Is ExxonMobil’s Downstream Portfolio Poised for Growth?



ExxonMobil’s downstream portfolio

In the previous two parts of this series, we looked at ExxonMobil’s (XOM) Ranger-1 well discovery and the company’s robust upstream portfolio. In this part, we’ll look at its expanding downstream portfolio.

ExxonMobil expects an increase of around 30% in its cash flow from operations (or CFO) from its downstream segment. The increase is from 17 major downstream projects that are expected to start between 2016 and 2020. The company expects its refining segment to witness ~200,000 barrels per day of improvement in refining volumes. Its chemical segment could see 4.1 million tons per annum of capacity additions in its petrochemical capacities.

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A significant downstream project is ExxonMobil’s US Gulf Coast project. It plans to invest around $20 billion at 11 sites in the US Gulf Coast region through 2022. They involve projects in refining, chemicals, lubricants, and LNG (liquefied natural gas), which are being undertaken to expand production capacity and export capability. XOM intends to use the ample domestic supply of crude oil and natural gas and its low-cost manufacturing abilities to penetrate international markets. In the US Gulf Coast, the company expects to see its integrated model work at its best, optimizing value from the entire supply chain right from the production of oil, refining, and chemical processing to the supply of products to the markets.

Another project in the downstream segment is the hydrocracker project at the Rotterdam refinery, which is expected to yield higher value refined products. The Singapore chemical segment project is aimed at the production of low-cost, high-value feedstocks and chemicals.

Also, the acquisition of Jurong Aromatics in 3Q17 has been a big boost for ExxonMobil’s downstream portfolio. Jurong owns one of the largest aromatics plants in the world. The facility was very close to ExxonMobil’s existing facility in Singapore. ExxonMobil had an integrated refining cum petrochemical complex in Singapore. Thus, the acquisition of Jurong is anticipated to provide significant operational synergies to ExxonMobil.

In a nutshell

Overall, in the scenario of a strong refining and chemical environment, XOM’s growing downstream capacities could result in higher earnings. The downstream earnings will partially shield ExxonMobil’s total earnings from an oil price decline, which significantly dents upstream earnings.

In the next part, we’ll analyze ExxonMobil’s preparedness for 2018 in terms of debt position.


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