ExxonMobil plans to drive up capital spending over the next four years, increasing oil and gas production and raising outlays for its low-carbon energy division after a period of self-imposed austerity following a 2020 commodity price crash.
The largest US oil company by sales said it expected annual capital and exploration expenditure of $23bn-$25bn in 2024, rising to $22bn-$27bn from 2025 to 2027. That compares with an outlay of less than $23bn last year and previous forecasts of $20bn-$25bn through 2027.
The increased spending will help the US supermajor boost oil and gas production by about 10 per cent to 4.2mn barrels a day by 2027, as it raises investments in key operations in the Permian Basin in the US south-west and Guyana. Exxon is in the process of closing a $60bn deal for Pioneer Natural Resources, the biggest producer in the Permian.
Spending on low-carbon projects is forecast to total $20bn over the six years between 2022 and 2027, a rise of $3bn from the company’s previous plans.
“Our capex?.?.?.?reflects consistent investment in our traditional businesses and a growing set of high-return opportunities in lithium, hydrogen, biofuels and carbon capture and storage,” Darren Woods, Exxon’s chief executive, told analysts on Wednesday.
Exxon said the US Inflation Reduction Act law enacted in 2022 had helped to make cleaner forms of energy more attractive, though it said the pace of its spending in this business would depend on how policies, demand and markets evolve.
The company’s additional low-carbon investment would be focused on its nascent lithium extraction venture and on expanding its carbon management business, which recently tacked on the nation’s biggest carbon dioxide pipeline network through the acquisition of oil group Denbury.
Exxon shares were down 1.4 per cent on Wednesday.
The US oil industry has focused on maintaining capital discipline and boosting returns to shareholders in recent years following a dramatic collapse in prices during the pandemic, which caused a pullback in production growth. Analysts said Exxon’s increased spending, which does not include Pioneer’s capital expenditure budget, could herald a shift to more sustained higher spending.
Biraj Borkhataria, analyst at RBC Capital Markets, said: “The overall capex increase suggests that over the medium term, once [Pioneer] is consolidated, capex may drift higher closer to $30bn per annum, and [Exxon] will need to convince investors on the merits of the low-carbon spending from here, as typically, investors have taken a more cautious approach.”
Exxon’s capital expenditure plans are still well below what they were before the Covid-19 pandemic, when the company took an axe to spending. In 2020 the US oil group announced it would slash annual spending to $23bn, down from a previously announced $33bn, as it forecast oil demand would tumble 20 to 30 per cent.
Exxon forecasts oil production of 3.8mn oil-equivalent barrels a day in 2024, compared with 3.7mn b/d this year.
The company on Wednesday said it would also raise share buybacks to $20bn next year because of increased cash flows and earnings following the closing of its deal for Pioneer, which it announced in October. Exxon plans to repurchase $17bn of its shares this year.
