Exxon shares tumble despite recovery plan

Reuters NEW YORK (Reuters) — Exxon Mobil Corp. on Wednesday laid out a goal to double annual earnings by 2025 through heavier investments in a bid to allay investor fears that the world’s largest publicly traded oil producer has already seen its best days.

But shares still fell to their lowest level in more than two years after the company said the spending would not boost near-term production, and investors who had expected large share buybacks were disappointed that executives did not announce any.

Exxon was once the industry’s profit and cash-flow leader, but sagging output and a sliding share price have pushed total return, or share appreciation plus dividends, into negative territory over the last five years, according to Thomson Reuters data.

By comparison, total returns are up 16 percent for Chevron Corp. and 40 percent for Royal Dutch Shell Plc.

Exxon’s growth plan will require billions of dollars in spending spread across U.S. shale fields, along with refinery expansions and deepwater megaprojects. The company said investments should drive profit to $31 billion in 2025 with crude prices at or above current levels.

It was the first time Irving, Texas-based Exxon has given an earnings forecast so far in advance. Shares closed down 2.5 percent at $74.26, the lowest close since January 2016.

Darren Woods, who became chief executive in January 2017 after predecessor Rex Tillerson retired and became the U.S. secretary of state, also said he was committed to being more transparent with investors.

“There’s a lot different today, not just style,” Woods said at the company’s annual analyst day in New York. “My objective is to get this organization focused on driving value and turning that value into results that you all will see.”

Exxon said projects in Guyana and the Permian Basin region of Texas and New Mexico, as well as refining and chemical plant expansions, should drive earnings gains. Exxon reported an adjusted profit of $15 billion in 2017.

Ramping up capex

To achieve its goals, Exxon said it will boost spending on capital projects to $24 billion this year, $28 billion next year and an average of $30 billion from 2023 to 2025. Meanwhile, peers including Chevron are cutting spending or promising to hold budgets flat.

“Capex is the price you pay for cash flow,” said Woods, who added that every dollar in capital spending by Exxon in the past decade has generated $1.20 in operating cash flow.

Woods said he expected production to grow about 1 million barrels of oil equivalent per day (boe/d), to about 5 million boe/d in 2025 as 25 projects come online.

When an analyst asked if he would resign if the targets were not met, Woods did not directly answer, but said he intended to meet the long-range goals.

Tom Ellacott, senior vice president at consultancy Wood Mackenzie, noted that in the near term, Exxon’s production will be flat, and growth in the next decade will require hitting goals at five key development regions.Speech

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