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 The problem of declining production at legacy oil and natural gas
wells has become endemic for multinational energy groups, which have
tried to offset the trend by launching massive and risky exploration
projects.
Exxon's oil and natural gas production dropped 1.8 percent in the
fourth quarter from year-ago levels, with natural gas production
falling around the world and oil output slipping in half the regions
where the company operates.
The results reflected a "mediocre quarter" for Exxon, especially in
international production, Edward Jones analyst Brian Youngberg said.
"They've lost momentum already, reverting back to declining
production and stagnant earnings," Youngberg said.
Exxon rival Royal Dutch Shell Plc <RDSa.L> said on Thursday the
fourth quarter was its least profitable in five years as its own
production slipped.
To assuage Wall Street, Chief Executive Officer Rex Tillerson
promised in a statement that the company will ramp up exploration
projects over the next two years to find newer reserves.
Exxon spent $42.5 billion in 2013 on exploration and other capital
projects, a staggering sum that led Tillerson to admit last year: "I
never would have dreamed we'd be spending at this level.
Exxon's liquefied natural gas operation in Papua New Guinea should
make its first deliveries by September, while expansions at the
Kearl oil sands development in Canada and the Upper Zakum oil
project in Abu Dhabi are underway, executives said on a conference
call with investors.
The company also is expanding in U.S. shale formations, adding rigs
in the Permian formation in Texas and running all rigs available in
the Bakken formation in North Dakota and the Woodford Ardmore shale
in Oklahoma.
These and other projects should help Exxon reach its goal of
boosting annual oil and natural gas production 2 percent to 3
percent by 2017.
Investors said they supported the new exploration if it helps
increase total production.
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"If it's done in the context of normal exploration, or a change in
the makeup of demand, that's probably a positive," said Oliver
Pursche of Gary Goldberg Financial Services, who manages Exxon
shares for clients. "If it's as a result of existing wells are
drying up, that's a negative."
For the fourth quarter, Exxon posted net income of $8.35 billion,
or $1.91 per share, compared with $9.95 billion, or $2.20 per share,
in the year-ago period.
Analysts expected earnings of $1.92 per share, according to
Thomson Reuters I/B/E/S.
Earnings fell in all of the company's units, including refining,
where weaker margins eroded profit.
Refiners make more money when the price difference between various
types of crude oil is wide. When the gap narrows in the price
difference between West Texas Intermediate crude oil and Light
Louisiana Sweet crude oil, as it has in recent months, costs tend to
rise.
The company's chemical unit profit dropped slightly due in part to
higher supply costs, especially for high-end specialty materials.
Separately, Exxon said it supports U.S. exports of crude oil, a
potentially divisive issue in the country.
"We oppose any barriers or restrictions to free trade," David
Rosenthal, Exxon vice president of investor relations, told
investors on the call.
Shares of Exxon fell 0.8 percent to $94.32 in afternoon trading.
(Reporting by Ernest Scheyder in New
York; additional reporting by Anna Driver in Houston; editing by
Jeffrey Benkoe)
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