US giants Exxon, Chevron lose billions as demand for oil dries up

United States energy giants Exxon lost $1.1bn and Chevron lost $8.27bn in the second quarter as coronavirus lockdowns shuttered businesses and forced consumers to shelter in place, gutting crude demand in the US and around the world.  

Exxon, the Irving, Texas-based oil giant, brought in $32.6bn in revenue during the second quarter, less than half of what it brought in at the same time last year.

The quarter was one of the worst on record for the oil industry. A roughly 30 million barrel-a-day drop in global crude demand resulting from lockdowns and a halt in air travel was exacerbated by a price war initiated by Saudi Arabia.

In April, with the world awash in crude and storage space on land and at sea filling up, the price of US benchmark West Texas Intermediate crude turned negative for the first time ever as traders paid to have oil they had contracted for delivery taken off their hands rather than scramble for a place to store it.

Exxon announced that month that it would cut its capital spending budget by 30 percent to $23bn, and its cash operating expenses by 15 percent, in 2020.

On Friday, the company’s Senior Vice President Neil Chapman said it expects to spend less than $19bn next year, which would be the lowest for the company since at least 2005.

The past few months have presented unique challenges.

by Michael Wirth, CEO, Chevron

Oil prices have recovered somewhat since April’s historic rout, but have been stuck at about $40 a barrel for weeks. That is roughly 30 percent less than a barrel fetched a year ago and well below what most US producers need to cover their cost of production. 

As a result, the US oil industry has lost more than 100,000 jobs since February, with 45,000 of those shed by upstream oil and gas companies in Texas alone, according to Rystad Energy, a consulting firm.

“The global pandemic and oversupply conditions significantly impacted our second quarter financial results with lower prices, margins, and sales volumes,” said Darren Woods, chairman and CEO, in a statement on Friday. “We responded decisively by reducing near-term spending and continuing work to improve efficiency by leveraging recent reorganizations.”

Exxon Mobil Corporation produced 3.6 million barrels of oil-equivalent, down 7 percent from last year. That included a 12 percent drop in natural gas production.

Chevron Corp lost $8.27bn during the quarter, a sharp contrast to the $4.3bn it brought in during the same quarter last year.

The San Ramon-based oil giant brought in $13.49bn in revenue, about a third of what it brought in last year.

“The past few months have presented unique challenges,” said Michael Wirth, Chevron’s chairman of the board and CEO, in a statement. “The economic impact of the response to COVID-19 significantly reduced demand for our products and lowered commodity prices.”

Phillips 66, the Houston-based oil refining and logistics company, lost $141m during the quarter.