With prices languishing at their lowest levels in a decade, there's been lots of hand wringing among supporters of natural gas-focused independents as they drop dry gas rigs or shift to more liquids-rich plays. But don't expect to see any of those types of worry lines on the top guns of ExxonMobil Corp., the biggest gas producer in the United States.

To borrow a phrase from the inimitable Yogi Berra, New York Yankees catcher and manager, "It ain't over till it's over."

CEO Rex Tillerson and his team suited up at the New York Stock Exchange not to discuss baseball, but the company's philosophy is in some ways similar to the game. They acquire the best players, build the best product, play to win, and don't set a time limit on how long the game will last. If they can win in nine innings, that's great. But it might take 10 innings. It might take 14. ExxonMobil is patient and ready to go the distance.

No natural gas projects are being taken off the table. Period. End of story, said Tillerson. The CEO was asked whether the company's $43 billion acquisition of XTO Energy Inc. in 2010, which lifted ExxonMobil to the No. 1 U.S. natural gas producer, had in fact been as fortuitous as the company had claimed it to be (see Daily GPI, June 28, 2010).

Tillerson said he'd been asked those questions in various ways time and again.

"Why are we drilling in some dry gas basins? Why XTO? Why the whole deal?.." At the time ExxonMobil closed the transaction XTO's reserves base was estimated at 45 Tcfe. In less than two year the subsidiary's reserves base has grown to 82 Tcfe, an increase of 81% and a cost of 23 cents/Mcfe.

"We view the world supply as vital," said Tillerson. The XTO transaction "would be the same thing if we had gone out and discovered a 10 billion boe field. We would have gone out and studied it and appraised it. And now we have gone out and appraised it and have figured out how to get the maximum value.

"Now that's the same model all others would have followed. But they don't have the resources. They don't have the financial resilience we have. They don't have the development resources. We can be patient. They don't have a lot of money. It's what we do with complex resources. It's the same thing we'd do with a single bin barrel in Africa...

"It's very much about how we are going to make that pay off not this year and not last year and not next year but in many years...Strategically that's what's behind building that resource capacity," he told analysts.

"We have massive investment projects," Tillerson said, when asked at what gas price the company might stop investing in some of its global projects. More than half (51%) are gas-related. "We will be carrying a fair amount of construction costs that won't be producing for some time...Historically it is a larger percentage of capital employed and that's what capital expenses have done. They are opportunity-driven with higher costs today.

"When you talk about a specific gas price, I'm not going to give any signals to anybody on that. They are very basin-specific. There's not a price at which you'd say everything is performing where you want it to..."

Natural gas prices have dropped steeply since ExxonMobil consummated its acquisition of XTO on June 28, 2010. On that day, physical trading at the Henry Hub for next-day delivery averaged $4.85/MMBtu, more than twice the $2.24/MMBtu average recorded Wednesday, according to NGI's Price Index.

"There's a function of where XTO was when it came onto the books, of the existing resources number, which can be quite different, depending on which basin you are talking about," said the CEO.

XTO's resource base extended into the Barnett, Haynesville, Marcellus, Fayetteville and Woodford gas shales, the San Juan/Raton Basin, the Uinta Basin, East Texas Cotton Valley/Bossier Sands, the Permian Basin, Bakken oil shale and along the Gulf Coast.

"There's not really a [gas price] number," said Tillerson. "That's not the way we talk about it. In all honesty, we don't look at the business that way. We look at the costs, what we can sell the resource for, the returns that we want to have...with the XTO purchase, we have to continue to capitalize on the costs for the future.

"It's not about today; it's really about the future we see and the view that we have to be a significant participant in the supply in this type of resource. This portfolio of the future will be the type of cash cow of future investments. It's what the conventional portfolio provided in the past."

As to whether ExxonMobil has changed its natural gas/liquids project mix in North America in light of prices, Tillerson said, "First of all, I don't comment on what gas volumes are doing with current capacity like others are doing. Historically, that's not viewed very favorably by those on price collusion. We want to be silent on that..."

"Activity is shifting to more liquids-rich acreage," said Senior Vice President Andy Swiger, who provided the North American unconventional upstream outlook to analysts. "We're acquiring more liquids-rich acreage at the same time...Having said that, there are some dry gas plays...where it doesn't make sense to us to continue investing..."

Swiger said the unconventional gas business was "building for a long-term future through a magnitude of projects...testing of new technologies and different types of laterals, different types of frack [hydraulic fracture] stages, learning early on, which is important for the future. Some dry gas drilling is continuing for good reason but we are continuing to shift to a more liquids portfolio."

There has been, however "no change in the mix of projects" from 2009 to 2014, said Senior Vice President Mark Albers. "We are crossing the threshold of more than 50% [of projects] to liquids...but there's been no fundamental shift there."

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