ExxonMobil lowers 2021 capex, writes down $18.5 billion of upstream portfolio

ExxonMobil expects 2021 capital expenditures to decline 11-25% from 2020 levels as the company focuses on projects with lower breakevens amid an uncertain price environment, company executives said during a fourth-quarter earnings call Feb. 2.

Company guidance now shows 2021 capital expenditures to range from $16 billion to $19 billion, in sharply from a full-year 2020 capex spend of $21.4 billion.

The guidance assumes a Brent price floor of $50/b and downstream margins at ten-year lows in 2021, however the company retains flexibility to further reduce capex while maintaining its dividend should prices fall below this level, chairman and CEO Darren Woods said.

S&P Global Platts Analytics forecasts Dated Brent prices to average at $56.30/b in 2021 and at $54.10/b in 2022, up from a 2020 average of $41.65/b.

Approximately 90% of ExxonMobil's 2021-2025 upstream development portfolio has a cost-of-supply of $35/b Brent or below, according to company filings.

The company's 2020 capex spend was down $9.8 billion from 2019 levels and around $12 billion shy of its original target prior to the historic oil price collapse caused by the COVID-19 pandemic last spring.

ExxonMobil posted a fourth quarter net loss of $20.1 billion, including a total impairment charge of $19.3 billion, bringing its total losses for the full year 2020 to $22.4 billion, down from a 2019 profit of $14.3 billion. The company said the impairments were an effort to trim "less strategic assets," specifically dry gas resources in the United States, western Canada and Argentina.

The bulk of the impairment charges were in the company's upstream portfolio, which accounted for $18.5 billion in losses, $16.8 billion of which was in US assets. The remaining impairment charges were found in non-US downstream and chemical operations, and corporate and financing.

Permian output climbs

Output from ExxonMobil's Permian Basin assets climbed around 100,000 barrels of oil equivalent per day in 2020 compared with 2019 as drilling rates increased 20% year on year despite a pullback in capex spend, the company said. Drilling and completion costs in the basin were approximately 15% below 2020 guidance and more than 25% below 2019 levels.

Given current price outlooks, Permian production is expected to grow by around 700,000 boe/d by 2025, Woods said, noting that sustained Brent prices of above $50/b could see the company produce an additional 100,000 boe/d from the basin.

Global production volumes for full year 2020 reached 3.76 million boe/d, down 191,000 boe/d, or 5%, from 3.95 million boe/d in 2019. The bulk of this decline was in gas production, which was down 923 MMcf/d from 2019. Total liquids production, in contrast, was just 37,000 b/d lower in 2020 than the year prior.

Focus on carbon capture

ExxonMobil announced the creation of ExxonMobil Low Carbon Solutions, a new business unit focused on advancing carbon capture and sequestration technologies. The move is aimed streamlining the company's preexisting efforts in the space to capitalize on emerging market demand for carbon storage, Woods said.

"[The world] is unlikely to meet the goals of the Paris Climate agreement without focused action and innovation on carbon storage," Woods said. "We are beginning to see a broader recognition of the importance of [CCS] technology," he added, noting that government policy actions have created frameworks for establishing CCS and that there is money looking for opportunities in the space.