Current XOM Stock Info

Big quarter for acquisitions: $9.4 billion in Permian, Mozambique

ExxonMobil (ticker: XOM) announced first quarter earnings today, reporting earnings of $4 billion, or $0.95 per diluted share. This result is significantly better than ExxonMobil’s earnings in Q1 2016 or Q4 2016, when low commodity prices and impairments decreased earnings to $1.8 billion and $1.7 billion, respectively.

The global economy grew modestly in Q1 2017, strengthening ExxonMobil’s results. Expansion in the U.S. slowed in Q1, but growth in China and Europe was stable, while Japanese growth improved slightly. Both natural gas and oil prices improved, which significantly improved results. The price recovery has generated significant activity, but this has mostly been confined to the U.S.

$6.6 billion Permian acquisition doubles resource

ExxonMobil made several significant transactions in Q1. The largest among these is the company’s acquisition of the Bass family’s Permian assets. In this transaction Exxon doubled its Permian resource, adding about 250,000 acres in a deal valued at $6.6 billion. ExxonMobil’s unconventional assets are managed by its subsidiary XTO Energy, whose Permian Basin resource base now totals more 6 billion BOE.

Mozambique offshore to produce 5.26 Bcf/d of LNG

ExxonMobil also announced the purchase of a stake in offshore Mozambique operations in early March. The company reports that it acquired a 25% interest in the natural gas Area 4 block from Eni (ticker: E) for $2.8 billion. Located off the coast of northern Mozambique, the Area 4 block is estimated to contain 85 Tcf of natural gas. According to Reuters, this volume would be enough to supply Germany, Britain, France and Italy with gas for nearly 20 years.

ExxonMobil Reports $4 billion in Earnings as Commodities Recover

Source: ExxonMobil Investor Presentation

Prepping for 250% growth, XOM investing in one of world’s largest LNG export projects

Exxon will lead the construction and operation of the planned onshore facilities developing this field. The project will produce LNG, processing approximately 5.26 Bcf/d of gas. This capacity will make this project among the largest LNG facilities in the world.

ExxonMobil projects that the overall global demand for gas will grow by 1.5% per year through 2040, but expects that LNG demand will grow much more quickly. In its Outlook for Energy, ExxonMobil predicts that the total LNG supply and demand will grow by 250% from today to 2040.

Q&A from XOM Q1 2017 conference call

Q: Could we go back to Mozambique if we could? I’ve obviously heard what you’ve been saying about it but could you just clarify the development. I assume, obviously, that you’re leading an onshore effort means that presumably that’s the direction that you’re going to want ahead and. Could you firstly, just remind us why you bought into this reserve? Secondly, how you plan to develop it? Especially as we’re aware that you’re not involved in the existing project offshore?

XOM IR VP Jeffrey J. Woodbury: Well, the why is really because that we see it as a very competitive low-cost to supply LNG source in the market. You think about some of the big greenfield developments that we’ve done historically and that we’ve participated in, upfront in the development of Qatar and we’re very proud of the role that we played in helping the state of Qatar to meet their overall objectives. And has evolved into the world’s leader in LNG. Papua New Guinea, another big greenfield development that has been extremely successful and is a key competitive source of LNG in the market and we see the same type of characteristics in Mozambique. So that’s why we see it as a very competitive LNG source.

In terms of what the plans are, remember, that there was a floating LNG concept that was being progressed by the current co-venturers. It’s called the Coral floating LNG, that is still intended to move forward. And then the most significant part of the Mozambique development would be an onshore development, as I said my prepared comments, with anticipated capacity up to 40 million tons per annum for Area 4.

Q: Is that going to be own standalone development then, led by Exxon?

Jeffrey J. Woodbury: Yes. Let’s be clear what’s going on. So the actual ownership is by an ENI [ph] affiliate that we bought into. So the operator is ENI East Africa. The leadership will be provided by Exxon Mobil on the onshore LNG facilities and ENI on the onshore facilities.

Q: Do you have an onshore position land or site?

Jeffrey J. Woodbury: It’s being worked the government concurrently.

Q: Okay. So that’s not yet the case but it’s underway. And what’s the best guess, Jeff, for when this thing might actually be final investment decision and producing gas?

Jeffrey J. Woodbury: Yes. I really have nothing to share with you at this point. What’s important right now Paul is that we get the regulatory approvals, and then working with the coventurers to really optimize the development and we’ll have a better handle on that once we get past those milestones.

Will crude rebalance in 2017?

Q: Jeff, always appreciate your perspective on the oil macro. Trying to get some legs under it here in 2017. Where does Exxon believe we are in terms of the crude rebalancing process? We appreciate your views on OPEC/non-OPEC in demand.

Jeffrey J. Woodbury: Clearly I would say that the macro would still indicate, from an ExxonMobil perspective, still indicate the need to be cautious going forward. As we’ve talked in the past, underlying demand growth has been generally strong. We are seeing demand growth of about 1.4 million barrels per day, similar to last year. And that’s above the 10-year average. As we would’ve expected. We’re seeing a supply-side response to supply and demand coming into balance, and we do see that non-OPEC volumes are growing particularly driven by North America, and specifically the unconventionals.

And you think over the last recent period unconventionals have grown round numbers about 800,000 barrels a day on trend, and maybe 1 million barrels a day over a 12-month period. So I think it all indicates the importance of making sure that we are very thoughtful about the near and longer-term macro environment.

On an OPEC basis as you’ve seen, OPEC has generally met their commitments. A little bit short, but they are demonstrating a level of compliance. But when you step back and look at the supply side, I think is the biggest issue in front of us, and that will be a function of so many elements, including the North American response I talked about, but also economic growth and other variables. Remember, we still have round numbers about 600 million barrels in storage, and depending on what near-term prices do, that’s going to come out at some point. So a lot of variables to think about, and that’s what really underpins my comment about just being cautious.


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