ExxonMobil’s Robust Upstream Portfolio: Poised for Growth

ExxonMobil (XOM) produced 4.1 MMboepd (million barrels of oil equivalent per day) from its worldwide operations in 4Q16. It’s imperative to note that of this total production, 3.1 MMboepd, or 76%, came from its international operations. The amount stood at 82% in 3Q16, with the same level of international production, indicating a rise in its domestic production in 4Q16.

Comparatively, Royal Dutch Shell (RDS.A) produced 3.9 MMboepd in 4Q16. Chevron’s (CVX) and BP’s (BP) productions stood lower at 2.7 MMboepd and 2.2 MMboepd of hydrocarbon production, respectively, in 4Q16.

Liquids accounted for 2.4 MMboepd, or 58%, of XOM’s total production in 4Q16. Crude oil prices have recovered in the past few quarters, and XOM’s average US crude oil realizations rose to $44 per barrel in 4Q16, compared to $35 per barrel in 4Q15. XOM’s average international crude oil realizations stood at $45 per barrel in 4Q16, marginally higher than its US realizations.

However, XOM’s natural gas realizations from its international operations stood ~85% higher than the realizations from its US operations. Its average gas realizations in the United States stood at $2.7 per kcf (thousand cubic feet) in 4Q16. However, its international operations yielded $4.9 per kcf. The lower US prices were on account of a higher supply of natural gas in the country.

ExxonMobil has a robust upstream portfolio with almost 100 projects in various stages of development. Of these, ~0.85 million boepd of production, in terms of working interest, can yield more than 10% returns, assuming Brent crude oil’s price of $57 and Henry Hub natural gas’s price of $3 per MMBtu (million British thermal units).

XOM expects five projects with working interest production capacity (or WIPC) of 0.34 MMboepd to start operations in 2017–2018.

ExxonMobil also has a high-quality, diversified portfolio of upstream assets that hold proved reserves to the tune of ~20 billion barrels of oil equivalent. For more information, read ExxonMobil’s Proved Reserves: Beneath the Surface. 

ExxonMobil’s Permian Basin deal, its oil discoveries offshore Guyana, and its acquisition of InterOil should further boost its upstream portfolio in terms of higher production and a larger resource base. No wonder the company looks set to take advantage of a rise in crude oil prices.

If you’re looking for exposure to integrated energy sector stocks, you can consider the iShares North American Natural Resources ETF (IGE). The ETF has ~21% exposure to the industry.