What happened

Shares of ExxonMobil (NYSE:XOM) plunged 40.9% in 2020, according to data provided by S&P Global Market Intelligence. While a roughly 20% decline in oil prices played a role in Exxon's slump, it wasn't the only factor.

So what

The COVID-19 outbreak upended the oil market in 2020. It caused demand to fall off a cliff, which forced oil companies like Exxon to shift gears. Exxon initially responded by reducing its 2020 capital spending program by 30% and operating expenses by 15%.

IMAGE SOURCE: GETTY IMAGES.

While those moves helped reduce the bleeding, the company significantly outspent its cash flow in 2020, partly because it maintained its massive dividend. As a result, its debt ballooned from $47.1 billion in the third quarter of 2019 to $68.8 billion by the third quarter of 2020, putting pressure on its stock price.

Meanwhile, persistently low oil prices caused Exxon to lose billions of dollars in 2020. Through the third quarter, the oil giant posted more than $2.3 billion in losses. But that pales compared to what the company anticipates for the fourth quarter, as it warned it would record a massive writedown of up to $20 billion in assets.

Exxon also changed its long-term strategy in 2020. It plans to prioritize high-value assets, which will result in it investing only $16 billion to $19 billion in capital projects in 2021 while spending an annual average of $20 billion to $25 billion through 2025. That's a roughly $10 billion yearly reduction from its initial long-term forecast. As a result, it won't grow its production and earnings as much as it initially envisioned.