San Diego Union-Tribune (Sunday)
LOSSES MOUNT FOR OIL COMPANIES AMID PANDEMIC
Money-losing year is new territory for giant Exxon Mobil
Exxon Mobil reported its third consecutive quarter of losses as the global pandemic curtailed travel and crippled global economic activity.
The energy giant on Friday posted a $680 million third-quarter loss and revenue tumbled to $46.2 billion, down from $65.05 billion during the same quarter last year.
The string of losses and what by almost all counts will be a money-losing year is new territory for Exxon Mobil, which has not posted an annual loss since Exxon and Mobil merged in 1999.
“This is a business that’s made a billion dollars a quarter on average from 2011 to 2018 and it’s had a rough go,” said Peter Mcnally, global sector lead for industrials, materials and energy at Third Bridge, a research firm.
Already struggling with weak prices from oversupply, the pandemic has intensified the pain for oil and gas companies. The price of U.S. benchmark crude has fallen 40 percent since the start of the year. The cost for a barrel of oil tumbled 10 percent just this past week as coronavirus infections surged in the U.S. and abroad.
Commuting to work has largely ended for millions of people. Air travel this year fell to levels not seen in the jet age and the economy suffered its worst contraction in decades as factories and other big energy consumers shut down. All indications point to a Thanksgiving celebrated close to home, and in smaller numbers this year.
Exxon has begun slashing costs to offset falling energy demand, and that means jobs.
A day after announcing 1,900 job cuts, Exxon said on Friday that it plans to cut 15 percent of its global workforce by the end of next year, about 11,250 jobs. The company employed 75,000 people at the end of 2019.
Chevron also announced job cuts Thursday after closing on its acquisition of Noble Energy earlier this month, saying it would trim the headcount at that company by about a quarter.
“We remain confident in our long-term strategy and the fundamentals of our business, and are taking the necessary actions to preserve value while protecting the balance sheet and dividend,” said Exxon Mobil CEO Darren Woods in a prepared statement.
Exxon said Friday that it may divest $25 billion to $30 billion in North American dry gas assets, and that it would cut capital expenditures to between $16 billion and $19 billion next year.
That would follow a year in which Exxon reduced capital spending by 30 percent, to $23 billion.
“We are on pace to achieve our 2020 cost-reduction targets and are progressing additional savings next year as we manage through this unprecedented down cycle,“Woods said.
Those planned reductions might not be enough to appease some investors. Exxon was the only one of the super-majors to post a loss this quarter, and is behind its peers in cost-cutting, said Jennifer Rowland, senior analyst at Edward Jones. “Everyone else either stayed in the black or got back into the black from the abyss of the second quarter. I think it’s telling that they’re the only ones still running in the red.“
The company produced 3.7 million barrels of oil per day in the third quarter, up 1 percent from the second quarter. But production is down slightly from the same period last year.