In a world of $55-a-barrel oil, Exxon Mobil is relying on shale fields in Texas, Oklahoma and North Dakota to help fund the next wave of big overseas projects that it needs to thrive.
Exxon unveiled plans Wednesday to double the oil it pumps from U.S. shale fields within three years, even as it moves more cautiously on investments in big projects elsewhere. Decades after quitting many U.S. fields to pursue bigger reserves from the Middle East to the North Sea, Exxon now sees its U.S. assets as its most reliable cash engines.
With its leading technology, expertise and market clout, the biggest U.S. oil producer has reduced costs and improved efficiency in domestic shale fields it began acquiring in 2010. That progress, coming even as the price of crude has dropped, has let Exxon generate “attractive returns,” Chief Executive Officer Rex Tillerson said.
“It might surprise some people how attractive some of these things are in this environment,” Tillerson told a gathering of investors in New York on Wednesday. North American shale “is more resilient than some people think it is.”
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Exxon expects its worldwide production of crude and natural gas to climb 7.5 percent to the equivalent of 4.3 million barrels a day by the end of 2017, the Irving-based company said. The last time Exxon performed at that level was 2011.
The U.S. contribution to Exxon supplies has edged higher the last few years amid Tillerson’s renewed focus on domestic assets in shale and other so-called tight-rock resources that require intensive drilling and fracturing.
U.S. wells accounted for 22 percent of Exxon’s crude output last year, up from 15 percent in 2008. The supply bump from Exxon’s domestic fields during the next three years will be driven by drilling in West Texas, North Dakota and south Oklahoma.
Exxon merged with XTO in Fort Worth in 2010. XTO, a big investor in the Permian Basin, had 16 rigs drilling in West Texas in the third quarter of 2014 — about triple what it had in the third quarter of 2013 — as well as 65 other work-over rigs to enhance conventional production.
A “significant portion” of U.S. shale fields are competitive with overseas oil projects at current prices, Tillerson said, thanks to more efficient production techniques and cost-cutting. His statement contradicts many analysts who had predicted that most shale wells would lose money as crude fell below $75 a barrel.
Tillerson’s remarks Wednesday fueled talk of takeover bids. The “key potential targets” with strong positions in those regions include Hess Corp., Continental Resources, Apache Corp., Devon Energy Corp. and Anadarko Petroleum Corp., analysts at Wolf Research Llc. wrote.
EOG Resources and Occidental Petroleum Corp. would also be good candidates, though they may be too expensive, the Wolfe analysts said. Pioneer Natural Resources Co. and Denbury Resources may also attract Exxon’s attention, they wrote.
Staff writer Max B. Baker contributed to this report.