Texas markets

ExxonMobil directs growth to Permian, Guyana and increasingly global LNG markets

Growth in the Permian Basin, Guyana’s offshore and the global liquefied natural gas (LNG) market are gaining momentum, along with low-carbon opportunities, ExxonMobil CEO Darren Woods said Friday.

During the 1Q2022 conference call, Woods told investors that “recent events” have clarified the direction of oil and gas producers. New investment in Russia was scuttled by the supermajor in the quarter, but a plethora of opportunities exist elsewhere, he said.

The “rapid increases” in crude, natural gas and refined product prices in the first three months were ignited by “a tight supply/demand environment, driven primarily by low levels of investment during the pandemic… Clearly, events in Ukraine added uncertainty to what was already a tight supply outlook.

Brent prices climbed 27% from 4Q2021, and natural gas prices today “are above historic 10-year ranges, due to tight global market conditions and ongoing supply concerns. in Europe.
“The same tight supply/demand factors also pushed refining margins up the range. Chemical margins in Asia fell sharply as product prices lagged sharp increases in feed and energy costs. In our case, the advantage of ethane in the United States provided a significant positive offset against this overall view. »

While the market is volatile and uncertain, ExxonMobil plans to continue its longstanding strategy of capital discipline, Woods said. A basket of ongoing oil and gas opportunities, led by the Permian and Guyana, is pulling reserves higher.

Permian Tracking 25% growth

In the Permian, America’s premier coin, ExxonMobil’s March production reached “approximately 560,000 boe/d, on track to deliver a 25% increase over 2021,” Woods noted. This year’s plan is to average 10-12 rigs and six-eight completion teams, which is “on plan”.
What ExxonMobil plans to avoid are constraints in routing supply from the basin. Developments must match basin infrastructure while increasing capital efficiency. “That tends to guide what we do there.”

For the Permian, the company has “developed procurement strategies to mitigate any issues with moving supply.” The issues have been exacerbated by lack of consumables and “labour pressures,” which may “continue to grow… We are fundamentally challenged to manage this,” while “not undermining profits or barrels”.

Meanwhile, the company is working to build a “globally diversified portfolio” of LNG projects. Exports from Golden Pass Terminal LLC, southeast of Houston, remain on schedule to increase in 2024, Wood said. The venture with Qatar Energy received federal approval this month to increase capacity to 18.1 million metric tons/year (mmty) from 15.6 mmty.

In Mozambique, the 3.4mmty floating LNG production vessel Coral South operated by Eni SpA “is being commissioned after arriving on site in January,” Woods noted. Eni manages the project on behalf of its partners, including ExxonMobil.

“Coral South is on budget, with the first LNG shipment expected in the fourth quarter,” Woods said.

LNG business opportunities are also growing, he noted.

The Irving, Texas-based producer juggles many developments around the world, including his world-class offshore business in Guyana. The ExxonMobil-led development of the huge Stabroek block has led to more than 20 discoveries – five this year alone – with gross reserves approaching 11 billion boe.

“This quarter saw the successful start of Liza Phase 2,” Woods said of the Stabroek business. “Production is ramping up earlier than expected and is expected to reach capacity of 220,000 bpd of oil by the third quarter…

“Combined with Liza Phase 1, it will bring our total production capacity in Guyana to over 340,000 bpd… Our third project, Payara, is ahead of schedule with start-up now likely by the end of the year 2023.” Yellowtail, the fourth and largest project to date, is expected to start in 2025.

“In addition to investing in high-value opportunities in our existing businesses, we are also developing opportunities in our Low Carbon Solutions business,” Woods said.

[Want today’s Henry Hub, Houston Ship Channel and Chicago Citygate prices? Check out NGI’s daily natural gas price snapshot now.]

CCS opportunities are growing

“During the quarter, we announced our intention to build a full-scale hydrogen plant in Baytown, TX,” on the Houston Ship Channel. “We anticipate the facility will have the capacity to produce up to 1 billion cubic feet of hydrogen per day.”

Combined with carbon capture and storage (CCS) of approximately 10 mmty of carbon dioxide (CO2), the Baytown facility “will be a foundational investment in the development of a CCS hub in Houston,” said the CEO. If the project is sanctioned, it would have the potential to eliminate 100 mmty of CO2. During the quarter, ExxonMobil also approved a CCS project at its helium plant in Wyoming.

Separately, ExxonMobil implemented a series of organizational changes at the end of March, combining its downstream and chemical operations into the Product Solutions business. The company is now organized around three main divisions: Upstream, Product Solutions and Low Carbon Solutions.

During 1Q2022, global natural gas volumes fell to 8.45 Bcf/d from 9.17 Bcf/d a year ago. US gas volumes were nearly flat at 2.78 Bcf/d. Volumes in Canada and other North American countries fell to 182 MMcf/d from 216 MMcf/d.

Global crude and liquids volumes were virtually flat year-over-year at 2.27 million boe/d. US volumes increased from 665,000 to 753,000 boe/d. Volumes in Canada fell from a year ago to 474,000 boe/d from 575,000.

Net profit reached $5.48 billion ($1.28/share) in the first quarter, double the profit of $2.73 billion (64 cents) a year ago. Total revenue jumped to $90.5 billion from $59 billion in 1Q2021.

Net operating cash increased year-over-year to $14.79 billion from $9.26 billion.

Capital spending in the United States rose to $1.37 billion from $810 million a year ago. Global upstream spending increased from $2.36 billion to $3.88 billion.

ExxonMobil also announced it was increasing share buybacks by up to $30 billion through 2023.

“Continually investing in our people and maintaining a strong culture are fundamental strategic priorities and essential to achieving our long-term goals,” Woods told investors. “As part of this effort, we are tripling the number of employees eligible for stock awards by bringing in high performers at an early stage in their careers.

“Our goal is to increase the participation of our employees in the company and, more importantly, in our financial and operating results. Second, in June we will implement a 3% off-cycle compensation adjustment in the US to maintain competitiveness. Our compensation and benefits programs are a key part of our total value proposition that allows us to continue to attract and retain the best talent in the industry.