IEEFA Investor Memo ExxonMobil (XOM): Company Is an ‘Outlier’ in How It Reports Write-offs on Canadian Oil Sands Assets
Loss Accounting ‘Largely Overlooked by Industry Analysts;’ Full Transparency Could Affect Balance Sheet by $22 Billion
April 17, 2017 (IEEFA.org) – The Institute for Energy Economics and Financial Analysis (IEEFA) today published an investor memo questioning whether ExxonMobil has appropriately accounted for its recent write-off of billions of barrels of Canadian oil sands assets.
In “ExxonMobil Investment Note,” IEEFA outlines how ExxonMobil remains the exception in the oil industry in its treatment of these write-offs.
“Most U.S. oil companies with significant holdings in Canadian oil sands have both de-booked these reserves and taken significant impairments on the value of these and other assets,” the memo states. “Such impairments totaled $200 billion in 2015 and $36 billion in 2016.”
“ExxonMobil remains an outlier in the industry in how it discusses Canadian oil sands losses. In its 10k filing in February 2017 the company de-booked 3.5 billion barrels of its oil sands reserves (leaving 700 million barrels on the books), but it did not take a parallel impairment in asset value — a fact that has been largely overlooked by industry analysts. IEEFA estimates that this value could be as much as $22 billion, or 6 percent of the value of the company’s long-lived assets.”
“ExxonMobil managers may have harmed the company by preparing the market for the de-booking write-down and then failing to take a value impairment,” the memo states. “A value reduction of the amount implied in this document would be considerable and would probably have an impact on ExxonMobil’s stock value.”
The memo follows research published in October by IEEFA that suggests ExxonMobil “may be in irreversible decline” (CNN Money) as its debt mounts and its profits fall (for additional coverage of the report, see also International Business Times, Oct. 27, 2016, “Oil Crisis: Low Prices Mean Exxon Mobil, World’s Largest Oil Company, May Be In A Death Spiral.”)
“Transparency is lacking,” said Tom Sanzillo, IEEFA’s director of finance and author of the memo. “Stockholders deserve better.”
Media contact: Karl Cates, firstname.lastname@example.org, 917.439.8225
About IEEFA: The Cleveland-based Institute for Energy Economics and Financial Analysis (IEEFA) conducts research and analyses on financial and economic issues related to energy and the environment. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.