Over the past week, ExxonMobil, BP, and Shell have released annual reports showing huge damage from 2020. The Covid-19 pandemic, the oil trade war, and consistently low demand have left their marks on the industry giants.
Currently, oil prices continue to steadily inch upward to their highest in twelve months, reflecting the optimistic tone of several reports. After a year of record losses, most companies expect 2021 to improve as the pandemic eases.
ExxonMobil reports $22.4bn loss in 2020, mostly in Q4
On Tuesday, ExxonMobil released its report, showing the company’s first loss since Exxon and Mobil merged in 1998. The company posted a $22.4bn loss for the full year of 2020, compared to a $14.3bn profit in 2019.
After making a loss in every quarter of the year, most of the annual loss came from the company’s fourth quarter loss of $20.1bn. Relatedly, the company made a $20.2bn loss in non-cash impairments, a categorisation whereby property loses its value compared to previous reports. Given the fall in oil value over the year, much of this will come from the value of reserves and stored oil. Without these “unfavourable identified items”, the company made a small earning of $110m in the fourth quarter.
This formed a trend across ExxonMobil, BP and Shell: while cash reserves have taken a hit, they are not as dire as the headline figures imply.
Still, the company lost $16.8bn in US extraction in the last three months of 2020, with another $1.7bn lost overseas. Despite the losses, the company maintained its shareholder dividend.
Compared to one year before, the company produced 10% less hydrocarbons in Q4. A company statement put this down to production cuts mandated by the US government. Approximately two-thirds of this fall came from gas production, due to reduced demand.
ExxonMobil CEO Darren Woods said: “The past year presented the most challenging market conditions ExxonMobil has ever experienced. While the effects of the pandemic significantly impacted our 2020 results, our previously executed strategic initiatives and reorganizations enabled us to respond decisively. These improvements are expected to deliver structural expense savings of $6 billion per year by 2023, relative to 2019.”
On Sunday, the Wall Street Journal reported that Woods spoke to Chevron CEO Mike Wirth about a possible merger of the two companies. The paper’s sources say that the talks were “preliminary” and no longer in progress, but could return in future.
BP posts losses of $20.3bn, emphasising “transformational year”
BP made a massive $20.3bn loss attributable to shareholders in 2020, compared to a $4bn profit in the full year of 2019.
Between October and December 2020, BP turned $115m profit, despite accounting a $710m loss due to asset depreciation. A company statement said that this “was impacted by a significantly weaker result in gas marketing and trading, and higher exploration write-offs”. This was in turn offset by lower tax charges and payments from the company’s stake in Rosneft increasing.
An earnings statement emphasised the company’s “transformation” in 2020, and the moves it has made toward renewable generation. CEO Bernard Looney announced a push to net-zero before the pandemic hit its operations, and its statement made mention of projects with Equinor and Ørsted.
As part of this “reinvention”, the company changed its organisational structure during the year, leading to 10,000 redundancies. The statement says that this will cost $1.4bn overall, with most costs paid out in the first half of 2021.
Looney said: “Our sector was hit hard. Road and air travel are down, as are oil demand, prices, and margins. We began reinventing BP – with nearly 10,000 people leaving the company. We strengthened our finances – taking out costs and closing major divestments. And through all of this, the underlying operations of the company remained safe – one of our safest years – and reliable, and major new projects were brought online.”
Royal Dutch Shell sees debt fall slightly in 2020
On Thursday, Shell posted a similar 2020 loss of $21.7bn, compared to a $15.8bn profit in 2019. This is Shell’s first annual loss since before 1990. Adjusted for “one-off factors” and the cost of supply, the company earned $4.8bn. This is less than one third of its earnings in the year before.
Approximately $4bn of the unadjusted losses came in the fourth quarter of 2020. While this hurt the company, it seems small when looking at the $18bn loss made in the second quarter of the year.
Across the year, raw earnings stood slightly above half of those in 2019. The company’s debt fell by nearly $4bn, though it still stands at $75.4bn.
Despite the losses, Shell raised its dividend for the fourth quarter. The company’s statement also said it expects to raise it again in the coming months.
Next week, Shell CEO Ben van Beurden will expand upon Shell’s plans to move toward renewable generation.
Van Beurden said: “We are coming out of 2020 with a stronger balance sheet, ready to accelerate our strategy and make the future of energy. We are committed to our progressive dividend policy and expect to grow our US dollar dividend per share by around 4% as of the first quarter 2021.”
Shell’s stock price took a hit after the announcement.