Exxon Mobil to stop contributing to its employee 401k plans

Paul Takahashi Aug. 11, 2020 houstonchronicle.com/business/energy

Exxon Mobil plans to stop contributing to its employees’ retirement plans this fall to further cut costs and protect its shareholder dividend in the aftermath of the coronavirus-driven oil bust.

The Irving, Texas oil major said it is suspending company match contributions to its U.S. employee’s 401k plans starting in October. The company currently matches a 6 percent minimum employee contribution with 7 percent of the plan holder’s pay.

“The suspension is part of the company’s effort to reduce costs in response to the impact of the pandemic,” Exxon spokeswoman Ashley Alemayehu said in an email. “ExxonMobil’s total remuneration remains competitive despite the suspension.”

The move, first reported by Reuters, comes after the nation’s largest oil company said it lost $1.1 billion in the second quarter, suffering its first consecutive quarterly loss in more than three decades. The Irving, Texas oil major reported losses across its upstream, downstream and petrochemicals businesses as demand for crude and petroleum products plunged during the global pandemic.

Exxon responded to the oil bust by cutting its overhead and operating expenses by $800 million, and reducing its capital spending on new drilling projects by 30 percent to $23 billion this year. The company last month said it is looking to cut its budget further, aiming to spend $19 billion on new projects by the fourth quarter into next year. The cuts will come from shale plays across the country, as well as by deferring downstream and petrochemical projects.

In the Permian Basin, the nation’s top-producing shale play, Exxon cut its rig count by about half, ending the second quarter with 30 rigs. The company expects to halve its Permian rig count again, leaving 10 to 15 rigs operating in West Texas by the end of the year.

However, Exxon does not plan to cut its dividend as investors have increasingly soured on the energy sector, which has become the worst-performing in the U.S. stock market after years of middling performance. Energy companies, including Exxon, are cutting expenses and refusing to take on debt to protect the dividend and ensure investor returns.

Exxon has grown its dividend for 37 years. About 70 percent of its shareholders are retail investors, said Neil Chapman, Exxon's senior vice president.

“The investor sets come to view that dividend as a source of stability in their income, and that's something we take really, really seriously,” Chapman told analysts in a conference call last month. “We feel a great commitment to our dividend.”