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Photo: Andrew Harrer/Bloomberg As expected, COVID wrought havoc with earnings, leaving ExxonMobil with an enterprise-wide return on capital employed of minus 9.5%. But the real story was not in the income statement; it was the estimate of oil reserves. At the end of 2019, ExxonMobil claimed 22.4 billion barrels of oil reserves worldwide. Now, it claims just 15.2 billion barrels—a drop of more than 7 billion barrels, including 3 billion barrels in Canada and more than 1 billion in the U.S. Much of this decline was actually a “re-de-booking.” The company first struck its Canadian oil sands barrels from its ledgers in 2017, under scrutiny by the U.S. Securities and Exchange Commission after the company’s peers had renounced their oil sands reserves in 2015 and 2016. Two years later, ExxonMobil reversed itself, reclaiming the oil sands as viable reserves. Now, once again, the company admits its oil sands assets fail the financial tests needed to count as reserves. This pattern of de-booking and re-booking tells us that the oil sands reserves are economically marginal at best. When taken against ExxonMobil’s broader financial backdrop—including a $10 billion year-over-year cut in capital expenditures and a $60 billion increase in debt—it now […]
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