Exxon 4Q Earnings Soar on US Tax Change
US supermajor ExxonMobil reported 2017 earnings of $19.7bn, up from $7.8bn in 2016. Its earnings were $8.4bn in 4Q 2017, up 399% on the $1.7bn profit year-before quarter. The earnings were boosted by one-off non-cash gain arising from the US federal tax reform of $7.1bn, offset by $1.3bn impairments in Canada and dry gas producing operations mostly in the US Gulf. Earnings in 4Q2017 excluding US tax reform and impairments were $3.7bn, down 2%.
“The impact of tax reform on our earnings reflects the magnitude of our historic investment in the US and strengthens our commitment to further grow our business here,” said CEO Darren Woods February 2: “We’re planning to invest over $50bn in the US over the next five years.”
Exxon investor relations vice president Jeff Woodbury stressed the $50bn is a projection, but said the company expects two-thirds of that to be spent upstream, mostly on unconventional oil and gas, with the remaining one-third split evenly between downstream and chemicals. Capital expenditure across the group worldwide in 2017 was $23.1bn.
Upstream production declined by 3% to 3.99mn boe/d, relative to 4Q2017, yielding 133,000 b/d less oil but 17mn ft3/d more gas.
Production in full year 2017 was 4mn boe/d, down 2%, of which liquids were 2.3mn b/d, down 82,000 b/d versus 2016 on field declines and lower entitlements partly offset by new project volumes, plus 10.2bn ft³/d natural gas. The latter was up 84mn ft³/d owing to project ramp-up primarily in Australia, partly offset by field decline and “regulatory restrictions in the Netherlands” – a reference to capping of its joint-venture Groningen field production, output from which may be halved from 2018.
In 4Q2017, Exxon completed its $2.8bn acquisition of a 25% indirect stake in Mozambique’s 85 trillion ft³ Area 4 block from Eni and will lead construction and operation of all future liquefaction units (excluding Coral FLNG, already under development by Eni). Woodbury said scope of such non-FLNG liquefaction in Mozambique is "more than 40mn mt/yr"; sanctioning these LNG phases is some way off.
Later on, when asked in an analysts call, Woodbury did not explicitly spell out whether that "more than 40mn mt/yr" refers solely to Area 4 gas, when he said that there could be "synergies between Area 1 [operated by Anadarko, with no Exxon involvement] and Area 4." He also said other exploration acreage in the area was being progressed.
Eni and Anadarko have planned building liquefaction trains on a joint onshore site in northern Mozambique. Also Exxon has been talked of as potential farm-n partner for Anadarko, but no transaction to date has been announced.
Exxon also found more gas in Papua New Guinea in 4Q2017 that may expand its LNG venture there; and signed a production sharing contract in Mauritania. Seismic offshore Mauritania is planned later in 2018 on the three deepwater Mauritania blocks, covering 8.4mn acres in water depths up to 11,500 feet. Moreover Exxon also plans to spud a first well in gas-prospective Block 10 offshore Cyprus, having completed a seismic survey in 2017.
And back in the US, it said it plans to ramp up drilling in Permian and Bakken from 26 rigs, growing to 36 by year end 2018, with $2bn investments planned in midstream infrastructure out to 2025 to move gas from inland to the US Gulf Coast, ramping up Delaware, Midland and Bakken shales from 200,000 boe/d now to four times as much by 2025.
Woodbury said $21bn-$22bn of assets had been divested by Exxon in the past five years as part of its high-grading programme, so about $4bn/yr. Although said this year's divestments were lower, they included Norway assets.