ExxonMobil has returned all but 140,000 b/d of oil production curtailed during the spring's oil price crash, and the producer aims to increase output from the Permian Basin next year despite slashing capital spending by more than a third.
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The company reported a third-quarter loss of $680 million Oct. 30, following its largest-ever loss of $1.1 billion in Q2.
The results come a day after it announced it would cut its US workforce by 1,900 people, primarily from its Houston management offices. Globally, the company will cut staffing 15% by year-end 2022 compared with 2019.
ExxonMobil sees the global oil market in the "early stages of demand recovery," with demand increasing 13% in Q3 from Q2, compared with a 1% increase in supply.
All of the 140,000 b/d of oil equivalent in Q3 curtailments were from government-mandated cuts, although it did not give locations. The company said those shut-ins would increase to 220,000 boe/d in Q4.
The driller pumped 401,000 boe/d from the Permian in Q3, with a return of all wells shut during the spring. It expects Permian production to average 360,000 boe/d in 2020.
ExxonMobil said it has cut drilling and completion costs in the Permian by more than 20% while increasing lateral-feet-per-day drilling rates and fracturing-stages-per-day rates by more than 30%.
It continues to shed rigs in the Permian and expects to close out the year with about 10 rigs, down from 30 rigs in Q2 and 50-60 rigs prepandemic, executives said.
ExxonMobil said it was ahead of schedule on cutting its 2020 global capital spending to $23 billion, from $33 billion, "reflecting increased efficiencies, lower market prices, and slower project pace."
Concerns about the long-term outlook for the oil sector loomed over the company's Q3 earning's call, as analysts asked executives to defend the strategy of weathering the current downturn through cost-cutting but ultimately sticking to its upstream fundamentals, while other oil majors embrace the idea of a shift to cleaner energy technologies.
LOOMING ENERGY TRANSITION
ExxonMobil executives sounded confident that global energy demand would rebound with economic recovery, and oil prices would eventually rise once the current lack of investment leads to lower supply that no longer offsets depleting reserves.
Andrew Swiger, senior vice president, said that prepandemic, the industry was already investing at levels below historic rates and below what would be required to meet future demand and overcome 5%-6% annual natural production declines.
"If the industry is to meet credible third-party estimates for energy demand, we will need to significantly increase investments," Swiger said. "For the industry to fund this level of investments, prices will have to rise."
Analysts also pressed executives on long-term plans for refining capacity in the face of global decarbonization efforts.
Jack Williams, senior vice president, said the company's highly complex refineries that are integrated with chemicals production would fare the best.
"Those are the refineries [that] are going to be competitive and long term that belong in the portfolio," he said. "So we're making that call between ones we're going to invest. The ones that are already there in our highly integrated refineries in the Gulf Coast, Baytown, Baton Rouge and increasingly, Beaumont. And then those - we're pushing that direction with some good strategic investments to kind of shore up some of the conversion capacity gaps we've had."
Williams said medium, low-complexity refineries in OECD countries, however, "are going to be challenged going forward, and that certainly plays into our thinking."