ExxonMobil Corp. now has about 51 natural gas and oil rigs operating in the U.S. onshore, which is down from the 57 rigs it averaged from April through May and well below the rig count a year ago, Investor relations chief David Rosenthal told analysts on Thursday.
The top North American natural gas producer has been shifting its rigs to liquids targets, he explained during a conference call to discuss quarterly performance. With the shift, gas output has dropped, while the dry gas focus now is on delineating exploration areas.
"There has been a shift, and it continues in the rig count," he said. "The program itself is being managed across the entire portfolio, which does include delineating and appraising dry gas areas, while at the same time focusing drilling on liquids-rich plays."
North American gas production also has fallen because of some divestments in the Gulf of Mexico, Rosenthal said. "It's been a combination of [natural] declines and divestments and some shifting of rigs and production."
A year ago ExxonMobil was running about 70 rigs in the U.S. onshore at a time when gas was priced at about $4/Mcf. At an analyst conference in March, CEO Rex Tillerson had said no natural gas projects were being taken off the table, even with the fall-off in prices (see NGI, March 12). Rosenthal said that was still the case -- for the long term.
"What you are seeing us doing is more reflective of the longer-term approach to this," Rosenthal said. "We still are drilling in dry gas areas and we will continue to work on delineating and evaluating those plays to make sure that again, over the long term, we can achieve maximum recovery and value generation of those plays.
"That hasn't changed. What we have seen is a total reduction in the rig count in response to short-term pricing. In addition, we've moved a lot of rigs to liquids-rich plays and we are starting to delineate new acreage in places like the Woodford Shale's Arkoma Basin and in the Bakken Shale, where we are up to 10 rigs -- out of the 51 running."
ExxonMobil doesn't have a "price trigger to any big extent" as to when it might start actively pursuing more domestic gas, he said. "Some of it is different at the margin in the quarter, but really, we look at the overall plan and our strategy continues to be to take the very long-term view with the very large resource that we've got."
As to whether the 51 rigs were too many or not enough, Rosenthal said he couldn't say. "We don't have an outlook going forward. There's some variability but there's no direction on the rig count specifically."
The world's largest publicly traded oil company once again hit a new earnings record for the quarter on profits of $15.9 billion ($3.41/share) in 2Q2012, up from $10.68 billion ($2.18) in the year-ago period. The latest quarter included a $7.5 billion gain on the sale of the Japanese refinery and chemical portfolio. Revenue rose 1.5% to $127.36 billion. Excluding one-time items, ExxonMobil earned 8.4 billion in 2Q2012. Cash flow from operations and asset sales was $13.9 billion, including $3.7 billion in proceeds associated with asset sales.
Pressured by lower U.S. natural gas prices, domestic profits dropped by more than half year/year to $467 million from $1.4 billion. ExxonMobil invested $1.6 billion in the U.S. upstream arm in 2Q2012, which was down from $4 billion a year earlier. The declines in U.S. upstream were offset by gains overseas, where earnings rose to $7.68 billion from $7.1 billion. International spending also was higher in the latest period at $5.7 billion, up from $5.3 billion.
Capital and exploratory spending totaled $9.3 billion in 2Q2012, which was 9% less than the oil major spent in the year-ago period. However, the company remains on track to "invest about $37 billion per year over the next five years to help meet the global demand for energy," said Tillerson. "Despite global economic uncertainty, we continue to invest throughout the business cycle taking a long-term view of resource development."
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