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ExxonMobil to Take $20 Billion in Upstream Charges in Q4

By Rich Duprey - Dec 31, 2020 at 9:51AM

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The company warns there may be more to come before it's finished.

ExxonMobil ( XOM -0.64% ) is warning investors that the pandemic is going to hit its exploration and production business hard in the fourth quarter, saying it will take between $18 billion and $20 billion in writedowns on its upstream assets.

And though it says that may not be the full scope of the charges that are taken when it finally does report its fourth-quarter earnings, the oil and gas giant tried to soften the blow by saying it expects higher oil, gas, and chemical prices will bolster the segment's earnings for the period. 

Oil pumps at sunset

Image source: Getty Images.

In a filing with the Securities and Exchange Commission, Exxon said that improved gas prices will increase earnings by $200 million to $600 million and upstream liquid-fuels pricing could lift them by as much as $400 million, while margins in its chemicals business could see an increase between $200 million and $400 million.

On the other side of the ledger, downstream refining margins could range between a $100 million decline to a $100 million increase while mark-to-market derivatives could negatively impact earnings by $100 million to $300 million.

ExxonMobil cautioned that the list of puts and takeaways it is providing is not comprehensive, and said that it "may not account for all adjustments and charges required to fully reflect the changes in industry conditions."

The company was hit hard by the coronavirus pandemic, which saw the travel and tourism industries crushed, leading to demand collapsing and oil prices plummeting. Pricing has recovered some since.

In response, Exxon dramatically scaled back its planned capital expenditures while focusing on preserving its dividend payment.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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