(Bloomberg) – Exxon Mobil Corp. and Chevron Corp. posted the worst losses in a generation after the global pandemic and crude gluten combined to beat almost every part of their businesses.
Exxon’s $ 1.1 billion loss in the second quarter was the deepest in the company’s modern history. The fall in crude prices has left the company’s production division while Covid-19 locations have reduced demand altogether, from jet fuel to plastic wrapping, which has boosted the the company’s finishing and chemical units.
Chevron has recorded its weakest performance in at least three decades and warned that the global pandemic wreaking havoc on energy markets could continue to drag on earnings. The explorer plans to reduce the equivalent of 5% of its world production during the quarter and has brought back plans to massively increase production by its valued Permian Basin holdings. .
Oil has become the poorest sector with the highest performance of U.S. equity markets as a confluence of economic, political and structural threats that unite the foundations of the petroleum industry. Redundancies, budget cuts and project cancellations were not enough to halt the industry’s downturn as runaway investors made the worst investment in the S&P 500 Index this year.
Without the massive trading operations that protected European oil explorers such as Royal Dutch Shell Plc and Total SE from losses, Chevron was exposed to the full force of its oil price route. year. Notably, Exxon’s fledgling trading forums “experienced unfavorable impacts on brand derivatives to market,” the company said.
Exxon generated zero cash from operating activities during the quarter, according to a statement on Friday.
“I was looking at the press release and it looked like,‘ Is that a typo? ’” Said Jennifer Rowland, an analyst at Edward D. Jones & Co. in St. Louis. “It’s mind boggling for an Exxon-sized company.”
The Exxon was down 13 cents to $ 41.74 at 9:42 a.m. in New York after sinking as early as 2.3%. Chevron fell 3.7%.
The worries of U.S. supermajors are 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 brought record profits during the first decade of the century have now been reduced to widespread job cuts, belt tightening and heavy lending to cover dividends and other spending.
Exxon, which earlier this year began taking efforts to reduce the U.S. workforce, said it is developing plans to further reduce operating costs, without giving details. The loss of 26 cents per share of the company was better than the average loss of 64 cents by analysts in a Bloomberg survey.
The worst crude crash ever made at a time vulnerable to Exxon because it had just started an aggressive multi-dollar rebuilding program. After falling $ 10 billion in capital spending and freezing dividends, Executive Officer Darren Woods may be off the leverage to pull.
On Friday, Woods said that, based on current projections, the company will not take on any additional debt. The pledge appears to be a strategic shift and a defensive move against investors who have said they will test the boundaries of acceptable leverage levels in the next few years.
What Bloomberg Intelligence is saying
Leverage has gone to levels not seen in recent declines and management comments that it does not plan to take more leverage may indicate that a long-term recovery would force the company to cut further spending, or even the vaunted dividend. its.
– Fernando Valle, BI analyst
Chevron completely deleted the value of its Venezuelan operations from its books, amounting to $ 2.6 billion, after they were effectively frozen by U.S. sanctions, and wrote another $ 1.8 billion in assets due to higher prices. low product prices.
Even if the impairments were removed, Chevron’s adjusted loss was $ 3 billion, more than double the average analyst’s estimate in a Bloomberg survey and the deepest since at least 1989.
“While demand and commodity prices have shown signs of recovery, they are not back to pre-pandemic levels, and financial results may remain steady in the third quarter of 2020,” he said. Chevron in a statement on Friday.
Venezuela and with low prices set aside, Chevron also had a one-time fee of $ 780 million related to its plan to cut 6,000 jobs, or about 13%, of its workforce.
Despite the red ink, Chevron CEO Mike Wirth saw an opportunity for expansion along the route: $ 5 billion, the entire stock acquisition of Noble Energy Inc. announced less than two weeks ago. Analysts have noted that the deal enters a minuscule premium and binds holes in Chevron’s long-term portfolio.
(Stock performance updates in the eighth paragraph.)
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