Exxon Mobil closed the books on a terrible 2020 on Tuesday, reporting losses in the fourth quarter and for the full year in the wake of lower oil prices amid the Covid-19 crisis.
The big US oil company, which has been criticized over the last year for both its financial performance and its approach to renewable energy investment, suffered a 2020 loss of $22.4 billion, after posting a profit of $14.3 billion in 2019.
The global energy giant unveiled new cost-cutting efforts, a new low-carbon business unit and a new board member which the firm said would position it for the future.
“The past year presented the most challenging market conditions Exxon Mobil has ever experienced,” said Chief Executive Darren Woods, adding that the company responded “decisively” in ways that will situate the company for the long term.
In the fourth quarter, Exxon Mobil suffered a loss of $20.1 billion following huge write-offs. Revenues fell 30.7 per cent to $46.5 billion.
The company unveiled plans for additional spending cuts of $3 billion in annual expenses expected by 2023, its latest belt-tightening move amid the industry-wide downturn.
While oil prices have partly recovered from historic lows during the worst of the pandemic shutdowns, US oil prices in the fourth quarter were in the low $40-a-barrel range, off from the mid-$50s in the year-ago period.
Petroleum demand has been choppy week to week and “things seem to be shifting quarter to quarter on the perceptions and nature of the recovery,” said Peter McNally, an analyst at Third Bridge Group.
Preserving the dividend
But he said the Exxon Mobil’s belt-tightening poses risks once the economy rebounds.
“If they don’t spend the money, the volumes aren’t going to grow,” McNally said. “At least for 2021, spending is going to be down again.”
Exxon Mobil again signaled the importance of its investor dividend, which it has preserved at comparatively high levels even as it tightened spending.
Planning for 2022 to 2025 is built around oil prices between $45 and $50 per barrel, but if prices slip below this level, “the company has the ability to further reduce capital investments, cover the dividend and maintain a strong balance sheet,” Exxon Mobil said.
Amid criticism it has not invested in renewable energy, Exxon Mobil said its low carbon solutions business would focus on carbon capture and storage technology as a means to counter the emissions that cause global warming.
The company said it met environmental targets to reduce methane emissions and flaring throughout its operations.
The oil giant also nominated to its board former chief executive of Malaysian national oil company Petronas, Tan Sri Wan Zulkiflee Wan Ariffin.
Shares rose 1.8 percent to $45.71in morning trading.
