ExxonMobil Corp. Thursday reported the highest quarterly profits ever by a public corporation, but the super major's oil and natural gas reserves and production -- despite record spending -- once again failed to grow.
Exxon's net profit reached $14.8 billion in the quarter, which was up 58% from the $9.4 billion reported in 3Q2007. Capital spending (capex) rose to $6.8 billion, which brought its yearly total to date to almost $20 billion.
The economic downturn, which has forced other producers to announce spending cutbacks and project delays, is not expected to force the Irving, TX-based company to make any big changes, said David Rosenthal, the company's investor relations chief. He detailed Exxon's plans during a conference call with financial analysts.
"Our first priority is to fund our robust investment program, which will continue to be $25-30 billion a year capex, and there is no change to those plans at this time," Rosenthal said. "Our projects are progressing as expected..." Exxon also plans to fund a dividend for shareholders and continue to buy back shares.
"Of course, the cash on the balance sheet will be utilized in whatever avenue is designed to increase shareholder value over the long term," he told analysts. And that may include mergers and acquisitions (M&A).
"M&A activity is just one of the many opportunities that we look at on a continuing basis," Rosenthal said. "That's true [when oil prices are] at $140/bbl and it's true at $70/bbl. We're monitoring what's going on in the market. But M&A is just one opportunity among many..."
The "major projects" that Exxon has under way are "very long-term, large-scale projects," he said. "When we are analyzing and evaluating a project, we look at them from a fairly broad range of prices...and they are robust across that range. Out into the future, we can wait and see the impact of these costs, which will determine how quickly they come through and the impact they might have on a project..."
Overall, "we pursue investment opportunities, not projects," he said. "We don't have a spending 'target.' We are budgeting $25-30 billion a year going forward, but that's not a target...That's an outcome from the portfolio that we are pursuing...We will pursue all investment opportunities that we perceive as robust."
Still being pursued by Exxon is a U.S. liquefied natural gas (LNG) import facility. Affiliate Golden Pass LNG Terminal LP launched the permitting process at the Federal Energy Regulatory Commission in November 2003 for an LNG facility to be located in Sabine Pass, TX (see NGI, Jan. 19, 2004).
"We are progressing along on schedule," Rosenthal told analysts. "We did have some hurricane impacts on the project, and we are assessing the impact of that and determining what restorative work is needed. It is still in the 'assessment' stage, and I'm not prepared to give any specific indications on cost impacts or schedules. We are working through all of that, and we'll provide an update with more information."
Exxon considers its LNG investments to be "long-term in nature," he said. "They aren't subject to short-term prices or demand imbalances. We do expect to eventually have some volumes, but I wouldn't want to try and give you a specific profile" on how Exxon would use the facility.
"Longer term," he said, "the United States will need more LNG, and we feel like we will be well positioned to meet that need. This is a very long-term project, meaning there will be a very long-term need to bring more gas into the United States."
These are "challenging times economically" around the world, Rosenthal acknowledged. However, "we're built to handle it, even though costs are fluctuating widely." Because Exxon uses a range of scenarios for its business, "we don't get excited by the highs, or panic at the lows."
On an oil-equivalent basis, Exxon's output dropped 8% from 3Q2007. Excluding lower entitlement volumes and the impacts from the Gulf of Mexico hurricanes in September, production was off around 5% from the same period a year ago. Higher maintenance activity and downtime reduced volumes by just under 3%.
Quarterly gas production fell 460 MMcf/d from a year earlier to 7,823 MMcf/d. New volumes from overseas projects "were more than offset by mature field decline, increased maintenance activity and entitlement effects," the company said.
In the United States, Exxon's gas production available for sale in the quarter reached 1,167 MMcf/d, which was down from 1,414 MMcf/d in 3Q2007. Among other things, Exxon has sold its Barnett Shale gas assets in the past year. Canada/South American gas production in the latest quarter reached 633 MMcf/d, which was down from 799 MMcf/d a year ago.
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