Oil giants post huge losses to cap 2020
The nation’s largest oil companies were expected to trim losses in the fourth quarter as crude soared above $50 a barrel amid the rollout of coronavirus vaccines.
Instead, Exxon Mobil, Chevron and ConocoPhillips reported massive losses in the three months ended Dec. 31, underscoring the deep and enduring wounds caused by the pandemic. Earnings fell short of Wall Street expectations as global demand for transportation fuels remained soft, hurting refinery margins.
Peter McNally, an energy analyst with Third Bridge Group in New York, summed up the earnings in one word: “disappointing.”
Exxon on Tuesday said it lost $20.1 billion in the quarter as it wrote down the value of its oil and gas assets by $19 billion. It was the fourth-straight quarterly loss for a total of $22 billion for the year, the
Irving company’s worst financial performance in at least three decades. Its U.S. rival Chevron last week posted a fourth-quarter loss of $665 million and a yearly loss of $5.5 billion.
BP, Exxon’s European rival, on Tuesday said it eked out a fourth-quarter profit of $115 million, a slight improvement from a $100 million third-quarter profit. In the fourth quarter a year earlier, the company made $2.6 billion.
ConocoPhillips, the largest U.S. independent, on Tuesday reported a $772 million loss for the quarter, compared with a $450 million loss in the third quarter and a $260 million profit in the second.
“We’re happy to close the book on 2020,” Exxon CEO Darren Woods told analysts in a conference call Tuesday. “The pandemic had a devastating impact on people and businesses around the world, but they were especially devastating for our industry.”
The pandemic, which swept the U.S. in March, posed an extraordinary challenge for oil and gas companies as demand for crude evaporated among economic lockdowns and travel restrictions. Oil and gas companies responded by slashing capital spending, freezing dividends and laying off tens of thousands of workers.
Though the U.S. benchmark, West Texas Intermediate, has recovered to near $55 a barrel, oil executives said they are not rushing back into the oil patch. Oil’s recovery remains tenuous, they said, as global COVID-19 cases climb.
After slashing its 2020 capital budget to the lowest level in company history, Exxon said that this year it will maintain capital spending in a range of $16 billion to $19 billion and look for another $1 billion in operational savings.
ConocoPhillips said it will raise capital spending to about $5.5 billion for the year, up from $4.3 billion in 2020, but down from a prepandemic level of $6.5 billion.
“While the macro environment has firmed up recently, we are cautious about the trajectory and the timing of a recovery,” CEO Ryan Lance told analysts Tuesday. “The demand recovery is taking longer, spare supply remains and inventories remain elevated. It makes no sense to grow into this market environment, so we’re choosing to stay at a sustaining level for the year.”
Instead, the large companies are maintaining dividends, building cash reserves and developing lowcost, high-return operations, such as drilling in the Permian Basin and in petrochemicals facilities along the Gulf Coast. Oil and gas, Lance said, still offer the highest payouts for shareholders.
Nevertheless, Exxon, BP and ConocoPhillips on Tuesday said they plan to invest more in the coming years on clean energy sources such as solar, wind, hydrogen and biofuels as the world transitions from fossil fuels.
Exxon on Monday said it would invest $3 billion over five years in its new Exxon Mobil Low Carbon Solutions business, which the company hopes will help develop 20 carbon capture projects around the world. The new venture comes as San Francisco-based activist investor Engine No. 1 this month launched a proxy fight to pressure company leaders to focus more on renewable energy to boost financial performance.
“Today’s patchwork of announcements do not materially alter ExxonMobil’s long-term trajectory nor do they position it to succeed in a changing world,” Engine No. 1 said in a statement Tuesday, in response to Exxon’s low carbon venture and earnings.
Woods, Exxon’s chief executive, said his company plans to invest $500 million a year in energy efficiencies, carbon capture and renewable energy purchases to help reduce greenhouse gas emissions. The company has invested more than $10 billion in technologies that it says have eliminated 480 million tons of carbon dioxide, the equivalent of taking 100 million gasolinepowered cars off the road.
“This is an area where we have the experience and can deploy resources to make a difference,” Woods said.