“Uncertainty” is the word for the oil market today and a single 24-hour snapshot of the price of WTI is an illustration, an Exxon Mobil senior vice president said.
“We've had perhaps the shortest oil spike in the history of the oil markets,” Jack Williams said at a J.P. Morgan energy conference June 24.
“It started on a Sunday evening; ended by Monday morning.”
The WTI-August contract on CME Group closed June 20 for the weekend at $74, up from about $68 a week earlier before Israel launched daily attacks on Iranian targets.
The U.S. joined in on June 21, dropping bunker-buster bombs onto underground Iranian nuclear infrastructure.
The contract resumed trading at 4 p.m. CDT June 22, opening at $78/bbl.
The following afternoon on June 23, after Israel and Iran agreed to a cease-fire, the contract fell to $64/bbl, which was the price on June 11.
Williams said, “So I mean, I think it's really hard to predict near term where things are going to go. We have a lot of volatility out there.”
‘Well-positioned’
Exxon can weather sub-$70 WTI, though, he said. “We think we're well positioned and ready in that kind of environment."
And, of course, if prices improve “we'll benefit pretty hugely with the production we have going on.”
The $470-billion market cap, international and integrated energy major’s five-year plan is based on mid-cycle prices of about $65 Brent.
Still, at $55 Brent, “we generate $110 billion of surplus cash after dividends and capex,” Williams said.
“So we certainly can withstand lower pricing and that would be for an extended period of time over that entire period [into 2030].”
Exxon Mobil’s net debt to capital is 7%. “So sitting very, very good there.”
Some $24 billion of divestments “got us really down to our fighting weight. So we’re in really good shape.”
Into the M&A ring
If Exxon varied from its five-year plan, “it would be because we see a really, really good attractive opportunity in front of us—not because we need to because of market conditions kind of forcing, kind of tying our hands.
“We're, of course, keeping our head up and looking around for opportunities and we'll take advantage of those as they present themselves.”
The operator bought Permian Basin pureplay Pioneer Natural Resources in May 2024 for $64.5 billion in stock and debt assumption, picking up 721,000 boe/d, 53% oil.
Post-closing results have been surprising—to the upside—Williams said.
“What we didn't factor in enough is the quality of the Pioneer workforce, work processes, what they were doing and the reverse synergies we're going to get from that.
“So we certainly had a pleasant surprise there with the quality of what Pioneer brought to the corporation.”
Exxon has increased its estimate of Permian Basin operational savings from the Pioneer deal from $2 billion a year to $3 billion due to synergies.
“I would say that's looking really good, really positive,” Williams said.
Meanwhile, though, digesting the Pioneer acquisition hasn’t “boxed us in at all in terms of having too much of the organizational firepower working on that.”
Exxon is “pretty wide open in terms of the ability to do … more acquisitions,” he added.
It’s looking for deals that are “one plus one equals three. We're looking for value. We have to be able to add significant value.”
Within the Permian Basin, there are small deals to be done too.
“With the Pioneer acreage and our legacy [Permian] acreage, we have a lot of areas where we can do some trades around the edges so we can do real win-wins or some bolt-on acquisitions around the edges … that we bring a lot of value.”