ExxonMobil reports its first annual loss since the merger

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It is the latest company to report the worst year on record during the Covid-19 pandemic.

The fossil fuel industry has suffered from a drop in oil prices as home orders in both the country and the world have caused the greatest drop in oil consumption ever – and oil producers in Russia and Saudi Arabia simultaneously flooded the world with oversupply in a production dispute that months.

“The past year has been the most challenging market conditions ExxonMobil has ever experienced,” said CEO Darren Woods at a conference call.

The company has taken cost-cutting and reorganization steps that will help Exxon be in better shape going forward, Woods said. Those measures are expected to save the oil giant $ 6 billion a year by 2023, compared to before the pandemic. It also cut capital outlays to $ 21.4 billion, which is 35% lower than initially planned for the year.

Exxon said it should be able to pay dividends to investors just as it did in 2020 – a time when other companies are halting dividends due to mounting losses.

Digging into the results – and the effect of depreciation

The company’s $ 22.4 billion net loss was largely due to impairments on its assets. Even excluding these write-offs, Exxon would have lost $ 1.4 billion this year, compared to a profit of $ 9.6 billion on that basis in 2019.

Excluding special items, the company reported a fourth quarter net loss of $ 20.1 billion. But that was largely due to the write-offs.

Exxon reported adjusted income of $ 110 million excluding special items, a fraction of the $ 1.8 billion it made a year earlier, but still its first profitable quarter of that year.

Fourth quarter results were slightly better than expected and ExxonMobil (XOM) stocks were up nearly 4% during afternoon trading.
Shares of Exxon were down 41% over the course of 2020, but so far stocks are up about 9% this year in hopes of a recovery in the global economy and a rise in oil prices after OPEC and Russia were agreed to continue limiting production. Analysts predict that ExxonMobil should remain profitable in every quarter of 2021 and for the foreseeable future.
The Wall Street Journal reported on Monday that there had been talks between ExxonMobil and Chevron (CVX), the country’s No. 2 oil company, on a possible merger. Woods said that while the company continues to consider merger and acquisition options, he declined to comment on the report during the company’s conference call Tuesday.
Exxon is in crisis. Angry shareholders revolt

Exxon also announced it would appoint a new board member – Tan Sri Wan Zulkiflee Wan Ariffin, the former CEO of Malaysian oil company Petronas. It said it is also in talks with other potential new board members.

But the company is facing a proxy battle by an activist investor group, Engine No. 1, who nominated four candidates for the board last week. Engine No. 1 states that ExxonMobil is not making the necessary adjustments to respond to the changing long-term outlook for the global energy sector.
“A board that has defied this dramatically and shareholder sentiment for so long has not earned the right to elect its own new members or pack itself in the face of calls for change,” said a statement by Engine No. 1 on Tuesday. “ExxonMobil has spent years pursuing spending and strategic plans that ensure that it can only succeed in the absence of a material shift in long-term energy demand, and remains in the position of continued value destruction for decades under alternative scenarios.”
The industry faces global challenges to reduce CO2 emissions to combat climate change. The United States rejoined the Paris climate agreement on President Joe Biden’s first day. He has also canceled new oil and gas leases on federal grounds.
Electric vehicles are widely seen as the future of the automotive industry, as major car manufacturers like Volkswagen (VLKAF) are shifting their future production plans to electric vehicles. General engines (GM) announced last week that it hopes to stop selling gasoline cars by 2035.

In response to push to cut carbon, ExxonMobil announced on Monday that it had formed a new company to commercialize its technology to extract carbon from the atmosphere, and that it would invest $ 3 billion in lower-emission energy solutions through 2025 .

“Carbon capture storage is a critical element to achieving the ambitions of the Paris Agreement,” said Woods.

ExxonMobil captured 120 million tons of carbon last year, which Woods says is equivalent to taking more than 25 million passenger cars off the road. But Engine No. 1 said relying on carbon capture is the wrong approach to the company’s long-term outlook, and that it should instead invest more in clean energy to diversify profitably.

“It is … poor long-term planning to rely almost exclusively on the idea that carbon capture will become scalable and affordable soon enough to allow for the continued growth of oil and gas production over decades under a Paris-compliant trajectory . ” said group.

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