Hit by pandemic, oil giants Exxon, BP post huge losses
What's the story
Oil giants Exxon and BP reported staggering losses for 2020 on Tuesday as the pandemic crushed energy demand and undercut oil prices.
Exxon Mobil Corporation reported the largest losses in its history, nearly $20.1 billion for the fourth quarter, including more than $19 billion to write down the value of company assets. For the full year, it lost $22.4 billion.
COVID-19
Oil companies hope COVID-19 vaccines will return normalcy
BP PLC posted a profit of $825 million in the fourth quarter but still lost $18.1 billion in 2020. The results came after Chevron reported last week that it lost $5.5 billion last year.
Oil companies are hoping that the rollout of COVID-19 vaccines will mean a return to normal life for businesses and consumers, which would boost demand for oil and natural gas.
Information
Indications that oil companies will see better results this year
Signs point to better results for the oil giants this year. Crude prices are up roughly 50 percent in the past three months, including a gain of more than ten percent since January 1, as major producers led by Saudi Arabia have cut output.
Energy demand
Industry reported simultaneous lows for the first time
Energy demand slumped last year as COVID-19 led to lockdowns and a drop in energy for uses such as transportation.
"Energy consumption collapsed as economies shut down, oil prices hit their lowest point in history, and refining margins fell below ten-year lows," said Exxon CEO, Darren Woods.
"It was the first time in memory that we saw simultaneous lows in our businesses," he said.
Exxon
Texas-based Exxon is responding by cutting costs
Irving, Texas-based Exxon is responding by cutting costs. It expects by 2023 to cut $6 billion in annual spending compared with 2019 levels.
Exxon's big fourth-quarter loss contrasted with a $5.7 billion profit a year earlier. Excluding the massive write-downs and impairment costs, the company said it earned three cents per share.
Analysts expected a penny per-share profit, according to Zacks Investment Research survey.
Emissions
Will reduce greenhouse gas emissions from our own operations: Exxon
Revenue dropped 31 percent to $46.5 billion.
Exxon has long been under pressure from activist shareholders to focus on renewable fuels and pivot away from its fossil-fuel legacy.
The company said on Tuesday, it will reduce greenhouse gas emissions from its own operations and has created a division to commercialize technology it hopes to develop to capture carbon emissions before they enter the atmosphere.
Shareholder value
'Exxon's announcements don't position it to succeed in changing world'
However, investment firm Engine No. 1 said Exxon's announcements don't change the company's long-term course nor do they position it to succeed in a changing world.
The fund said Exxon is headed for decades of destroying shareholder value by assuming that oil and gas production will continue to grow even in the face of efforts to reduce climate change.
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BP's goal of net-zero production of carbon emissions by 2050
Engine No. 1 has nominated four candidates for Exxon's board of directors to be chosen in May. Meanwhile, London-based BP last year announced it seeks to become a net-zero producer of carbon emissions by 2050 but new oil and gas projects are still being operated.