May 02, 2020 News
By Kiana Wilburg
The novel coronavirus is drilling deep losses into the financial statements of many oil giants. Just yesterday, ExxonMobil Corporation revealed to the market that it is expected to suffer an estimated first quarter loss of US$610 million. This would also be one of its worst performances in years.
When these losses are considered alongside prevailing industry conditions, the American oil company disclosed that 2020 capital spending has been further reduced. In fact, Capital Expenditure (CapEx) is now expected to be approximately US$23 billion for the year, down from the previously announced guidance of US$33 billion.
But in the midst of it all, the company was keen to note that Guyana remains one of the shining stars in its growth portfolio while adding that production in the Stabroek Block has not been affected by COVID-19. Expounding on this front during ExxonMobil’s 2020 first quarter Earnings call was its Chairman and Chief Executive Officer (CEO), Darren Woods.
The official said, “…Guyana remains an integral part of our long-term growth plans and as such, is a high priority. Our Liza Phase One operations have been largely unaffected by the pandemic. Production ramp-up is progressing and should reach full capacity in the second quarter. We’ve also managed the impact on Liza Phase Two, keeping this project on schedule for a 2022 start-up.”
Woods added, “Unfortunately, the ongoing election process and uncertainty around the next administration has slowed government approvals of the Payara development plan.” In addition, Woods said that the challenge of rotating crews due to the impact of COVID-19 has temporarily slowed the firm’s drilling campaign. As a result, it expects a delay in future developments of roughly six to 12 months which would push its production objective of more than 750,000 barrels per day into 2026.
Turning his attention to the company’s financial capacity, Woods was keen to note that it was built for times like this.
“As you know, a strong balance sheet is a core competitive advantage and an integral part of our strategy, allowing us to maintain our capital allocation priorities across the price cycles. This approach has proven itself during these trying times, allowing us to selectively advance critical investments to structurally improve our business despite very low demand and margins.”
He added, “We issued debt of US$8.5 billion in the first quarter, increasing our debt capital to 24% and raising cash balances to more than US$11 billion. We also increased our revolving credit facilities to US$15 billion. With our cash, this gives us a solid backstop in these uncertain and very volatile markets.”
In anticipation of a slow economic recovery, Woods said that ExxonMobil has taken advantage of a market window in April to issue another US$9.5 billion of debt, taking its estimated debt capital to 26% and increasing cash to about US$18 billion. Woods explained that this provides a strong foundation to manage the remaining challenges in 2020.
“Of course, as always, we’ll need to keep an eye on developments and respond accordingly,” the official added.
In closing, Woods reemphasized that the fundamentals that underpin the company’s business remain unchanged. He noted that ExxonMobil’s capital allocation priorities remain the same, while adding that they will continue investing to create value, rewarding shareholders with a reliable growing dividend and maintaining a strong balance sheet.
“While we work to conserve cash in the near term, we remain focused on enhancing long-term value, leveraging our competitive advantages and the optionality provided by a deep portfolio of opportunities.
“We do all this, while working to ensure the safety of our people and communities and doing our part to support society response to pandemic. Our company remains strong. Our people have the skills, experience, and fortitude to not only face the challenges but to find opportunity in them emerging stronger than ever.”
Oil money vanishing in thin air
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