More output and projects at ExxonMobil
Energy major ExxonMobil will target annual project spending of up to $27bn by 2027, the company said in an update on Wednesday.
The plan leaves out projected gains from the $60bn acquisition of Pioneer Natural Resources, which is expected to close next year. Exxon has received two requests for information on the deal from the US Federal Trade Commission.
The annual forecast is watched closely by investors for its spending and production targets. This year’s outlook is awaited keenly because of deals for Pioneer and carbon pipeline firm Denbury, both of which will underpin long-range targets.
Exxon bought Pioneer in October for nearly $60bn in an all-stock deal due to close in the first half of 2024, saying that it plans to more than triple production in the top US shale field to 2-million barrels a day (bpd) by 2027. Denbury was a $4.9bn acquisition to buttress its carbon business.
Exxon’s estimated production growth for next year excludes about 700,000 bpd of production it would gain from the Pioneer acquisition.
That deal would double Exxon’s Permian shale oil and gas output to more than 1.3-million bpd, the company has said.
GOVERNMENT SUPPORT
Exxon’s spending outlook will raise outlays for its energy transition unit, called Low Carbon Solutions, to $20bn between 2022 and 2027, from $17bn. But the higher spending will require government support.
“We need technology-neutral durable policy support, transparent carbon pricing and accounting, and ultimately, customer commitments to support increased investment,” CEO Darren Woods said in a statement.
Exxon will increase its share buybacks to $20bn a year until 2025, from $17.5bn now, after the Pioneer merger closes, the company said. A divestment plan for its refining operations also will continue.
The share price fell slightly on Wednesday. Analysts said excluding Pioneer’s contributions, the company’s oil and gas production targets were below expectations and spending forecast higher than expected.
Expenditures could go up to $32bn by 2027, above market expectations, assuming an incremental $4bn-$5bn in spending for Pioneer’s assets, said Biraj Borkhataria, associate director at RBC Capital.
“Exxon will need to convince investors on the merits of the low-carbon spending from here,” Borkhataria said in a note.
Exxon projected annual earnings and cash flow to rise by $14bn through 2027, on a combination of cost cutting, higher oil output from Guyana and US shale and gains in its refining and chemicals business. The company is forecast to post a $37.2bn profit this year.
Cost cuts will expand by $6bn to the end of 2027 on top of a $9bn reduction from 2019 levels. The company slashed project spending and overheads after suffering a historic $22bn annual loss in 2020.
The company forecasts production of 3.8-million barrels of oil equivalent per day (boepd) in 2024, from 3.7-million bpd this year, as the top US oil producer bets on a lift from the Permian shale basin and Guyana.
Spending on new projects will expand to between $22bn and $27bn next year, with a range that has a midpoint spending of $24.5bn a year from 2025 through 2027.
The company has said it expected output to be flat until the end of this year, at 3.7-million boepd, due to its withdrawal from Russia.