Daily Management Review

Analysts: 2020 is the worst year for the oil industry in 10 years


The Wall Street Journal reports that 2020 has been the worst year for oil companies in at least a decade. In the first nine months of this year alone, oil producers were forced to write down about $145bn worth of assets.

To compare, during the same period in 2015, when oil quotations fell by half compared with early autumn 2014, oil companies wrote off assets worth $72.1bn, which is half the amount written off in 2020. 

The statistics for the first nine months of this year do not include ExxonMobil's $20 billion write-down, which will occur in the fourth quarter, or Chevron's $10 billion write-down, recorded at the very end of 2019.

This year's massive write-downs were triggered by the COVID-19 pandemic, which collapsed energy demand back in the spring due to massive production closures around the world, as well as a price war between OPEC and Russia, which for months could not agree on further cuts in oil production to stabilise market prices.

Royal Dutch Shell, BP of the UK and Total of France were the most aggressive in abandoning their own projects. They have accounted for around a third of the total oil market write-downs this year. 

US offshore producers Concho Resources and Occidental Petroleum have written off more assets in the last nine months than in the previous four years combined. In total, the amount of assets written off this year is already about 10% of the market capitalization of all global oil companies worth more than $1 billion.

source: wsj.com