New York CNN Business  — 

ExxonMobil lost $22.4 billion in 2020, its first annual loss since the 1999 merger that created the nation’s largest oil company.

It’s the latest company to report its worst year on record during the Covid-19 pandemic.

The fossil fuel industry has suffered from a plunge in oil prices as stay-at-home orders around both the nation and the world caused the biggest drop in oil use on record – and oil producers in Russia and Saudi Arabia simultaneously flooded the world with excess supply in a production dispute that lasted for months.

In April, oil prices were trading on global markets at a negative price, as oil producers and traders were having to pay to store all of the excess oil rather than being able to sell it.

Annual revenue at ExxonMobil plunged $83.4 billion, or 31.5%, to $181.5 billion.

“The past year presented the most challenging market conditions ExxonMobil has ever experienced,” CEO Darren Woods said on a conference call.

The company has taken cost-cutting and reorganization steps that will help Exxon be in better shape going forward, Woods said. Those moves are expected to save the oil giant $6 billion per year by 2023, compared to before the pandemic. It also slashed capital spending to $21.4 billion, which is 35% lower than initially planned for the year.

Exxon said it should be able to keep paying a dividend to investors, as it did throughout 2020 – a time when other companies discontinued their dividends due to mounting losses.

Digging into the results – and effect of writedowns

The company’s $22.4 billion net loss was largely the result of writedowns in the value of its assets. Even excluding those writedowns, Exxon would have lost $1.4 billion for the year, compared to a profit of $9.6 billion on that basis in 2019.

Excluding special items, the company reported a fourth-quarter net loss of $20.1 billion. But that was greatly due to the writedowns.

Exxon reported an adjusted income of $110 million excluding special items, a fraction of the $1.8 billion it made a year-earlier, but still the first profitable quarter it recorded for the year.

The fourth-quarter results were slightly better than forecast and ExxonMobil shares were up nearly 4% in midday trading.

Exxon’s stock had fallen 41% over the course of 2020, but shares have rebounded about 9% so far this year on hopes for a recovery in the global economy and a rise in oil prices after OPEC and Russia agreed to continue to limit production. Analysts are forecasting that ExxonMobil should stay profitable in every quarter of 2021, and into the foreseeable future.

The Wall Street Journal reported Monday that there had been discussions between ExxonMobil and Chevron (CVX), the nation’s No. 2 oil company, about a possible merger. Woods said while the company continues to consider merger and acquisition opportunities, he declined to comment on the report during the company’s conference call Tuesday.

Exxon also announced it would name a new board member – Tan Sri Wan Zulkiflee Wan Ariffin, the former CEO of the Malaysian oil company Petronas. It said it is also talking to other potential new board members.

But the company is facing a proxy fight by an activist investor group, Engine No. 1, which last week nominated four candidates for the board. Engine No. 1 argues that ExxonMobil is not making the necessary adjustments to respond to the changing long-term outlook for the global energy industry.

“A board that has underperformed this dramatically and defied shareholder sentiment for this long has not earned the right to choose its own new members or pack itself in the face of calls for change,” said a statement from Engine No. 1 on Tuesday. “For years ExxonMobil has pursued spending and strategic plans that position it to succeed only in the absence of a material long-term energy demand shift, and it remains positioned for continued value destruction for decades to come under alternate scenarios.”
The industry faces challenges around the world to cut carbon emissions in order to combat climate change. The United States rejoined the Paris climate accord on President Joe Biden’s first day in office. He also has halted new oil and gas leases on federal lands.

Electric vehicles are widely seen as the future of the auto industry, as major automakers such as Volkswagen (VLKAF) shift their future production plans to EVs. General Motors (GM) announced last week it hopes to no longer sell gasoline-powered cars by 2035.

In response to the pressure to reduce carbon, ExxonMobil announced Monday that it had created a new business to commercialize its technology to pull carbon out of the atmosphere, and that it would invest $3 billion on lower emission energy solutions through 2025.

“Carbon capture storage is a critical element to achieving the ambitions of the Paris agreement,” said Woods.

ExxonMobil captured 120 million tons of carbon last year, which Woods said is equivalent to taking more than 25 million passenger vehicles off the road. But Engine No. 1 said counting on carbon capture is the wrong approach for the company’s long-term outlook, and that it should instead make more significant investments in clean energy in order to profitably diversify.

“It is … poor long-term planning to rely almost exclusively on the idea that carbon capture will become scalable and affordable soon enough to allow for continued oil and gas production growth for decades to come under a Paris-compliant trajectory,” the group said.