(Adds five-year share price performance)
By Jennifer Hiller
HOUSTON, Nov 30 (Reuters) - Exxon Mobil Corp on
Monday said it would write down the value of natural gas
properties by $17 billion to $20 billion, its biggest ever
impairment, and slash project spending next year to its lowest
level in 15 years.
The oil major is reeling from the sharp decline in oil
demand and prices from the COVID-19 pandemic and a series of bad
bets on projects when prices were much higher. New cost cuts aim
to protect a $15 billion a year shareholder payout that many
analysts believe is unsustainable without higher prices.
The writedown lays bare the size of the miscalculation that
the company made in 2010 when it paid $30 billion for U.S. shale
producer XTO Energy as natural gas prices went into a
decade-long decline. The writedown also includes properties in
Argentina and western Canada.
While smaller than the up to $30 billion charge the company
forecast a month ago, the quarterly charge to earnings reflects
the company's recent reduction in its outlook for oil and gas
prices.
Exxon will continue initiatives in offshore Brazil, Guyana,
the Permian Basin shale field in the United States, and in
performance chemicals despite plans to implement deeper spending
cuts, it said. Not mentioned was its $30 billion Mozambique
liquefied natural gas project, which sources do not expect final
investment decision on until early 2022.
"Recent exploration success and reductions in development
costs of strategic investments have further enhanced the value
of our industry-leading investment portfolio," said Chief
Executive Darren Woods.
Business conditions are continuing to show signs of
improvement despite the pandemic, he said.
Exxon shares fell 5% in late trading to $38.13 and are down
by half in the last five years.
The impairment charge "further worsens the company's already
substantial jump in financial leverage," said Pete Speer, senior
analyst at Moody's Investors Service. "With this charge added to
the big rise in debt this year, we see ExxonMobil’s
debt/capitalization rising to nearly 30%, from just over 20% at
the start of 2020."
Next year's spending will fall, to between $16 billion to
$19 billion, but Exxon could increase spending by 2025 to more
than this year's about $23 billion level, Woods said.
The plan to return to higher levels of capital expense
struck investor Mark Stoeckle, senior portfolio manager at Adams
Funds, as unusual.
"In this environment it makes no sense to me at all. What's
the hurry?" he said. "I don't think it's going to help them with
investors."
Exxon said last month it could cut 14,000 employees, or 15%
of its global workforce, by the end of 2021.
(Reporting by Jennifer Hiller in Houston and Arathy S Nair in
Bengaluru; Editing by Marguerita Choy, Stephen Coates, Shri
Navaratnam and Tom Brown)