Imperial Oil to take up to $1.2B charge on oilsands pullback
Follows parent Exxon’s lead in retrenching
Imperial Oil Ltd. will take an impairment charge of about $ 900 million to $ 1.2 billion in the fourth quarter as it no longer plans to develop a significant portion of its oilsands in Alberta, the company said on Monday.
The move by Imperial comes after France’s Total SE earlier this year said it would take a US$ 8- billon impairment on the value of its assets, mainly in Canadian oilsands projects.
Calgary- based Imperial said on Monday the assets are non- core, non- producing, undeveloped assets and it does not expect any material future cash expenditures related to the impairment.
The impairment excludes the high- value, liquids- rich portion of Imperial’s unconventional asset, which the company still plans to develop.
U. S. major Exxon Mobil Corp, a majority shareholder in Imperial, earlier said on Monday that it would write down the value of Us$17-billion to US$ 20- billion of U. S. and South American natural gas assets.
Some of the company’s North American and Argentine gas fields have been removed from its development plan, resulting in noncash impairment charges of US$ 17 billion to US$ 20 billion for the fourth quarter, Irving, Tex.-based Exxon said in a statement Monday. Capital spending won’t exceed US$25 billion a year through 2025, a US$ 10- billion reduction from the company’s pre-pandemic target.
Exxon has been warning shareholders since October that its gas assets were at risk of significant impairment. Previously, the energy titan’s largest writedown was for about US$ 3.4 billion in 2016, according to Bloomberg Intelligence.
Exxon’s drastic spending cuts are aimed at defending its dividend, the third- highest in the S&P 500 Index and a mark of pride for the company, which has increased it each year for almost four decades. Cash shortfalls due to the COVID-19 pandemic have put the payout under unprecedented strain in recent months, forcing the company to boost borrowing.
“Continued emphasis on high- grading the asset base — through exploration, divestment and prioritization of advantaged development opportunities — will improve earnings power and cash generation, and rebuild balance sheet capacity,” Exxon CEO Darren Woods said in the statement.
The writedown stems from former CEO Rex Tillerson’s decision a decade ago to buy XTO Energy for US$ 35 billion rather than spend years building an inhouse shale business.