Losses mount for oil companies as pandemic grips economy

Cathy Bussewitz
·4 min read

NEW YORK — Exxon Mobil reported its third consecutive quarter of losses as the global pandemic curtailed travel and crippled global economic activity.

The energy giant on Friday posted a $680 million third-quarter loss and revenue tumbled to $46.2 billion, down from $65.05 billion during the same quarter last year.

The string of losses and what by almost all counts will be a money-losing year is new territory for Exxon Mobil, which has not posted an annual loss since Exxon and Mobil merged in 1999.

“This is a business that’s made a billion dollars a quarter on average from 2011 to 2018 and it’s had a rough go,” said Peter McNally, global sector lead for industrials, materials and energy at Third Bridge, a research firm.

Already struggling with weak prices from oversupply, the pandemic has intensified the pain for oil and gas companies. The price of U.S. benchmark crude has fallen 40% since the start of the year. The cost for a barrel of oil tumbled 10% just this week as coronavirus infections surged in the U.S. and abroad.

Commuting to work has largely ended for millions of people. Air travel this year fell to levels not seen in the jet age and the economy suffered its worst contraction in decades as factories and other big energy consumers shut down. All indications point to a Thanksgiving celebrated close to home, and in smaller numbers this year.

Exxon has begun slashing costs to offset falling energy demand, and that means jobs.

A day after announcing 1,900 job cuts, Exxon said on Friday that it plans to cut 15% of its global workforce by the end of next year, about 11,250 jobs. The company employed 75,000 people at the end of 2019.

Chevron also announced job cuts Thursday after closing on its acquisition of Noble Energy earlier this month, saying it would trim the headcount at that company by about a quarter.

"We remain confident in our long-term strategy and the fundamentals of our business, and are taking the necessary actions to preserve value while protecting the balance sheet and dividend,” said Exxon Mobil CEO Darren Woods in a prepared statement.

Exxon said Friday that it may divest $25 billion to $30 billion in North American dry gas assets, and that it would cut capital expenditures to between $16 billion and $19 billion next year.

That would follow a year in which Exxon reduced capital spending by 30%, to $23 billion.

“We are on pace to achieve our 2020 cost-reduction targets and are progressing additional savings next year as we manage through this unprecedented down cycle," Woods said.

Those planned reductions might not be enough to appease some investors. Exxon was the only one of the super-majors to post a loss this quarter, and is behind its peers in cost-cutting, said Jennifer Rowland, senior analyst at Edward Jones. “Everyone else either stayed in the black or got back into the black from the abyss of the second quarter. I think it’s telling that they’re the only ones still running in the red."

The Irving, Texas, company produced 3.7 million barrels of oil per day in the third quarter, up 1% from the second quarter. But production is down slightly from the same period last year.

“We are not cancelling any projects that are in execution or in the funding process,” said Andrew Swiger, chief financial officer, in a conference call Friday.

Several analysts on the call questioned why Exxon will continue paying a dividend given the losses it's suffering.

“Our objective is to maintain the dividend, advance the highest value investments, and maintain the debt at a cost- competitive level,” Swiger said.

“It’s not going well,” McNally said about Exxon. “You have to squint at some of the things to find things that are good.”

And the third quarter was an improvement compared with the last, when oil futures crashed below zero. Exxon and Chevron lost a combined $9 billion.

Chevron on Friday swung to a loss of $207 million after a quarterly profit of $2.9 billion last year. Revenue fell by $11 billion, to $24 billion.

Oil prices appeared to stabilize during the third quarter, however, and better conditions enabled Exxon to recover some of the production it had curtailed, the company said.

Demand for refined products also improved, and chemical sales volumes rose as demand for packaging increased and automotive and construction markets recovered, Exxon said.

Oil demand is expected to fall 8% globally this year, according to the International Energy Agency. While some demand has recovered since oil futures fell below $0 a barrel in April, countries are again locking down as the coronavirus surges anew across Europe and the U.S.

Exxon's stock fell almost 3% Friday, and it's down more than 50% this year. Chevron was relatively unchanged, but its shares are down about 40% in 2020.

The energy sector is the only one in the S&P 500 to fall since President Donald Trump took office. Energy stocks in the index have lost nearly 57%, and the five worst-performing stocks since Trump's presidency began were energy companies.

Cathy Bussewitz, The Associated Press