For much of the past year, investors criticized Exxon and Wall Street was plagued by rumors the company would cut its dividend to preserve cash. The stock price had fallen about half from the start of last January, falling to $ 31 in November, its lowest level in nearly 20 years.
But Exxon’s share price has rebounded to around $ 46, mainly because energy prices have rallied sharply in recent weeks. Oil prices have risen nearly 10% this year, and the snowstorm in the northeast is pushing up natural gas prices because the fuel is used to heat homes and businesses. Exxon’s dividend now looks secure. And write downs aside, Exxon made a small profit in the last three months of the year.
“The industry has gone to hell and back,” said Michael C. Lynch, president of Strategic Energy and Economy Research. “Most of them have survived the worst circumstances they’ve ever faced, and it’s almost certain that things will improve from here in terms of price and demand.”
Goldman Sachs has predicted that oil prices could rise by $ 10 a barrel, up to $ 65 by July. It would be a remarkable recovery from prices which were languishing at less than half of those for much of 2020, even if it would remain well below prices of a decade ago, when a barrel of oil was over $ 140 and the oil companies were making record profits.
The industry has suffered repeated shocks in recent years, with prices falling during the recession that began in December 2007, again in 2015 when OPEC flooded the market with crude to cut US production, and the year last, when the pandemic took hold.
The pain of the industry has forced many companies to lay off employees and cut dividends. Dozens of once-high-flying companies like Chesapeake Energy have declared bankruptcy in recent years.
Even now, as conditions appear to be improving, the outlook for the industry remains uncertain. Due to the emergence of new variants of the coronavirus, it is not clear how quickly the United States, Europe and other major economies will bring the spread of the virus under control. And then there are the big questions about climate change.