ExxonMobil raises capital spending plans in effort to boost production

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ExxonMobil plans to drive up capital spending over the next four years and increase oil and gas production as it loosens the shackles on investment after a period of self-imposed austerity following a 2020 energy price crash.

The largest US oil company said it expected annual capital and exploration expenditure of $23-$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 $20-$25bn through 2027.

Spending on low-carbon projects is forecast at $20bn between 2022 and 2027, a rise of $3bn on previous plans.

“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,” said Darren Woods, ExxonMobil’s chief executive. 

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.

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.

 “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,” said Biraj Borkhataria, analyst at RBC Capital Markets.

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 by 20 to 30 per cent.

The new investment in increased production by the company — which made record profits in 2022 after prices surged higher following Russia’s invasion of Ukraine — comes as it bets on continuing strong oil demand for decades to come. Exxon forecasts oil production of 3.8mn oil-equivalent barrels a day in 2024, compared with 3.7mn b/d this year.

Exxon said on Wednesday 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.

Exxon shares were down 0.5 per cent in early Wall Street trading on Wednesday.