Exxon Mobil, Chevron report losses on weak oil prices

Marco Green
August 1, 2020

The logo for ExxonMobil appears above a trading post on the floor of the New York Stock Exchange.

Oil has become the poorest-performing sector of US equity markets as a confluence of economic, political and structural threats coalesce to imperil the very foundations of the petroleum industry. The market deteriorated so much that the price of a benchmark United States crude oil future dropped below $0 a barrel for the first time ever in April.

Chevron Corp lost $8.27bn during the quarter, a sharp contrast to the $4.3bn it brought in during the same quarter previous year.

Producers had been pumping far more oil than the world was using as global travel all but shut down, and storage tanks were filling up.

The average price of an American barrel of crude oil during the second quarter was $28.

The company had already announced this year it was taking steps to reduce its US workforce, and on Friday it said it's developing plans to further curtail operating expenses, without providing details.

"To put it in context, absolute demand fell to levels we hadn't seen in almost 20 years". Two straight quarterly losses, combined with nearly $15 billion in annual dividend commitments, will translate into what Goldman Sachs Group Inc. analysts warned will be an unprecedented debt load.

"We've had to charge planes to move our rotating operating staff all over the globe without the availability of commercial planes", Chapman said. Chevron announced multibillion dollar writedowns on its assets for the second time in a year, said it will cut the equivalent of 5 per cent of its worldwide output during the current quarter and backtracked on plans to massively ramp up production from its prized Permian Basin shale holdings. That included a 12 per cent drop in natural gas production.

The San Ramon-based oil giant brought in $13.49bn in revenue, about a third of what it brought in past year.

Even stripping out the impairments, Chevron's adjusted loss was $3 billion, more than twice the average analyst estimate in a Bloomberg survey and the deepest since at least 1989.

The figures incorporated a downgrade to the value of assets in Venezuela.

Chevron also impaired its $2.6 billion in investment in Venezuela due to the operating environment's uncertainty, it said.

Phillips 66, the Houston-based oil refining and logistics company, lost $141m during the quarter.

United States energy giants Exxon lost $1.1bn and Chevron lost $8.27bn in the second quarter as coronavirus lockdowns shuttered businesses and forced consumers to shelter in place, gutting crude demand in the U.S. and around the world.

"The biggest unknown is what happens with the price deck, and that's really anybody's guess", said Glickman, adding that while prices have stabilized at around US$40 (NZ$60), they could fall into the thirties as Covid cases rise.

Without the massive trading operations that shielded European oil explorers such as Royal Dutch Shell Plc and Total SE from losses, Chevron was exposed to the full force of this year's oil price rout.

Other reports by Click Lancashire

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