Exxon says no to cost cutting, and lifts spending targets to highest since 2014

Houston, US — Exxon Mobil 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.

Annual capital outlays will average $32bn to the end of 2020, a 24% increase from 2018, the 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 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 as much as 1.3% in pre-market 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 $9bn through 2025 compared with targets laid out at last years investor meeting.

Other highlights

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.

Bloomberg