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ExxonMobil Ups U.S. Onshore Rig Count, Prowls For Opportunities

Insulated by a top-notch balance sheet and long-term view of supply and demand, ExxonMobil Corp. boosted its U.S. onshore rig count by five in the Bakken and Woodford shales, and in the Permian Basin in the final three months of 2014, the investor relations chief disclosed Monday.

Jeff Woodbury hosted a conference call to discuss the supermajor's 4Q2014 and full-year results, spending close to an hour discussing last year's progress. The company didn't disclose many aspects of its capital spending plans for the year, nor its strategic outlook, except that it is reducing its share buybacks. More answers are expected during a March 4 webcast with CEO Rex Tillerson at the New York Stock Exchange.

However, when pressed to provide some tidbits about how ExxonMobil is responding to the sharp drop-off in oil prices, and in particular, how it's coping in the U.S. onshore, Woodbury offered what might have been startling news: more rigs were added, not dropped, in its three key plays.

"Across the three main liquid plays, we're producing in excess of 220,000 b/d gross and we're running currently about 44 rigs," Woodbury said. "We're active in all three of them. That rig count has, if you compare back to what I said last quarter, has increased."

Not only has the rig count increased, but so has output. During the 3Q2014 conference call in October, he had highlighted how the Permian, Bakken and Woodford together were producing at that time more than 210,000 b/d on a total of 39 rigs. At that time 13 rigs were running in the Bakken, 10 in the Woodford and 16 were at work in the Permian (see Shale DailyOct. 31, 2014).

No details were offered about where or how many rigs were added in each of the three plays. However, "we're active in all three of them," Woodbury told analysts. "We have a very encouraging list of opportunities and we're making great success in integrating our learnings and driving down the cost curve."

In North Dakota, which last year was the hubbub of ExxonMobil subsidiary XTO Energy Inc.'s onshore activity, the company holds about 531,000 acres. Oklahoma acreage numbers more than 1.28 million acres, a mix of oil and natural gas. The Permian holdings in Texas cover more than 1.5 million acres.

More rigs have been added, and there's the possibility it could add acreage as well, said the investor relations chief. In any case, the largest North American producer isn't going to overreact to price volatility.

"Our investment program is driven by a long-term projection, not an overreaction to the market," Woodbury said. ExxonMobil is "mindful" of prices, but its eye is on "overall supply and demand projections," which are updated every year. In its annual Outlook for Energy, the latest issued in December, ExxonMobil forecast oil demand to grow at a rate of 0.8% a year through 2040, with natural gas demand growing by 1.6% a year (see Shale DailyDec. 10, 2014). Supplies are expected to soar, with gas showing the strongest gains overall -- a good sign for North America's largest gas producer.

To that end, the operator is on the lookout for opportunities, Woodbury said. They could be bolt-ons to XTO's portfolio, he disclosed. ExxonMobil has an ongoing program to high-grade its portfolio through divesting nonstrategic and lower-value assets, as well as bringing in acquisitions that offer new opportunities.

"Those may be bolt-on acquisitions; they may be entries that are synergistic to our business, but we stay very alert to value proposition, watchful where we can capture opportunities to high-grade our portfolio, whether it be oil, whether it be gas, whether onshore or offshore.

But the real focus here is creating value. And we'll pursue only those acquisitions that we think that have ultimate strategic value and are accretive to our longer term returns."

Not on the list are reserves already being produced or in decline, said Woodbury.

Potential assets "have to have a very significant component of development potential, where we can apply our resource capability/expertise...our proprietary technology and our strong balance sheet...We don't want something that's already on decline and doesn't have potential. We're really looking for something that can upgrade our overall portfolio and add future potential."

ExxonMobil doesn't plan to "forgo any attractive opportunities. We have a significant debt capacity, but we will maintain our financial flexibility and we’ll assess the cash and our funding options under a range of outcomes to take a balanced approach to meet those obligations."

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