There was a lot of news on Monday worth mentioning, from vaccine makers to electric vehicle stocks. However, one big new snippet from the oil sector went largely unnoticed by many traders. Exxon Mobile (NYSE: XOM) announced on Monday that it would be cutting back around 15% of its global workforce as part of an overall reorganization to save costs. This includes, among other things, a $20 billion writedown on some of its poor-performing assets.
The plan is to take a more gradual approach, with the company shedding 15% of its global workforce by the end of 2021. At the same time, Exxon said that it would be taking a one-time writedown of around $20 billion during Q4 2020 due to some of its poorer performing oil assets. In terms of the oil industry, this is one of the largest writedowns seen in a large energy company in recent history.
“Prices and margins for many of our businesses have improved from the third quarter and when coupled with continuing efforts to reduce spending and capture additional efficiencies, quarter-to-date cash flow has improved versus our plan assumptions,” said Darren Woods, CEO of Exxon in an official press release, trying to stay positive amidst the major layoff plans.
While a 15% global workforce cut is a big deal, Exxon’s been rather slow to make such a major announcement. In comparison, most large oil companies had taken these cost-cutting measures much earlier this year when oil prices were much lower.
Shares of Exxon Mobil were down around 5.2% over the course of the day in response to the news, a pretty big dip for such a large energy company. Since the beginning of 2020, Exxon’s stock has tumbled around 50% as demand for oil and gas remains lower than ever thanks to both the coronavirus, as well as the emergence of new oil supplies around the world.
This includes the Libyan oilfields, which are coming back online following a multi-year shutdown. This new influx of oil is coming in at perhaps the worst time in the industry’s history. However, despite this, oil prices have managed to inch up slowly but steadily to around the $45 per barrel price point, which is reasonable enough for big companies to make a profit from. Time will tell how the oil industry will fare in the long term, but for now, most analysts are expecting more bankruptcies of small to mid-sized oil companies across the country.
Exxon Mobil Company Profile
ExxonMobil is an integrated oil and gas company that explores for, produces, and refines oil around the world. In 2019, it produced 2.4 million barrels of liquids and 9.4 billion cubic feet of natural gas per day. At the end of 2019, reserves were 22.4 billion barrels of oil equivalent (including 3.8 billion for equity companies), 65% of which are liquids. The company is the world’s largest refiner with a total global refining capacity of 4.7 million barrels of oil per day and one of the world’s largest manufacturers of commodity and specialty chemicals. It operates its business divisions in North and South America, Europe, the Middle East, North and sub-Saharan Africa, and the Asia-Pacific. – Warrior Trading News
