ExxonMobil Corp. announced at its annual investor meeting in New York on 5 March, that it will reduce its capital spending 6% in a continued effort to focus on profitability and returns on invested capital. Shares fell nearly 3%.
Last year was a record high for ExxonMobil's capital investment at US$42.5 billion. The company will reduce that to about $40 billion in 2014, followed by an annual average of less than $37 billion in 2015-2017.
ExxonMobil said overall production will be flat, rising only about 100,000 b/d in 2015-2017. Reduced investment will impact production; although the company expects to produce 4.3 MMboe/d of oil in 2017, which would slightly surpass the 4.2 MMb/d produced in 2013, the new estimate is 10% below the 4.8 MMb/d for 2017 that it projected a year ago.
Oil remains lucrative; ExxonMobil expects to increase liquid production 2% in 2014, as it begins production at 10 major projects, adding 300,000 b/d in new capacity.
ExxonMobil's decision follows similar capex reductions at Chevron, Royal Dutch Shell, and Total.
In December, Chevron announced a $39.8 billion capex program for 2014, about $2 billion less than the company's total investments for 2013.
ExxonMobil Chairman and CEO Rex Tillerson said that the company aims to "remain disciplined and selective with our capital, ensuring that any new investment contributes to robust cash flow growth." Tillerson also said ExxonMobil plans to rebalance its investments in favor of the downstream segment.
Regarding the company's operations in 2013, Tillerson said, “For the 20th consecutive year, we added more oil and natural gas reserves than we produced, with our proved reserve replacement ratio exceeding 100%.
“In 2013, we had improved oil and gas reserves totaling 1.6 billion oil-equivalent barrels, of which nearly 76% are liquids. At year-end 2013, proved reserves totaled 25.2 billion oil-equivalent barrels, comprised of 53% liquids and 47% natural gas.
“ExxonMobil’s upstream earnings per barrel were $18.3 in 2013, an average $17.26 over the last five years … one of our ongoing priorities is to improve unit profitability.”
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