Inventory impairments push ExxonMobil to Q1 Loss

Non-cash charges totalling nearly $2.9bn related to tumultuous global oil and gas markets in the midst of the Covid-19 pandemic and in the wake of the Saudi-Russia price war pushed US supermajor ExxonMobil to a $610mn loss in Q1 2020, the company reported May 1.

Earnings excluding identified items were $2.273bn, of which upstream contributed $536mn, after deducting a loss in the US of $704mn from earnings of $1.24bn from the rest of the world. 

About half the total non-cash charges – about $1.53bn – were from ExxonMobil’s non-US downstream operations, and related primarily to inventory valuations and asset impairments under the company’s last-in/first-out inventory accounting practice. Total downstream inventory charges amounted to nearly $2.1bn.

A year ago, the company reported quarterly earnings of $2.35bn; in Q4 2019, profit was nearly $5.7bn. Cash flow from operating activities was $6.3bn, but the company provided no year-ago comparable.

“Covid-19 has significantly impacted near-term demand, resulting in oversupplied markets and unprecedented pressure on commodity prices and margins,” CEO Darren Woods said. “While we manage through these challenging times, we are not losing sight of the long-term fundamentals that drive our business. Economic activity will return, and populations and standards of living will increase, which will in turn drive demand for our products and a recovery of the industry.”

Oil-equivalent production rose 4mn b/d, up 2% from a year ago, with a 7% increase in liquids partly offset by a 5% drop in gas production. Natural gas production available for sale averaged 9.4bn ft³/day, down from 9.9bn ft³/day in Q1 2019.

As previously reported, ExxonMobil is reducing 2020 capital spending by 30% and cash operating expenses by 15%. Capex is now expected to be $23bn for the year – spending in Q1 totalled $7.1bn – down from previous guidance of $33bn.