ExxonMobil slashed its spending plans, postponed an earnings growth target and will write off up to $20bn of assets in the fourth quarter as it reviews its portfolio in the wake of this year’s pandemic-induced oil price crash.
The biggest US oil producer by volume on Monday said it would spend $16bn-$19bn next year and then $20bn-$25bn annually until 2025, down from an original budget of $30bn-$35bn.
The company said it would write off $17bn-$20bn worth of natural gas assets in western Canada, the US and Argentina — all of which will be removed from its development plan.
The latest cuts follow a brutal six months for the US oil industry and Exxon, a company that in the past embodied American corporate power. Once the most valuable company in the world, it is now worth less than local rival Chevron and has reported losses in every quarter this year.
Darren Woods, chief executive, said the “high-grading” of the company’s asset base — getting rid of underperforming assets and focusing on better ones — would improve profits “and rebuild balance sheet capacity to manage future commodity price cycles while working to maintain a reliable dividend”.
A target to double earnings by 2025 has been postponed until 2027.
Exxon said the moves would allow it to focus on core growth projects in the Permian Basin of New Mexico and Texas, deepwater developments in Guyana and Brazil, and some chemicals developments.
The potential writedowns come little more than a decade after Exxon bought US natural gas producer XTO Energy for $41bn — a deal in which Exxon is considered to have vastly overpaid.
Unlike European rivals such as Royal Dutch Shell and BP, Exxon has refused to cut its dividend, which was raised earlier in 2020 for the 37th straight year.
The company is convinced a strategy to continue increasing oil and gas production will be rewarded by a recovery in the fuels’ prices as demand recovers and other supply growth slows because of under-investment in exploration and production activity.
Exxon has not officially changed its plans to increase production from less than 4m barrels a day now to 5m b/d by 2025, although growth in Permian output will probably be slower than envisaged.
The oil group reported a net loss of $680m in the three months to the end of September, down from a $3.2bn profit in the same period last year — its third consecutive quarterly loss.
The company is in the process of cutting 14,000 jobs globally, or 15 per cent of its workforce, as part of its effort to cut operating costs and protect its dividend.
Exxon’s share price is down by almost half since the start of the year.