Exxon to offer spending outlook on Wednesday, December 1 as investors seek clues to low-carbon returns

By Sabrina Valle
Reuters
30 November 2021

HOUSTON, Nov 30 (Reuters) - Exxon Mobil (XOM.N) will brief Wall Street on Wednesday on its future spending plans, with investors looking for how it will balance oil and low-carbon initiatives without compromising shareholder returns.

This year, the largest U.S. oil producer slashed costs by slowing several big expenditures while boosting investment in low-carbon ventures. The briefing will be the first time analysts can quiz executives on spending and proposed new investments in carbon capture and biofuels.

Exxon's disclosure of expected returns targets are the "main concern" for shareholders, said Ben Cook, portfolio manager of Hennessy BP Energy Transition Fund, which holds shares in Exxon. Its nearly 6% dividend yield is critical to investors, he said.

A four-fold increase in low-carbon spending through 2027, to $15 billion, raised "the question of which legacy projects will be pushed out and whether the new low carbon investments could generate comparable returns" to oil, Scotiabank analyst Paul Cheng said.

The update will be the first under a board that includes three new members elected last spring by investors demanding the company cut spending, boost returns and better address climate concerns. Exxon has pivoted from questioning climate change to viewing it as a business opportunity.

Investors will want to hear whether Exxon's increased spending on carbon capture and clean fuels will require cutting some oil and gas projects, Cheng said. Low-carbon could "remain a drag to the company's overall portfolio," Cheng said.

SPENDING REBOUND

Last month, the company signaled it would loosen its spending belt after pandemic-induced cuts, and restore between $4 billion and $9 billion to annual spending over the next few years. It also promised to resume share buybacks next year. read more

New oil and gas investments in offshore Guyana, Brazil, U.S. shale, and in chemicals products have been included in company's future budgets. Offsetting the costs are proposed sales of billions of dollars in less productive assets.

In Guyana, Exxon recently raised to 10 billion barrels of recoverable oil and gas and projected output will grow eight-fold to 1 million bpd in 2027 - more than a fourth of the company's total output. read more

Another $8 billion deepwater oil project in Brazil in which Exxon holds a 40% stake was approved this year. Two drilling rigs were added in the U.S. Permian basin, raising Exxon's total to nine in the top U.S. shale field.

The company committed to a $30 billion liquefied natural gas project in Mozambique, pledging to add carbon capture technology to the effort on the east coast of Africa.

"Exxon will either add more spending or a tonne more spending," said Sankey Research oil analyst Paul Sankey. The question is "how much and where" it will put money in the shorter term, he said.

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Source: Business Wire

IRVING, Texas, December 01, 2021--(BUSINESS WIRE)--ExxonMobil (NYSE: XOM) said today it has finalized corporate plans, which increase spending to $15 billion on greenhouse gas emission-reduction projects over the next six years while maintaining disciplined capital investments in its industry-leading portfolio. The plans support the corporate strategy of continued structural cost savings, investment in low-cost-of-supply and lower-emission products, and further portfolio high-grading, positioning the company to double earnings and cash flow by 2027 versus 2019.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20211201005509/en/

The company also announced it is on track to meet its 2025 greenhouse gas emission-reduction plans by year-end 2021, four years ahead of schedule. In addition, ExxonMobil has developed more aggressive plans for further Scope 1 and Scope 2 reductions through 2030, consistent with Paris Agreement pathways.

Capital Plans

ExxonMobil plans to maintain capital investments in the range of $20-$25 billion per year through 2027 with flexibility to adjust to adverse market conditions or changes in policy and technology for low-emissions projects.

"The restored strength of our balance sheet and improved financial outlook support accelerating investment in our industry-advantaged, high-return projects, and a growing list of financially accretive lower-emission business opportunities," said Darren Woods, chairman and chief executive officer. "Our strategy is designed to create shareholder value by leveraging our competitive advantages while maintaining flexibility to respond to future policy changes and technology advances associated with the energy transition."

Projected growth of cash flow and earnings in the Upstream business results from aggressive cost reductions and progressing advantaged investments in low-cost-of-supply projects in Guyana, Brazil, and the Permian Basin in the United States. More than 90% of Upstream planned capital investments through 2027 are expected to generate returns of greater than 10% at prices less than or equal to $35 per barrel of oil equivalent, while reducing Upstream GHG emissions intensity by 40-50% through 2030, compared to 2016 levels.

Downstream and Chemical earnings and cash flow growth plans are focused on high-return projects, which are expected to double the volume of valuable performance chemicals and lower-emission fuels and lubricants. The company will leverage its industry-leading manufacturing scale, integration, and technology position to high-grade its portfolio and reduce costs, while optimizing operations and leveraging the capabilities of the Low Carbon Solutions business to reduce greenhouse gas emission intensity at operated facilities.

Increased cash flow and earnings enable both further debt reduction and returns to shareholders. To date in 2021, the company has repaid $11 billion in debt and expects to be comfortably within the range of its targeted debt–to-capital ratio of 20-25% by year-end. It has also announced a $10 billion share-repurchase program over 12-24 months that will commence in 2022, and it increased its annual dividend payment for the 39th consecutive year.

Greenhouse Gas Emission Reduction Plans

As part of its plan, ExxonMobil has committed $15 billion for lower-emission investments through 2027. These investments will include a balance between projects to reduce greenhouse gas emissions from existing operations and increased investments in the Low Carbon Solutions business. The same capabilities, technical strengths and market experience that support base energy and chemical businesses will help drive commercial growth opportunities for carbon capture and storage, biofuels and hydrogen where supportive policies currently exist and provide for strong returns.

ExxonMobil is on track to exceed its 2025 greenhouse gas emission-reduction plans announced in December 2020. The company anticipates year-end 2021 results to show a reduction of 15-20% in greenhouse gas intensity from Upstream operations compared to 2016 levels, four years ahead of schedule. This is supported by an anticipated reduction of 40-50% in methane intensity and 35-45% in flaring intensity compared to 2016.

"The focused actions we have taken have enabled us to accelerate greenhouse gas reductions particularly in the areas of methane and flaring," said Woods. "We anticipate meeting our 2025 greenhouse gas emission-reduction plans ahead of schedule, which gives us confidence to set more aggressive medium-term goals across all of our businesses."

The new medium-term greenhouse gas reduction plans for 2030 are consistent with Paris Agreement-aligned pathways and include the following:

(1) 2030 Greenhouse Gas Emission-Reduction Plans

(2) 20-30% reduction in corporate-wide intensity

(3) 40-50% reduction in Upstream intensity

(4) 70-80% reduction in corporate-wide methane intensity

(5) 60-70% reduction in corporate-wide flaring intensity

These new plans include actions that are expected to reduce absolute corporate-wide greenhouse gas emissions by approximately 20%. The company also reaffirms it plans to achieve the goals of the World Bank for zero routine flaring no later than 2030.

ExxonMobil’s 2030 GHG emission-reduction plans cover Scope 1 and Scope 2 greenhouse gas emissions from assets operated by the company compared to 2016 levels. For assets not operated by the company, it will work with its equity partners and strive to achieve comparable results.

Supporting materials for this press release are available on the Investor Relations page of ExxonMobil.com.

About ExxonMobil

ExxonMobil, one of the largest publicly traded international energy companies, uses technology and innovation to help meet the world’s growing energy needs. ExxonMobil holds an industry-leading inventory of resources, is one of the largest refiners and marketers of petroleum products, and its chemical company is one of the largest in the world. To learn more, visit exxonmobil.com, the Energy Factor and Carbon capture and storage | ExxonMobil.

@1wpf+1e4w1viN
Is the military a publicly traded company?

@geg+1e4w1viN by your logic all military spending is "wealth distribution" because it is sourced from governments.

Well, the Exec team's slides will please the investors. That's a given.
and, No, we don't lie under oath even.

"Exxon's disclosure of expected returns targets are the "main concern" for shareholders, said Ben Cook, portfolio manager of Hennessy BP Energy Transition Fund, which holds shares in Exxon."

How can you run an Energy Transition fund and not know the returns are garbage? They are 100% dependent on government money. There is NO private sector profit (I chose that word carefully) source for capturing CO2, NONE. Any money to be made has to be ultimately sourced from a government body (i.e. wealth redistribution).

Thread regarding ExxonMobil Corp. layoffs

Exxon to offer spending outlook on Wednesday, December 1 as investors seek clues to low-carbon returns

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