Exxon Anticipates Earnings To Rise Two-Fold By 2027 As It Slashes Spending, Eliminates Assets

Exxon Mobil Corporation XOM is reassessing its outlook — by cutting costs and impairing assets — after the COVID-19 outbreak led to a cumulative loss of around $2.4 billion in the first three quarters of the year.

In a statement on Monday, the Oil and Gas company disclosed plans to cut down spending till 2025 and added that it may slash its assets under the developmental plan by $20 billion in the fourth quarter.

Spending Target Guidance Till 2025: The forecasted spend in capital and exploration investments next year is estimated in the range of $16 billion to $19 billion, and annual expense in the range of $20 billion to $25 billion, between 2022 to 2025.

The latest announcement is in contrast to Exxon’s earlier plans for increasing spending to accelerate production levels, the Wall Street Journal noted. The company had earlier announced plans for $30 billion in capital expenditures annually through 2025.

Exxon anticipates earnings to increase two-fold by 2027, based on a constant price and stable margin assumptions listed on the 2020 Investor Day.

The company will retain investment focus in assets with the highest future value, which includes sites in Guyana, the Permian basin in the U.S., and Brazil. It will also invest in certain chemical projects.

Asset Impairment: Exxon will monetize or eliminate assets of a lesser strategic value from its developmental plan. Most of these consist of dry gas assets from the Appalachian and Rocky Mountain territory in Oklahoma, Texas, Louisiana, and Arkansas. Outside the United States, assets in Western Canada and Argentina could also be removed.

Along with the asset impairment, the compensation committee of the company’s board of directors has opted to suspend the 2020 bonus program for eligible employees. However, Chairman and CEO Darren Woods hinted that the reliable dividend would remain unchanged.

Price Action: Between January and the end of the third week of March, the Texas-headquartered company’s stock fell around 56% touching a 52-week low price of $30.11 on Mar. 23. On a year-to-date basis, the stock is down 46%.

Exxon shares last closed 5.13% lower at $38.13 on Monday.

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