In coming years, Exxon Mobil Corp.’s newly purchased oil land in New Mexico and West Texas could raise its U.S. shale oil production to as much as a quarter of its output worldwide.
It would take more than a decade to reach a production plateau of 350,000 barrels of oil equivalent a day from the thousands of coveted acres it bought in the Delaware Basin, where the previous owners, the wealthy Bass family of Fort Worth, had only developed 5 percent of the oil land.
“We want to get to it right away,” said Jeff Woodbury, an Exxon Mobil spokesman, during a conference call with investors on Tuesday.
The company plans to begin ramping up oil production in the Delaware Basin this year, and over time, it could bring on 15 rigs or more in the region. Woodbury said the company plans to drill more than 85 percent of its wells at least two miles sideways “because the acreage is not constrained by traditional land lease issues.” With the addition of the Delaware Basin acreage, the company now has some 4,500 wells that could make a 10 percent return at $40 a barrel oil in the Permian Basin, he added.
The largest U.S. oil company also said it expects to increase its capital expenditures some 14 percent this year to about $22 billion, one of the few announcements by a major oil company signaling a spending hike this year. Woodbury didn’t provide much detail about the company’s investment plans, but said the spending increase reflects rising drilling activity, not just anticipated drilling cost inflation that inevitably follows rising oil prices.
“We’ll all experience market pressure,” he said, but said the company will continue to look for ways to trim costs.
Exxon Mobil’s profits fell 40 percent in the fourth quarter as it wrote down the value of its natural gas assets in the Rocky Mountains and elsewhere in the United States by about $2 billion.
The oil company banked $1.7 billion in net income, or 41 cents a share, in the fourth quarter, down from $2.8 billion, or 67 cents a share, in the same October-December period the year before. Revenues increased from $59.8 billion to $61 billion in the same period.
The company said its U.S. oil and gas production business lost $2.3 billion in the fourth quarter, largely driven by the after-tax impairment charge, compared to its fourth-quarter profit of $1.7 billion overseas. Its oil production fell by 127,000 barrels of oil equivalent a day, or 3 percent.
Its oil refining and chemicals businesses netted a combined $2.1 billion, down from $2.3 billion in the fourth quarter of 2015.
For the full year, Exxon Mobil collected $7.8 billion in profits, down 51 percent from 2015. Its capital spending nearly a third to $19.3 billion last year.