ExxonMobil Says Covid Drove $1.1bn Q2 Loss
US supermajor ExxonMobil said July 31 the Covid-19 pandemic and the measures taken to slow its spread were the main drivers behind a $1.1bn loss in Q2 2020. Second quarter net earnings last year were $505mn.
Second quarter production averaged 3.6mn barrels of oil equivalent (boe)/day, down 7% from Q2 2019, with liquids production down 3% and natural gas production down 12%, the company said, reflecting the impacts of Covid-19 on global demand.
Global natural gas production available for sale averaged 7.99bn ft3/day in Q2 2020, down from 9.14bn ft3/day in Q2 2019 and from 9.4bn ft3/day in the first quarter this year. Most of the reductions were reported in Europe, where its Groningen output in the Netherlands continues to decline and it has sold assets; and Asia.
“The global pandemic and oversupply conditions significantly impacted our second quarter financial results with lower prices, margins, and sales volumes,” ExxonMobil CEO Darren Woods said. “We responded decisively by reducing near-term spending and continuing work to improve efficiency by leveraging recent reorganisations.”
Included in the second quarter loss was a positive non-cash inventory valuation of $1.92bn. Under last-in/first-out (LIFO) accounting principles, downstream product inventories are carried at the lower of current market value or cost, which in Q1 2020 resulted in a charge of $2.1bn as the book value of inventories were written down to their market value at the end of the quarter.
“The corporation’s results for the second quarter of 2020 include an after-tax earnings benefit of $1.92bn, mainly reflecting the partial reversal of the first quarter charge due to rising commodity prices,” ExxonMobil said.
Without the positive revaluation – what ExxonMobil refers to as an “identified item” – the second quarter loss would have been just over $3.0bn, compared to earnings, excluding identified items, of $2.62bn a year ago.
Revenue in the second quarter fell to $32.6bn from $69.1bn in the comparable 2019 quarter, while total costs and other deductions were reduced to $34.2bn from $64.4bn. That left a pre-tax (Ebitda) loss of $1.64bn compared to Ebitda of $4.6bn in Q2 2019.