Exxon Mobil Corp. announced plans to raise capital expenditures by 10% or more over multiple years, a strategy that led to a decline in its stock price as competitors reduce investments. CEO Darren Woods defended the approach during an investor meeting, stating, "You do it when everybody else is at home," emphasizing the company's focus on U.S. shale development amid shifting industry dynamics.
The company's spending will rise to $33 billion to $35 billion in 2020, up from $30 billion in 2019 and $23.1 billion in 2017, when Woods took over as CEO. This contrasts with rivals like Chevron and BP, which have seen stronger stock performance over the past five years, with Exxon's shares posting a 0.16% total return compared to 32% for Chevron and 54% for BP.
Shale Focus and Production Projections ¶
Exxon's strategy centers on the Permian Basin, where it aims to boost production to 1 million barrels of oil and gas daily by 2024, exceeding previous estimates. The company argues that rising global demand and declining output from existing wells justify increased investment. Woods claimed Exxon can achieve double-digit returns in the Permian even at $35-per-barrel oil prices, projecting $60 billion in annual operating cash flow by 2025 at $60-per-barrel oil prices.
Independent shale producers have scaled back drilling due to investor pressure, while Exxon and other majors continue expanding. U.S. Energy Department data shows Permian well production per rig fell from 760 barrels per day in mid-2016 to 600 barrels per day in February 2020, highlighting challenges in maintaining output growth.
Exxon also outlined plans to divest $15 billion in assets over three years and improve transparency following shareholder demands. Analysts noted the company must demonstrate that higher spending will translate to long-term shareholder returns, with some citing asset sales as a potential catalyst for market confidence.
