ExxonMobil to grow business in Asia/US; to double earnings by 2025
Chemicals/oil major ExxonMobil expects to grow its chemicals manufacturing capacity in North America and Asia Pacific by about 40%. That growth will be achieved in part by adding 13 new facilities, including two world-class steam crackers in the US. These investments would enable the US-based company to meet increasing demand in Asia and other growing markets, said Darren W. Woods, CEO/Chairman, speaking at the annual meeting of investment analysts at the New York Stock Exchange recently.
ExxonMobil’s downstream business is projected to double earnings by 2025 by upgrading its product slate through strategic investments at refineries in Baytown and Beaumont in Texas and Baton Rouge, Louisiana, Rotterdam, Antwerp, Singapore, and Fawley in the UK.
These projects are expected to result in double-digit returns by enabling increased production of higher-value products, such as ultra-low sulphur diesel, chemicals feedstocks and basestocks for lubricants. As a result of these improvements, the company’s 2025 downstream margins are projected to increase by 20%.
Expansion is supported by projected demand growth in emerging markets, and includes entries into new markets such as Mexico and Indonesia. It is supported by integration with chemical manufacturing and upstream production.
“We are uniquely positioned to take advantage of the global demand growth for higher-value products in the downstream and chemical,” Woods said. “Our combined strengths in innovative technology, resource and market access, marketing product leadership and integration improve profitability and create significant shareholder value.”
Woods said the company’s overall growth strategy is designed with a key goal in mind – fully leveraging its competitive advantages to grow shareholder value across all three of our world-class businesses. Through higher returns from increased investments, the company has the potential to increase its return on capital employed to about 15% by 2025.
As part of its aggressive growth strategy to more than double earnings and cash flow from operations by 2025 at today’s oil prices, Woods said growth plans include steps to increase earnings by more than 100% – to US$31 billion by 2025 at 2017 prices – from last year’s adjusted profit of US$15 billion, which excluded the impact of US tax reform and impairments.
“We’ve got the best portfolio of high-quality, high-return investment opportunities that we’ve seen in two decades.”
Woods said this plan projects double-digit rates of return in all three segments of ExxonMobil’s business – upstream, downstream and chemical – which are all three world-class businesses in their own right.
In the upstream, the company expects to significantly increase earnings through a number of growth initiatives involving low-cost-of-supply investments in US tight oil, deepwater and liquefied natural gas (LNG). Growth coming online from new and existing projects is expected to increase production from 4 million oil-equivalent barrels per day to about 5 million.
The company plans to increase tight-oil production five-fold from the US Permian Basin and start up 25 projects worldwide. Those start-ups will add volumes of more than 1 million oil-equivalent barrels per day. In LNG, the company expects to bring on new production to meet a projected increase in global demand.
Upstream growth will benefit from ExxonMobil’s industry-leading exploration success and strategic acquisitions. In 2017 alone, the company added 10 billion oil-equivalent barrels to its resource base in locations including the Permian, Guyana, Mozambique, Papua New Guinea and Brazil.
Key drivers of growth are in Guyana, where exploration success has added 3.2 billion gross oil equivalent barrels of recoverable resource and plans are in place for development and further exploration, and in the Permian, where the company has increased the size of its resource to 9.5 billion oil-equivalent barrels from less than 3 billion in the past year.
Through its acquisition of several Bass entities in 2017, ExxonMobil added an estimated resource of 5.4 billion oil-equivalent barrels in the Permian. The original resource estimate of 3.4 billion barrels at the time of the purchase was increased through technical evaluation and successful delineation in the Delaware Basin, reducing the acquisition cost to just above US$1 per oil-equivalent barrel.
The contiguous stacked pays from the New Mexico acquisition are now estimated to provide more than 4,800 drilling locations with an average lateral length of more than 12,000 feet, enabling capital-efficient execution of Permian volumes growth and the potential to further increase future volumes.
“We are in a solid position to maximise the value of the increased Permian production as it moves from the well head to our Gulf Coast refining and chemical operations, where we are focusing on manufacturing higher-demand, higher-value products,” Woods said.