ExxonMobil Writedowns Speak to Broader Issues

ExxonMobil Corp. has been criticized for many years for not writing down assets. That is until last year, when it wrote down $17 to $20 billion in natural gas assets, the largest it has ever made.

The assets were located in the U.S., Canada and Argentina. Many of the U.S. assets were acquired a decade ago when ExxonMobil engaged in a poorly timed $41-billion deal to expand its natural gas holdings.

Many oil companies announced writedowns last year after oil and gas prices dropped sharply because of COVID. These companies make investments based on predicted commodity prices and price drops such as what occurred last year, which can make a planned project suddenly unprofitable.

For many companies, taking projects off the books as an impairment or write-down is a routine accounting practice after a price drop. But ExxonMobil has long been an exception, maintaining its plans are unchanged despite the adjustments made by rivals. The company says it makes investments based on long-term strategies that are not affected by short-term prices.

And while some companies are starting to factor in long-term reductions in oil demand due to climate action, Exxon maintains that demand for petroleum will remain robust and is not attributing the change to any price forecast shifts. Instead, ExxonMobil says it dropped “less strategic assets” from its plans.

The company on Tuesday reported an annual loss of $22.4 billion, its first since the 1999 merger that created ExxonMobil.

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