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The U.S. energy behemoth ExxonMobil Corporation (XOM - Analyst Report) is likely to boost its output level in the next five years thanks to the major liquid rich project start-ups lined up during the period.
ExxonMobil expects its liquids production to increase 4% per year on average between 2013 and 2017. The company’s 28 major oil and gas project start-ups will facilitate it in achieving the target. Of the total, 24 are in liquids projects.
Specifically, 22 important ventures are expected to commence production over the next three years. Expansion of the Kearl oil sands project in Alberta, Canada, and a liquefied natural gas export project in Papua New Guinea are among them. The company also remains upbeat on its progress related to its downstream operations. ExxonMobil is making improvements in its new facilities in Singapore, China and Finland to tap the Chinese as well as Russian markets.
ExxonMobil expects these start-ups to deliver 1 million oil-equivalent barrels over the next five years. It also aims to expend about $190 billion over the next five years, or $38 billion per year, in search of new resources to meet the growing energy demand.
Last year, ExxonMobil’s production fell 6%. We see the company as struggling to consistently grow production volumes. In fact, the last six quarters saw production declines. For this year, the company expects production to decline 1% due to weaker natural gas output. Then, the oil and gas giant expects its annual production to climb 2% to 3% per year through 2017.
While its 2010 purchase of XTO Energy Inc. is expected to be a positive move over the longer term, we are yet to see any material benefit, given the continued weak natural gas prices. The deal positioned ExxonMobil as the largest natural-gas producer in the U.S. With natural gas accounting for almost half of ExxonMobil’s fourth quarter 2012 production, we remain cautious due to the tempered outlook on natural gas prices for the future.
Now, with most of the new ventures tilted towards liquid rather than gas, ExxonMobil is expected to generate meaningful production in the next five years and beyond. Natural gas percentage in total production dropped from approximately 51% in the first quarter of 2012 to almost 49% in the fourth quarter. Again, it added 1.8 billion oil-equivalent barrels in proven reserves in 2012, 78% of which comprised petroleum and the remaining was liquids. This proves ExxonMobil’s endeavor in oil exploration at the cost of less lucrative natural gas business.
ExxonMobil holds a Zacks Rank #3, which is equivalent to a short-term Hold rating. However, there are other stocks in the oil and gas sector that are expected to perform better. These include Total SA (TOT - Analyst Report), Range Resources Corporation (RRC - Analyst Report) and NGL Energy Partners LP (NGL - Snapshot Report). Total sports a Zacks Rank #2 (Buy), while Range Resources and NGL Energy carry a Zacks Rank #1 (Strong Buy).