Exxon Mobil Corp. posted a $19.3-billion writedown of U.S. natural gas and other assets, capping the first annual loss for the Western world’s largest oil company in at least four decades.
Excluding the historic impairment, Exxon returned to profit in the fourth quarter, earning 3 cents per share, and ending a run of three consecutive quarterly losses. That compares with the Bloomberg Consensus estimate for a 2-cent profit.
Cash flow from operations — a key gauge of corporate strength — shrank by almost 9% during the final three months of 2020 to $4 billion. Still, the company assured investors it will maintain its $3.7 billion-a-quarter dividend, which is the third-largest in the S&P 500 Index. The shares rose 2.2% to $45.92 at 7:47 a.m. in New York.
Exxon is emerging from the wreckage of 2020 facing the worst crisis in its modern history. In addition to growing criticism of its environmental record, financial performance has deteriorated. Exxon hasn’t increased payouts since early 2019.
Such was the pressure exerted by last year’s price collapse that Exxon’s Chief Executive Officer Darren Woods held preliminary talks with his counterpart at Chevron Corp. about a megamerger, the Wall Street Journal reported Sunday.
The company’s promise to “maintain” dividends on Tuesday cheered investors who had been worrying the oil titan might resort to a cut to shore up its cash position. As recently as October, the company was still pledging to increase payouts, but that changed a month later when management dropped the word “growing” from its discussion of dividends.
Exxon isn’t alone in facing serious challenges even as commodities are on a tear. Chevron disappointed investors at the end of last weak with a surprise loss grounded on weaker-than-expected refining margins. Earlier Tuesday, BP Plc squeezed out a small profit that was a fraction of what the explorer earned in pre-pandemic days. ConocoPhillips posted a third consecutive loss.
As he begins his fifth year as CEO, Woods is taking an axe to capital spending and operating costs, all but abandoning his circa 2018 blueprint for expanding output while drilling and construction costs were low. Exxon announced 14,000 job cuts, delayed megaprojects from the Permian Basin to Mozambique, and has pledged to keep a tight rein on spending through the middle of this decade.
The cutbacks helped turn Wall Street analysts more positive on the stock, especially with oil prices rebounding this year, but investors are still nursing deep losses after a 41% plunge in 2020 and years of underperformance compared with peers.
Last week, activist investor Engine No. 1 formally took up the cause for a change in strategy, nominating four directors to the board ahead of Exxon’s annual meeting in May. The investor, which has the support of the California State Teachers’ Retirement System, is calling on Exxon to invest more in clean energy, commit to reducing emissions and improve returns on capital.
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