Exxon Mobil to Write Down $2.5 bn in California Assets, Warns of Reduced Operating Profits

Exxon Mobil business

Exxon Mobil has issued a cautionary note, announcing a projected write-down of approximately $2.5 billion concerning California assets in the fourth quarter. The largest U.S. oil producer cited lower energy prices as a contributing factor in the decline of its operating profits.

A preliminary overview by the energy behemoth indicates a potential drop in operating results to around $8.9 billion. This marks a substantial 30 percent decrease from the $12.7 billion net profit recorded a year ago and a 3 percent downturn compared to the third quarter’s performance.

Exxon’s assessment forecasts a write-down ranging between $2.4 billion to $2.6 billion, primarily impacting oil and gas properties along the Southern California coast. The assets were acquired by Sable Offshore, a company established in 2020, which had previously agreed to a $643 million deal for these holdings.

Exxon Mobil acknowledged challenges within the state’s regulatory landscape, hindering efforts to restore operations at its Santa Ynez facilities near Santa Barbara. Notably, these properties were previously disclosed for a $643 million sale to a startup company, a transaction structured with high leverage.

This write-down underscores a trend of major oil firms divesting from California due to the maturity of oilfields and the stringent regulatory and environmental policies of the state.

Chevron, in December, criticized the state’s energy policies for creating a challenging investment climate, leading to a substantial reduction in spending since 2022. Earlier this month, the second-largest U.S. oil producer announced intentions to write down up to $4 billion in assets, primarily concentrated in California.

Additionally, Exxon Mobil revealed an anticipated impairment of approximately $250 million within its chemicals business.

Despite these substantial charges, RBC analyst Biraj Borkhataria expects investors to perceive the update as neutral. Borkhataria interpreted the snapshot as placing the quarter’s net profit at approximately $9 billion or $2.20 per share, Reuters news report said.

The filing highlighted that lower oil prices and a contraction in fuel margins are likely to reduce Exxon’s operating profits by around $2.2 billion compared to the third quarter. However, an increase in natural gas prices is anticipated to contribute about $600 million to operating profits.

Exxon Mobil’s full financial results are slated for release on February 2. During the fourth quarter, Brent prices averaged $82.85, marking a 7 percent decline from the same period last year and a 4 percent drop from the preceding quarter.