ExxonMobil Corp. on Thursday reported lower U.S. natural gas production year/year in the first quarter, as the super major shifted rigs from dry gas to liquids targets. However, with more North American gas prospects than any other, the company stands ready to react if conditions dictate, investors relations chief David Rosenthal said Thursday.
He spoke with analysts about first quarter performance during a conference call.
Natural gas production fell about 4% from a year ago in the United States, not surprising since management has said it would drop nearly all of its dry gas rigs in domestic plays until prices rise. U.S. output in 1Q2013 was tallied at 3.59 Bcf/d, compared with 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.
With natural gas prices higher and analysts suggesting they could go higher, Rosenthal was asked whether ExxonMobil might ramp up more dry gas rigs. It’s not likely in a short-term.
“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.
“If you step back and look at our unconventional resource in North America, and particularly in the U.S. that we are working on, what we’ve talked about in the last few quarters was dedicating more resources to liquids-rich plays, the Woodford Ardmore, the Bakken, for instance, and those efforts are continuing and making great progress. Those efforts continue unabated…”
The “good news for us, is the flexibility we have across our unconventional resource. 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.”
The Irving, TX-based super major 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 were substantially higher year/year at $11.78 billion, a full one-third more 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.
Included in the period’s expenses was $3.1 billion to buy Canada’s Celtic Exploration Ltd., an unconventional producer in the Montney and Duvernay shales (see Daily GPI, Oct. 18, 2012). Imperial Oil Ltd., nearly 70% owned by ExxonMobil, bought a half-stake in November (see Daily GPI, Nov. 30, 2012).
The higher spending in the latest period didn’t translate into higher production numbers overall.
Worldwide, total natural gas and oil production declined from a year ago by 3.5% to about 4.4 billion boe/d from 4.55 billion boe/d. Excluding entitlement volume impacts, OPEC quota effects and sales, production was down 1.2%. Liquids output was 2.19 billion b/d, down 21,000 b/d.
Global upstream earnings were $7.04 billion in the latest quarter, $765 million less than in the first period of 2012. “Lower liquids realizations, partially offset by improved natural gas realizations, decreased earnings by $230 million,” said management. “Production volume and mix effects reduced earnings by $280 million. All other items, including higher operating expenses, decreased earnings by $250 million.”
Earnings from U.S. upstream operations were $859 million, down $151 million from 1Q2012. However, domestic downstream profits reached $1.04 billion, which was $436 million more year/year. Global chemical earnings also were higher at $1.14 billion, also $436 million more than a year earlier, which were attributed to higher margins, mainly commodities, which increased profits by $320 million. U.S. chemical earnings climbed to $752 million from $432 million in 1Q2012.
In the first three months of this year ExxonMobil purchased 63 million shares of its common stock at a gross cost of $5.6 billion; it plans to spend $4 billion on stock repurchases through the end of June.
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