© Reuters. Cars are seen at an Exxon gas station in Brooklyn, New York City, U.S., November 23, 2021. REUTERS/Andrew KellyFile Photo
By Sabrina Valle
HOUSTON (Reuters) -Exxon Mobil Corp warned on Thursday it would write down about $2.5 billion of California assets in the fourth quarter, and said lower energy prices reduced operating profits.
The snapshot by the largest U.S. oil producer showed operating results could drop to about $8.9 billion, down 30% from the $12.7 billion net profit a year earlier, and 3% weaker than in the third quarter.
Exxon (NYSE:) estimated taking a $2.4 billion to $2.6 billion impairment to oil and gas properties along the Southern California coast. Sable Offshore, a company created in 2020, agreed more than a year ago to pay $643 million for the assets.
“Continuing challenges in the state regulatory environment have impeded progress in restoring operations” at the company’s Santa Ynez facilities near Santa Barbara, it said. It had previously disclosed the properties would be sold for about $643 million in a highly leveraged deal to a startup company.
The writedown marks another exit by large oil companies from California over the relatively mature oilfields and the state’s environmental and regulatory policies.
Chevron (NYSE:) in December blasted the state’s energy policies as having “made it a difficult place to invest” and leading it “reduce spending by hundreds of millions of dollars since 2022.” Earlier this month, the second largest U.S. oil producer also said it would write down up to $4 billion in assets, primarily in California.
Exxon also indicated it will take an impairment of about $250 million in its chemicals business.
Despite the charges, RBC analyst Biraj Borkhataria expects investors will view the update as neutral. The snapshot puts the quarter’s net profit at about $9 billion, or $2.20 per share, he said.
Lower oil prices and a contraction in fuel margins will slash Exxon’s operating profits by about $2.2 billion compared to the third quarter, the filing showed. Higher prices should add about $600 million to operating profits.
Full results are expected on Feb. 2.
prices in the fourth quarter averaged $82.85, down 7% from the year-ago period and a 4% decline from the third quarter.