Exxon loses $610 million in the first quarter on write-downs tied to plunging oil

KEY POINTS
  • Exxon Mobil on Friday reported its first loss in decades as oil prices plunged to historic lows following a drop-off in demand due to the coronavirus.
  • The oil giant lost $610 million in the first quarter due to $2.9 billion in write-downs tied to falling oil prices.
  • “COVID-19 has significantly impacted near-term demand, resulting in oversupplied markets and unprecedented pressure on commodity prices and margins,” CEO Darren Woods said in a statement.

Exxon Mobil on Friday reported its first loss in decades as oil prices plunged to historic lows following a drop-off in demand caused by the coronavirus.

The oil giant lost $610 million in the first quarter due to $2.9 billion in write-downs tied to falling oil prices. Exxon posted a GAAP loss of 14 cents per share, and a non-GAAP profit of 53 cents per share. Revenue fell to $56.16 billion. In the same quarter a year earlier the company earned $2.35 billion, or 55 cents per share, on revenue of $63.63 billion.

Shares of Exxon slipped slipped 7.2% on Friday.

“COVID-19 has significantly impacted near-term demand, resulting in oversupplied markets and unprecedented pressure on commodity prices and margins,” CEO Darren Woods said in a statement.

The company said that oil-equivalent production in the first quarter rose 2% year over year to 4 million barrels per day. Looking forward, however, Exxon plans to cut production by around 400,000 oil-equivalent barrels per day due to “economic shut-ins and market curtailments as [a] result of COVID-19.”

West Texas Intermediate, the U.S. oil benchmark, has dropped more than 70% this year, which has forced energy companies to slash spending and in some cases, cut their dividend.

But Exxon has said the company has no plans to cut its dividend, and on Wednesday, ahead of the earnings release, the company said it would maintain its dividend at 87 cents per share.

In April, Exxon slashed its capital spending plan for 2020 by 30% from $33 billion to around $23 billion, and said it would cut operating expenses by roughly 15%. The company said the largest share of the reduction would be in the Permian Basin, where it’s easier to adjust short-cycle investments.

“Our company remains strong and we will manage through the current market downturn as we have for decades,” said Woods. “Today’s circumstances are certainly unique, but our people have the experience, our business has the scale, and we have the financial strength to see us through and emerge stronger than ever,” he added.

Shares of Exxon have lost 38% this year.

Oil prices wilt on surprise build-up in US crude stocks

CNBC

Reuters
KEY POINTS
  • Brent futures fell by 44 cents, or 0.7%, to $63.90 per barrel by 0342 GMT.
  • U.S. West Texas Intermediate crude slipped by 33 cents, or 0.6%, to $58.91 a barrel, down from a more than two-month high reached on Tuesday.
GP: Oil tank North Dakota 190926
A photo taken on August 19, 2013 shows a worker checking oil tanks at an oil well near Tioga, North Dakota.
Karen Bleier | AFP | Getty Images

Oil prices fell on Wednesday after industry data showed an unexpected build in crude inventory in the United States and as investors waited for news on whether a fresh round of U.S. tariffs on Chinese goods would take effect on Sunday.

Brent futures fell by 44 cents, or 0.7%, to $63.90 per barrel by 0342 GMT. U.S. West Texas Intermediate crude slipped by 33 cents, or 0.6%, to $58.91 a barrel, down from a more than two-month high reached on Tuesday.

“At this time, everyone was expecting we would have strong draws in the inventory, but it was a build,” said Tony Nunan, oil risk manager at Japanese trading house Mitsubishi Corp.

U.S. crude stocks clocked a surprise rise in the most recent week while gasoline and distillate inventories also rose, data from industry group the American Petroleum Institute shows.

Crude inventories rose by 1.4 million barrels in the week to Dec. 6 to 447 million, while analysts were expecting a fall of 2.8 million barrels.

The weekly EIA report is due later on Wednesday.

U.S.-China trade tensions continue to cloud the outlook for demand, with a Dec. 15 deadline for the next round of U.S. tariffs on Chinese imports approaching fast.

With the market expected to be over-supplied next year on growing shale oil output and new projects coming on stream, any additional tariffs will dent demand and, in turn, prices, said Mitsubishi’s Nunan.

“The big question is how will the demand hold up?” he said.

“The demand slowdown in growth, a lot of it seems to be coming from the (U.S.-China) trade war. If tariffs go into effect, sentiments will turn bearish again.”

The U.S. is on track to become a net exporter of crude and fuel for the first time on record on an annual basis in 2020, the EIA said, due to a production surge that has dramatically reduced its dependence on foreign oil.

Also adding to global supply, U.S. producers Exxon Mobil and Hess plan to export the first-ever shipments of crude oil from Guyana between January and February, a milestone for Latin America’s newest oil producer, sources with knowledge of the plans said.

Elsewhere, Venezuela’s crude output in November jumped more than 20% from the prior month to the highest level since the United States tightened sanctions on state oil company PDVSA in August, two people with knowledge of PDVSA data said this week.

Investors are also eyeing other major events this week including the British election on Thursday and U.S. and European Central Bank meetings for further trading cues.

Oil dips on US stocks build, production outlook

CNBC

Reuters

KEY POINTS
  • Both international benchmark Brent and U.S. crude futures declined.
  • Chevron Corp and Exxon Mobil Corp released dueling Permian Basin projections on Tuesday pointing to big increases in shale oil production.
  • Data from the American Petroleum Institute (API), an industry group, also showed larger-than-expected U.S. crude stockpiles.
  • The rise in North American production undermines supply cut efforts led by the Organization of Petroleum Exporting Countries.
Reusable: Oil pump jack leased by Devon Energy 150922
A pump jack operates at a well site leased by Devon Energy Production Co. near Guthrie, Oklahoma.
Nick Oxford | Reuters

Oil prices slipped on Wednesday as bullish output forecasts by two big U.S. producers and a build in weekly U.S. crude stockpiles outweighed ongoing OPEC-led production cuts.

International Brent crude futures were at $65.36 per barrel at 0440 GMT, down 50 cents, or 0.8 percent, from their last settlement.

U.S. West Texas Intermediate (WTI) crude oil futures were also down 0.8 percent, or 45 cents, at $56.11 per barrel.

“Crude oil futures continue to demonstrate whippy trades as markets balance between OPEC-led cuts and the effects of rising U.S. production levels,” said Benjamin Lu, commodities analyst at Singapore-based brokerage firm Phillip Futures.

Increasingly event-driven trading was adding to market volatility, he added.

Chevron Corp and Exxon Mobil Corp released rival Permian Basin projections on Tuesday pointing to increased shale oil production.

If realized, the increases would cement the pair as the dominant players in the West Texas and New Mexico field, with one-third of Permian production potentially under their control within five years.

Data from the American Petroleum Institute (API), an industry group, also showed larger-than-expected U.S. crude stockpiles.

U.S. crude inventories rose by 7.3 million barrels in the week ending March 1 to 451.5 million, compared with analysts’ expectations for an increase of 1.2 million barrels, API said. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 1.1 million barrels.

“An increase in U.S. crude inventories is weighing on oil prices and in the long term, concerns over rising oil production in the Permian region is keeping a lid on prices,” said Kim Kwang-rae, commodity analyst at Samsung Futures in Seoul.

Official data from the U.S. Department of Energy’s Energy Information Administration is due later on Wednesday.

The rise in North American production undermines supply cut efforts led by the Organization of Petroleum Exporting Countries (OPEC).

OPEC and its allies pledged to curb output by 1.2 million barrels per day, and they are likely to push back their decision whether or not to extend the output cut agreement to June from April, according to sources.

Meanwhile, the market is looking for further signs that the United States and China are making progress in talks to resolve their trade conflict.

U.S. Secretary of State Mike Pompeo said President Donald Trump would reject any trade deal that is not perfect, but added the White House would keep working on an agreement.

Exxon’s Darren Woods will break from oil giant’s longstanding CEO silence on quarterly results

DALLAS NEWS

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Wire Services

Darren Woods is breaking with tradition to become the first Exxon Mobil Corp. CEO to sit in on quarterly conference calls with analysts. But it’s not happening until next year.

Woods, who rose to chief executive in early 2017, will participate in the Irving-based company’s fourth-quarter earnings call, typically in late January or early February, Vice President of Investor Relations Jeff Woodbury said Friday in a webcast. In the meantime, a member of his inner circle will answer questions on quarterly calls.

“We believe that the investment community did not have a very good understanding of what our value growth potential was,” Woodbury said Friday during a conference call. “We have taken an extra effort in order to engage with the investment community at all levels of the corporation.”

Exxon CEO Darren Woods(Melissa Repko/Staff)
Exxon CEO Darren Woods
(Melissa Repko/Staff)

For Exxon, the announcement represents a seismic shift in corporate culture as well as a bow to investors and analysts who have said they want more direct access to Woods. Typically Woodbury hosts the calls alone.

Neither of the CEO’s predecessors — Rex Tillerson and Lee Raymond — participated in the quarterly ritual during their combined 24 years leading the company.

The comments follow an earnings report that included the worst first-quarter output since the 1999 merger with Mobil and financial results that fell short of expectations. Exxon reported first-quarter earnings of $4.65 billion, which missed analysts’ estimates despite rapidly rising crude prices.

Crude oil prices are recovering after years of low prices weighing down revenue and profit for Exxon and its peers. Higher prices helped offset higher costs and a drop in production.

The company’s profit jumped 16 percent, with earnings of $1.09 a share, a nickel shy of projections on Wall Street, according to a poll by Zacks Investment Research.

Revenue rose 16.3 percent to $68.21 billion, which easily exceeded analyst expectations of $66.07 billion.

Crude prices are up about $8 per barrel since the beginning of the year.

“Increased commodity prices, coupled with a focus on operating efficiently and strengthening our portfolio, resulted in higher earnings and the highest quarterly cash flow from operations and asset sales since 2014,” Woods said in the earnings announcement.

The Associated Press and Bloomberg

Producers could be getting their appetite for investment back with oil at $65

CNBC

  • With oil prices in a protracted period of relative stability, oil majors are gradually getting the confidence to invest once again, the CEO of Woodside Petroleum indicated.
  • Although Coleman cautioned that it was still too early to budget for $65 oil, he also acknowledged bullish developments in the space.
Why fossil fuels are not necessarily 'dirty': Woodside CEO

Why fossil fuels are not necessarily ‘dirty’: Woodside CEO  

With oil prices in a protracted period of stability, oil companies are gradually getting the confidence to invest once again, the chief executive of Australia’s biggest independent oil and gas producer indicated Monday.

“It’s a nice spot where it is at the moment, around $60 and $65 per barrel,” Peter Coleman, CEO of Australian oil and gas producer Woodside Petroleum, told CNBC at the Credit Suisse Asian Investment Conference in Hong Kong.

“You can almost say that $65 today is kind of the new $80 of what we were three or four years ago, simply because we’ve got cost down and we’ve got margin back into our business,” he said, adding that current price levels meant that operations are sustainable today.

On Monday, oil prices pared some of their gains made after settling above $62 in the last session.

Although Coleman cautioned that it was still too early to budget for $65 oil, he also acknowledged bullish developments in the space.

“At this price, you’re starting to see new projects go to final investment decisions so people are starting to get that confidence again that they can invest,” Coleman said, adding that plenty of companies are making substantial investments in the renewable energy space.

According to Coleman, companies are also starting to change their portfolio mix in a bid to tackle their carbon footprint.

“You can see they’re going more gas-oriented. They’re actually starting to say the mantra is moving from being an oil and gas company to being a gas and oil company,” he said.

Woodside announced earlier in the month that its intention to buy Exxon Mobil’s 50 percent stake in the Scarborough gas field in Australia had been approved by BHP, a stakeholder in the development.