Exxon, Chevron slash their losses
Exxon Mobil and Chevron slashed their losses by millions of dollars in the third quarter as they hacked away at their budgets in an attempt to weather a historic downturn caused by a pandemic that shows no signs of easing.
Irving-based Exxon said Friday it lost $680 million in the quarter, three months after posting a $1 billion loss. California-based Chevron lost $207 million, a fraction of its $8.3 billion loss in the second quarter.
The narrowing losses reflect improved economic conditions from July to September that saw demand rise slightly and oil sit steadily above $40 a barrel. But continued losses forecast more hard times ahead for the industry and the tens of thousands of people who work for it.
During the quarter, Exxon slashed its capital budget by more than $1 billion and reduced operating expenses by $200 million from secondquarter levels. On Thursday, Exxon said it expects to cut its global workforce
of 88,300 by 15 percent, or some 14,000 workers, by the end of 2022.
These cuts and layoffs may not be enough, the company warned Friday.
It is considering selling up to $30 billion of its natural gas assets in North America next year to bolster its core crude business. It also plans to slash its 2021 drilling and production budget to as low as $16 billion from the 2020 target of $23 billion.
Exxon also plans to reduce the number of rigs it operates, to as few as 10 from 15 by year's end
“They're under pressure (from shareholders) to improve their earnings,” said Ed Hirs, an energy fellow and economics professor at the University of Houston.
Amid the mounting pressure, Exxon revealed Friday that if conditions don't improve, it could sacrifice its shareholders' holy grail: the dividend.
Despite losing money for the third-straight quarter for the first time in its history, Exxon has maintained the third-highest dividend among companies in the S&P 500 Index. The company plans to pay investors 87 cents a share for the current quarter.
“We fully understand the importance of the dividend to our share
holders. It's very important to them and we're very thoughtful on that,” said Andrew Swiger, Exxon's chief financial officer. If “we get into some situation where we're back in a world like we've been in the second and third quarters, obviously, all bets are off.”
Neither Exxon CEO Darren Woods nor Chevron CEO Michael Wirth took part in their respective
company's calls with investors.
While the companies slashed expenses, revenues offered slight relief, inching up during the quarter as demand for gasoline, automotive lubricants and plastics improved after governments eased restrictions on businesses and travel.
Exxon reported revenue of $46.2 billion, up from $32.6 billion dur
ing the second quarter; Chevron reported revenue of $24 billion, up from $16 billion in the second quarter.
Still, earnings and revenues are a far cry from what they were a year ago, before the global pandemic crushed crude demand and prices. But the industry still isn't out of the woods as oil prices tumbled this week amid a surge in coronavirus cases around the world.
Oil prices have dropped the most this month since March, when the pandemic was beginning to overtake the U.S. West Texas Intermediate, the U.S. benchmark, declined by 1.6 percent Friday to $35.60.
Exxon's ongoing troubles add to what has been a difficult year for the nation's No. 1 oil company and the world's most valuable company just seven years ago.
It recently was removed from the list of companies that make up the Dow Jones Industrial Average, the 30 stocks that serves as a benchmark for the U.S. stock market.
Chevron, which this year surpassed Exxon as the most valuable U.S. oil company, now is the only energy stock on the Dow.
Exxon shares Friday closed down by 1 percent at $32.62 and Chevron shares were up by 1 percent, closing at $69.50.