PNG Impacts ExxonMobil 1Q Output
ExxonMobil reported 1Q earnings of $4.65bn on April 27, up 16% from its $4.1bn in 1Q2017. Increased commodity prices and better efficiencies resulted in higher earnings and “the highest quarterly cash flow from operations and asset sales since 2014,” said CEO Darren Woods. Cashflow was $10bn, including $1.4bn proceeds from asset sales. Capital expenditure was $4.9bn, up 17%.
Production however was 6% lower year on year at 3.9mn barrels of oil equivalent per day- a reduction of 262,000 boe/d that split into 117,000 b/d fewer liquids and 0.87bn ft3/d less gas. The seven-week shut-in at Papua New Guinea LNG which ExxonMobil operates, following a severe earthquake on Feb.26, reduced ExxonMobil 1Q earnings by $80mn and production by 25,000 boe/d. Maintenance scheduled for late 2018 at twin-train PNG LNG was brought forward to coincide with the outage, investor relations chief and company secretary Jeff Woodbury told analysts, adding that train 2 restarted this week. Train one had started up earlier this month.
The supermajor's results statement did not say how curbs on its Dutch NAM joint venture's Groningen gas output, also earthquake-related, impacted it (see below for subsequent comment). It did however say that US unconventional development progressed with 27 operated rigs in the Permian and four operated rigs in the Bakken; those two US basins together yielded 18% production growth year-over-year.
Natural gas prices realised by ExxonMobil were supported by strong seasonal demand with colder weather across both Europe and the US and higher crude-linked LNG prices. Upstream earnings increased by $1.2bn, as the average 1Q gas price realised rose by $0.90/’000ft3 and its oil price firmed by $10.8/b, both year on year.
ExxonMobil cited the eight additional blocks won in last month’s Brazil offshore round, the recent increase to its PNG gas reserves sufficient to consider a third LNG train that could add a possible 8mn mt/yr capacity, and new rights offshore Ghana, as “strengthening the portfolio.” Downstream earnings were down $176mn year on year at $940mn in 1Q2018, due to lower refining margins and other factors.
Debt was reduced to $40.6bn at end-March 2018, from $42.3bn three months earlier, and $43.6bn at end-March 2017.
Update: 3.15pm British Summer Time (2.10pm GMT)
Woodbury was asked to comment on a decision by Shell, Exxon's joint venture partner in NAM, to book lower gas reserves at Groningen in Netherlands, and about compensation payments. He declined to elaborate, saying: "It's a very dynamic situation, We continue in discussions with NAM and the government, which are confidential. We don't want to speculate at this stage. But the [Groningen] field is operating under its present cap of 21.6bn m3/yr."
Responding to a question, he said that timing of a decision on the possible third PNG LNG train was "yet to be determined."
He told analysts that a member of its five-man management board would also participate on each of ExxonMobil's future 2018 quarterly results conference calls, with CEO Darren Woods himself joining the 4Q/full year call - due February 2019. ExxonMobil has been unusual among the top oil majors not to include top management on these calls; Woodbury is not a board member. The change was welcomed by several analysts on the call.