ExxonMobil’s nightmarish 2020 just got worse.
It’s yet more evidence of how badly Exxon erred when it acquired natural gas giant XTO Energy for $41 billion in late 2009. Roughly half of that deal’s value has now been erased. The natural gas market is depressed, with gas trading at about $3 per million British thermal units — less than half the price at the time Exxon swooped in to buy XTO. Natural gas peaked in late 2005 at more than $15 per million BTU. But today the world has a glut of natural gas due to the shale boom that unlocked vast amounts of fossil fuels in the United States. Exxon’s «colossal gas asset impairment» is management’s «clearest acknowledgement to date that the XTO deal was an epic failure — not that any reminders of this are needed,» Raymond James analyst Pavel Molchanov wrote in a note to clients Tuesday. The bulk of the writedown covers properties in Appalachia, the Rockies, Texas, Oklahoma, Louisiana and Arkansas that were acquired in the XTO deal. The rest of the charge is for overseas gas properties in western Canada and Argentina. Exxon is hardly the only oil company forced to whittle down the value of its fossil fuel properties. Over the past year, Chevron (CVX), BP (BP) and Shell (RDSA) have all taken massive writedowns. But not only is Exxon slashing the value of its natural gas portfolio, the company has completely removed some of these gas properties from its development plan.
