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ExxonMobil’s Capex cut is one of the smallest seen among supermajors so far

ExxonMobil (ticker: XOM) held an analyst meeting today, giving a presentation with the company’s expectations for 2015. The energy-major cut its capital budget for this year to $34 billion, a 12% cut from 2013, making it one of the smallest cuts for any large-cap company to date.

Pavel Molchanov of Raymond James Equity Research said, “While this (the 12% Capex cut) is a bit steeper than the 5-10% cut that we had anticipated, it is still easily one of the smallest cuts among large-caps in this downcycle.” The only large-cap companies to make smaller cuts to their capital budgets are YPF (3% cut), Statoil (8% cut), BP and Total (11% cut each).

During the company’s presentation, Rex Tillerson, Chairman and CEO of ExxonMobil, said that XOM continues to maintain its long-term view. “The oil and gas business is cyclical and we’ve been here before,” he said. “We have a relentless focus on things we control… We are always looking for ways to lower our cost structure and we expect to lead the cost curve especially under these conditions.”

ExxonMobil’s presentation can be downloaded here.

Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. The company or companies covered in this note did not review the note prior to publication.

Analyst Commentary

Pavel Molchanov, Raymond James Equity Research 03.04.2015
At the risk of stating the obvious, Exxon’s ultra-long-term perspective
means that it is making only small course corrections following the oil price meltdown –
there are no wholesale strategic changes of any kind. Today’s analyst meeting highlighted
the key themes of capital intensity and finally achieving more visible production uplift.
The main headlines were generally positive on both fronts, as the 2015 budget came in a
bit lower than we anticipated, while production growth guidance is encouraging.

William Featherston, UBS Global Research 03.04.2015
XOM disclosed 2015 capex guidance of $34 billion, in line with the
longer-term guidance of $34 billion per annum provided in its 10-K last
week. The guidance represents a ~12% decrease from last year's spending of
$38.5 billion, with all of the decrease due to lower Upstream spending, as
Downstream and Chemical capex are expected to be unchanged to up
modestly YoY. We estimate this level of spending should enable just a modest
~0.45% FCF yield this year. Assuming the current futures strip, this level of
spending should enable $5.5 billion in free cash flow before $12 billion in
dividends and $4 billion in share repurchases in 2015. Post dividends and
repurchases, we forecast a $10 billion FCF deficit (at strip prices).

Roger Read, Wells Fargo Equity Research 03.05.2015
ExxonMobil hosted its annual analyst day Wednesday morning with confirmation of its 2017 production outlook of 4.3 mmboed on slightly lower capital expenditures, higher drilling activity in the U.S. shales, the completion of multiple mega projects and an $8.0 billion debt offering.  


Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.