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ExxonMobil Outlines Goal to Double Earnings, Cash Flow by 2025

The world’s biggest supermajor on Wednesday outlined plans to become even bigger under an aggressive growth strategy that could by 2025 more than double earnings and operational cash flow at today’s crude oil price.

The management team laid out the growth strategy during the annual investment analyst meeting held at the New York Stock Exchange.

“We’ve got the best portfolio of high-quality, high-return investment opportunities that we’ve seen in two decades,” CEO Darren W. Woods said. “Our plan takes full advantage of the company’s unique strengths and financial capabilities, using innovation, technology and integration to drive long-term shareholder value and industry-leading returns.”

The strategy is designed to increase earnings to $31 billion by 2025, versus 2017 adjusted profits of $15 billion, which excluded the impact of U.S. tax reform and one-time impairments.

Woods said the plan projects double-digit rates of return in all three segments of ExxonMobil’s business – upstream, downstream and chemical.

In the upstream, the company expects to significantly increase earnings through a number of growth initiatives involving low-cost-of-supply investments in U.S. tight oil, deepwater and liquefied natural gas (LNG). Growth coming online from new and existing projects is expected to increase production from 4 million oil-equivalent barrels per day to about 5 million.

Last year, the company added almost 10 billion boe to its resource base in locations including the Permian, Guyana, Mozambique, Papua New Guinea and Brazil. They were the largest gains since ExxonMobil acquired XTO Energy Corp. in 2010. It also added 2.7 billion boe of proved reserves during 2017.

Tight oil production from the Permian Basin is expected to increase five-fold, management said Wednesday. In late January, ExxonMobil had predicted growth from the Permian would triple by 2025 to more than 600,000 boe/d.

Through its acquisition of several Bass family entities in 2017, ExxonMobil’s estimated Permian resource has climbed by more than 5.4 billion boe. The original resource estimate was 3.4 billion boe at the time of the purchase, and it has improved through “technical evaluation and successful delineation” in the Delaware sub-basin in New Mexico.

ExxonMobil said the evaluation had reduced the Bass acquisition cost to “just above $1.00/boe.”

The contiguous stacked pays from the Permian New Mexico acreage “are now estimated to provide more than 4,800 drilling locations with an average lateral length of more than 12,000 feet” and should enable capital-efficient volume growth.

“We are in a solid position to maximize the value of the increased Permian production as it moves from the well head to our Gulf Coast refining and chemical operations, where we are focusing on manufacturing higher-demand, higher-value products,” Woods said.

Twenty-five other projects are slated to start up worldwide, which could add more than 1 million boe/d in volumes. New production also is forecast for ExxonMobil’s myriad global LNG projects.

Upstream growth would benefit from exploration success and strategic acquisitions, Woods said.

A big driver of future growth is seen in Guyana, where exploration success has added 3.2 billion gross boe of recoverable resource. Plans are in place for development and further exploration.

In the Permian Basin, the company in the past year increased the size of its resource to 9.5 billion boe from less than 3 billion boe.

ExxonMobil’s downstream business is projected to double earnings by 2025 through upgrading its product slate and investments at U.S. refineries in Baytown and Beaumont in Texas and in Baton Rouge, LA, as well as overseas in Rotterdam, Antwerp, Singapore and at Fawley in the UK.

These projects are expected to result in double-digit returns with increased production of ultra-low sulfur diesel, chemicals feedstocks and base stocks for lubricants. As a result of improvements, the 2025 downstream margins are projected to increase by 20%.

“Expansion is supported by projected demand growth in emerging markets and includes entries into new markets such as Mexico and Indonesia,” management said. “It is supported by integration with chemical manufacturing and upstream production.”

In its chemical business, ExxonMobil expects to grow North American and Asia Pacific manufacturing capacity by about 40% total.

Growth would be achieved in part by building 13 facilities, including two world-class steam crackers in the United States. ExxonMobil said last month that its 1.5 million metric ton/year (mmty) ethane cracker southeast of Houston in Baytown was mechanically complete, with startup on track before midyear.

ExxonMobil and Saudi Basic Industries Corp. also agreed last year to develop an ethane steam cracker on the Texas Gulf Coast near Corpus Christi, a facility that if given final approval would be able to produce 1.8 mmty.

The Investments would enable the company to meet increasing demand in Asia and other growing markets, Wood said.

“We are uniquely positioned to take advantage of the global demand growth for higher-value products in the downstream and chemical,” he told analysts. “Our combined strengths in innovative technology, resource and market access, marketing product leadership and integration improve profitability and create significant shareholder value.”

The company’s overall growth strategy is designed with a key goal in mind, he said, “fully leveraging our competitive advantages to grow shareholder value across all three of our world-class businesses. Through higher returns from increased investments, the company has the potential to increase its return on capital employed to about 15% by 2025.

“Our existing business and plans for growth are robust to a wide range of price environments, allowing us to maintain a growing dividend and a strong balance sheet while returning excess cash to our shareholders.”

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