Since 2019, a solid execution of ExxonMobil’s strategy has increased the earnings power of the corporation, adding about US$10 billion to its annual earnings and cash flow at a real Brent price of US$60/bbl. These improvements provide a strong foundation to further grow annual earnings and cash flow by US$14 billion from year-end 2023 through 2027, as the company continues to reduce structural costs and improve the mix of its business by growing production from low-cost-of-supply, advantaged assets and increasing sales of high-value performance chemicals, lower-emission fuels, and performance lubricants.
By any measure, our plans have and will continue to deliver exceptional value,” said Darren Woods, Chairman and Chief Executive Officer. “We remain committed to providing the energy and products that raise living standards around the world while building a new business to reduce emissions in hard-to-decarbonise parts of the economy. ExxonMobil is uniquely equipped to do both, and we’re confident that both present significant opportunities for profitable growth.”
The company also announced it intends to deliver US$6 billion in additional structural cost reductions by year-end 2027, bringing the total structural cost savings to approximately US$15 billion versus 2019. Opportunities from consolidating value chains and centralising key activities including maintenance, supply chain, procurement, order to cash, financial reporting, planning and analysis, and trading will enable further efficiency and execution effectiveness.
Upstream earnings potential is on track to more than double by 2027 vs 2019, resulting from investments in high-return, low-cost-of-supply projects. Over the next five years, approximately 90% of the company’s planned upstream capital investments in new oil and flowing gas production are expected to generate returns greater than 10% at a Brent price of US$35/bbl. The company has made good progress executing its plan to reduce upstream operated greenhouse gas emissions intensity by 40 – 50% by 2030, compared with 2016 levels, having already achieved approximately half of this planned reduction.
The company expects oil and gas production in 2024 to be about 3.8 million boe/d, rising to about 4.2 million boe/d by 2027, driven by growth in the Permian and Guyana.
Product Solutions is leveraging scale and technology advantages to nearly triple earnings potential by 2027 vs 2019. Earnings growth is being delivered through structural cost reductions, strategic project execution that will double sales of high-value products, and other earnings improvements such as higher reliability, more efficient maintenance, facility optimisation projects, and commercial improvements including trading. The portfolio value is being continuously upgraded through divestments of non-strategic assets and continued investment in advantaged sites to increase high-value products such as the recent chemical expansion in Baytown.
The company’s capital allocation approach prioritises competitively advantaged, high-return, low-cost-of-supply, value-accretive investments. The company now anticipates total annual capital expenditures and exploration expense of US$23 billion to US$25 billion in 2024 and US$22 billion to US$27 billion annually from 2025 through 2027, generating an average return of approximately 30%. Greater than 90% of the CAPEX has payback periods less than 10 years. The increase in CAPEX beginning in 2025 is driven by the growth in value-accretive low carbon solutions opportunities to reduce emissions.
Increased cash flow and earnings enable further surplus cash generation and increased shareholder distributions. The company remains on track to complete US$17.5 billion in share repurchases in 2023 as part of the US$35 billion repurchase programme previously announced for 2023 and 2024. After the merger closes, the go-forward pace of the programme in 2024 will be increased to US$20 billion annually through 2025, assuming reasonable market conditions.
Low carbon solutions: Building a new value-accretive business
ExxonMobil is pursuing more than US$20 billion of lower emissions opportunities through 2027, which represents the third increase in the last three years, from an initial US$3 billion in projects identified in early 2021. This is in addition to the company’s recent US$5 billion all-stock acquisition of Denbury, which expanded carbon capture and storage opportunities through access to the largest CO2 pipeline network in the United States.
The company is pursuing a portfolio of opportunities in lithium, hydrogen, biofuels, and carbon capture and storage that in aggregate is expected to generate returns of approximately 15% and could reduce third-party emissions by more than 50 tpy by 2030. These lower emissions solutions help address climate change and closely align with ExxonMobil’s competitive advantages and core capabilities. Approximately 50% of the planned investments support building the company’s Low Carbon Solutions business, which reduces customers’ greenhouse gas emissions.
“We continue to see more opportunities to harness our technology, scale, and capabilities to implement real solutions to lower emissions and to profitably grow our Low Carbon Solutions business,” added Woods. “Success in accelerating emission reductions requires the development of nascent markets. We need technology-neutral durable policy support, transparent carbon pricing and accounting, and ultimately, customer commitments to support increased investment. We’re actively advocating for each of these areas so we can grow a profitable, and ultimately large, low carbon business.”
ExxonMobil is developing a leading position in lithium, leveraging its upstream skills, such as geoscience, reservoir management, and efficient drilling. It also taps into the company’s downstream capabilities in fluid processing and extraction to separate the lithium from the brine. These skills and experiences underpin the company’s cost advantaged entry into the lithium business at scale, with strong returns and a lower environmental impact. Work has begun for the company’s first phase of lithium production in southwest Arkansas, an area known to have large, highly concentrated lithium deposits. First production is expected in 2027. The company is evaluating further growth opportunities in lithium globally. By 2030, ExxonMobil aims to produce enough lithium to supply the manufacturing needs of approximately 1 million EVs per year.
The company recognises the significant uncertainty in how the energy transition and its low carbon business will develop and expects to pace emissions-reduction investments, effectively allocating resources as markets, customer commitments, and policy evolve. This minimises the downside risks while establishing an advantaged position to capture and maximise the upside potential.
The balance of the company’s low carbon capital will be used to reduce its own emissions in support of its 2030 emission reduction plans and its 2050 Scope 1 and 2 net zero ambition. In the Permian Basin, the company is on track to reach net zero emissions for unconventional operations by 2030, and as previously announced, it also expects to leverage its Permian greenhouse gas reductions plans to accelerate its net-zero ambition by 15 years, to 2035 from 2050.
Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/07122023/exxonmobil-provides-update-on-corporate-plan/