Exxon Mobil Corp posted its third straight quarterly loss yesterday and detailed deeper spending cuts to come, as the oil major reels from the Covid-19 pandemic’s impact on energy demand and prices.
The largest US oil producer by volume said it will slash its capital spending for 2021 to between $16bn and $19bn, a cut of as much as 30% from this year’s plan.
The move signals the company will continue to fight to protect its rich shareholder dividend payout, now yielding 11%, by delaying projects.
Its 2021 spending plans are lower than rival Royal Dutch Shell’s.
It also said it was reassessing its natural gas holdings in North America and could take impairments on assets with a book value of as much as $25bn to $30bn – but only if it changes its long-term development plans.
It is evaluating those assets this quarter, which include properties it added with its 2010 purchase of XTO Energy, a deal worth roughly $30bn at the time.
Exxon beat expectations with an adjusted loss of 18 cents per share, Analysts had expected a loss of 25 cents per share, Refinitiv Eikon data showed.
Oil companies last quarter continued to suffer from weak prices for their products, but rivals Chevron, Royal Dutch Shell and BP Plc also posted higher-than-expected results after deep cost cuts this year.
“We remain confident in our long-term strategy and the fundamentals of our business,” said Chief Executive Darren Woods, adding that Exxon would continue to protect its shareholder dividend.
It has spent about $16.5bn this year on new projects and had planned around $23bn for the full year.
The potential write down of shale gas “has been looming large for some time” and would “draw a line in the sand on the poor timing around its XTO acquisition a decade ago,” said RBC Capital Markets analyst Biraj Borkhataria.
Exxon’s third-quarter net loss was $680mn, or 15 cents per share, compared with a profit of $3.17bn, or 75 cents per share, a year earlier.
Shares on Wednesday morning traded at $32.76, down a fraction.
Exxon’s chemicals business regularly generated $1bn in quarterly profit as recently as 2018.
Its refining business reported a loss of $231mn, compared with profits of $1.2bn last year, on lower margins and weaker conditions for refiners as the pandemic eats into travel.
Novo Nordisk
Danish pharma giant Novo Nordisk, the world’s leading insulin maker, said yesterday that its bottom-line profits rose in the third quarter, even as the coronavirus pandemic weighed on the number of patients starting treatment.
For the period from June to September, Novo Nordisk said it booked net profit of 10.29bn Danish kroner ($1.61bn, 1.38bn euros), up 1% from a year earlier.
Revenue grew 2% to 30.92bn kroner, the company said in a statement, noting that the pandemic negatively impacted growth “as fewer patients initiated treatment.”
Earlier this month, the company had upgraded its forecast for 2020 on the back of a “continued robust sales performance.”Novo Nordisk commands 47% of the world’s insulin market.
And according to the International Diabetes Federation, there are roughly 463mn adults with diabetes, a number that is expected to rise to 700mn by 2045.
Air France-KLM
Air France-KLM said yesterday that the coronavirus pandemic pushed it deep into the red in the third quarter as international travel restrictions caused passenger numbers to plummet, adding that the situation was expected to remain “challenging” in the final quarter.
The airline group said in a statement it booked a net loss of 1.7bn euros ($1.9bn) in the three months to September, compared with profit of 363mn euros in the same period a year earlier.
“The continuation of the Covid-19 crisis severely impacted our third-quarter results,” Air France-KLM said.
Following the lifting of the lockdown in the spring, Air France-KLM observed “a positive demand recovery trend until mid-August,” the statement said.
But then, “the negative trend reversal for the passenger activity led (our) airlines to adjust downwards the capacity planned for the fall and winter period,” the carrier explained.
“There is limited visibility on the demand recovery curve as customer booking behavior is much more short-term oriented and also highly dependent on the imposed travel restrictions, especially on the long-haul network.”
And with France now re-entering lockdown to try to stem a second wave of virus infections, that would represent “a new difficulty that will weigh on the group’s activities.”
Third-quarter revenues nosedived to 2.5bn euros, from 7.6bn euros a year earlier.
And passenger numbers were down 70% at 8.8mn.
NatWest
British state-owned bank NatWest, formerly known as the Royal Bank of Scotland, said yesterday that it rebounded into third-quarter profit on lower charges and impairments, and despite “challenging” virus-hit trade.
Profit after taxation stood at £61mn ($79mn, 68mn euros) in the three months to the end of September, after a year-earlier net loss of £315mn sparked by compensation for mis-selling credit insurance.
However, revenues declined by 16.5% in the reporting period to £2.4bn.
NatWest noted the “continued significant economic uncertainty” but added that it expected total annual impairments to be “at the lower end” of its forecast range of between £3.5bn and £4.5bn.
“These results demonstrate the resilience of our underlying business and the strength of our balance sheet in the face of significant continued uncertainty,” said chief executive Alison Rose.
“Our sector-leading capital position, strong levels of liquidity and intelligent and consistent approach to risk mean we can continue to provide our customers and communities with the support they need.”
Rose warned however that overall impact of the coronavirus pandemic on the group’s performance remains uncertain.
And she cautioned that tighter restrictions and the withdrawal of some government stimulus would lead to more challenging trade.
“Although impairments were relatively low in the quarter and we have seen some positive trends across our customer base, the full impact of Covid-19 remains very unclear,” Rose said.
“Challenging times lie ahead, especially as the current government support schemes come to an end and as new Covid-19 related restrictions are introduced. “We continue to deliver well against our strategy, building a bank that champions potential and has the capability to grow.” Rose was appointed around one year ago, becoming the first female CEO of a major UK lender.
Japan Airlines
Japan Airlines said yesterday it had forecast an annual net loss of more than $2.3bn after the coronavirus pandemic grounded air travel around the world.
The carrier, Japan’s second-largest by market share, said it expected a net loss of 240-270 bn yen for the year ending March 2021.
It did not issue annual forecasts when it published first quarter earnings in August, citing deep uncertainty surrounding the pandemic.
“The airline industry has been...affected in an unprecedented way and fallen into very difficult circumstances” due to the pandemic, the company said in a statement.
“Many countries and areas still show no sign of slowing down the spread (of infection), which makes the recovery of international passenger demand difficult to predict,” it added.
Japan Airlines suffered a net loss of 161bn yen in the April-September period, plummeting from a 54.2bn yen profit for the same period a year ago.
Sales plunged 74.0% to 194.8bn yen while it reported an operating loss of 224bn yen.
The airline said domestic demand was beginning to pick up but it will “take more time...to make a full recovery.” Its announcement came after the country’s biggest carrier, ANA Holdings, earlier this week forecast a record $4.87bn net loss for this financial year.
IAG
IAG, the owner of British Airways and Spanish carrier Iberia, dived into a net loss of 1.76bn euros ($2.1bn) in the third quarter on coronavirus fallout, it said yesterday.
The loss after taxation in the three months to September contrasted with net profit of 1.0bn euros a year earlier, IAG announced in a statement.
IAG added that its losses so far this year totalled 5.6bn euros as a result of the worsening Covid-19 crisis that has decimated demand for global air travel.
The company resumed flights over the summer, following the national lockdown, but still only operates a greatly reduced volume of services.
Revenue plunged 83% to 1.2bn euros in the reporting period, according to IAG which had already outlined its dire quarterly performance last week.
The group repeated on Friday that it suffered an operating loss before exceptional items of 1.3bn euros, after profit of 1.4bn euros a year earlier.
“These results demonstrate the negative impact of Covid-19 on our business but they’re exacerbated by constantly changing government restrictions,” said IAG chief executive Luis Gallego.
“This creates uncertainty for customers and makes it harder to plan our business effectively.” IAG urged governments worldwide to embrace pre-departure testing to enable safer air travel.
“We are calling on governments to adopt pre-departure testing using reliable and affordable tests with the option of post flight testing to release people from quarantine where they are arriving from countries with high infection rates,” said Gallego.
“This would open routes, stimulate economies and get people travelling with confidence.
When we open routes, there is pent-up demand for travel. However, we continue to expect that it will take until at least 2023 for passenger demand to recover to 2019 levels.”
New British Airways chief executive Sean Doyle has already urged the UK government to end the quarantining of passengers arriving from abroad.
BA, which is slashing thousands of jobs, earlier this month announced the sudden departure of Doyle’s predecessor Alex Cruz.
The European travel giant, whose portfolio also includes Aer Lingus, Level and Vueling, is in the process of axing 13,000 jobs or more than a quarter of its workforce.
Total
Oil and gas giant Total said yesterday it sustained a steep drop in profits in the third quarter as a result of the falling price of crude, but it still managed to remain in the black.
Total said in a statement that its bottom-line net profit plummeted 93% to $202mn in the three months to the end of September.
Adjusted for a number of one-off items, after-tax earnings were down 72% at $849mn, it said.
“After a second quarter in which we faced exceptional circumstances with oil prices falling below $20 per barrel and a very strong slowdown of global activity linked to the health crisis, Total benefited during the third quarter from a more favourable environment,” said chief executive Patrick Pouyanne.
Oil prices moved back above $40 thanks to Opec countries and other oil producing nations sticking to their agreement to curb output and another positive factor was a recovery in demand for petroleum products for road transportation, he said.
Nevertheless, the environment remains “mixed with low natural gas prices and severely depressed refining margins due to excess production capacity relative to demand and high inventories”, Pouyanne said.
Total said its own output fell by 11% to 2.715mn barrels per day in the third quarter, largely as a result of the Opec+ deal aimed at propping up crude prices.
It said it projecting annual output to be below 2.9mn bpd for the whole of 2020.
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