economy

Exxon reports a dramatic drop in profits

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Photo credit: Reuters / Toru Hanai.

By Anders Lorenzen

Climate campaigners have been celebrating after the oil company Exxon Mobil, which is the largest oil and gas company in the world reported a dramatic drop in profits. They might be hoping it is a sign that investors are finally waking up to risky oil investments and the danger of investing in an industry seen as increasingly toxic. A growing number of investors are starting to take climate change seriously and that is beginning to be reflected in investments. In addition, several Class A lawsuits, one by New York State, and the global divestment movement could also be having an impact. 

Last month, Exxon reported a 5.2% drop in fourth-quarter profits due to a weakness in chemicals and refining as well as flat oil and gas outputs. The company’s full-year profit of $14.3 billion fell somewhat short of the $25 billion figure targeted by CEO Darren Wood.

Exxon still produces a lot of oil and gas; its output actually grew slightly in 2019 rising just under 1% producing 4.02 million barrels daily. Its production in the Permian Basin, the largest US shale field, was up 54% from a year ago to around 294,000 barrels of oil and gas daily. But quarterly profits on U.S. production were down 74% as the company spent heavily to boost output and suffered from lower natural gas prices. Additionally, the company raised its Guyana oil estimates by 2 billion barrels, bringing total recoverable oil and gas resources from the discovery to more than 8 billion barrels. The company benefited from the sale of production assets in Norway for $4.5 billion to Vår Energi AS. Exxon lost $355 million in the chemical part of the company, their first loss in 13 years. Biraj Borkhataria, an analyst with RBC Capital Markets said that he does not expect the company to significantly recover in 2020. Woods has acknowledged that 2019 was a challenging year, but has stopped short of referencing climate change.

US climate activists have in particular targeted Exxon after a few years ago it was leaked that the company knew about the serious consequences of climate change as early as the 1970s but decided not to release that information.

 

 

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