Exxon Mobil announced it will cut capital expenditures 25% this year amid low oil prices, but it may look at acquisitions.
Exxon expects output from its 45,000 oil and gas wells to average the equivalent of 4 million to 4.2 million barrels a day through the end of the decade, the Irving, Texas-based explorer said in a slide presentation for its annual analyst day event on Wednesday. That’s a more modest goal than the 4.3 million target for the end of 2017 that Chairman and Chief Executive Officer Rex Tillerson announced a year ago. The company intends to lower spending by about 25 percent this year to $23.2 billion and will continue shaving cash outlays through the end of 2017, according to the slides. Unlike most of its competitors, Exxon is under no pressure to resort to asset sales to raise cash as tumbling energy prices erode revenue, Tillerson said. "We are not event-driven,” Tillerson told analysts at the New York Stock Exchange on Wednesday. “This approach avoids forced sales at the wrong point in the cycle.” For Tillerson, an Exxon lifer in his 11th year as CEO, Wednesday’s event may be among his final chances to explain the long-term strategy of a company with annual sales that dwarf most of the world’s national economies. He turns 64 this month, one year shy of Exxon’s mandatory retirement age. The board elevated former refining boss Darren Woods to president in December, signaling he is in line to succeed Tillerson as CEO.
The comment comes two days after Exxon Mobil on Monday sold $12 billion of new bonds, one of the biggest corporate-debt deals of the year and a sign investors remain willing to lend to higher-quality companies. However Exxon Mobil’s borrowing costs relative to market benchmarks have risen since it sold bonds last year. Exxon Mobil also said it is on track to start up 10 exploration-and-production projects in 2016 and 2017, and that the company is advancing several projects in other business segments. The company also noted that its reduced its capital and operating costs by a net $12 billion last year, including a 9% decrease in unit costs in its exploration-and-production business.
But it expects long-term production of between 4.0 million and 4.2 million boed through 2020, compared to 4.25 million boed in the last quarter of 2015. That outlook is based on a Brent oil price LCOc1 of $40 to $80 a barrel, Exxon said. Brent oil currently trades at just under $37 a barrel. Oil prices have fallen some 70 percent since mid-2014, prompting major companies to slash budgets for expensive projects designed to bring hard-to-find new discoveries online. Exxon's oil and gas production rose 3.2 percent in 2015, as the company's downstream refining unit provided some insulation against the impact of falling oil prices on its upstream exploration and production unit.