(Bloomberg) – Exxon Mobil Corp. and Chevron Corp. posted the worst losses in a post-pandemic generation and a global raw gluture combined to destroy almost every part of their business.
The $ 1.1 billion loss in the second quarter of Exxon was the deepest in the modern history of the company. A drop in raw prices tricked the company into splitting production as Covid-19 blockades reduced demand for everything from jet fuel to plastic wrap, hobbying enterprise refining and chemical units.
Chevron recorded its weakest performance in at least three decades and warned that the global devastation of pandemic destruction in energy markets could continue to pull profits. The explorer plans to reduce the equivalent of 5% of its worldwide production during the current quarter and pulled into the plan to massively increase production from its Permian Basin-priced properties.
Oil has become the weakest sector of US capital markets as a combination of economic, political and structural threats come together to destroy the foundations of the oil industry. Dismissals, budget cuts and project cancellations have not been enough to arrest the industry downturn as fleeing investors made energy the worst investment in the S&P 500 Index this year.
Without the massive trading operations that protected European oil explorers like Royal Dutch Shell Plc and Total SE from losses, Chevron was exposed to full force this year. In particular, Exxon’s rare trade deficit “experienced adverse impacts from the market derivative,” the company said.
Exxon produced zero money from operating activities during the quarter, according to a statement Friday.
I was looking at the press release and I was like, ‘Is this a typo? “” Said Jennifer Rowland, an analyst at Edward D. Jones & Co. in St. Louis. “It’s mind boggling for a company the size of Exxon.”
Exxon was down 13 cents at $ 41.74 at 9:42 a.m. in New York after previously dipping to 2.3%. Chevron fell 3.7%.
The suffering of American supermajors is emblematic of the broader threats threatening the oil industry in what is proving to be the deepest crisis in its 161-year history. International titans that recorded record profits during the first decade of the century have now been reduced to widespread job cuts, belt-tightening and large borrowing to cover dividends and other expenses.
Exxon, which earlier this year began making efforts to reduce its workforce in the U.S., said it was developing plans to further reduce operating costs, without giving details. The company’s 26-cent stock loss was better than the average 64 percent loss from analysts in a Bloomberg study.
The worst raw crash ever came at a tangible time for Exxon because it had just embarked on an aggressive, multibillion-dollar reconstruction program. After cutting $ 10 billion in capital spending and freezing dividends, CEO Darren Woods may not run out of leverage to pull off.
On Friday, Woods said that, based on current forecasts, the company will not take on any additional debt. The mortgage appears to be a strategic shift and a protective move to counter investors who claimed it would test the limits of acceptable leverage levels in the coming years.
What Bloomberg Intelligence says
Leverage has gone to levels not seen in recent downturns and management comments that they do not plan to take on more leverage may indicate that a prolonged recovery would force the company to cut costs further, or even shake its dividend. .
– Fernando Valle, analyst at BI
Chevron completely wiped out the value of its operations in Venezuela from its books, amounting to $ 2.6 billion after they were effectively frozen by U.S. sanctions, and wrote off another $ 1.8 billion in assets. due to low commodity prices.
Even removing the damage, Chevron’s adjusted loss was $ 3 billion, more than double the average analyst estimate in a Bloomberg study, and the deepest since at least 1989.
“While demand and commodity prices have shown signs of recovery, they are not returning to pre-pandemic levels, and financial results may continue to depress in the third quarter of 2020,” Chevron said in a statement Friday.
Venezuela and low prices in addition, Chevron also had a single fee of $ 780 million in connection with its plan to cut 6,000 jobs, or about 13%, of its workforce.
Despite the red paint, Chevron CEO Mike Wirth saw an opportunity for mid-way expansion: $ 5 billion, acquisition of shares in Noble Energy Inc. announced less than two weeks ago. The deal comes at a premium minuscule and opens holes in Chevron’s long-term portfolio, analysts noted.
(Updates stock performance in paragraph eight.)
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