While ExxonMobil Corporation is one of the few oil majors to earn record-breaking quarterly earnings totaling some US$17.9 billion, it did not do so by some mere stroke of good luck. It was due to its commitment to cost savings and prudent investments in assets like Guyana during the most turbulent of financial times, says the company’s Chief Executive Officer and Chairman, Darren Woods.
While the high price environment did have a role to play, Woods said that it was the growth of the company’s oil and gas stocks that allowed it to be in a well-advantaged position for shareholders.
Despite much criticism, Woods said, “We have been investing more than any other [international oil company] IOC, in anticipation of tighter balances due to attriting supply. Between 2017 and 2021, we invested nearly US$90 billion to grow oil and natural gas production.”
Woods said that was more than double what ExxonMobil had earned in the upstream during the same time period.
“For example, in 2020, when oil prices collapsed and ExxonMobil lost US$20 billion in the Upstream business alone, but we continued to invest. In addition, we advanced the engineering work and procurement processes for multiple projects, locking in critical contracts at a low point in the cycle,” Woods said.
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Exxon’s overall approach, he reasoned, therefore positioned it to efficiently resume projects delayed by the pandemic, offset rising inflation, increase production, advance capacity expansions in the downstream, and continue delivering the energy and products the world needs today.
In terms of his industry outlook, Woods said it is clear demand is recovering to pre-pandemic levels. However, for oil and gas, supply has weakened through depletion and reduced industry investment.
“You can see the significant reduction in industry oil investment in the graph. Industry investments were already low, leading up to the pandemic. But when the pandemic hit in 2020, economy-wide shutdowns deeply impacted the industry’s earnings and cash flows,” he said.
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Expounding further, the Chairman explained that as the world began to recover from the pandemic, demand for all but jet fuels recovered far faster than the time required to bring on new investments. As a result, the CEO said the industry hasn’t been able to meet the recovery in demand. As a depletion business, he said large annual investments in oil and gas production are needed to offset the decline in supply – roughly a 7% per year reduction.
Clearly, to lower prices, the Exxon boss said the industry needs to increase investment and catch up to recovering demand. Unfortunately, this will take time, said Woods. He assured nonetheless that Exxon will continue to manage its business with an eye to the future and make investment decisions with cyclical demand and industry depletion in mind.
