Losses mount for oil companies as pandemic grips economy

NEW YORK (AP) — Exxon Mobil reported its third consecutive quarter of losses as the global pandemic curtailed travel and crippled global economic activity.

The energy giant on Friday posted a USD680 million third-quarter loss and revenue tumbled to USD46.2 billion, down from USD65.05 billion during the same quarter last year.

The string of losses and what by almost all counts will be a money-losing year is new territory for Exxon Mobil, which has not posted an annual loss since Exxon and Mobil merged in 1999.

“This is a business that made a billion dollars a quarter on average from 2011 to 2018 and it had a rough go,” said Peter McNally, global sector lead for industrials, materials and energy at Third Bridge, a research firm.

Already struggling with weak prices from oversupply, the pandemic has intensified the pain for oil and gas companies. The price of United States (US) benchmark crude has fallen 40 per cent since the start of the year. The cost for a barrel of oil tumbled 10 per cent just this week as coronavirus infections surged in the US and abroad.

Exxon Mobil reported on Friday a loss of USD680 million in the third quarter as the global pandemic curtailed travel throughout the world, diminishing the need for fuel. PHOTO: AP

Commuting to work has largely ended for millions of people. Air travel this year fell to levels not seen in the jet age and the economy suffered its worst contraction in decades as factories and other big energy consumers shut down.

Exxon has begun slashing costs to offset falling energy demand, and that means jobs. A day after announcing 1,900 job cuts, Exxon said on Friday it plans to cut 15 per cent of its global workforce by the end of next year, about 11,250 jobs. The company employed 75,000 people at the end of 2019.

Chevron also announced job cuts on Thursday after closing on its acquisition of Noble Energy earlier this month, saying it would trim the headcount at that company by about a quarter.

“We remain confident in our long-term strategy and the fundamentals of our business, and are taking the necessary actions to preserve value while protecting the balance sheet and dividend,” said Exxon Mobil CEO Darren Woods in a prepared statement.

Exxon said on Friday it may divest USD25 billion to USD30 billion in North American dry gas assets, and that it would cut capital expenditures to between USD16 billion and USD19 billion next year. That would follow a year in which Exxon reduced capital spending by 30 per cent, to USD23 billion.

“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,” Woods said.

Those planned reductions might not be enough to appease some investors. Exxon was the only one of the super-majors to post a loss this quarter, and is behind its peers in cost-cutting, Edward Jones Senior Analyst Jennifer Rowland said. “Everyone else either stayed in the black or got back into the black from the abyss of the second quarter. I think it’s telling that they’re the only ones still running in the red.”

The Irving, Texas, company produced 3.7 million barrels of oil per day in the third quarter, up one per cent from the second quarter. But production is down slightly from the same period last year. “We are not cancelling any projects that are in execution or in the funding process,” said Chief Financial Officer Andrew Swiger in a conference call on Friday.

Several analysts on the call questioned why Exxon will continue paying a dividend given the losses it is suffering.

“Our objective is to maintain the dividend, advance the highest value investments, and maintain the debt at a cost-competitive level,” Swiger said.

“It’s not going well,” McNally said about Exxon. “You have to squint at some of the things to find things that are good.” And the third quarter was an improvement compared with the last, when oil futures crashed below zero. Exxon and Chevron lost a combined USD9 billion.

Chevron on Friday swung to a loss of USD207 million after a quarterly profit of USD2.9 billion last year. Revenue fell by USD11 billion, to USD24 billion.

Oil prices appeared to stabilise during the third quarter, however, and better conditions enabled Exxon to recover some of the production it had curtailed, the company said.