Exxon Mobil Corp (NYSE:XOM) issued a warning on Thursday, indicating an anticipated write-down of approximately $2.5 billion in California assets in the fourth quarter, coupled with reduced operating profits attributed to lower energy prices. The snapshot provided by the largest U.S. oil producer suggests a potential 30% decline in operating results to about $8.9 billion, in contrast to the $12.7 billion net profit recorded a year earlier and a 3% dip from the third quarter.
Exxon estimates a $2.4 billion to $2.6 billion impairment related to oil and gas properties off the Southern California coast. The company Sable Offshore, formed in 2020, had agreed over a year ago to acquire these assets for $643 million. Exxon cited challenges in the state’s regulatory environment as hindering progress in restoring operations at its Santa Ynez facilities near Santa Barbara. It had previously disclosed the sale of these properties for about $643 million in a highly leveraged deal to the startup company.
This write-down signifies another exit by major oil companies from California, citing the maturity of oilfields and the state’s stringent environmental and regulatory policies. Chevron criticized the state’s energy policies in December, labeling it a challenging place to invest and revealing significant spending reductions since 2022. Earlier this month, the second-largest U.S. oil producer announced potential write-downs of up to $4 billion in assets, predominantly in California.
Exxon also mentioned an expected impairment of about $250 million in its chemicals business. Despite these charges, RBC analyst Biraj Borkhataria anticipates that investors will view the update as neutral. The snapshot places the quarter’s net profit at approximately $9 billion, or $2.20 per share, according to Borkhataria.
The filing revealed that lower oil prices and a contraction in fuel margins would reduce Exxon’s operating profits by approximately $2.2 billion compared to the third quarter. On the positive side, higher natural gas prices are expected to contribute about $600 million to operating profits. Full results are scheduled for release on February 2, and Brent prices in the fourth quarter averaged $82.85, reflecting a 7% decrease from the year-ago period and a 4% decline from the third quarter.
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