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ExxonMobil’s newest trades in long-term pumping projects will give the company the option to switch off shale oil and gas production in lockstep with barrel prices, according to a new report by World Oil.
One-third of the U.S. company’s drilling budget will be dedicated to purchasing access to shale fields that Exxon can begin profiting off of in three years or less, according to Exxon CEO Darren Woods.
Woods made the announcement in his first public event since securing the position from now Secretary of State Rex Tillerson. As part of Exxon’s plans to deepen its focus on the Americas, half of the company’s international drilling budget in 2018 will be spent on U.S. shale, with output from shale wells growing by roughly 20 percent every year until 2025.
“The shift from long to short is really a reflection of the opportunity that has grown in the short-cycle business,” Woods said. “That part of the business isn’t in discovery mode; it’s in extraction mode.”
In January, Exxon closed a deal to pay as much as $6.6 billion to double the company’s drilling rights in the Permian Basin. At current prices, the total value of the six billion barrels of crude in the company’s section of the Texas basin stands as $324 billion. Even if barrel prices fall to $40 again, the region will still create “attractive returns” for Exxon.
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Woods is now at the reigns of a company that suffered $154 billion in losses when oil prices collapsed in 2014. In Exxon’s biggest reserves reduction since 1999, the new CEO unloaded 3.3 billion barrels of unextracted crude from its portfolio last week.
Thus, investors may need more positive news as the company “continues to struggle to showcase upstream volume growth over the near to medium term,” according to Vincent Piazza, a Bloomberg Intelligence analyst.
By Zainab Calcuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on…