ExxonMobil is expected to exceed its targeted reductions in spending this year, deferring more than $10 billion in capital expenditure, according to analysts, who noted the US supermajor is expected to continue its restructuring efforts.

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Chief executive Darren Woods hosted an employee town hall on Wednesday at the company's Irving, Texas headquarters and published a letter encompassing management’s thoughts on the current market situation and the steps it is taking to combat effects of the oil industry downturn.

The Covid-19 pandemic limited the number of people who could attend the meeting, although the company published on social media an email sent to employees by Woods, summarising his remarks.

According to the summary, ExxonMobil continues to see the outlook for energy — and oil — demand as more positive.

The company expects oil demand to grow at 0.6% per annum over time, with gas demand growth at 1.3% per annum.

“In short, the house view is, even accounting for the short-term demand impact of Covid-19, the investment case is still clear,” analysts at the Royal Bank of Canada (RBC) said in a note.

‘Underperform’

Earlier in the year, ExxonMobil announced a reduction in capex for 2020 to $23 billion, which compares to its prior guidance at the “low end” of the $30 billion to $35 billion range.

Analysts at RBC, however, noted that this is capex, and RBC’s expectations is that around 85% of this will be cash capex.

In addition, ExxonMobil targeted a 15% operational expenditure reduction, which analysts said is “substantial”.

“ExxonMobil noted that it expects to exceed its targeted reductions in spending, deferring more than $10 billion in capital spend. We expect this to translate into lower spending for 2021 also. Consensus capex sits at $18.2 billion in 2020 and $14.5 billion in 2021,” RBC said in the note.

Continued restructuring expected

ExxonMobil expects the results of its restructuring programmes to lead job cuts, which aim to eliminate lower-value work and redesign work processes, ultimately making the organisation “more nimble”.

The company previously said it plans to slash its workforce in Europe as it continues to struggle with the drop to demand caused by the Covid-19 pandemic.

The move, similar to those made recently by fellow supermajors BP and Shell, will see a reduction of 1600 jobs across ExxonMobil’s affiliates in Europe.

“On balance, we continue to see the risk-reward for ExxonMobil as less attractive than for peers, and we rate the shares at underperform,” analysts at RBC said.

“In order to see upside from here, we would need to observe a substantial rally in commodity prices, coupled with visible under-investment from the rest of the industry. This could occur, but is likely to take some time.

“Further capex cuts could help protect the dividend, however this already looks reflected in consensus estimates,” analysts said.