((Automated translation by Reuters, please see disclaimer https://bit.ly/rtrsauto))
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Exxon plans to increase project spending to $28 billion to $33 billion annually by 2030
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The objective is to triple Permian production and increase that of Guyana by 2030
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Big investments in low-carbon businesses await revisions to US hydrogen incentives
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Company’s cost reduction target raised to $18 billion by 2030
(Added comments from executives and analysts, details on increased production, low-carbon fuels in paragraphs 4-8, 17-21; added bullet points) by Gary McWilliams and Mrinalika Roy
Exxon Mobil XOM.N said on Wednesday its annual project spending would increase to between $28 billion and $33 billion between 2026 and 2030, aiming to increase oil and gas production by 18%.
The top U.S. oil producer outlined a five-year plan to boost production and increase profits by $20 billion by 2030 from this year, and use the profits to boost shareholder investment returns.
These new goals come as Exxon is booming. Its Guyana operations generate huge profits and its US shale operations are on track to double oil production this year through the acquisition of US shale producer Pioneer Natural Resources.
Chief Executive Darren Woods said increased project spending is expected to “generate returns of more than 30% over the life of the investments.” Exxon’s focus on oil and gas production from of low-cost deposits gives it a “competitive advantage that we believe is unique in the industry,” he said at a press conference.
Exxon shares lost more than a dollar in early trading, to $111.64, as a large number of projects and targets are already known. The increase in spending also surprised analysts. Its previous capital spending, excluding Pioneer-related spending, projected $22 billion to $27 billion annually through 2027.
WAIT AND SEE
“Production plans and earnings prospects appear largely in line with expectations,” wrote Biraj Borkhataria, an analyst at RBC Capital Markets. “The market may remain skeptical about earnings potential until we have additional evidence of achievement of objectives
The company’s cost-cutting goal was raised to $18 billion by 2030, Chief Financial Officer Kathryn Mikells said, from $15 billion by 2027. Exxon’s strong balance sheet, with 27 billion dollars in cash and equivalents, “provides a buffer against price volatility,” Ms. Mikells said.
Exxon aims to more than triple its production in the Permian, the main US shale field, to 2.3 million barrels per day (bpd) by 2030 and pump 1.3 million bpd of its lucrative operations in Guyana.
Total oil and gas production is expected to reach 5.4 million bpd, an increase of about 18% from the current 4.58 million bpd. Its long-term goal is more ambitious than that of its American rival Chevron, which plans to reduce its project spending next year ( ) and slow the growth of shale production.
President-elect Donald Trump’s promise to encourage U.S. oil production and “get out of the way of industry” bodes well for Exxon and energy producers, Mr. Woods said. However, its plans may be revised depending on market conditions, he added.
Exxon has announced two new projects for Guyana by 2030, compared to previously announcing a total of seven to ten projects. Its LNG production target remains unchanged at 40 million metric tons per year.
OBJECTIVES FOR SHALE
In its U.S. shale operations, Exxon hopes to realize $3 billion in savings by combining its shale operations with those of Pioneer Natural Resources. Drilling engineers at Exxon headquarters remotely control the combined 35 drilling rigs that operate in the Permian Basin, said Neil Chapman, vice chairman of the board.
Improved economies of scale in drilling, water removal and well lengthening have also reduced the number of wells drilled while increasing the amount of oil recovered by 20%. in each of them. Exxon is also using new fracking material supplied by its refineries to drain oil and gas from shale wells, Mr. Chapman said.
The new targets aim to assure shareholders that returns can be maintained despite price fluctuations in the oil market. The barrel of Brent, the world benchmark, is expected to fall to around $75 next year, compared to $81 this year, which will weigh on oil company profits.
But the 12.7% rise in Exxon shares since the start of the year is far greater than the sector’s appreciation of about 8.4%, as measured by energy mutual fund XLE. The stock price increase contrasts with double-digit declines in shares of ConocoPhillips COP.N and Occidental Petroleum OXY.N this year.
LOW CARBON FUELS
The company invests in its carbon capture and sequestration operations around the world. It now collects 7 million tonnes of carbon per year, which allows it to obtain “very solid returns”.
Profits from its “Low Carbon Solutions” business can increase by $2 billion by 2030 compared to this year. Exxon did not specify the unit’s 2024 profits.
The Denbury acquisition provided a network of carbon pipelines that Exxon is using to expand its business to help industry reduce climate-warming atmospheric emissions of carbon dioxide.
Woods reiterated that Exxon would not approve a massive hydrogen production project in Texas pending a review of US incentives for such projects. President Joe Biden’s administration has implemented regulations aimed at limiting incentives for hydrogen produced from natural gas, a position Exxon opposes.
“The extent to which we choose to invest will depend on the policies put in place,” he said.
Cash not invested in low-carbon businesses can be invested elsewhere, he added. Exxon plans to provide low-carbon power to data center operators looking to improve access to electrical power.
