ExxonMobil plans to hold capital spending steady over the next six years for its natural gas and oil projects while bumping up expenditures for carbon-reduction projects, the supermajor said Wednesday.
Annual capital expenditures (capex) are to be “held constant” at $20-25 billion, a 17-33% reduction from the $30 billion spending target set in 2019 before the pandemic struck. As projects and staffing were reduced, this year’s capex plan was set at $16-19 billion. However, during 3Q2021, profits jumped to $6.8 billion ($1.57/share), reversing the year-ago loss of $680 million (minus 15 cents). Cash flow soared three-fold from a year earlier to $12 billion.
“The restored strength of our balance sheet and improved financial outlook support accelerating investment in our industry-advantaged, high-return projects, and a growing list of financially accretive lower-emission business opportunities,” said CEO Darren Woods. “Our strategy is designed to create shareholder value by leveraging our competitive advantages while maintaining flexibility to respond to future policy changes and technology advances associated with the energy transition.”
Projected growth in upstream cash flow and earnings is expected to result from “aggressive cost reductions and progressing advantaged investments in low cost-of-supply projects.” These include ongoing development in its No. 1 U.S. target, the Permian Basin, where production volumes averaged 500,000 boe/d in 3Q2021, a nearly 30% increase year/year.
Other big exploration targets to be funded are in Guyana, where a plethora of discoveries has been unearthed, and in Brazil.
Targeting 10%-Plus Returns At $35/Boe
More than 90% of the planned upstream spend through 2027 is forecast to generate returns of 10%-plus at oil and gas prices of up to $35/boed.
Meanwhile, upstream GHG emissions intensity is set to decline from 2016 levels through 2030 by 40-50%. Spending on greenhouse gas (GHG) emission reduction projects, set in October at $15 billion over the next six years, is four times higher than initially projected. The company also said it is on track to meet its original 2025 GHG emission-reduction plans by the end of this month.
Management also has unveiled, “more aggressive plans” to further reduce through 2030 direct and indirect corporate emissions, i.e. Scope 1 and 2 emissions.
“The focused actions we have taken have enabled us to accelerate greenhouse gas reductions particularly in the areas of methane and flaring,” said Woods. “We anticipate meeting our 2025 greenhouse gas emission-reduction plans ahead of schedule, which gives us confidence to set more aggressive medium-term goals across all of our businesses.”
One year ago, ExxonMobil set targets to reduce by 2025 the intensity of operated upstream GHG emissions by 15-20% from 2016 levels. It also set a goal to reduce methane intensity by 40-50% and cut flaring intensity by 35-45%.
The updated targets to 2030, which are forecast to reduce absolute corporate-wide emissions by 20%, go further.
By 2030, the GHG reduction target is 20-30% in corporate-wide intensity; 40-50% in upstream intensity; 70-80% in corporate-wide methane intensity; and 60-70% in corporate-wide flaring intensity.
The company also reaffirmed that it is working to achieve the goals of the World Bank for zero routine flaring by 2030. For assets not operated by the company, ExxonMobil said it would work with equity partners and “strive to achieve comparable results.”
For the downstream and chemical segments, growth would be centered on “high-return projects,” including lower-emission fuels and lubricants. In addition, ExxonMobil wants to use its manufacturing scale, integration and technology to high-grade the portfolio and reduce costs. The capabilities of the Low Carbon Solutions business would be used to further reduce GHG emission intensity at operated facilities.
To date this year, the company said it has repaid $11 billion in debt and expects to be within the range of its targeted debt-to-capital ratio of 20% to 25% by year’s end. It also is launching a $10 billion share repurchase program in 2022.
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