Exxon hints at loss, threatening dividend
Exxon Mobil likely made a third consecutive loss in the last quarter, heaping further pressure on the energy giant’s ability to pay its $15 billion-a-year dividend, currently the third-highest in the S&P 500 Index.
Exxon suffered further losses in its refining division in the third quarter while higher oil prices were likely not enough to push its production operations back into profit, the Irving-based company said Thursday in a filing. Refining margins took a negative hit of as much as $600 million in the period while chemicals made a small profit.
A third-quarter loss would suggest Exxon still isn’t able to fund either its dividend or capital expenditure from operational cash flow, meaning it’s reliant on debt to get by. The last time the company generated enough free cash to cover its dividend was the third quarter of 2018, according to data compiled by Bloomberg.
In aggregate, Exxon probably made a loss of about 30 cents a share, compared with analyst expectations of a 1-cent loss, analysts at Tudor, Pickering, Holt & Co. said in a note to clients. The update from Exxon will likely weigh on the shares, they said.
Air travel stats alarm refineries
Autumn has arrived, and with it a fresh slump in commercial flights that will alarm the world’s oil refineries as they struggle with a glut of jet fuel that’s crushing profitability.
The outlook for jet fuel is crucial for the wider oil market as refiners are confronted by a two-speed recovery in demand
from the coronavirus slump. While gasoline consumption has risen sharply as commuters shun public transport in favor of their own cars, demand remains depressed for diesel and jet fuel.
The drop in flights would also alarm Saudi Arabia and Russia, the leaders of the OPEC+ alliance who, in two months time, will need to assess whether oil demand has recovered enough to
relax their production cuts.
The number of daily worldwide commercial flights fell to a three-month low last week, according to data from Flightradar24, a website that tracks flights in real time. Although daily numbers are fickle, the less volatile 7-day moving average also shows a drop, hitting the lowest since mid August.
Air traffic had been steadily
recovering in the wake of the coronavirus, but there’s been a lingering question about what would happen when summer vacations came to an end in northern hemisphere countries.
While a seasonal decline in flights is to be expected, the recent drop seen in Flightradar24 data appears more pronounced than the comparable period last year — and from a much lower base. Hopes for a recovery in traffic, which airlines had previously expected to begin in summer and improve through the end of the year, have faded as a rising spate of Covid-19 cases across the world have prompted the reinstatement of travel restrictions and forced airlines to scrap flights.
Oxy deal provides needed cash
Occidental Petroleum plans to sell its Colombia assets to a private equity firm for about $825 million, a boon for the debtladen Houston oil and gas company.
The sale to The Carlyle Group includes onshore operations in the Llanos Norte, Middle Magdalena and Putumayo basins in onshore Colombia. Oxy plans to maintain its offshore operations in the country.
“Occidental has operated in Colombia, in partnership with Ecopetrol, for more than 40 years and is honored to remain a key partner in driving the country’s energy evolution,” Oxy CEO Vicki Hollub said in a statement. “We have expanded our strategic partnership with Ecopetrol to the onshore U.S. and to exploration blocks offshore Colombia. These highly prospective offshore blocks hold tremendous potential that could significantly bolster the country’s energy resources.”
The deal is the second significant asset sale for Oxy since the coronavirus pandemic sank oil markets in March and April. Oxy, saddled with debt from its $38 billion acquisition of rival Anadarko Petroleum last year, is struggling to sell assets to pay creditors after the oil bust erased billions of dollars of their value.