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ExxonMobil Takes Long-Term View, Continues to Up Spending

ExxonMobil Corp. launched nine major projects in the first three months of 2009, including the first phase of its Piceance Basin project in Colorado, and the company will continue to advance other natural gas and oil projects despite the downturn in the economy, an executive said last week.

Investor Relations chief David Rosenthal presided over a conference call to discuss the company's 1Q2009 earnings. ExxonMobil's quarterly profits, which have repeatedly broken records for the past five years, plunged 58% to $4.55 billion (92 cents/share) from $10.89 billion ($2.02) a year ago. Revenue was down by almost half to $64 billion from 1Q2008.

Earnings from U.S. upstream operations totaled $360 million, which was $1.27 billion lower than in 1Q2008. Non-U.S. upstream earnings were $3.14 billion, down $4.01 billion from a year ago. However, ExxonMobil is sticking with its spending plans for 2009, said Rosenthal.

"We're continuing to take the long-term view," said Rosenthal, who mirrored comments made in March by CEO Rex Tillerson (see NGI, March 9). "We're long-term focused on our investment program. When the market turns around, it will tell you why we're sticking with our investments today. We have not changed our outlook on the changes in demand we expect to see going forward.

"Exxon has a very diversified business," he said. "Consistent with the global economy, we know that demand is weak. But we're very pleased with our portfolio, the manufacturing and product mix, and we're managing this business through the downturn as we have in the past. We'll be very pleased with our position in the industry when this thing turns around."

The Irving, TX-based major's capital spending actually was 5% higher, or $5.8 billion more, than it spent in 1Q2008. The company's capital spending budget remains set at $26-30 billion this year, up from $26 billion in 2008, Rosenthal told financial analysts.

"If you don't let your checkbook get out of control in the good times, you don't have to slam on the breaks and disrupt the organization in the bad times," he told analysts. "The most important thing for our shareholders is we are not constrained in our ability to take advantage of opportunities that would present themselves."

In North America natural gas projects will hold most of ExxonMobil's attention.

"We are pushing unconventional gas projects across the globe," Rosenthal said. "In the Horn River Basin in northeastern British Columbia...we are continuing on our initial phase of drilling on significant shale gas acreage." Last year ExxonMobil acquired 115,000 acres in the play with joint partner Imperial Oil Ltd. (see NGI, May 5, 2008).

Although the number of gas rigs in operation has fallen across the Rocky Mountains, Rosenthal also pledged ExxonMobil's continued commitment to its Piceance Basin project in Colorado. The first phase of its Piceance Basin project began flowing gas at the end of March, Rosenthal said. The 300,000-acre development in northwest Colorado was launched in September 2007 (see NGI, Sept. 10, 2007). At its peak, production is expected to be 1 Bcf/d, well ahead of what it was producing in 2007.

Asked by an analyst why ExxonMobil had not delayed its Piceance Basin plans in light of low gas prices, Rosenthal held to ExxonMobil's philosophy.

"In the Piceance, we're taking a very long-term approach to a very large resource," he said. "We have no plans to slow down."

ExxonMobil's 1Q2009 production averaged 4.2 million boe/d worldwide, which was flat from a year ago. The company noted that its output would have been up 2% year/year except for the impact of production-sharing contracts, the effect of quotas imposed by OPEC and divestments. Natural gas output totaled 10,195 MMcf/d, down 34 MMcf/d from 1Q2008.

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