With production growing 39% in the Ardmore Basin's Woodford Shale and a 75% increase in Bakken output, ExxonMobil Corp. plans to forge ahead with liquids and crude oil unconventional opportunities in North America, and keep its substantial natural gas prospects for better days, the investor relations chief said Thursday.
David Rosenthal held the microphone to discuss the Irving, TX-based super major's operational and financial performance in the first three months of this year.
Neither first quarter earnings nor production were standouts, but Rosenthal explained that just as other North American operators have shifted their crews from natural gas to liquids targets, so too must the biggest player. ExxonMobil also hasn't ended its quest to pad the portfolio. The company completed in March its acquisition of Canadian unconventional operator Celtic Exploration Ltd., a prize it now shares equally with 70% owned subsidiary Imperial Oil Ltd. (see Shale Daily, Oct 18, 2012).
The company now is "rapidly integrating personnel, systems and processes," for Celtic, "leveraging both our own extensive unconventional expertise and our long operating experience in Canada," said Rosenthal. "We are currently developing future drilling plans to focus on areas expected to deliver the highest liquids yield and to optimize both drilling and completion methodologies."
In the U.S. onshore, the Bakken Shale is proving its worth. Gross operated output jumped by 75% year/year, on "increased development and optimized completions. We are utilizing 10 drilling rigs in the Bakken and have fully integrated the acquired Denbury properties into our operations."
Last fall ExxonMobil increased its Bakken position to near 600,000 net acres by purchasing Denbury Resources Inc.'s Bakken portfolio, which added 196,000 net acres and an estimated 96 million boe of proved reserves (see Shale Daily, Sept. 21, 2012).
In Woodford Shale, which is the "most active unconventional play" in ExxonMobil's portfolio today, operated output jumped 39% from a year ago. Twelve operated rigs are "delineating more than 270,000 acres in the Ardmore and Marietta basins. We have absorbed encouraging early results from our first well in the Marietta Basin since coming online a year ago." The company last year conducted a successful test of the Caney Shale in the core of the Ardmore Basin area, and additional delineation continues through the Marietta area.
Rosenthal declined to provide a specific capital expenditure (capex) outlook for its U.S. unconventional program in 2013, but "our focus...in particular...is the liquids rich plays... We are allocating an additional amount of capex to those areas relative to what we would be allocating to dry gas...It is reasonable to expect that on a relative basis year-to-year over time, we will be spending more money on those liquids rich plays..."
Not only is there improved performance and production from the Bakken and Woodford, "but the efficiency that we're getting, improved completions, improved performance, that strategy and that approach is starting to play out and you're starting to see the dividend."
Increasing activity in North America's unconventional natural gas basins today is not on the table, Rosenthal said.
"I don't know what prices will do going forward and I wouldn't want to predict what they'll be doing in any given time period. Today, we are focused on liquids-rich plays, but we are maintaining our flexibility and optionality in gas as well," Rosenthal said. "We have very large positions in all of the unconventional gas plays in the U.S., and we are still maintaining activity in some of the gas plays where the returns are good...We can increase our efforts in those areas if we want to...
"But when you look at prices in any commodity, they move around. We don't intend to take the last two data points and react. We tend to have longer-term approaches to development...We'll react as it's appropriate to the changes and market factors."
Appraisal also continues in several global unconventional prospects.
"We have a very active program underway in Colombia...and we're progressing activities there and testing some wells and planning to drill some more. Argentina continues to be a very active area for us. We drilled a number of wells last year that we're testing and looking at. We are planned to drill a number of more wells in Argentina...We do still intend to get to work in West Siberia over the course of this year and get some work there.
"So, that's doing very well and we continue to leverage again the expertise that we have here in North America into those places. But having said that, there is activity in Europe and as we mentioned before, we have a very large acreage position and unconventional activity in Germany for both gas and liquids. We are working with the government there to try to get permits that would allow us to continue our exploration, enterprise process. We stand ready to ramp-up activity there, depending on that."
Unconventional production "is a long-term business; it's a long-term resource development. Both the oil companies and the countries that have these resources are just getting started with their evaluation programs and developing policies. We can pace our activity based on local requirements and regulations, and again the good news for us is, we've got a very large portfolio in a lot of different areas...and we're able to dedicate the resources both human and financial and technology to those areas with the most promise and the most availability and accessibility..."
U.S. natural gas production fell about 4% from a year ago in the United States to 3.59 Bcf/d from 3.93 Bcf/d in the year-ago quarter. In its combined Canada/South America operations, gas production dropped to 322 MMcf/d from 377 MMcf/d. Worldwide gas production also declined to 13.21 Bcf/d from 14.04 Bcf/d.
U.S. crude oil and liquids production was higher year/year, climbing to 435,000 b/d from 426,000 b/d. Canada/South America output fell, reaching 264,000 b/d from 268,000 b/d. Global oil production was lower than in the year-ago period, ending at 2.19 million b/d from 2.21 million b/d.
The producer earned $9.5 billion net ($2.12/share) in 1Q2013, only a 1% increase from a year ago, and down from $9.95 billion ($2.00) earned in the final three months of 2012. Cash flow from operations and asset sales totaled $14 billion; proceeds from asset sales was $400,000 million. Revenues in the latest period fell year/year to $109 billion from $124 billion.
Capital and exploration expenses rose to $11.78 billion, one-third higher than in the first period of 2012 when it spent $8.83 billion. However, quarterly upstream spending declined in the United States, falling to $2.09 billion from $2.42 billion.