ExxonMobil Corp., the largest natural gas producer in the United States, saw its overall upstream profits slip by almost half year/year during the third quarter, but the super major is capturing significant drilling efficiencies and lower service costs, which have reduced capital costs year/year by close to $8 billion.

ExxonMobil said 3Q2015 earnings fell to $4.2 billion ($1.01) from year-ago profits of $8.1 billion ($1.89). Revenue plunged 37% to $67.3 billion, while cash flow from operations and asset sales fell to $9.2 million from $12.4 million. Upstream earnings plunged 79% to $1.36 billion. The U.S. division swung to a loss of $422 million, compared with profits a year ago of $1.26 billion.

During an hour-long conference call on Friday to discuss results, investor relations chief Jeff Woodbury credited improved drilling efficiencies and better deals with vendors in helping to reduce capex year/year by 22% to $7.87 billion. Domestic capex in 3Q2015 fell to $1.99 billion from $2.26 billion.

ExxonMobil continues to guide spending for this year at $34 billion but it likely won’t be that high.

“We are running lower than our plan, and it is reasonable to extrapolate that to a year-end number that will bring us below $34 million,” he said. “We’re never satisfied with our cost structure…We are always working to reduce the structural costs in the business…Within the market capture benefits, we continue to work actively with our service providers to identify innovative, lower cost solutions that end up being win-win solutions…Our expectation is that we’ll continue to drive meaningful improvement in cost structure while maintaining high operational integrity.”

Upstream production volumes increased 2.3%, or 87,000 boe/d, to 3.9 million boe/d in the quarter from a year ago. Liquids volumes of 2.3 million b/d rose 13%, driven by new developments in the United States, Canada, Indonesia, Angola and Nigeria. Bg-ticket items in the United States today are the Permian Basin and Bakken and Woodford shales.

U.S. natural gas production declined year/year to 3.09 Bcf/d net from 3.41 Bcf/d. Domestic oil and liquids output rose to 468,000 b/d net from 442,000 boe/d.

Although it holds more gas reserves than any other U.S. operator, gas of late has taken a back seat to oil. However, ExxonMobil’s long-term view of its value hasn’t diminished, Woodbury said. The company’s annual Outlook for Energy, mostly recently issued at the end of last year, has North American gas production growing by almost 75% from 2010 to 2040 to about 140 Bcf/d as unconventional output almost triples (see Daily GPI, Dec. 9, 2014).

Gas still “underpins” the global strategy, including a view that liquefied natural gas (LNG) will grow in importance overseas.

“We see gas growing 1.6% per year,” Woodbury said, “and we expect LNG demand to triple from current capacity. That sets up, if you will, an investment case. Globally, we are well positioned around the globe to participate not only in the domestic market but in the LNG market.”

Specifically in the United States, “we have had a constructive view that gas is going to continue to grow…as gas replaces coal for power generation. Our gas resource base is significantly underpinning our investment in our petrochemicals. Our expansion for instance at the Baytown (TX) refinery to add ethylene lines…as well as a concurrent commitment at Mont Belvieu (TX) to add polyethylene lines…will be underpinned by advantaged feedstock — that’s U.S. natural gas.

Domestic gas “also positions us to provide a source for LNG export into the global market.” ExxonMobil is half-owner of the revamped Golden Pass export facility, formerly sited as an import terminal, on the Texas Gulf Coast. It is under federal regulatory review for complete approval.

If anything is holding back ExxonMobil’s U.S. gas resource growth it’s the regulatory environment, Woodbury said. Allowing more gas exports would allow more gas exploration and development. “We will time the investment in gas resource development activities to underpin value chain opportunities that we’re pursuing,” he said.

Otherwise, the Lower 48 rig count is falling. The producer is running 32 rigs in the onshore today, down from 44 in February (see Shale Daily, Feb. 2). The pullback is not solely related to lower prices.

“We’ve seen significant improvements in operational performance, cost and productivity,” Woodbury said. “While the rig count is down, part of that is offset by the improvement in performance. The second of that is a deliberate effort to manage within our means.”

Profits have been steadily falling for the oil major. Since the beginning of 2014, the decline in profits from lower natural gas and oil prices has been stark. In 1Q2014, ExxonMobil earned $9.1 billion, with profits falling to $8.78 billion in 2Q2014, to $8.07 billion in 3Q2014, and to $6.57 billion in the final quarter of last year. By the first quarter earnings had slumped to $4.94 billion then fell in 2Q2015 to $4.19 billion.

However, even as its fortunes rise and fall, the importance of the integrated operations proved its worth again. Downstream segment earnings nearly doubled year/year because of stronger refining margins. Chemical results, about flat from a year ago, also reflected continued strength in product margins and the quality of the product and asset mix.