And Exxon Mobil and Chevron groups announced on Friday huge losses in the second quarter of this year, while weak economic prospects due to the emerging Corona virus will force the oil industry sector to further reduce costs.
“We have never seen market demand fall so quickly and so quickly,” said Neil Chapman, vice president of Exxon Mobil. He said, “The improvement in the price of jet fuel will likely be much slower than the recovery in demand for gasoline, which is beginning to improve, due to the reduction in flights.”
ExxonMobil revealed a loss of $ 1.1 billion in the second quarter, the largest since ExxonMobil merged in 1999.
Meanwhile, Chevron incurred $ 8.3 billion in losses during the same period, after it reduced the value of the assets according to expectations that commodity prices will remain low for a longer period.
These figures included a devaluation of assets in Venezuela. Mike Woerth, chief executive of Chevron, warned that weak economic conditions may have a negative impact on the group’s results during the third quarter due to the significant decline in demand for petroleum products.
He added, “Given the lack of clarity in the vision of the economic recovery and the large supply of oil and gas, we reduced our expectations regarding the prices of our products, which led to a decrease in the value of assets and other expenses.”
Exxon Mobil lost $ 1.1 billion in losses during the second quarter of 2020, the largest since 1999
Chief Financial Officer Chevron Pierre Briber said during a conference call that we cannot predict future prospects, explaining that the company is preparing for a “low oil scenario” for a longer period.
The losses come after Royal Dutch Shell, Total and Eni groups released similar reports on Thursday to confirm the overall bleak picture of a sector closely related to the real economy.
The profits of Exxon Mobil fell more than fifty percent to 32.6 billion dollars in one season, while the profits of “Chevron” fell about two thirds to 13.5 billion dollars.
Although the price of a barrel of oil has returned to $ 40, it is still lower than it was during the same period in 2019. This has led to losses for exploration and production companies alike.
The weak demand also affected refining and liquefaction operations, although the international branch of Exxon Mobil Refining was profitable thanks to lower costs and improved operations compared to the same period in 2019.
Chapman announced during a conference call with analysts that the group was re-evaluating its oil price forecasts, but indicated that it would reduce its expenditures and stop borrowing. In April, the company cut its spending plan to 23 billion dollars from 33 billion.
Chapman said that the company will reduce its activities in the Permian field in Texas in the second half of 2020. He also said about the budget for the year 2021 that it will be less than 19 billion dollars.
However, keeping the profit of investors by fixing the share price of about $ 0.87 was considered a priority, stressing that the long-term energy demand outlook has not changed.
“We do not believe there will be a change in the long term,” he said, referring to expectations for an increase in energy demand by 25 percent by 2040. “The population will continue to grow and with it the economies will grow,” he said.
For comparison, the Royal Dutch Shell group reduced its profits in May. The British-Dutch group also pledged to cut carbon to zero by 2050. Chapman added that ExxonMobil had seen no reason to make acquisitions but was monitoring the situation. Earlier last month, Chevron announced it was taking over US energy company Noble Energy for five billion dollars, in the largest energy deal in the midst of the Covid-19 crisis.
Chevron’s press statement stressed spending restrictions. Briber refused to accurately reveal forecasts, but pointed to a slower economic recovery due to the new Corona virus.
“Our products are closely related to economic activity,” Preper said during a conference call with analysts, adding that the company was also planning to maintain $ 1.29 billion in profits.
Exxon Mobil shares rose 0.5 percent to 42.08 dollars, while Chevron shares fell 2.7 percent to 83.94 dollars.