ExxonMobil pitches investors on dividend growth, debt reduction

[HOUSTON] ExxonMobil on Wednesday pitched investors with plans to grow its dividend and curb spending after ambitious growth plans and the Covid-19 pandemic led the top US oil and gas producer to a historic annual loss last year.

Investor pressure has mounted for Exxon to cut costs, improve financial returns and better prepare for the energy transition to lower-carbon fuels.

At its investor day presentation, the company reaffirmed plans to keep project spending between US$16 billion and US$19 billion in 2021, and between US$20 billion and US$25 billion a year through 2025.

It expects output to remain flat at around 3.7 million barrels of oil and gas per day through mid-decade as it focuses on boosting cash flow instead.

Before the pandemic, and to the dismay of many investors, chief executive Darren Woods promised to "lean in" on spending as much as US$35 billion per year on projects. The company made costly misfires in recent years by overspending on shale and oil sands projects that it later wrote down.

But after the pandemic slashed energy demand, ExxonMobil cut spending by nearly a third - reducing the value of its shale gas properties by more than US$20 billion - trimmed workers, and added debt to cover spending.

Shares were up a fraction to US$56.49, and have risen by more than a third so far this year.

The company is trying to pitch a skeptical Wall Street that it has embraced cost cutting, with much of its investor pitch focused on cost reductions, cash flow and earnings projections that are not as bold as in previous years.

Mr Woods pitched the company's new Low Carbon Solutions Business, where he sees near-term opportunities in carbon capture and storage and carbon offsets, though technology and cost improvements are needed in more emerging areas such as hydrogen.

"There's growing momentum and opportunity," said Mr Woods. "The questions are at what cost and for what return?" ExxonMobil's oil and gas production spending will focus on Guyana, the Permian Basin and Brazil, and its flat production outlook appears to be due to lower aspirations in the Permian, said Biraj Borkhataria, analyst with RBC Capital Markets.

ExxonMobil is likely "to steadily shift from gas to liquids, which is at odds with most peers," Mr Borkhataria said.

Two years ago, ExxonMobil forecast shale production of 1 million barrels per day in the Permian as early as 2024, grabbing the spotlight from rival Chevron Corp's 900,000-barrel target. Both companies have since dialed back plans in the top US shale field.

ExxonMobil has drawn the ire of activist investors focused on climate, but since December the company has said it would reduce the intensity of its oilfield greenhouse gas emissions by 15 per cent to 20 per cent from 2016 levels.

It has not set an overall emissions target, however, and reducing intensity means that emissions still could rise if oil and gas output grows.

It also announced plans to commercialise technology that helps cut carbon emissions and disclosed its Scope 3 emissions, a large category of greenhouse gases emitted from fuels and products it sells to customers such as jet fuel and gasoline.

REUTERS