EXXON'S PRODUCTION WILL DOWN
ExxonMobil, the world's largest listed oil company, expects its production in 2020 to be roughly the same as last year, as cuts in investment prompted by the low price of crude force the group to abandon its earlier projections of growth.
Rex Tillerson, chief executive, also played down speculation that Exxon would be making acquisitions following its $12bn bond sale this week.
At Exxon's annual presentation to analysts, he suggested he had spoken with executives of other companies about possible deals, but had been unable to propose valuations that both sides would find acceptable.
Exxon said it expected production in 2020 to be between 4m and 4.2m barrels of oil equivalent per day. That is lower than the projection Exxon set out a year ago, when it expected output would average 4.3m barrels per day in 2017.
The 2015 production forecast was based on an oil price of $55 per barrel for internationally traded Brent crude. The new forecast is based on a price of $40 to $80 per barrel.
Brent was trading at about $36 per barrel on Wednesday.
Mr Tillerson said Exxon was focused on "making choices to enhance shareholder value".
Exxon is the financially strongest of the large oil companies — it is the only one with an AAA credit rating — but like its rivals it has been hit by the steep decline in prices of crude and natural gas since the summer of 2014.
The change in Exxon's production over the next five years is now expected to be in a range between a 2 per cent fall and a 2 per cent rise from the 4.1m b/d it reported for 2015.
Over the same period total world demand for oil is expected to grow by about 6m barrels per day, or about 6.5 per cent, according to the International Energy Agency, the watchdog backed by rich countries.
Charts shown at the analyst presentation suggested that Exxon would need an oil price of about $50 per barrel to cover its capital spending and dividend payments from its cash flow this year, but next year and out to 2020 that would drop to a price in the low $40s.
Capital spending, which has been cut 25 per cent from last year to $23.2bn for 2016, is budgeted to fall again to about $22bn in 2017. Then it would average about $16bn to $24bn per year between 2018 to 2020.
Mr Tillerson said criticism of the company for lack of production growth "doesn't bother us", adding Exxon was constantly working to offset the natural decline in output from its oil and gas wells.
"People say 'Well, you're not growing'," he said. "That just tells you how hard it is to hold your own in a depleting business."
He said many smaller US oil companies had been "destroying value" by loading up with debt, which meant that attractive assets were encumbered.
"It's like buying a house with a big mortgage: there's not a lot of equity there that you can build on," he added.
"The value's been destroyed, but the expectations haven't changed. So it's getting more difficult, not easier [to do deals]."
Mr Tillerson said Exxon was pursuing deals to buy assets, and was "open to something more", but it would be "challenging" to agree a deal to buy an exploration and production company.
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IMF - Output grew by 3.8 percent in 2017, underpinned by a resilient non-hydrocarbon sector, with robust implementation of GCC-funded projects as well as strong activity in the financial, hospitality, and education sectors. The banking system remains stable with large capital buffers. Growth is projected to decelerate over the medium term.
IMF - Higher oil prices and short-term portfolio inflows have provided relief from external and fiscal pressures but the recovery remains challenging. Inflation declined to its lowest level in more than two years. Real GDP expanded by 2 percent in the first quarter of 2018 compared to the first quarter of last year. However, activity in the non-oil non-agricultural sector remains weak as lower purchasing power weighs on consumer demand and as credit risk continues to limit bank lending.