(ExxonMobil, 6.Dec.2023) — ExxonMobil gave an update to its Corporate Plan through 2027, reflecting continued execution of its strategy to provide the products society needs and to lower emissions, both its own and others’.
- Expecting capital investments to generate average returns of ~30%, with payback periods less than 10 years for greater than 90% of the capex2
- Pursuing more than $20bn in lower emissions opportunities, up $3bn
- Generated $9bn in structural cost savings with $6bn more expected by 2027
- Increasing pace of share repurchases to $20bn per year from the Pioneer close through 2025, assuming reasonable market conditions
Since 2019, solid execution of ExxonMobil’s strategy has increased the earnings power of the corporation, adding about $10bn to its annual earnings and cash flow at a real Brent price of $60 per barrel. These improvements provide a strong foundation to further grow annual earnings and cash flow by $14bn from year-end 2023 through 2027, as the company continues to reduce structural costs and improve the mix of its business by growing production from low-cost-of-supply, advantaged assets and increasing sales of high-value performance chemicals, lower-emission fuels, and performance lubricants.
“By any measure, our plans have and will continue to deliver exceptional value,” said Darren Woods, chairman and chief executive officer. “We remain committed to providing the energy and products that raise living standards around the world while building a new business to reduce emissions in hard-to-decarbonize parts of the economy. ExxonMobil is uniquely equipped to do both, and we’re confident that both present significant opportunities for profitable growth.”
The company also announced it intends to deliver $6bn in additional structural cost reductions by year-end 2027, bringing the total structural cost savings to approximately $15bn versus 2019. Opportunities from consolidating value chains and centralizing key activities including maintenance, supply chain, procurement, order to cash, financial reporting, planning and analysis, and trading will enable further efficiency and execution effectiveness.
Upstream earnings potential is on track to more than double by 2027 versus 2019, resulting from investments in high-return, low-cost-of-supply projects. Over the next five years, approximately 90% of the company’s planned Upstream capital investments in new oil and flowing gas production are expected to generate returns greater than 10% at a Brent price of $35/bbl. The company has made good progress executing its plan to reduce Upstream operated greenhouse gas emissions intensity by 40% to 50% by 2030, compared with 2016 levels, having already achieved approximately half of this planned reduction.3
The company expects oil and gas production in 2024 to be about 3.8 million oil-equivalent barrels per day, rising to about 4.2 million oil-equivalent barrels per day by 2027, driven by growth in the Permian and Guyana.
Product Solutions is leveraging scale and technology advantages to nearly triple earnings potential by 2027 vs. 2019. Earnings growth is being delivered through structural cost reductions, strategic project execution that will double sales of high-value products, and other earnings improvements such as higher reliability, more efficient maintenance, facility optimization projects, and commercial improvements including trading. The portfolio value is being continuously upgraded through divestments of non-strategic assets and continued investment in advantaged sites to increase high-value products such as the recent chemical expansion in Baytown.
The company’s capital allocation approach prioritizes competitively advantaged, high-return, low-cost-of-supply, value-accretive investments that enable ExxonMobil to lead the industry now and through the energy transition. The company now anticipates total annual capital expenditures and exploration expense of $23bn to $25bn in 2024 and $22bn to $27bn annually from 2025 through 2027, generating an average return of approximately 30%.2 Greater than 90% of the capex has payback periods less than 10 years.2 The increase in capex beginning in 2025 is driven by the growth in value-accretive Low Carbon Solutions opportunities to reduce emissions.
Increased cash flow and earnings enable further surplus cash generation and increased shareholder distributions. The company remains on track to complete $17.5bn in share repurchases in 2023 as part of the $35bn repurchase program previously announced for 2023 and 2024. After the Pioneer merger closes, the go-forward pace of the program in 2024 will be increased to $20bn annually through 2025, assuming reasonable market conditions.
Low Carbon Solutions: Building a new value-accretive business
ExxonMobil is pursuing more than $20bn of lower-emissions opportunities through 2027, which represents the third increase in the last three years, from an initial $3bn in projects identified in early 2021. This is in addition to the company’s recent $5bn all-stock acquisition of Denbury, which expanded carbon capture and storage opportunities through access to the largest CO2 pipeline network in the United States.
The company is pursuing a portfolio of opportunities in lithium, hydrogen, biofuels, and carbon capture and storage that in aggregate is expected to generate returns of approximately 15% and could reduce third-party emissions by more than 50 Mta by 20304,5. These lower emissions solutions help address climate change and closely align with ExxonMobil’s competitive advantages and core capabilities. Approximately 50% of the planned investments support building the company’s Low Carbon Solutions business, which reduces customers’ greenhouse gas emissions.
“We continue to see more opportunities to harness our technology, scale, and capabilities to implement real solutions to lower emissions and to profitably grow our Low Carbon Solutions business,” added Woods. “Success in accelerating emission reductions requires the development of nascent markets. We need technology-neutral durable policy support, transparent carbon pricing and accounting, and ultimately, customer commitments to support increased investment. We’re actively advocating for each of these areas so we can grow a profitable, and ultimately large, low carbon business.”
ExxonMobil is developing a leading position in lithium, fully leveraging its upstream skills, such as geoscience, reservoir management, and efficient drilling. It also taps the company’s downstream capabilities in fluid processing and extraction to separate the lithium from the brine. These skills and experiences underpin the company’s cost advantaged entry into the lithium business at scale, with strong returns and a lower environmental impact. Work has begun for the company’s first phase of lithium production in southwest Arkansas, an area known to have large, highly concentrated lithium deposits. First production is expected in 2027. The company is evaluating further growth opportunities in lithium globally. By 2030, ExxonMobil aims to produce enough lithium to supply the manufacturing needs of approximately 1 million EVs per year.6
The company recognizes the significant uncertainty in how the energy transition and its low carbon business will develop and expects to pace emissions-reduction investments, effectively allocating resources as markets, customer commitments, and policy evolve. This minimizes the downside risks while establishing an advantaged position to capture and maximize the upside potential.
The balance of the company’s low carbon capital will be used to reduce its own emissions in support of its 2030 emission reduction plans and its 2050 Scope 1 and 2 net-zero ambition. In the Permian Basin, the company is on track to reach net-zero emissions for unconventional operations by 2030, and previously announced it also expects to leverage its Permian greenhouse gas reductions plans to accelerate Pioneer’s net-zero ambition by 15 years, to 2035 from 2050.
1 Adjusted net income sourced from Bloomberg; for ExxonMobil, Bloomberg’s adjusted net income is earnings ex. identified items for the applicable period. Figures for 2019 to 2022 are actuals sourced from Bloomberg. Consensus estimates for 2023 to 2027 are sourced from Bloomberg as of October 2, 2023.
2 Calculations are based on ExxonMobil plan. Calculations exclude capex for Corp & Fin, Operated by Others projects, exploration, LTO/maintenance/sustaining programs, and incubating projects and spend to reduce own emissions not supported by policy.
3 Emission reduction plans announced in Dec. 2021 include a 20- to 30-percent reduction in corporate-wide greenhouse gas intensity by 2030 compared to 2016 levels. This will be supported by a 40- to 50-percent reduction in upstream greenhouse gas intensity, a 70- to 80-percent reduction in corporate-wide methane intensity, and a 60- to 70-percent reduction in corporate-wide flaring intensity compared to 2016. Plans cover Scope 1 and Scope 2 emissions for assets operated by the company.
4 Lower-emission investment portfolio delivers ~15% return on a capital-weighted basis under current and potential future government policies based on ExxonMobil projections. Calculations exclude capex for incubating projects and spend to reduce own emissions not supported by policy.
5 We see the opportunity to help other essential industries and customers achieve their goals to lower emissions. Estimates of GHG emissions are on a life cycle basis and include avoided and abated emissions from hydrogen, lower-emission fuels, and carbon capture and storage. For example, customers could avoid up to 25 Mta of their GHG emissions if all of ExxonMobil’s projected 2030 supply to the market of lower-emission fuels displaces conventional fuel refined from crude oil. Calculation is an ExxonMobil analysis illustrating the general benefits of lower-emission fuels based on estimated fuel CI from various third-party sources (such as Argonne National Labs’ GREET model) as compared against its conventional fuel alternate on a life cycle basis. Calculation is an estimate that represents a range of potential outcomes that are based on certain assumptions. Estimates are based on the potential implementation of projects or opportunities that are at various stages of maturity. Individual projects or opportunities may advance to a final investment decision by the company based on a number of factors, including availability of supportive policy and permitting, technology and infrastructure for cost-effective abatement, and alignment with our partners and other stakeholders. Actual avoided and abated emissions abatement may differ.
6 Based on ExxonMobil internal analysis.