Venture: Dead End of Oil
Exxon Mobile has been wounded since people have been quarantined in their homes, displaying a $680 million loss in the third quarter compared with a $3.17 billion profit during the same period last year. As gas use is on the decline, many consumers are also switching over to electric in many departments. This two-way attack against gas giants is genuinely starting to hurt and will be a slow recovery.
Exxon has reported their third straight quarter of losses with revenue down 30% for the very first time. This news comes as quite alarming for not only the company but also the investors, who are losing about 18 cents per share during the third quarter.
Being the savvy company, that Exxon is, it was able to state that thanks to their "early stage of demand recovery," saved many more millions in revenue loss. To further heighten their statement's positivity, Exxon is telling the public that this will not have a lasting effect at the end of the year financial reports, believing losses will be recouped in the long run.
Chairman and CEO Darren Woods stated, "We remain confident in our long-term strategy and the fundamentals to our business and are taking the necessary actions to preserve value while protecting the balance sheet and dividend," said the chairman. "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."
Like most companies for the past six months, Exxon was ill-prepared for the pandemic; however, it is now slowly gaining its bearing in this new world. With many unprecedented factors hurting Exxon, they stated that they would reduce its U.S staff by 1900 employees and with workforce reductions potentially risking to as much as 15%. Exxon also had plans in 2020 to spend $33 billion, but the cut is capital expenditures to $23 billion due to the pandemic. Lockdowns throughout the world are negatively impacting Exxon, with many everyday consumers no longer traveling are left working in their homes.
It did not help that with the Lockdowns, it pushed oil prices to a near five-month low, with the average cost for a barrel of oil dropping into the negatives in April. Real-time supply and demand dynamics drive oil prices. Many investors and analysts are bracing for a lot more volatility with hopes that a vaccine and more stimulus plans can support consumers. Many industries are hinging their company on whether the federal government will stabilize the market and give consumer trust in the market again. A blow this big to the energy industry is setting it back many years, and most companies will not be able to recover for a couple of years after the coronavirus has run its course. This most significant factor affecting energy companies is the lockdowns associated with quarantine policies; recently, Europe announced a new wave of shutdowns where another 10% of the expected drop in oil demand will hurt companies like Exxon even more.
Many energy companies are now banding together to revive their market. The Organization of the Petroleum Exporting Countries (OPEC) will meet at the end of November and January to plan to further their relaxation of production cuts that were agreed in the wake of the oil-market crash earlier this year. An analyst at Commerzbank said, "The latest price slide is likely to spur OPEC into action once again. We believe it is increasingly unlikely that oil production will be stepped up from January."
One area where Exxon can see improvement for a more sustainable company is being able to embrace the clean energy wave. Their initial plans revolve around reducing greenhouse gas emissions, advancing biofuels, and carbon capture storage (CSS). Exxon currently holds around a third of CSS capacity and was able to capture 6.9 million metric tonnes of carbon dioxide for sequestration. This process is commonly known as the separation of gas from the atmosphere. Last year it announced plans to develop carbon capture fuel cell technology, which produces power and captures and concentrates C02 for storage, resulting in potential cost reductions.
In the end, Exxon and companies alike will continue to face volatility like everyone else throughout the pandemic. Still, they will have to be ebb and flow with the market and federal conditions. With many people staying indoors, it will limit oil production and put many halts on growth. On top of that, Exxon will still have to find a way to please its investors and maintain strength in the market. Exxon may see a more considerable decrease in income and allow for consumer confidence to return to normal before production can continue with attempts to not cut dividends.