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Exxon To Curb Shale Production To Lower Costs And Preserve Dividend

Exxon To Curb Shale Production To Lower Costs And Preserve Dividend
The focus of Exxon Mobil Corp is now on cutting down on costs and preserving dividends to win back investors who have not been impressed with the strategies of the company which has been allegedly overspending for years. This strategy change has forced the company to scale down its targets and ambitions for production of oil and gas, the company said on Wednesday.
Following a historic loss of $22.4 billion last year, the top oil producer of the United States is now trying to a skeptical Wall Street about the potential for the company to stage a turnaround after the company was left in huge debt and lagging behind rivals because of over spending for years and with rivals already moving into cleaner energy segments ad such clean energy demands rise across the world. 
Last year, the stocks of the company dropped to a two-decade low and the company was also dropped of the Dow Jones index of top US companies. A section of the investors of the company are pushing the company to reduce its dependence on fossil fuels.
"The priority right now is to rebuild the balance sheet," Exxon Chief Executive Darren Woods said on a media call after a virtual analysts day in which the company stressed on its commitment to bring down costs and reducing debts. The current debts of the company stand at $67.6 billion compared to $37.8 billion just two years ago.
However, according to some analysts who were critical of the spending plans of Exxon, in contrast to what some of its rivals such as Chevron Corp and Royal Dutch Shell are doing, it is likely that the company’s focus will be on oil instead of gas and not shift towards cleaner energy. The company is also accused to taking calculated steps for spending in low carbon fuel business even as other global rivals are investing aggressively in development of renewable energy projects.
The company has decided on restraining its annual project spending at or below $19 billion for 2021 and in the range of between $20 billion and $25 billion till 2025, Woods assured. The company also plans to keep production more or less flat at about 3.7 million barrels of oil and gas per day.
The company’s Senior Vice President Neil Chapman said that the spending of the company on oil and gas production will primarily be focused on shale oil production in Guyana, Brazil and the United States. "Based on market conditions," the company expects its 400,000 barrels of daily output in west Texas and New Mexico to rise to about 700,000 by 2025.
According to Biraj Borkhataria, analyst with RBC Capital Markets, the overall output of the company is likely "to steadily shift from gas to liquids, which is at odds with most peers".
As part of a new low-carbon business, the company has pledged to increase investments in carbon capture and storage. Exxon said that about 3 per cent of its total new spending will be devoted to that effort compared to its previous spending of just 1 per cent.
"It is still far from the double-digit levels of companies such as Shell and Total," said Pavel Molchanov, analyst with Raymond James.

Christopher J. Mitchell

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