Oil industry analysts expect ExxonMobil to scale back its global operations amid weak oil and gas demand and pricing caused by the COVID-19 pandemic. At the same time, investors are worried that Exxon may consider cutting the dividend to ease its financial burden. When taking the company’s CEO position, Darren Woods visioned a relentless global expansion by betting on US shale oilfields, pipelines, global refining, and plastic production.
The company also bet on offshore oilfields in Guyana and LNG projects in the US, Mozambique, and Papua New Guinea. However, the coronavirus pandemic appears to have strained the oil giant’s financial muscles. Analysts estimated a massive shortfall of about $48 billion through 2021. This year, the company raised $23 billion in loans, which almost doubled its outstanding debt. Such a shortfall is expected to force the company to carry out a worldwide review to cut expenses and even cut the previously sacrosanct dividend.
According to the analysts, Exxon will likely cut spending in the Permian Basin shale field from the initial budget of $7.4 billion to around $3 billion. It has previously said that it would reduce its Permian rigs from 55 to 15 or fewer. Financial constraints may also prompt the company to divest some of its oil, refining, and plastics assets. Analysts with ScotiaBank and RBC Capital Markets expect Exxon’s project outlays to halve to $10.4 billion-$15 billion in 2021.
Exxon owns a 30% stake in a $10-billion LNG facility in Texas which has progressed slowly, with startup expected to delay to 2025 at the earliest. It is unlikely to make a final investment decision on a massive LNG project in Mozambique until 2023. Low prices are also likely to delay expansion at Exxon LNG exports in Papua New Guinea. Other operations that Exxon may reduce includes offshore activity in Mexico and the $1.9 billion expansion of its Beaumont refinery in Texas.
