Driven by ballooning growth in the Permian Basin, ExxonMobil’s global liquids production grew by 8% in the second quarter year/year, while a Gulf Coast steam cracker started up only last year already is surpassing design capacity by 10%.
Oil-equivalent production in total was up 7% from a year ago at 3.9 million b/d, with natural gas volumes rising 5%. Permian development roared, with output rising 20% from the first quarter and almost 90% year/year to average 274,000 boe/d.
“We remain on schedule, with plans to increase production in the Permian to 1 million boe/d by 2024, as we also continue to build out supporting infrastructure and takeaway capacity,” investor relations chief Neil A. Hansen said during a quarterly conference call Friday morning.
In the Lower 48, most of the development was geared to the Permian, where 51 rigs were working with 12 completions crews. Senior Vice President Neil Chapman, who oversees the upstream arm, said 67 Permian wells were turned to sales in the quarter.
“Our unique development plans, which are focused on maximizing long-term value of the resource and leveraging the scale of ExxonMobil to drive capital efficiency are delivering encouraging results,” Chapman said of the Permian play.
“The rocks and well performance are extremely strong.” The approach is to understand the impact of development and operating practices on both initial production (IP) rates and long-term recovery. “Drilling a single well and applying a larger completion with higher intensity fracture can yield higher IPs, but it may yield lower ultimate recovery.” Instead, the plan is to drill “several wells with less intense completions.”
Capital costs in the Permian also are “critical,” Chapman said, an area where the team is constantly looking for ways to improve.
“It's all about balancing capital outlay IPs and the ultimate recovery to achieve the highest value. We've ramped up activity above surface,” to build out infrastructure to move more than 1 million b/d of liquids supply to the Gulf Coast.
“The Permian level activity is high, and we're making great progress.”
The complement to the booming onshore gas and oil production is ExxonMobil’s estimable Gulf Coast petrochemical complex east of Houston. The Baytown/Mont Belvieu 1.5 million metric ton/year (mmty) steam cracker/polyethylene facility, which ramped last year, already is exceeding capacity by 10%. A companion polyethylene complex in nearby Beaumont with 1.7 mmty began service last month ahead of schedule.
Set to ramp in 2022 farther south near Corpus Christi is a massive 1.8 mmty steam cracker, a joint venture with SABIC, Saudi Basic Industries Corp.
ExxonMobil in the first six months of the year sanctioned nine “major strategic projects” from all three business lines, the upstream, downstream and chemicals segments, Hansen noted. Key milestones also were achieved in two liquefied natural gas (LNG) export projects under development in Papua New Guinea and Mozambique.
The supermajor is preparing to start up projects that include the Liza Phase 1 development in Guyana, where the estimated recoverable resource has been increased to more than 6 billion boe.
Domestic oil, gas and liquids production climbed year/year to 662,000 boe/d from 543,000 boe/d. Canada/Other Americas net rose to 469,000 boe/d from 391,000 boe/d.
Total U.S. net natural gas production increased year/year to 2,803 Mcf/d from 2,591 Mcf/d, with Canada/Other Americas higher at 249 Mcf/d from 226 Mcf/d.
U.S. natural gas received a realized average quarterly price of $2.22/Mcf, compared with $2.57 a year ago and $2.22 in the first quarter. For gas sold outside the United States, the realized average was $5.84 from $6.88 a year ago and $7.18 sequentially.
The decline in gas prices was blamed on “supply length and crude-linked LNG effects.”
U.S. crude fetched an average price of $57.95/bbl in the second quarter, versus $64.06 in 2Q2018 and $53.30 in 1Q2019. Outside the United States, crude fetched $62.47/bbl, off from $66.35 a year ago but higher than the average $57.12 in 1Q2019.
U.S. upstream profits fell to $335 million from $439 million as volumes growth was more than offset by lower liquids prices and higher growth-related expenses. Domestic downstream earnings also declined from a year ago at $310 million from $695 million, which was attributed to increased downtime/maintenance.
Net earnings of $3.13 billion (73 cents share), were down 21% year/year but up 33% sequentially. Capital and exploration spending rose 22% from a year ago to $8.08 billion, reflecting Permian investments, with U.S. spending alone rising sharply to $3.26 billion from $1.75 billion.