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ExxonMobil Makes Strong Turn to U.S. Liquids

Like the lumbering giants they resemble, oil majors take a bit more time to pivot from one target to the next, a task exceedingly difficult for North America's top natural gas producer, ExxonMobil Corp. The pirouette to more oily targets came full circle in the third quarter in the three most strategic U.S. leaseholds, the Permian Basin and the Woodford and Bakken shales.

Investor Relations chief David Rosenthal discussed the Irving, TX-based supermajor's 3Q2013 report for more than an hour on Thursday with analysts, who directed a good bit of their questioning to North America, which has been undergoing a big transition since the company gobbled up XTO Energy Inc. in 2009 and with it the largest gas holdings in the country.

Since then, ExxonMobil has been stuck with a lot of gas and depressed prices, which forced it to work on capturing the better priced liquids opportunities that it gained from XTO and other more quietly purchased targets. So far, so good. And it's not just unconventional opportunities, Rosenthal explained.

From the second quarter to the third, "we did see quite a nice contribution on the liquids side, and that was offset a bit as we expected and talked about on the gas side of the business..."

In the latest quarter, "things came out really just about the way we expected, higher liquids, particularly in some of our more profitable areas, and then a decline in gas volumes particularly in the U.S..." Worldwide, total volumes decreased sequentially by 1.4%, with gas volumes down 440 MMcf/d and liquids up by 17,000 b/d.

"We are taking steps, and we will continue to take steps, to strengthen profitability...I wouldn't want to take any one quarter and say we've set a trend, but we are certainly starting to see the impact of the higher liquids volumes and a little lower gas volumes in the U.S. as we had expected."

ExxonMobil now has about 41 rigs operating across the United States. It has had as many as 45 rigs in operation this year, said Rosenthal. Nearly all of the rigs are targeting liquids.

In the Permian Basin, where ExxonMobil controls 1.5 million net acres, the exploration company is "ramping up activities to develop conventional and unconventional reservoirs," Rosenthal said. "We currently have eight operated rigs and have turned almost 100 wells to sales this year across the entire basin.

"Our net production is more than 90,000 b/d. More than 65 workover rigs are also active on our Permian properties, increasing production by opening additional zones and performing fracture stimulation treatments."

ExxonMobil crews also are optimizing development in the Permian and expanding infrastructure in carbon dioxide (CO2) projects in the Permian's Central Basin platform area to enhance oil recovery prospects, he said. In addition, crews "continue to actively evaluate conventional potential across our Permian acreage, highlighted by the Wolfcamp, Wolfbone, Wolfberry and Bone Spring reservoirs."

In the Bakken Shale, gross operated production recently hit a record 65,000 boe/d, Rosenthal told investors.

In the Bakken Shale, ExxonMobil's gross operated production recently hit a record 65,000 boe/d, said Rosenthal. From July through September, oil equivalent production increased by 81% year/year in the shale play, driven by a record 85 wells turned to sales year-to-date, along with the impact of the 2012 Denbury Resources transaction (see Shale Daily,Dec. 4, 2012). Denbury provided 196,000 net acres in the Bakken along with an interest in CO2 reserves in ExxonMobil's LaBarge field in Wyoming.

"This volume increase reflects the benefits of well pad development drilling and optimized well completions across our core Bakken acreage," said Rosenthal.

Meanwhile, in the Woodford Shale in the Ardmore Basin of Oklahoma, once a natural gas drilling haven, well results continue to be strong in the liquids-rich areas, with peak 30-day equivalent production rates up 17% year-to-date, according to Rosenthal.

"For example, a recent five-well pad completion had a peak seven-day production rate of just below 4,000 bbl of oil and 13 MMcf of gas per day," he said. "We also continued to develop infrastructure for our growing liquids production, recently putting in service a 65-mile oil gathering pipeline in the Ardmore area."

ExxonMobil earned $7.87 billion net ($1.79/share) in 3Q3013, versus $9.57 billion ($2.09) in the year-ago period, dragged down mostly because of poor performance in the refining and marketing business.

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