Exxon faces $ 20 billion hit by 'epic failure' of last decade

Exxon faces $ 20 billion hit by ‘epic failure’ of last decade

Exxon (XOM) Plans to take on $ 17 billion to $ 20 billion in non-cash ventures – a huge blow for companies that have long opposed the recruitment of writers. It is believed to be the largest writing in Exxon history.

The natural gas market is in shambles, with gas trading at around $ 3 million per UK heat exchanger – less than half the price at the time Exxon turned to XTO. Natural gas peaked at the end of 2005 at more than $ 15 per 1 million baht.

But today the world is full of natural gas due to the growth of shale, which causes huge amounts of fuel in the United States.

Exxon’s gas asset shortcomings are “the most obvious execution of executives to date that the XTO agreement is a serious failure – not that any warnings about this are necessary”, analyst Raymond James Pavel Molchanov wrote in a note to clients on Tuesday.

Most of the authors covered properties in Appalachia, Rockies, Texas, Oklahoma, Louisiana and Arkansas acquired in the XTO agreement. The rest of the charge is for offshore gas properties in western Canada and Argentina.

Exxon Petroleum is not the only oil company forced to undermine the value of fossil fuel properties. Last year, Chevron (CVX), BB (BB) And Snails (RDSA) Has done all the great writing.

But not only has Exxon reduced its natural gas commercial value, the company has eliminated some of these gas properties from its development plans. Exxon said in a statement that it may sell some of these assets, “subject to a buyer’s valuation.”

Reduce the budget

Instead of putting more money into natural gas, Exxon is promising investors to “prioritize near-term spending with the most profitable and promising assets in the future.”

In particular, Exxon said it will focus on developing its vast oil resources in Guyana, accelerating production in the Permian basin of West Texas and exploring some parts of Brazil.

Exxon is also retreating after bold plans to accelerate investment even as prices weaken. The company currently expects to spend $ 19 billion, or less, by 2021 and between $ 20 billion and $ 25 billion a year by 2025. That’s the cry from Exxon’s March forecast that it will Spend $ 30 billion to $ 35 billion a year By 2025.
Exxon is scrambling to cut costs – and jobs. The company reiterated its plans to cut its global workforce by 14,000, or 15 percent, by the end of last year. That includes cutting about 1,900 jobs in the United States, mostly at its Houston headquarters.
Epidemics and oil prices have weakened Exxon’s financial position. The company reported quarterly losses for the first time in a decade and it was ejected from the Dow Jones Industrial Average after 92 years on the index.
As of 2012, Exxon is the most valuable company in the world. But today it is worth just $ 161 billion – less T-Mobile US (TMUS Company), AbbVie (ABV), Nike (Of) Or Adobe (ADB). Exxon’s market capitalization has fallen by more than half to $ 285 billion since peaking at $ 446 billion in mid-2014.

‘Anxiety’

Wall Street is hoping that tightening the belt and more conservative budgets will be enough to save Exxon dividends, which is key to investor appeal. But analysts are skeptical. This is the first time since 1982 that Exxon has not been able to increase its dividends.

Molchanov, an analyst at Raymond James, warns that “Exxon cannot mobilize its dividends by 2021” without further loans or asset sales.

For now, the capital markets are open and Exxon should be able to borrow to exchange for dividends. But it can not last forever.

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RBC’s Riraj Borkhataria’s analyst says: “It’s a question of how much they want to borrow.” “Dividends seem challenging.”

And although Exxon will avoid cutting dividends, its drastic spending cuts raise questions about the company’s long-term future.

Oil companies need to constantly seize money for drilling – otherwise production will dry up, causing cash flow.

“The companies are in a precarious position because of the agreements they have made and the fact that they have not been registered for many years.”

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