, its per share loss of 70 cents missed Wall Street's estimate of 61 cents, according to data from Refinitiv.
Exxon's oil and gas output fell 7% to 3.6 million barrels per day during the quarter as it curtailed production due to the oil price crash.
Rival Chevron on Friday reported an USD8.3 billion loss on asset writedowns, plummeting fuel prices, and expenses tied to thousands of jobs cuts.
Exxon's production business reported a nearly USD1.7 billion loss on lower output prices, compared with a USD3.3 billion gain last year. Refining generated a USD976 million operating profit despite lower margins and volumes. The unit's gain came from an about USD3.5 billion boost from non-cash inventory revaluations and by reversing a prior quarter's impairment.
Chemical operating profit was USD467 million, up from USD188 million last year, and was "resilient" in a tough environment, said analyst Biraj Borkhataria of RBC Europe Limited.
The company is running out of capacity to add debt "without jeopardizing the strength of its balance sheet," said analyst Jennifer Rowland of Edward Jones. The losses call into question "how long Exxon can continue to fund its dividend if the macro environment doesn't substantially improve.
As MRC wrote before, ExxonMobil Corp is preparing deep spending and job cuts, according to people familiar with the matter, as it fights to preserve a 8% shareholder dividend with a multi-billion-dollar quarterly loss looming.
We remind that boiler work at the ExxonMobil-operated 830,000-metric tons/year ethylene plant at Mossmorran, UK, was scheduled for completion in June, 2020. Two of the three boilers at the plant exploded in August 2019, resulting in the plant being taken offline until the end of February. OPIS sources said in May that the plant was currently able to operate at full capacity with two boilers in operation but that the third boiler would be working by June.
We also remind that in September 2019, ExxonMobil announced plans to spend GBP140 million over the next two years in an additional investment program at its Fife ethylene plant, which has a capacity of more than 800,000 t/y.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
ExxonMobil is the largest non-government owned company in the energy industry and produces about 3% of the world"s oil and about 2% of the world"s energy.
MRC