Exxon Mobil (XOM.N) has outlined a steady investment strategy, aiming for an annual project expenditure of $22 billion to $27 billion through 2027, maintaining its current spending and production targets. This strategy was detailed in a recent update, affirming the oil giant’s commitment to its existing financial goals.
The leading U.S. oil producer is set to increase its investment in emerging sectors like lithium and low-carbon technologies by 18% over the same period. Despite this strategic direction, the company’s presentation conspicuously omitted details on the anticipated benefits from its substantial $60 billion acquisition of Pioneer Natural Resources (PXD.N), slated for completion in early 2024. This omission led to a decline in shares by over 1%.
Exxon Mobil’s executives highlighted that significant profits from its venture into energy transition sectors, such as carbon dioxide reduction and lithium production, are expected beyond 2027. The success of these ventures largely depends on regulatory and infrastructural support from the government.
CEO Darren Woods commented on the convergence of these factors, stating, “All those things are coming together,” but acknowledged the current uncertainty until these elements are firmly in place. The outlook, according to Woods, remains “less certain” until then.
Analyst Biraj Borkhataria of RBC Capital noted the importance of Exxon convincing investors of the low-carbon spending benefits. The annual forecast, which traditionally attracts investor attention for its spending and production plans, was especially anticipated this year due to the Pioneer deal and the acquisition of carbon pipeline firm Denbury.
In a major strategic move, Exxon announced its intention to acquire Pioneer in October for nearly $60 billion in stock, aiming to triple its shale field production in the U.S. to 2 million barrels per day (bpd) by 2027. Additionally, the $4.9 billion purchase of Denbury reinforces its carbon business.
Despite the Pioneer acquisition, Exxon’s projected production growth for the next year does not include the over 700,000 bpd boost from the deal. This acquisition is expected to double Exxon’s output in the Permian shale to approximately 1.3 million bpd.
The company’s Low Carbon Solutions unit investment will rise to $20 billion from 2022 to 2027, up from $17 billion. However, this increased expenditure necessitates government support. Woods emphasized the need for “technology-neutral durable policy support, transparent carbon pricing and accounting, and ultimately, customer commitments.”
Furthermore, Exxon plans to escalate its share buybacks to $20 billion annually through 2025, post the Pioneer merger, up from the current $17.5 billion. This increase comes alongside a continued divestment plan in its refining operations.
Analysts observed that excluding Pioneer’s contributions, Exxon’s oil and gas targets fell short of expectations, with a spending forecast higher than anticipated. Delays are also expected in the production start-up of Exxon’s Golden Pass LNG plant, now projected for 2025.
RBC Capital predicts annual expenditures could reach $32 billion by 2027, factoring in an additional $4 billion-$5 billion for Pioneer’s assets. The company projects earnings and cash flow increase through 2027 by $14 billion, driven by cost cuts, higher output from Guyana and U.S. shale, and gains in refining and chemicals. LSEG financial firm forecasts Exxon’s earnings at $37.2 billion for the current year.
Higher cash flow is expected from increased earnings and a new $6 billion cost reduction target by 2027. This follows significant spending and overhead reductions after a historic $22 billion annual loss in 2020.
Exxon anticipates a production rise to 3.8 million barrels of oil equivalent per day (boepd) in 2024, up from 3.7 million this year, with expectations of gains from the Permian shale basin and Guyana. Project spending is set to increase to between $23 billion and $25 billion next year, averaging $24.5 billion annually from 2025 through 2027.
