ExxonMobil lowers 2021 capex, writes down USD18.5 billion of upstream portfolio

MOSCOW (MRC) -- ExxonMobil expects 2021 capital expenditures to decline 11-25% from 2020 levels as the company focuses on projects with lower breakevens amid an uncertain price environment, reported S&P Global with reference to company executives' statements during a fourth-quarter earnings call Feb. 2.

Company guidance now shows 2021 capital expenditures to range from USD16 billion to USD19 billion, in sharply from a full-year 2020 capex spend of USD21.4 billion.

The guidance assumes a Brent price floor of $50/b and downstream margins at ten-year lows in 2021, however the company retains flexibility to further reduce capex while maintaining its dividend should prices fall below this level, chairman and CEO Darren Woods said.

S&P Global Platts Analytics forecasts Dated Brent prices to average at USD56.30/b in 2021 and at USD54.10/b in 2022, up from a 2020 average of USD41.65/b.

Approximately 90% of ExxonMobil's 2021-2025 upstream development portfolio has a cost-of-supply of USD35/b Brent or below, according to company filings.

The company's 2020 capex spend was down USD9.8 billion from 2019 levels and around USD12 billion shy of its original target prior to the historic oil price collapse caused by the COVID-19 pandemic last spring.

ExxonMobil posted a fourth quarter net loss of USD20.1 billion, including a total impairment charge of USD19.3 billion, bringing its total losses for the full year 2020 to USD22.4 billion, down from a 2019 profit of USD14.3 billion. The company said the impairments were an effort to trim "less strategic assets," specifically dry gas resources in the United States, western Canada and Argentina.

The bulk of the impairment charges were in the company's upstream portfolio, which accounted for USD18.5 billion in losses, USD16.8 billion of which was in US assets. The remaining impairment charges were found in non-US downstream and chemical operations, and corporate and financing.

Output from ExxonMobil's Permian Basin assets climbed around 100,000 barrels of oil equivalent per day in 2020 compared with 2019 as drilling rates increased 20% year on year despite a pullback in capex spend, the company said. Drilling and completion costs in the basin were approximately 15% below 2020 guidance and more than 25% below 2019 levels.

Given current price outlooks, Permian production is expected to grow by around 700,000 boe/d by 2025, Woods said, noting that sustained Brent prices of above USD50/b could see the company produce an additional 100,000 boe/d from the basin.

Global production volumes for full year 2020 reached 3.76 million boe/d, down 191,000 boe/d, or 5%, from 3.95 million boe/d in 2019. The bulk of this decline was in gas production, which was down 923 MMcf/d from 2019. Total liquids production, in contrast, was just 37,000 b/d lower in 2020 than the year prior.

ExxonMobil announced the creation of ExxonMobil Low Carbon Solutions, a new business unit focused on advancing carbon capture and sequestration technologies. The move is aimed streamlining the company's preexisting efforts in the space to capitalize on emerging market demand for carbon storage, Woods said.

"(The world) is unlikely to meet the goals of the Paris Climate agreement without focused action and innovation on carbon storage," Woods said. "We are beginning to see a broader recognition of the importance of (CCS) technology," he added, noting that government policy actions have created frameworks for establishing CCS and that there is money looking for opportunities in the space.

As MRC informed earlier, last year, Exxon Mobil Corp announced it will lay off about 1,900 employees in the United States as the COVID-19 pandemic batters energy demand and prices.

We remind that ExxonMobil has undertaken a planned shutdown at its cracker in Singapore. The company halted operations at the cracker for maintenance on September 14, 2020. The cracker was expected to remain off-line till end-October, 2020. Located at Jurong Island, Singapore, the cracker has an ethylene production capacity of 1 million mt/year and a propylene production capacity of 450,000 mt/year.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, excluding producers' inventories as of 1 January, 2020).

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

MOSCOW (MRC) -- Lotte Chemical (Seoul, South Korea) says recovering petrochemicals demand and rising selling prices for its major petchem products have helped to more than double its fourth-quarter net profit year on year (YOY) to 97.2 billion South Korean won (USD86.5 million), according to Chemweek.

The 104% rise YOY in net earnings came despite a 12% decline in sales to W3.2 trillion. Operating profit for the quarter ended 31 December rose 49% compared to the prior-year period to W212.5 billion. Sales were up 6% sequentially on the third quarter, but net earnings were 51% lower quarter on quarter (QOQ). Operating profit rose 19% QOQ.

Operating profit at its largest business segment, basic chemicals, was down 19% YOY to W89 billion but up W10 billion sequentially, while sales fell 22% YOY to W1.35 trillion but were up 10% on the third quarter. Production and sales increased QOQ due to the restart of its Daesan steam cracker in December following a fire, with key product spreads improving “due to tight supply and robust demand,” it says. “Demand remained firm on expectations that the global economy would recover,” it says.

Lotte says it expects base olefins earnings and sales to improve with its Daesan plant operating normally in the first quarter of 2021, with demand expected to be good as the global economy continues to gradually recover. Although some steam crackers in the region will restart during the quarter, a number of turnarounds are also scheduled that are expected to offset some of the QOQ supply growth, it says.

Lotte’s aromatics division reported an operating loss of W6 billion, narrowing from a loss of W23 billion a year earlier, but swinging from a profit of W6 billion in the third quarter. Sales slipped 20% YOY to W391 billion but rose QOQ by W15 billion. Profitability decreased due to strong raw material prices and weak off-season demand, it says. For the first quarter, the market is forecast to continue to be oversupplied, but profitability is expected to improve.

Lotte’s advanced materials unit turned in a strong fourth quarter performance, with sales rising 25% YOY and 2% QOQ to W885 billion, while operating profit more than doubled to W83 billion compared to the prior-year period but fell 17% sequentially. The slight decline in profitability from the third quarter was due to rising feedstock prices, despite solid demand from the home appliances sector and an expanded mobility business performance on recovering automobile market demand. Lotte says the sector's profitability is expected to remain robust in the first quarter of 2021, with continuing good demand and the possibility of product price increases that were partially delayed in the fourth quarter. Production and sales costs rose in the fourth quarter, and are expected to be reflected in product prices during the first quarter, it says.

The company’s Lotte Chemical Titan Holding business unit reported fourth quarter operating earnings of W67 billion, swinging from a prior-year loss of W3 billion and also an increase over the third quarter. Sales were down 5% YOY to W524 billion and also down slightly on the third quarter.

Its Lotte Chemical USA business unit swung to an operating loss of W400 million from an operating profit of W33 billion a year earlier, but narrowed sequentially from a loss of W22 billion in the third quarter. Sales slipped 16% YOY to W106 billion but improved 65% QOQ. The narrowed operating loss was due to a plant restart and expanded product spreads, it says, while Lotte expects operating profit to return to positive territory in the first quarter due to the elimination of one-time costs associated with hurricanes and improving profitability due to stabilizing feedstock prices and rising product prices. Product prices “are expected to rise continuously” due to tight supply and a rising oil price, it says.

For the full-year 2020, Lotte Chemical’s net earnings plunged 75% compared to 2019 to W185.4 billion won, operating profit declined 68% YOY to W353.3 billion, and sales fell to W12.2 trillion, down 19%. Sales were hurt by low demand amid the COVID-19 pandemic and a fire at its Daesan petchems complex, which accounts for 21.8% of its total sales, it says.

Lotte Chemicals says it is also continuing to focus on maximizing the cracking of liquefied petroleum gas (LPG) as feedstock, having expanded its use to 20% of total company feedstock by the end of 2020, saving an estimated W30 billion in costs, it says. The company is aiming to expand LPG feedstock usage to 30% of the company’s total feedstock supply by 2023, with planned investments at its Daesan cracker, it says.

As part of its recently unveiled 2030 ESG strategy Lotte Chemical says it is also aiming to produce 360,000 metric tons/year of recycled polyethylene terephthalate (rPET) by 2023, as well as 260,000 metric tons/year of recycled polypropylene (rPP), recycled acrylonitrile-butadiene-styrene (rABS), and recycled polycarbonate (rPC).

As MRC reported earlier, Lotte Chemical Titan (part of Lotte Chemical) has shut its No. 2 cracker in Malayisia because of a technical issue. The company encountered technical problems at this cracker, located in Pasir Gudang, Malaysia, which produces 522,000 tons/year of ethylene and 360,000 tons/year of propylene, on 14 January, 2021, and was forced to lower its capacity utilisation. But then the facility was shut and is expected to remain off-line for 2-3 weeks.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and PP.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, excluding producers' inventories as of 1 January, 2020).

Lotte Chemical runs two naphtha crackers in South Korea. One cracker is located in Daesan county in Seosan which can produce 1.1 million tonnes per year of ethylene with the other 1.2 million tonnes per year cracker in the southwestern city of Yeosu.
MRC

MOSCOW (MRC) -- Rosneft Oil Company and BP have signed a Strategic Collaboration Agreement focused on supporting carbon management and sustainability activities of both companies, as per BP's press release

The agreement builds on years of partnership between the two companies and formalises key elements of their collaboration on sustainability and work to identify carbon reduction activities and low carbon opportunities.

Based on their longstanding partnership and taking into account the profound changes shaping the global energy transition to deliver more energy with less carbon, Rosneft and bp have agreed to ?cooperate in identifying and developing new low carbon solutions and programmes that will support their shared sustainability goals. The companies also intend to join efforts in aligning with developing ?industry methodologies and standards on carbon management, including methane reduction ?initiatives and energy efficiency applications.

“Rosneft and bp are united not only through the longstanding successful partnership in various areas but also in ?the intention to leverage this experience in future prospective projects outlined in this agreement,” said Igor Sechin, chief executive officer, Rosneft.

Rosneft and bp will also jointly evaluate new projects envisaging the use of renewables, opportunities for carbon capture, utilisation and storage (CCUS), as well as developments for hydrogen.

The companies intend to work together on opportunities for low carbon solutions in downstream ?businesses, including the development of advanced fuel as well as evaluate the potential for the development of natural forest sinks and trading of forest carbon-offsets credits. The companies will cooperate in sustainable development and social investment, including biodiversity.

“We’ve been partners with Rosneft for many years now and we learn a great deal from each other. That’s important, and I believe that this agreement can be an important catalyst for progress.” said Bernard Looney, chief executive officer, bp.

Commenting on the agreement signed, Rosneft chief executive officer Igor Sechin said: “Rosneft and ?bp are united not only through the longstanding successful partnership in various areas but also in the intention to leverage this experience in future prospective projects outlined in this agreement. Joint efforts of our two companies, as the world energy industry leaders, will not only strengthen our ?corporate aims in sustainable development, but will also provide a significant contribution to overcoming the challenges the industry and the society face in the climate action and the satisfaction of growing global economy demand for energy resources. This is necessary for balanced social and economic development and life quality improvement.”

bp chief executive officer Bernard Looney said: “We’ve been partners with Rosneft for many years ?now and we learn a great deal from each other. That’s important, and I believe that this agreement ?can be an important catalyst for progress. We both believe in the power of partnership and look forward to bringing together the best of Rosneft and bp to develop low carbon solutions and drive ?down emissions.”

As MRC reported earlier, in late January 2020, Russian oil producer Rosneft said that its German subsidiary Rosneft Deutschland GmbH had completed the deal to acquire a 3.57% stake in Germany’s Bayernoil Raffineriegesellschaft mbH from BP.

We remind that a fire at Ufaorgsintez (a subsidiary of ANK Bashneft, part of PJSC "NK Rosneft") did not lead to a shutdown of low density polyethylene (LDPE) and polypropylene (PP) production capacities. On 25 January, two containers with a methane-hydrogen fraction caught fire at the Ufa plant, and the blaze was extinguished in the morning of 26 January. The plant's customers said the fire was not critical for polymer production. PP production has been operating normally, whereas the LDPE production has temporarily reduced its capacity utilisation, thus, production of 158 grade polyethylene (PE) was suspended.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, exluding producers' inventories as of 1 January, 2020).

Rosneft became Russia's largest publicly traded oil company in March 2013 after the USD55 billion takeover of TNK-BP, which was Russia’s third-largest oil producer at the time.

BP is one of the world's largest oil and gas companies, serving millions of customers every day in around 80 countries, and employing around 85,000 people. BP’s business segments are Upstream (oil and gas exploration & production), and Downstream (refining & marketing). Through these activities, BP provides fuel for transportation; energy for heat and light; services for motorists; and petrochemicals products for plastics, textiles and food packaging. It has strong positions in many of the world's hydrocarbon basins and strong market positions in key economies.
MRC

MOSCOW (MRC) -- Sahara International Chemical (Sipchem) intends to restart its polypropylene (PP) and low density polyethylene (LDPE) plant in Jubail this week after completing the maintenance works, reported CommoPlast.

The turnarounds were scheduled to begin on 1 February. 2021.

The weeklong turnaround took place at the 200,000 tons/year PP unit and the 200,000 tons/year LDPE unit.

As MRC informed earlier, Sipchem is planning to mothball the Polybutylene Terephthalate (PBT) plant, owned by its affiliate, Sipchem Chemical Co., and Ethylene Vinyl Acetate (EVA) Film plant that is owned by affiliate firm, Saudi Specialized Products Co. Steps to implement the decision are underway, Sipchem said in a statement to Tadawul, adding that the suspension of both plants will start on Jan. 1, 2021, until further notice. The company expects a positive financial impact starting from Q1 2021 results.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, excluding producers' inventories as of 1 January, 2020).
MRC

MOSCOW (MRC) --AkzoNobel N.V. no longer intends to acquire Tikkurila following a higher competing offer from US paints and coatings producer PPG Industries, according to the company's press release on Monday.

Akzo Nobel submitted a binding proposal to acquire Tikkurila for EUR31.25 per share on January 28, 2021, having conducted customary due diligence to confirm potential synergies. The company no longer intends to pursue this acquisition, following a competing, higher, offer for Tikkurila. Despite a strong cultural fit - and more synergies than any other combination with Tikkurila - the intended transaction no longer meets AkzoNobel’s criteria for superior value creation.

Thierry Vanlancker, CEO of AkzoNobel, commented: “We have clear priorities and criteria for capital allocation, including investing for growth, paying dividends, conducting acquisitions, and carrying out share buybacks. The intended acquisition of Tikkurila can no longer compete with more attractive opportunities to create superior value for our shareholders and other stakeholders. Executing with discipline has been key to AkzoNobel’s transformation into a company with higher profitability and strong free cash flow. This is working well for us and part of who we are.”

AkzoNobel will continue delivering on its capital allocation priorities, including a disciplined approach to strategically aligned, value creating, acquisitions. The company continues its current €300 million share buyback program and maintains a target leverage ratio of 1-2x net debt/EBITDA.

We remind that Russia's output of chemical products rose in November 2020 by 9.5% year on year. At the same time, production of basic chemicals increased in the first eleven months of 2020 by 6.6% year on year, according to Rosstat's data. According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the January-November 2020 output. November production of polymers in primary form rose to 896,000 tonnes from 852,000 tonnes in October. Overall output of polymers in primary form totalled 9,240,000 tonnes over the stated period, up by 17.1% year on year.
MRC