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Tuesday, January 19, 2021

ExxonMobil to prioritize spending on “advantaged assets” in Guyana, USA and Brazil

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Following a review of its future business plans, ExxonMobil announced on Monday that it intends to prioritize near-term capital spending on advantaged assets with the highest potential future value. It said that these will include developments in Guyana and the U.S. Permian Basin along with targeted exploration in Brazil. Its chemicals projects will also benefit significantly so that the super major can grow high-value performance products.

In light of the direction to be taken, Chief Executive Officer and Chairman of ExxonMobil, Darren Woods commented that recent exploration success and reductions in development costs of strategic investments have without a doubt, further enhanced the value of the company’s industry-leading investment portfolio.

Woods was keen to note that continued emphasis will be placed on high-grading Exxon’s asset base through exploration, divestment, and prioritization of advantaged development opportunities. Woods said that management believes this will improve earnings power and cash generation and rebuild balance sheet capacity to manage future commodity price cycles while working to maintain a reliable dividend.

With regard to the details of its spending plans, the oil giant headquartered in Houston, Texas said that it will focus on leveraging the significant cost savings realized in 2020 that is on track to exceed announced reductions of US$10 billion or 30 percent of capital spending and 15 percent of cash operating expenses. It said that key to ongoing expense management is business line reorganizations and efficiencies that include a global workforce reduction of 15 percent by year-end 2021.

Further to this, ExxonMobil said it expects US$16 billion to US$19 billion will be expended in 2021 while US$20 billion to US$25 billion will be spent through 2025. OilNOW understands that the company plans to double earnings by 2027 when viewed on the same price and margin assumptions used in its 2020 Investor Day materials.

The super major also disclosed that one can expect the removal of less strategic assets from its development plan as a result of the growing strength of its portfolio. In this regard, it said that assets removed include certain dry gas resources in the Appalachian and Rocky Mountains, Oklahoma, Texas, Louisiana, and Arkansas in the United States, and in western Canada and Argentina. The company said that the decision will result in a non-cash, after-tax fourth-quarter impairment charge of approximately US$17 billion to US$20 billion.

Furthermore, it said that there will be increased focus on the monetization of less strategic assets to grow the portfolio of potential divestments, including certain North American dry gas assets, contingent on buyer valuations.

Apart from the foregoing, Woods said the business environment in the fourth quarter is showing signs of improvement despite the resurgence of pandemic cases and accompanying economic restrictions. He added that prices and margins for many of ExxonMobil’s businesses have also improved from the third quarter and when coupled with continuing efforts to reduce spending and capture additional efficiencies. Woods said he is pleased that quarter-to-date cash flow has improved versus the company’s planned assumptions during these unprecedented times.

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