Up to 20% of the World’s Oil and Gas Reserves May no Longer be Viable if Low Oil Prices Continue: Exxon Mobil
Following grim second quarter results for many oil companies across the US and Canada brought on by alarmingly low oil prices and significantly reduced demand, it appears that for many the financial strain is far from over. According to energy giant Exxon Mobil, up to 20% of global oil and gas reserves may not be viable if current low oil prices persist for the remainder of the year.
In a regulatory filing released on Wednesday, Exxon Mobil warned that the continuation of low energy prices will cause some quantities of natural gas, crude, and bitumen to no longer fall under proved reserves by the end of 2020. The company projects that up to 20% of reserves may be impacted, which would translate to approximately 4.5 billion barrels of crude oil, which amounts to an 18-month supply for every refinery along the US Gulf Coast.
Since oil prices crashed as a result of the pandemic, many oil and gas companies had no choice but to write off billions of dollars worth of assets. The second quarter proved to be a disastrous one for Exxon, as it recorded its worst loss in history. Exxon posted losses of $1.1 billion, which is significant financial damage given that the company posted earnings of $3.1 billion in the second quarter only a year prior. Despite the record losses though, the oil giant is not planning to slash dividends for the time being- a move which is expected to cost the company upwards of $15 billion.
Exxon does however, plan to issue various cuts to jobs and pension matching contributions in order to remain afloat. Given that a significant portion of Exxon’s shareholders are retail investors, foregoing dividend cuts remains a priority for the company. Since the beginning of the year, Exxon’s stock price fell nearly 40%, echoing much of the same losses felt across the oil industry amid the coronavirus pandemic.
Information for this briefing was found via Exxon Mobil. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
