Exxon Mobil announced it would take its largest-ever writedown and slash capital spending amid the continuing fallout from the sharp decline in oil demand and prices from the COVID-19 pandemic.

The biggest U.S. oil producer by volume said it would write down the value of natural gas properties in western Canada, the United States, and Argentina by $17 billion to $20 billion. The assets include those it acquired for $30 billion from U.S. shale producer XTO Energy in 2010.

The writedown “lays bare the size of the miscalculation that the company made in [acquiring XTO] as natural gas prices went into a decade-long decline,” according to Reuters.

On the capex side, Exxon said it would spend $16 billion to $19 billion next year and then $20 billion to $25 billion annually until 2025, down from an original budget of $30 billion to $35 billion.

“Continued emphasis on high-grading the asset base — through exploration, divestment, and prioritization of advantaged development opportunities — will improve earnings power and cash generation, and rebuild balance sheet capacity to manage future commodity price cycles while working to maintain a reliable dividend,” CEO Darren Woods said.

In the near term, the investment priorities are the Permian Basin of New Mexico and Texas, deepwater developments in Guyana and Brazil, and some chemicals projects, the company said.

As the Financial Times reports, Exxon’s latest spending cuts “follow a harsh six months for the U.S oil industry and for Exxon in particular.” The company has reported losses in every quarter this year but unlike rivals such as Royal Dutch Shell and BP, Exxon has refused to cut its dividend.

“The oil major is convinced a strategy of continuing to increase oil and gas production will be rewarded by a recovery in the fuels’ prices as demand recovers and other supply growth slows because of under-investment in exploration and production activity,” the FT said.

According to Woods, the business environment is showing signs of improvement despite the resurgence in COVID-19 cases. “Prices and margins for many of our businesses have improved from the third quarter,” he said.

 (Photo by Dean Mouhtaropoulos/Getty Images)

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