ExxonMobil on Tuesday reported its fourth straight quarter of losses amid impairments brought on by the global pandemic and low commodity prices, as the US giant also announced the creation of its new low carbon solutions business.
The Irving, Texas-based supermajor posted a loss of $20.1 billion for the three months to the end of December, down from the profit a year earlier of $5.7 billion.
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The huge loss was mainly due to impairments on its natural gas assets in the US, Canada, and Argentina last year.
“Total non-cash, after-tax fourth quarter impairment charges were $19.3 billion,” ExxonMobil said.
Excluding those impairments, ExxonMobil earned $110 million, or 3 cents per share, on revenue of $46.5 billion for the quarter, compared with a revenue of $67.2 billion in the fourth quarter 2019.
For the full year, ExxonMobil reported a loss of $22.4 billion, significantly more than the prior year’s $14.3 billion loss.
Revenues for the full year dropped to $181.5 billion compared to $264.9 billion year-on-year.
ExxonMobil estimated in its earnings presentation materials that it would spend $3 billion (through 2025) to research, develop and commercialise lower-emission solutions, including carbon capture and sequestration / hydrogen, biofuels, cogeneration and efficiency. It said in a footnote that the figure "represents currently identified future investment opportunities, consistent with past practice, results, and announced plans."
Output drop
Production for the fourth quarter was 3.7 million barrels of oil equivalent per day, consistent with the previous quarter but down from 329,000 boepd a year earlier.
Production for the full year was 3.7 million boepd, down more than 4% from 3.9 million boepd from the prior year.
The company cut spending by nearly a third last year on new projects and cut about 15% of its workforce to weather what it considered the “most challenging market conditions ExxonMobil has ever experienced,” chief Darren Woods said.
It reduced annual cash operating expenses last year by $8 billion, of which $3 billion are structural reductions.
The company expects to generate additional annual savings of $3 billion by 2023, resulting in total structural annual expense reductions of $6 billion, including savings from a global workforce reduction.
It also expects, at a $50 per barrel of Brent, that 2021 cash flow will cover capital expenditure while maintaining the dividend and a strong balance sheet.
Should pricing fall below that mark, then further reductions in capex will be made to enable dividend coverage and maintenance of balance sheet strength at Brent prices of about $45 per barrel, it said.
Advancing low-carbon solutions
The company remains a target for activist investors pushing for greater transparency and a strategy to transition to cleaner fuels.
On Monday, it announced the creation of a new business unit to commercialise its extensive low-carbon technology portfolio. ExxonMobil Low Carbon Solutions will initially focus on carbon capture and storage (CCS), advancing plans for more than 20 new global CCS opportunities through 2025.
“ExxonMobil Low Carbon Solutions builds on more than two decades of R&D for lower emission solutions, efficiency improvements in operations and an industry leading CCS position, all of which have enabled ExxonMobil to reduce its Scope 1 and Scope 2 greenhouse gas emissions from operated assets by 6% since the adoption of the Paris Agreement in 2016,” Exxon said.
Analysts at Cowen & Company noted that ExxonMobil plans on spending $3 billion through 2025 (on lower emissions initiatives), although it is unclear if this is accounted for in R&D, which historically is $1 billion per annum.
"This step represents a formalisation of activities that appeared to be ongoing and is a natural move given ExxonMobil's leading CCS position.
"The company could be pursuing CCS in an effort to decarbonise its current energy portfolio rather than face a more drastic shift in strategy," the investment bank said in a research note.
ExxonMobil also named Wan Zulkiflee Wan Ariffin, former Petronas chief executive, to its board of directors.
