Exxon Mobil, the largest oil company in the United States, has announced that it will be taking an impairment charge in the fourth quarter due to issues in California. This comes just a week after another major firm, Chevron, made a similar announcement.
According to Exxon, the impairment charge is estimated to be between $2.4 billion and $2.6 billion. Impairment charges are used in accounting when the value of assets decreases and are not typically included in adjusted earnings calculations.
The write-down is expected to be a result of idle Upstream Santa Ynez Unit assets. Exxon explained that despite their efforts to restart production, they have been facing challenges due to regulatory obstacles in the state.
Chevron also recently revealed that they will be taking a charge of up to $4 billion in the same quarter. They cited environmental regulations in California and issues in certain Gulf of Mexico fields as the reasons behind the impairment.
This isn't the first time that oil companies have criticized California's policies. They have argued that restrictions on new drilling and penalties on excessive refiner margins make it more challenging to invest in the state.
In response to this news, Exxon's shares rose by 0.4% in premarket trading on Friday, while Chevron saw a 0.2% increase. European competitors BP and Shell experienced little change.
As this situation unfolds, it will be interesting to see how these impairment charges impact the financial performance of Exxon Mobil and Chevron.