Exxon loses $ 1.1 billion in second quarter decimated by coronavirus

Exxon Mobil, the nation’s largest oil and gas producer, lost $ 1.1 billion in the second quarter, suffering its first consecutive quarterly loss in more than 30 years.

The Irving, Texas oil major on Friday reported losses in its upstream, downstream and petrochemicals business, demand for crude and petroleum products, such as gasoline, jet fuel and oil. engine, having plunged during the global coronavirus pandemic. Production at the company’s refineries has fallen to 30% of capacity and margins have fallen 50% below the annual low of the past decade.

Exxon was the only supermajor not to write down the value of its assets to reflect the market downturn. Without a $ 1.9 billion improvement in refining inventory valuations, Exxon said it would have suffered a loss of $ 3 billion in the second quarter. The oil major posted profits of $ 3.1 billion in the same period a year ago.

“We have never seen a decline of this magnitude and pace before, even compared to historical periods of demand volatility following the global financial crisis and as far back as the oil and energy crisis of the 1970s,” Neil Chapman, president of Exxon’s chemical division, told analysts on Friday during a conference call.

Energy has become the worst performing sector of the U.S. stock market after the global pandemic reduced demand and slumped prices for petroleum products, forcing companies to cut spending, halt drilling projects and lay off workers. thousands of employees. Exxon rival Chevron said on Friday it lost $ 8.3 billion in the second quarter, the worst performance in at least three decades.

ASSEMBLY OF LOSSES: Chevron loses $ 8.3 billion in second quarter destroyed by coronavirus

Exxon reacted quickly to the economic downturn. The company reduced its overheads and operating expenses by 15%, saving it $ 800 million and cutting expenses on new exploration and production projects by 30% to $ 23 billion.

Exxon is now looking to cut its capital budget further, with a goal of spending $ 19 billion by the fourth quarter of next year. The cuts will come from shale deposits across the country, as well as postponement of downstream and petrochemical projects.

In the Permian Basin, the country’s largest shale deposit, Exxon reduced its number of rigs by about half, ending the second quarter with 30 rigs. The company plans to halve its Permian rig count again, leaving 10 to 15 rigs in service in West Texas by the end of the year.

Exxon reduced its oil and gas production by approximately 330,000 barrels per day during the second quarter. As crude prices climbed above $ 40 a barrel, Exxon resumed most of its production from its shale fields in July. However, Exxon said it would maintain production cuts of 200,000 barrels per day on average in the third quarter, with the recovery in demand remaining fragile with the increase in coronavirus cases in the United States.

Exxon executives said they expect margins to remain “very low” in its downstream business, but that its petrochemicals business is expected to pick up more quickly. The company has increased production of chemicals essential to the fight against the pandemic, including isopropyl alcohol for hand sanitizer and specialty polypropylene for masks and medical clothing.

Demand for polyethylene, which is used to manufacture packaging and medical equipment, is up 2% since the start of the year. However, petrochemicals for automobiles and construction remain weak, the company said.

Exxon plans to maintain its dividend to shareholders and prioritize projects, such as offshore drilling in Guyana, which it says will help Exxon maintain crude production once prices recover. The company also issued around $ 15 billion in bonds to strengthen its balance sheet.

“We’ve never seen prices and margins drop so much, and that’s why having a strong balance sheet is so important,” Chapman said. “It means you can weather big storms. This means that you can overcome large-scale disruption. “