Exxon Mobil Faces Potential Asset Write-Down in California
Exxon Mobil is considering a write-down of up to $2.6 billion on its California assets, primarily stemming from regulatory challenges and a dormant offshore oil and gas field. Chevron also faces a potential charge of up to $4 billion.
Troy D. Hanson
January 05, 2024
Exxon Mobil announced on Thursday that it might write down the value of its California assets by up to $2.6 billion, according to a filing with the Securities and Exchange Commission.
The potential writedown, estimated between $2.4 billion and $2.6 billion, primarily pertains to the company's upstream division and is mainly attributed to idle upstream Santa Ynez Unit assets and associated facilities located in California.
Exxon stated that despite its ongoing efforts to restart production, challenges in the state regulatory environment have hindered progress in restoring operations.
The offshore oil and gas field has remained dormant since a pipeline spill occurred in 2015. However, Sable Offshore has expressed interest in acquiring and reviving operations from the field. Flame Acquisition Corp., a special purpose acquisition company (SPAC) attempting to acquire Sable Offshore, recently postponed the closing date of the Exxon-Sable deal until February 1.
Chevron, another major player in the industry, also recently announced a potential charge of up to $4 billion. The company cited not only California policies but also issues related to the Gulf of Mexico.
Exxon additionally indicated that its earnings would decrease compared to the third quarter. The company anticipates a decline of up to $800 million in upstream profits due to changes in oil prices and a decrease of up to $1.7 billion in its energy products division resulting from changes in industry margins. However, the energy products division stands to benefit by as much as $1.4 billion from unsettled derivatives.
Although Exxon shares experienced a slight increase during premarket trading, they have declined by 7% over the past 52 weeks, while the lead oil futures contract has only seen a 1% decline.