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ExxonMobil's Bakken, Woodford, Permian Driving U.S. Onshore

ExxonMobil Corp.'s U.S. onshore targets have proven to be a liquids-rich generator, and the company is continuing to prowl for attractive acquisitions, particularly in the Permian Basin, a top executive said Friday.

Investor relations chief Jeff Woodbury said the three big onshore targets, the Permian, the Ardmore Basin's Woodford Shale and Bakken Shale, today are spreading the wealth as ExxonMobil bears down on liquids production. He spent close to an hour updating analysts about global performance in the third quarter during a conference call.

The Irving, TX-based super major continues to be the No. 1 natural gas producer in the United States, but those operations are on cruise control while development centers on more profitable liquids, Woodbury explained. Subsidiary XTO Energy Inc., which oversees the onshore engine, took its gas-directed drilling machine and turned into a liquids profit center (see Daily GPI, June 28, 2010).

"The largest part of our unconventional liquids growth is in the Permian, Bakken and Woodford, where in total, those are producing in excess of 210,000 b/d now," said Woodbury. "It has really been a significant progress over the last several quarters..."

In the Bakken Shale, oil-rich output is up 38% from a year ago, and it has become the "most active unconventional liquids growth engine," with production up six-fold since 2008, Woodbury said.

Today, there are 13 rigs running in the play versus 10 in the year-ago period. New wells brought online between July and September are up 25% from a year earlier. And production from each well is higher, Woodbury said.

"We continue to achieve strong results and increased efficiencies," he said of the Bakken wells. "We are optimizing completions," with proprietary fracturing technology that has eliminated the need for plugs in perforations, cutting costs and improving estimated ultimate recoveries.

The Ardmore Basin, long a gas driver for ExxonMobil, has become a liquids-heavy performer as well, with 10 rigs running in the Woodford Shale. Production is 25% higher than it was a year ago on "more completions, stronger wells, and a move to pad drilling," said Woodbury. "Here too, well completions are seeing increases in efficiencies, and we are decreasing costs."

The rig count remains basically flat year/year, "but we've increased the number of wells by 33%," Woodbury said. From a year ago, ExxonMobil also is pumping up activity in the Marietta formation of the Ardmore, "and we are encouraged by higher proportion of liquids..."

Meanwhile, the Permian Basin is seeing more conventional and unconventional activity by the producer, which has close to 1.5 million net acres. Gross operated output is 8% higher than it was a year ago, with 16 rigs looking for liquids, almost triple that of a year earlier. ExxonMobil also has 65 workover rigs working the basin to enhance its base conventional production, Woodbury said.

ExxonMobil also is "looking for more opportunities to add more attractive acres" in the Permian, the investor relations chief said. That would follow three big acquisitions this year, two with Linn Energy LLC and one with Endeavor Energy Resources LP (see Shale Daily,Sept. 19;May 22;Feb. 3). New acreage would be designed to "complement the horizontal activity."

The chatter about the slump in oil prices continued during the question and answer period of ExxonMobil's conference call on Friday. Woodbury said the oil major was protected because of its integrated business model. The company, he said, was prepared for the "cyclical nature of the business," which is why it's been successful no matter the commodity price "by participating in the whole value chain," from exploration through refining.

"Frankly, we're in our sweet spot right now, optimizing our operations and maximizing the value of our resources," he said. On the drop in oil prices, Woodbury said, "I don't think any of us should be surprised, given the oversupply and continued economic weakness...

"We focus on the variables we can control," adding that asset management was a "core component of how we manage our business. We are constantly looping across our portfolio to assess how to maximize the value of our assets through development or by finding an alternative means to monetize those assets."

However, "these near-term price fluctuations are not going to have an impact on our operational activities" in the U.S. onshore," Woodbury told analysts. "We vet all of our investments across a range of economies across a range of prices.

"Our current inventory is fairly robust at this price environment. We are fairly confident. We are picking up rigs...we are continuing to progress our resource activities..." The onshore "is a significant part of our growth opportunities and importantly, or improvement in overall profitability."

ExxonMobil's total worldwide liquids and gas production in the third quarter was lower than a year ago at 3.83 million boe/d from 4.02 million boe/d.

The operator produced 2.07 million b/d in 3Q2014, down from year-ago output of 2.20 b/d. In the United States, liquids output was higher at 442,000 b/d from 423,000 b/d.

U.S. natural gas production fell to 3.411 Bcf/d from 3.557 Bcf/d. In Canada/Latin America, gas output also was down at 272 MMcf/d from 370 MMcf/d. Total global gas production available for sale declined to 10.595 Bcf/d from 10.914 Bcf/d.

Average realizations for U.S. crude oil in 3Q2014 were $89.60/bbl, versus $101.73 in the year-ago period. For U.S. natural gas, the average price received was $3.93/Mcf, compared with $3.31. Outside of the United States, average realizations for crude fell to $96.76/bbl from $106.72. For gas, realizations declined to $8.47/Mcf from $9.49.

Boosted by refining, ExxonMobil earned 3% more in 3Q2014 than it did a year ago, with net profits of $8.07 billion ($1.89/share) from $7.87 billion ($1.79). Revenue was down year/year by 4.3% to $107.5 billion.

The company spent less on U.S. exploration during the period from a year ago at $2.26 billion versus $2.31 billion. Total capital and exploration expenses in the United States fell to $9.94 billion from $10.55 billion. Earnings from exploration and production fell 4.4% to $1.26 billion from $1.05 billion.

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