Is It Exxon Mobil’s Time To Shine?

Is It Exxon Mobil's Time To Shine?

It’s hard to get excited about the future of Exxon Mobil (NYSE:XOM) since the company is not eying meaningful production growth in the near future. However, the company could still end up outperforming, especially if the oil price environment stays weak at less than $50 a barrel.

Exxon Mobil has ramped up capital spending for this year to $22 billion from $19 billion in 2016 as the company is increasing spending on a number of projects. In a recent presentation, Exxon Mobil highlighted that it has more than 100 projects under development, including more than a dozen conventional oil, heavy oil, and LNG projects located all over the world. Some of its major projects, such as Tengiz oil project in Kazakhstan, the Liza oil field in offshore Guyana, the LNG project in Papua New Guinea and the Hebron oil project in offshore Canada, will start up in the near future. Exxon Mobil is also increasing spending on its US shale assets at the Permian Basin and Bakken formation which are oil-rich, short-cycle, and high-return assets from where the company expects to achieve around 20% production growth in the long-term.

But the project startups won’t be enough to move the needle for Exxon Mobil which has been producing around 4.1 million to 4.2 million barrels of oil equivalents per day since 2012. As per the company’s forecast, its production will be in the range of 4 million to 4.4 million boe per day by 2020, even if oil prices (Brent) climb to as high as $100 a barrel. By comparison, its rival Royal Dutch Shell (RDS.A, RDS.B), which was producing less than 3 million boe per day before the BG Group acquisition, now aims to gradually grow volumes to roughly 4 million boe per day by 2020. Chevron (NYSE:CVX) is targeting 4% to 9% production growth this year, aided by the startup of major projects, such as Gorgon and Wheatstone in Australia. Meanwhile, the British oil major BP (NYSE:BP) aims to add 800,000 boe per day of new barrels by 2020.

by Sarfaraz A. Khan