The oil major is reeling from the sharp decline in oil demand and prices from the COVID-19 pandemic and a series of bad bets on projects when prices were much higher. New cost cuts aim to protect a US$15 billion a year shareholder payout that many analysts believe is unsustainable without higher prices.
The writedown lays bare the size of the miscalculation that the company made in 2010 when it paid US$30 billion for US shale producer XTO Energy as natural gas prices went into a decade-long decline. The writedown also includes properties in Argentina and western Canada.
While smaller than the up to US$30 billion charge the company forecast a month ago, the quarterly charge to earnings reflects the company’s recent reduction in its outlook for oil and gas prices.
Exxon will continue initiatives in offshore Brazil, Guyana, the Permian Basin shale field in the United States, and in performance chemicals despite plans to implement deeper spending cuts, it said. Not mentioned was its US$30 billion Mozambique LNG project, which sources do not expect final investment decision on until early 2022.
“Recent exploration success and reductions in development costs of strategic investments have further enhanced the value of our industry-leading investment portfolio,” said Chief Executive Darren Woods.
Business conditions are continuing to show signs of improvement despite the pandemic, he said.
Next year’s spending will fall, to between US$16 billion to US$19 billion, but Exxon could increase spending by 2025 to more than this year’s about US$23 billion level, Woods said.
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