Driven by the Permian Basin, ExxonMobil Corp. reported stronger upstream production and raised its projections in the play, but the solid operational news came as downstream and chemical results pulled first quarter profits down on “challenging industry margin environments.”
Estimated 1Q2019 earnings fell by almost half year/year to $2.4 billion (55 cents/share) from $4.7 billion ($1.09). Revenue fell 7% to $63.6 billion.
Capital and exploration expenditures climbed 42% to almost $7 billion as more investments were poured into the Permian. Production-wise, output was up 2% year/year to 4 million boe/d. Upstream liquids production increased 5%, driven by Permian growth of nearly 140%.
“Solid operating performance in the first quarter helped mitigate the impact of challenging downstream and chemical margin environments,” said CEO Darren W. Woods. “In addition, we continued to benefit from our integrated business model.
However, the change in “Canadian crude differentials, as well as heavy scheduled maintenance, similar to the fourth quarter of 2018, affected our quarterly results.”
Still, the results in the No. 1 U.S. play have led ExxonMobil to upgrade its Permian growth plans. It now expects to produce more than 1 million boe/d from West Texas and New Mexico by as early as 2024.
The size of its resource base is estimated at about 10 billion boe “and is likely to grow further as analysis and development activities continue,” management said.
While crude prices strengthened into the new year, they remained weaker on average through March. North American differentials narrowed, mostly because of Canada’s imposed production curtailments and takeaway capacity issues in the Permian. Natural gas prices also were impacted by warmer weather.
Operational expansions announced during the quarter, all may be linked to the long-term strategy around the Permian.
A final investment decision (FID) was clinched with partner Qatar Petroleum to proceed with a liquefied natural gas (LNG) export project in Sabine Pass, TX. Golden Pass LNG is scheduled to start up in 2024 with capacity to produce 16 million metric tons/year. The start up also coincides with ExxonMobil’s increased Permian production plans by 2024.
Also sanctioned was construction on a third unit at the massive Beaumont, TX, refinery to increase capacity by more than 65%, or 250,000 b/d, which would make it one of the largest in the country. The expansion is being done to increase light crude refining, supported by strong production in the Permian.
A third FID was reached to begin construction of a polypropylene production unit in Baton Rouge, LA, to increase capacity along the Gulf Coast by up to 450,000 metric tons per year. Construction begins this year, with start up anticipated by 2021.
In addition, ExxonMobil partnered with Microsoft Corp. to make the Permian operations the largest-ever oil and gas acreage to use cloud technology to drive improvements in analyses and enhance operational efficiencies. The application of technologies by ExxonMobil’s XTO Energy Inc. subsidiary is anticipated to improve capital efficiency and support Permian production growth by as much as 50,000 boe/d by 2025.
On another front, the supermajor and Renewable Energy Group also signed a joint research agreement with Clariant AG to evaluate the potential use of cellulosic sugars from sources such as agricultural waste and residues to produce biofuel, which has the potential to play a role in reducing greenhouse gas emissions.
Global net oil and gas production increased year/year to 3,981 million boe/d from 3,889 million boe/d. Worldwide net natural gas production declined to 9,924 MMcf/d from 10,038 MMcf/d on lower output from Europe and Africa.
U.S. natural gas production climbed from 1Q2018 to 2,712 MMcf/d from 2,576 MMcf/d. Canada/Other Americas gas output increased to 238 MMcf/d from 211 MMcf/d.
U.S. crude and liquids output increased to 600,000 b/d from 523,000 b/d, while Canada/Other Americas output climbed to 454,000 b/d from 427,000 b/d.
U.S. upstream earnings plunged from a year earlier to $96 million from $429 million. The domestic downstream arm posted a loss of $161 million versus year-ago profits of $319 million. U.S. chemical earnings fell to $161 million from profits of $503 million in 1Q2018.