Exxon Mobil and Chevron to increase outlays on energy projects

Oil industry forecast

Exxon Mobil and Chevron – the two largest U.S. oil companies – disclosed plans to increase outlays on energy projects next year amid high oil demand and prices.

Exxon Mobil said it would increase project investments next year to between $23 billion to $25 billion, up from a projected $22 billion this year.

Chevron said it plans to spend $17 billion, up from about $15 billion this year. Increases include new monies for emissions reduction projects and the impact of inflation.

The higher spending will not immediately lead to more production. Exxon has said it expects output next year to be flat at about 3.7 million barrels of equivalent oil per day (boed), while Chevron has forecast a greater than 3 percent compound average annual increase through 2026.

Exxon will miss its goal of pumping 1 million boed from its Permian operations by about two years, Exxon Chief Executive Darren Woods said on Thursday. It now aims to reach between 900,000-1 million boed in 2027.
global oil prices
The biggest change will be the amount of cash earned. Exxon sees potential for $100 billion in surplus cash by 2027, assuming global oil prices of $60 per barrel. Chevron should generate about $34 billion in free cash flow next year, according to Jefferies equity research, twice its oil investments levels.

“This leaves ample room for opportunistic M&A, increases to the buyback or simply even lower leverage with an eye toward increasing buybacks at a lower share price,” said Jefferies equity analysts Lloyd Byrne and Sam Burwell.

U.S. and European producers have partially recovering project spending slashed during the pandemic. Shell this year increased capital spending 22 percent to between $23 billion to $27 billion. BP this year expanded project spending by 21 percent to $15.5 billion from last year.

Exxon’s spending budget extends a plan set a year ago to allocate $22 billion on projects this year. It also set aside $17 billion for lower carbon projects through 2027, up from $15 billion.

The company has been boosting investments in lower carbon projects since a quarter of its directors lost their seats in 2020 to outsiders who rejected Exxon’s slow energy transition plans.

Most of that $2 billion increase through 2027 is targeted at curbing emissions from existing oil and gas operations and burying carbon underground, rather than on developing renewable fuels.

Exxon has one of the most ambitious plans in the industry to increase crude production over the next five years. Shell and BP are slowly cutting oil output and migrating to solar and wind power and other renewable energy projects.

Exxon aims to raise oil and gas production to a record 4.2 million barrels of oil equivalent per day (boepd) by end-2027. Most of the 500,000 boepd increase is expected to come from Guyana, the United States and Brazil.

But output will be flat this year and next at 3.7 million boepd. This year’s target is down from the 3.8 million boepd Exxon set a year ago. It lost about 100,000 boepd through its withdrawal from Russia, Reuters news report said.