By Avi Salzman

Exxon Mobil plans to invest heavily into several big projects over the next six years, even as some other oil companies are growing more cautious, the company said at an investor day on Wednesday. All that investment comes at a time when most analysts expect oil prices to fall next year because of a glut -- which may be why Exxon stock was down 0.7% in early trading.

Chevron, by comparison, said last week it will reduce its capital budget by about $2 billion next year.

Exxon CEO Darren Woods said the company is investing heavily in projects that can pay off at much lower oil prices -- even if per-barrel prices fell into the $30 range from recent levels around $70. That's because it's drilling in areas with abundant oil and natural gas deposits and using technology that can extract those resources without having to spend enormous sums of money.

"Compared to our competition, we are in a different league," Woods asserted.

Exxon will ramp up investments in areas like the Permian Basin in the U.S., offshore Guyana, and in four big projects to produce liquefied natural gas for shipment around the world. Exxon bought Permian Basin producer Pioneer Natural Resources earlier this year for about $60 billion. Next year, it expects to hold its capital spending about flat with this year, at $27 billion to $29 billion -- but it will ramp up spending from 2026 to 2030 to between $28 billion and $33 billion.

The company expects to be able to pump out 5.4 million barrels of oil and equivalents per day by 2030, up from 3.7 million in 2023. It expects to boost its annual earnings by $20 billion per year and cash flow by $30 billion as long as oil prices average $65 over that time period and natural gas prices average $3 million per million British Thermal Units. This year, analysts expect Exxon to earn $34 billion.

Exxon also says it plans to build a natural gas plant to generate electricity for data centers -- the hottest investment theme of 2024, given the rise of power-hungry artificial intelligence applications. The natural gas plant would have carbon-capture technology to keep 90% of its emissions from being sent into the atmosphere, the company says. The plant would also be disconnected from the electricity grid, meaning the customer would not have to wait for transmission lines to be built. Exxon has generally avoided electricity-related projects in the past, so this investment could mark a shift.

Overall, Exxon said it expects to spend $30 billion on lower-emission energy investments through 2030.

Exxon has been spending more heavily than peers for several years, and it's paid off so far. The stock is up 61% in the past five years, more than any other oil major.

But the next stage of growth will come as oil demand has been flattening and prices have already taken a turn down. J.P. Morgan strategists just said they are "outright bearish" on oil prices for next year. Woods is confident, however, that the company's long-term investment strategy will pay off.

"I recognize the industry's allocation of capital has not always been effective, primarily because it hasn't been focused on the fundamental or sources of structural advantage," he said. "I can't defend that, but we can change it and today we'll show you that we have."

Write to Avi Salzman at avi.salzman@barrons.com

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December 11, 2024 11:58 ET (16:58 GMT)

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