By Christopher M. Matthews 

Exxon Mobil Corp. 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.

"We are on pace to achieve our 2020 cost-reduction targets and are progressing additional savings next year as we manage through this unprecedented down cycle," Exxon Chief Executive Darren Woods said in a news release.

Rival Chevron Corp. on Friday posted a third-quarter loss of $207 million compared with a profit of $2.58 billion in the same quarter last year. Royal Dutch Shell PLC reported a profit of $546 million Thursday, while BP PLC lost $307 million.

The results make clear that the pandemic continues to weigh on the industry despite a modest economic recovery and rebound in demand for oil and gas.

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-led global recession. In all, big oil producers and services firms are collectively shedding more than 50,000 jobs.

"The world's economy continues to operate below pre-pandemic levels, impacting demand for our products which are closely linked to economic activity," Chevron CEO Michael Wirth said Friday.

Exxon's disclosure Friday that it could take a huge write-down comes after months of pressure from analysts and others to do so.

Lower oil and gas prices brought on by the pandemic and uncertainty over the pace of the transition to lower-carbon energy have caused major oil companies to question the value of their assets. Exxon had stood out among its peers this year for resisting large write-downs.

Shell said earlier this year it would write down the value of its assets by up to $22 billion because of lower energy prices and BP is writing down as much as $17.5 billion. Last year, Chevron said it would cut the value of its assets by $10 billion.

Exxon said Friday it is assessing the value of North American dry gas assets as part of its corporate development plan. Spokesman Casey Norton said Friday that the impairment of gas assets with a carrying value of $25 billion to $30 billion hadn't been completed and would be considered by the board later this year. Mr. Norton said the impairment doesn't indicate changes to Exxon's long-term price views and isn't a reaction to short-term price fluctuations.

The company also said it will reduce its capital expenditures to between $16 billion and $19 billion next year. Exxon had planned to spend $33 billion in 2020, but cut its capital expenditures to $23 billion after the pandemic took hold.

As The Wall Street Journal previously reported, several oil and gas accounting experts have alleged that Exxon's reticence to adjust the value of assets on its balance sheet amounts to accounting fraud in a series of complaints filed to U.S. authorities. By their estimates, Exxon should have taken a $44 billion impairment loss this year and a corresponding $56 billion reduction of its reported assets on its balance sheet in the second quarter.

The group, which filed a whistleblower complaint with the Securities and Exchange Commission, has singled out Exxon's acquisition of XTO Energy Inc., a natural-gas driller it purchased for $31 billion a decade ago, along with other assets.

Exxon has rebutted the criticism of its write-down practices, saying that the company is in compliance with accounting rules and SEC regulations about disclosures to investors.

Exxon wrote down the value of U.S. shale gas assets by $2.5 billion in 2017. Critics of the company, including some analysts, have questioned whether that was sufficient, noting the price of the XTO deal.

Exxon has long played down questions about its lack of asset write-downs, saying it is able to avoid them because it is extremely conservative in initially booking the value of new fields and wells and doesn't respond to short-term commodity-price fluctuations. Before 2016, Exxon had never recognized an asset impairment under U.S. accounting rules implemented in the 1990s.

Exxon's oil and gas production unit posted a $383 million loss in the third quarter. The company said production increased to 3.7 million barrels a day, up 1% from the second quarter but down nearly 6% from the same period last year.

Exxon's downstream and refining business lost $231 million in the quarter, while its chemical business posted a profit of $661 million, up from $241 million during the comparable period last year. The company said its chemical sales benefited from resilient packaging demand and recovering automotive and construction markets.

Chevron's production unit eked out a profit of $235 million, producing 2.83 million barrels a day in the third quarter, down 7% from a year ago. Its downstream earnings fell to $292 million from $828 million.

Chevron completed its $5 billion acquisition of Noble Energy Inc. in October and told staff it will lay off about 25% of Noble's employees. It said earlier this year it would cut its capital spending by $4 billion, or 20%, and plans to lay off as much as 15% of its own staff.

Dave Sebastian contributed to this article.

Write to Christopher M. Matthews at christopher.matthews@wsj.com

 

(END) Dow Jones Newswires

October 30, 2020 09:26 ET (13:26 GMT)

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