Exxon to cut Permian growth by 10% in response to price slump

Exxon Mobil is slowing the pace of its flagship shale project in the Permian Basin. Plans on track to more than double earnings and cash flow generation potential by 2025. First signs that the oil majors are throttling back on production in response to the recent slump in prices.

The U.S. energy giant will cut Permian production growth by about 10% over the next two years. Advantaged projects, industry-leading growth opportunities and favorable cost environment support earnings. Company released a model framework for industry-wide methane regulations.

The company said at its analyst day in New York on Thursday. Exxon Mobil Corporation’s (NYSE:XOM) board of directors has elected Stephen Littleton as vice president of investor relations. Stabroek Block recoverable resources increased by 2 billion oil-equivalent barrels.

He will stick to its long-term plan to almost triple output from the basin by 2024. Production for Liza Phase 1 to reach full capacity of 120,000 barrels of oil per day in the coming months. Work continues on lower-emissions technologies, including biofuels and carbon capture.

Exxon’s short-term slowdown in the Permian stands in contrast to plans by rival Chevron Corp. ExxonMobil is progressing growth plans to substantially increase earning. This week increased its output target for the basin to fund as much as $80 billion of dividends and share buybacks over the next five years.

Oil prices have plunged in recent weeks as concern mounts over the impact of the coronavirus on global consumption. Neil Hansen is currently vice president of investor relations and corporate secretary. Said earlier this week that demand will contract in 2020 for only the fourth time in 40 years.

ExxonMobil has been applying the principles of this framework to our oil and natural gas operations. The pressure is particularly acute for Exxon. Its shares have dropped to a 15-year. Uaru well is 16th discovery, will be incremental to the new resource estimate.

It continues to spend heavily on new projects through the downturn as part of a counter-cyclical strategy. Liza Phase 1 is the first of multiple offshore projects planned in the Stabroek Block. ExxonMobil has increased its estimated recoverable resource base in Guyana.

Chief Executive Officer Darren Woods says “Oversupply is driven by industry investments and some of these growth markets have exceeded demand”.

The Permian pullback means this year’s capital spending will be not more than $33 billion, the low end of its previously targeted range. The ExxonMobil model framework is based on its voluntary methane reduction program. Littleton is currently vice president of downstream business services and controller.

Even so, Exxon said its long-term plans were unchanged, with spending rising to as much as $35 billion a year through 2025. More than 1,700 Guyanese have worked on ExxonMobil activities in Guyana. ExxonMobil expects to increase annual earnings potential by more than 140 percent.

The scale of Exxon’s spending has meant the oil behemoth has failed to cover its dividend payments with cash flow for eight out of the last 10 quarters. Littleton has a business degree from the University of Missouri – St. Louis, and master of business administration.

It relying on asset sales and borrowing to make up the difference. More comprehensive than current federal rules, the proposed regulations would apply to new and existing sources. It’s not clear that the oil major’s analyst day presentation will be enough to soothe wary investors.

Hansen joined ExxonMobil in 2000 and after several roles in the controllers organization. The lack of a material change in strategy and capital spending “leave us thinking that XOM is in for another tough year. The new recoverable resource estimate includes 15 discoveries offshore Guyana through year-end 2019.

The longer a recovery in the company’s downstream and chemicals business takes. The company has reduced methane emissions from its U.S. unconventional operations by 20 percent since 2016. The longer XOM generates weaker free cash flow and returns versus peers.

Payout Problems. Exxon said Thursday its balance sheet has “significant financial capacity” to pay for project spending while growing the dividend. ExxonMobil has advocated in the United States for a cost-effective, federal regulatory standard to manage methane emissions.

Debt is “available at historically low cost.” Its shares dropped 3.8% to $50.44 at 9:36 a.m. in New York amid a broader equities decline. In 2012, Hansen was appointed manager of planning and financial markets in the treasurers department.

The company’s Permian pullback is another sign that U.S. shale growth may be slowing. Hansen graduated from Oklahoma State University with a bachelor’s degree in marketing. West Texas Intermediate crude prices have dipped well below $50 a barrel.

ExxonMobil, one of the largest publicly traded international energy companies. The Uaru discovery is the first of 2020 and will be added to the resource estimate at a later date. Company announced that oil production has started from the Liza field offshore Guyana.

A level at which many of the independent operators in the Permian are thought to be losing money. The company will continue to work constructively with state and federal regulators. ExxonMobil holds an industry-leading inventory of resources.

Shale producers have been cutting spending and hiking dividends as investors demand better returns. Woods highlighted progress on major upstream projects that are expected to help increase production. The company emphasized it is evaluating the pace of near-term development activities in response to market conditions.

ExxonMobil supports the Methane Guiding Principles for reducing methane emissions across the natural gas value chain. Exxon, along with Chevron, is making a large bet on the Permian as a source for future production growth. Uaru encountered approximately 94 feet (29 meters) of high-quality oil-bearing sandstone reservoir.

The projects include plans to increase production in the Permian Basin to 1 million oil-equivalent barrels. Investors Tuesday said that it sees its Permian output plateauing at 1.2 million barrels a day by the mid-2020s with capital spending of about $4.5 billion a year.

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