Exxon Mobil Corp's shares dropped 1.9% to $78.43 in early trading after CEO Darren Woods revealed a $33 billion to $35 billion capital spending plan for 2021-2025, representing a 10-17% increase from this year's $30 billion budget. The announcement disappointed investors who had hoped for stricter cost controls and greater shareholder returns.
Woods defended the strategy as necessary to counter declining production from aging wells, stating, "We're leaning in as our competitors are leaning back." The plan aims to reverse nine consecutive quarters of output declines, with a focus on expanding Permian Basin shale oil operations in Texas and New Mexico. Exxon projects Permian Basin production will reach 1 million barrels per day by 2024, with Woods asserting the region can deliver double-digit returns even at $35-per-barrel oil prices.
The company also highlighted offshore projects in Brazil, Guyana's 5.5 billion barrel oil reserves, and global liquefied natural gas investments. Analysts noted the spending increase contrasts with rivals prioritizing stock buybacks and dividends. Raymond James' Muhammed Ghulam observed, "Investors are pushing energy firms to return cash, making higher capital budgets less appealing." Exxon pledged to divest $15 billion in assets over three years while forecasting $60 billion in annual operating cash flow by 2025 at $60-per-barrel oil prices.
Woods addressed shareholder concerns by disclosing enhanced transparency measures and participating in Exxon's first quarterly analyst call since 2018. RBC Europe's Biraj Borkhataria cautioned, "Success depends on convincing investors higher spending will translate to long-term returns." The oil sector continues to struggle against broader market trends, with Edward Jones' Brian Youngberg noting investor frustration over industry volatility.
