Latest update November 15th, 2024 1:00 AM
ExxonMobil planning for slow market recovery
For the time being, there remains a lot of uncertainty on the timing of recovery for the oil industry. But ExxonMobil’s Chairman and Chief Executive officer (CEO), Darren Woods says the American oil giant is planning for a slow revival as it takes time to restart businesses and for consumers’ confidence to grow.
ExxonMobil CEO, Darren Woods
The official made these and other statements during his company’s recently held 2020 first quarter earnings call. Woods said that hopefully, market recovery happens faster than expected but for the full year, estimates range from a loss of four million to 12 million barrels per day. Woods said he expects it to be on the higher end of the range.
Woods also shared his take on the announced production cuts of OPEC+ totaling about 13 million barrels per day. Woods said that these are indeed significant. He noted however that it is still insufficient to offset the loss in demand for oil. The CEO said, “…Bottom line here, it’s going to be a very challenging summer with a pretty sloppy market as we move into the back half of the year.”
Taking this into consideration, Woods said that ExxonMobil has adjusted its plans to a low price and margin environment through year-end. He said, “Our price projections tend to be at the low end of third-party estimates. But once again, I hope we’re surprised with a quick recovery, which we have not ruled out particularly given our ongoing experience in China.”
While it is still early days, Woods said that there are some reasons to be cautiously optimistic as signs of demand and economic activity are beginning to pick up in China with April sales in three of its key businesses back in line and slightly above the same period last year. Woods told participants during the earnings call that it is too early to tell if this initial rebound will be sustained, or if it reflects the broader economy, or if it is even relevant to other economies around the world, given the range of government responses and policies.
Nonetheless, the CEO said he finds it somewhat encouraging as it supports what he knows will be true in the medium to long term. In this regard, Woods said, “Economies will recover. However in the short term, we need to compensate for the significant loss in demand and revenue, which is why we announced a 15% reduction in cash Operational Expenditure (OpEx) and a 30% reduction in Capital Expenditure ( CaEx) for 2020.”
The ExxonMobil official was keen to note that spending will be maintained on activities that are critical to the integrity of the company’s operations, the safety of its people and the protection of the environment. He said too that the company is focusing on capturing additional efficiencies and lower market prices, deferring less critical spend and prioritizing quick payout items.
As the year progresses, he said that ExxonMobil expects to see further reductions to achieve its projected targets.
He said, “We set an aggressive objective, reduce spend without compromising the project advantages or returns. Any inefficiency had to be offset with market savings or other efficiencies. I’m very pleased with the work we have done to date.”
To date, ExxonMobil has been able to identify opportunities to reduce CapEx by 30% down to US$23 billion and more than offset deferral costs while preserving returns and project advantages.
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