US oil giants cut output as Exxon Mobil reports first loss in decades
oil giants Exxon Mobil and Chevron said they were curtailing some production as they slash capital spending in response to an acute industry downturn in the wake of the coronavirus crisis.
Both US oil giants announced the belt-tightening moves as they reported first quarter results, a period that saw oil prices retreat, but which preceded the firstever drop in US crude futures to negative territory in April.
Results are expected to be far worse in the second quarter.
Exxon Mobil – which reported its first quarterly loss in decades last week – said it would curtail 400,000 barrels of oil-equivalent per day in the second quarter for “economic” reasons.
Exxon Mobil chief executive Darren Woods said the company expects a difficult second quarter, but he pointed to “encouraging” signs in China as it has begun to ramp up its economy following coronavirus shutdowns. Some US states have also li ed shelter-in-place directives in recent days.
“The basic drivers of energy demand have not changed because of what we say today,” said Woods, who added the company remained commi ed to investing in new energy projects in expectation of a rebound.
“It’s a really a question of time,” Woods told an analyst conference call, adding that the company could further trim its spending if needed.
Shares of both companies fell, but Exxon Mobil dropped much more significantly as the company faced skeptical questions from analysts over its strategy.
Exxon Mobil reported a US$610 million loss for the first quarter, compared with US$2.4 billion in profits in the year-ago period. Revenues fell 11.7 per cent to US$56.2 billion.
The loss included US$2.9 billion in non-cash costs on inventory and assets because of low commodity prices.
Exxon Mobil reduced capital spending by 30 per cent to around US$23 billion for 2020 and will trim operating expenses by 15 per cent.
The company will slow some projects in the US Permian Basin and Mozambique, as well as expansions of downstream and chemical plants.
The oil and gas production that has been shut is short cycle and could be ramped up quickly if crude prices suddenly improve, company officials said.
Woods defended recent company moves to take on billions of dollars in new debt and a decision to maintain its dividend. On Thursday, European rival Royal Dutch Shell cut its dividend for the first time since the 1940s.
“We think the dividend is an important part of the value proposition we provide to our investors,” Woods said.