Nightmare Scenario

Exxon warns it may write down natural-gas assets worth billions as the pandemic continued to weigh on fossil fuel companies.

The Wall Street Journal reports Exxon Posts Third Consecutive Quarterly Loss for First Time

Exxon Mobil Corp. XOM posted its third consecutive quarterly loss for the first time on record Friday and disclosed that it may write down the value of natural-gas assets worth as much as $30 billion, as the coronavirus pandemic continues to pressure the world’s biggest oil companies.

The Texas oil giant reported a loss of $680 million in the third quarter compared with a profit of $3.17 billion during the same period last year. 

Exxon Chief Executive Darren Woods invested heavily before the pandemic to grow Exxon’s oil and gas production by 2025. That decision has backfired as commodity prices plunged this year, forcing the company to make substantial cuts and painful choices about where to invest.

On Thursday, Exxon said it could cut as much as 15% of its global workforce, or about 14,000 jobs, as the struggling oil company tries to cut costs and survive the Covid-19 downturn. In all, big oil producers and services firms are collectively shedding more than 50,000 jobs.

Exxon Mobil Weekly Chart

Exxon Mobil Weekly Chart

Exxon Mobil Monthly Chart

Exxon Mobil Monthly Chart

Let This Sink In

Exxon Mobil Market Summary

Exxon Mobil Market Summary

Zoom Overtakes Exxon Mobil

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Business Insider reports Zoom overtakes Exxon Mobil in market value amid COVID-19 pandemic

In Thursday trades, Zoom Video is now worth $140 billion, surpassing Exxon Mobil's market capitalization of $137 billion, according to data from YCharts.com.

The change in fortunes for Zoom and Exxon highlights how swiftly the COVID-19 pandemic has impacted the US economy, and life in general.

As rolling economic shutdowns swept across the US in late March due to the spread of COVID-19, schools and businesses relied heavily on the video chat software platform from Zoom to conduct daily life in a semi-normal state.

This led to a surge in business for Zoom, and helped power its stock higher by as much as 658% year-to-date. Within the first three weeks of US shutdowns, Zoom added 100 million new customers, representing a quick double. 

Exxon Warns of $30 Billion Shale Writedown 

Bloomberg reports Exxon Warns of $30 Billion Shale Writedown Decade After XTO

Exxon Mobil Corp. warned it may take up to $30 billion in writedowns on natural gas fields acquired more than a decade ago, and reported a third straight quarterly loss.

Exxon is confronting one of its biggest crises since Saudi Arabia began nationalizing its oilfields in the 1970s. If the company takes the full $30 billion impairment, it will be the industry’s worst in more than a decade, according to Bloomberg data. 

The company lost $680 million, or 15 cents a share, during the third quarter, compared with the 25-cent per-share loss forecast in a Bloomberg survey of analysts. The shares fell 1.6% to $32.45 at 12:09 p.m. in New York and are down more than 50% for the year. 

That was in stark contrast to Chevron Corp., which disclosed a surprise profit as the company’s oil-production and refining divisions outperformed analysts’ expectations. Chevron’s shares rose 1.1%. European supermajors Total SE, Royal Dutch Shell Plc and BP Plc also turned in better-than-expected third-quarter performances.

Exxon stock has underperformed Chevron but outpaced Shell and BP. The drop has sent Exxon’s dividend yield soaring to more than 10%, a level that indicates investors expect the payout to be cut.

Ten Questions

  1. Exxon Mobil yields a nice 10.67% dividend. That's nice, but will the dividend last? The company affirmed the dividend, but that does not make it especially so.
  2. Will fossil fuel companies survive, for how long, and in what form?
  3. Biden wants to "phase out" fossil fuels. Will he? Can he? Will the next Senate be willing to go along? Will AOC and the Greens demand even more?
  4. Will biden work out a deal with Iran, flooding the market with more oil?
  5. What about work-at-home?
  6. When is there a big push for electric cars?
  7. When will plane travel rebound? 
  8. If energy is undervalued, how long will it be before the market agrees? 
  9. How many more writedowns are coming?
  10. Chartwise, a nice double bottom may be in play. Are you nimble enough to play? Will there be a whipsaw?

I do not know the answers to those questions and no one else has full answers either. 

But those are the kinds of questions value investors need to answer. 

The answers to questions 5, 6, and 8 may seem obvious but are they priced in? That answer may depend on the answer to questions 3, 4, and 9.  

Momo players hoping for a double-bottom may have an easier go of the decision.

Mish