Exxon Mobil Corp. raised its spending target to heights not seen since the historic oil-market collapse began in 2014, bucking the cost-cutting trend among rival energy explorers. Shares dropped, making Exxon the day’s worst-performing blue-chip stock.
Exxon said annual capital outlays will average $32 billion through the end of next year, a 24% increase from 2018, the Irving, Texas based driller said on Wednesday. CEO Darren Woods defended the budget increase in a presentation of his long-term vision to analysts at an event in New York.
“Society needs us to make these investments,” Woods told the gathering, an annual rite held at the New York Stock Exchange. “Perhaps the biggest risk to the industry today is underinvestment.”
Exxon, attempting to arrest years of production declines, is going against the grain of competitors such as Chevron Corp. that are holding the line or reducing spending. Analysts have soured on Exxon as an investment, with almost two-thirds recommending clients avoid buying any more of the stock. The shares fell 2.5% to $78.18 at 9:37 a.m. in New York trading.
Exxon assured investors and analysts that the spending will pay off -- eventually. The supermajor raised its 2025 profit-growth target by five percentage points to 140% compared with 2017 levels.
Cumulative “earnings potential” has increased by $9 billion through 2025, compared with targets laid out at last years investor meeting.
Exxon plans to raise as much as $15 billion through asset sales by the end of 2021 cash flow from oil and gas production is expected to rise by more than 6% this year and next, the company said in a slide presentation. In Guyana, the company expanded its estimate for the size of a sprawling offshore discovery by a half-billion barrels to 5.5 Bbbl, but didn’t change its production guidance of 750,000 bpd by 2025. Exxon hiked its Permian basin production target on Tuesday to 1 MMbpd by 2024. Woods is also expected to provide details on three other megaprojects in Brazil, Mozambique and Papua New Guinea.
With so many projects being built at one time in so many locations around the world, analysts are concerned that Exxon might be taking on too much, risking delays and spending blowouts for which the industry has long been infamous. In addition to the five upstream megaprojects, Exxon is also expanding a refinery in southeast Texas and a chemical plant in Louisiana.
Exxon is “leaning in while our competitors have leaned back,” Woods said.
Exxon was chided on Tuesday by Chevron CEO Mike Wirth, who touted his company’s plans to deliver production and profit growth in the near term rather than “several years” from now.