Exxon Writes Off Record Amount From Value of Assets Amid Energy Market Downturn

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An Exxon station in Hicksville, N.Y., in March. Exxon Mobil Corp. announced up to $20 billion in write-downs of natural gas assets, the biggest such action ever by the company.

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For many companies that’s a routine accounting practice after a price drop. But Exxon has long been an outlier, maintaining its plans are unchanged despite the adjustments made by its rivals. The company argues 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 even as climate concerns mount.

Even now, as it announces its largest-ever impairments, Exxon is not attributing the change to any underlying shift in price forecasts. Instead, it said it is dropping «less strategic assets from its plans.

Exxon has been criticized over the years for opting not to write down assets, with its natural gas assets recently singled out for particular scrutiny.

The company was also accused of improperly removing climate change risks from business calculations, including impairments; a court ruled that Exxon did not commit fraud.

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Andrew Logan, senior director of oil and gas at the sustainability nonprofit Ceres, works with investors who want to push fossil fuel companies to engage on issues of climate change. He said Exxon’s announcement is primarily an acknowledgement of a past strategic error, rather than a signal of any major shift going forward.

«The assets it is writing off require there to be massively higher natural gas prices to break even, and it has been clear for a while that the company would never be able to develop them, Logan said. «What is significant here is that the company is finally, begrudgingly, admitting this.

Exxon is continuing to make investments based on its prediction of a future where demand for oil grows for decades, Logan added.