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Exxon, Chevron’s earnings, has been gutted by a declining virus



(Bloomberg) – Exxon Mobil Corp. and Chevron Corp. recorded the worst losses in an entire generation after the pandemic and the global oversupply of raw materials combined to kill almost every part of their business.

Exxon’s $ 1.1 billion loss in the second quarter was the deepest in the company’s recent history. Falling raw material prices have reduced the company’s production division, while Covid-19 switches have reduced demand for everything from jet fuel to plastic packaging, refining refineries and chemical plants.

Chevron has recorded its weakest results for at least three decades and has warned that a global pandemic that is wreaking havoc in energy markets could continue to drive revenue. The researcher plans to reduce the equivalent of 5% of its world production during the current quarter and deviated from plans to massively increase production from its valuable funds in the Permian Basin.

Oil has become the poorest sector in US stock markets, when a merger of economic, political and structural threats is combined to jeopardize the very foundations of the oil industry. Significant layoffs, budget cuts and project cancellations were not enough to stop the industry from falling, as runaway investors made energy the worst investment in the S&P 500 this year.

Without large-scale trading operations that protected European oil explorers such as Royal Dutch Shell Plc and Total SE from losses, Chevron suffered the brunt of this year’s oil price. In particular, the nascent Exxon trading set “has adversely affected derivatives on the market,” the company said.

Exxon received zero cash from operating activities during the quarter, according to a report on Friday.

“I looked at the press release and looked like, ‘Is this a typo?’ “said Jennifer Rowland, an analyst at Edward D. Jones & Co. in St. Louis.” He’s fighting hard for an Exxon-sized company. “

Exxon fell 13 cents to $ 41.74 at 9:42 a.m. in New York after a previous zero of 2.3%. Chevron decreased by 3.7%.

The troubles of American supermasters are a symbol of the wider threats facing the oil industry in what is the deepest crisis in its 161-year history. International titans, who made record profits in the first decade of the century, are now reduced to widespread job cuts, belt-tightening and large borrowings to cover dividends and other expenses.

Cost reduction

Exxon, which earlier this year began efforts to cut the U.S. workforce, said it was developing plans to further reduce operating costs without providing details. The company’s loss of 26 cents per share was better than the 64 percent average loss from analysts in the Bloomberg survey.

The worst ever catastrophe has occurred at a critical time for Exxon, as it has just embarked on an aggressive multibillion-dollar recovery program. After cutting capital spending by $ 10 billion and freezing dividends, CEO Darren Woods may run out of leverage.

On Friday, Woods said that based on current forecasts, the company will not assume any additional debts. This pledge is a strategic shift and a defensive step to counter investors who have said they will test the limits of acceptable leverage over the next few years.

What does Bloomberg intelligence say?

Livering has reached levels not seen in recent declines, and management’s comments that it has no plans to take on more leverage may suggest that a protracted recovery will force the company to cut costs or even its notorious dividend.

– Fernando Vallee, biological analyst

Chevron completely erased the value of its operations in Venezuela from its books, amounting to $ 2.6 billion after they were actually frozen by US sanctions, and wrote off another $ 1.8 billion in assets due to lower commodity prices.

Even eliminating the reduction in utility, Chevron’s adjusted loss was $ 3 billion, more than twice the average analyst estimate in the Bloomberg poll, and the deepest since at least 1989.

“Although demand and commodity prices have shown signs of recovery, they have not returned to the pandemic level, and financial results may continue to decline until the third quarter of 2020,” Chevron said on Friday.

In Venezuela and low prices, Chevron also took a one-time fee of $ 780 million associated 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 to expand the route: $ 5 billion, a total buyout by Noble Energy Inc. announced less than two weeks ago. The deal is a small premium and closes holes in Chevron’s long-term portfolio, analysts say.

(Inventory efficiency update in the eighth paragraph.)

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