Exxon Mobil Corporation (XOM - Free Report) has made alterations in the Permian Basin growth plans and expects to boost production by roughly 80% compared with initial estimates.
The company now expects production from the Permian to increase to more than 1 million oil equivalent barrels per day by 2024 from its prior projection of 600,000 barrels equivalent per day and hence will boost considerably value.
ExxonMobil’s recoverable resource base in the Permian is estimated at about 10 billion oil equivalent barrels. The recoverable resource is expected to increase further asanalysis and development activities are underway.Further, appraisal of Delaware Basin’s increased resource size, infrastructure development plansas well as secured capacity to transfer oil and gas to ExxonMobil’s Gulf Coast refineries and petrochemical operations via the Wink-to-Webster, Permian Highway and Double E pipelines will contribute to the anticipated increase in production.
ExxonMobil, known for its conservatism, anticipates double-digit returns from investments in the Permian Basin even at low oil prices. For instance, production will have an average return of more than 10%at an oil price of $35 per barrel.
The company’sacreage position in the Permian is its vital advantage. The company has large adjacent acreage that facilitates multi-well pads in huge development corridors. These acreages are well linked to the gathering systems, whichlowers development costs and accelerates production growth. The expertise of ExxonMobil with respect to size, financial strength and technical capabilities facilitates it to optimize the value of the resource.
Currently, oil majors like EOG Resources Inc (EOG - Free Report) , Occidental Petroleum Corporation (OXY - Free Report) , Chevron Corporation (CVX - Free Report) and Apache Corporation that have vast holdings in the basin, are facing severe transportation capacity constraints. Chevron has also increased its production estimate from Permian basin to 900,000 barrels per day in 2023 from 650,000 barrels per day. To refrain from these issues, the company is also focusing on building infrastructure to support volume growth. It proposes to carry out construction at 30 sites to include central delivery facilities intended to handle about 600,000 barrels of oil and 1 billion cubic feet of gas per day as well as improved water-handling capacity through 350 miles of already-constructed pipeline.
The company’s expansion plans will benefit local communities of West Texas and southeast New Mexico. They will receivesignificant amountthrough property tax revenues, economic development and generation of high-paying jobs.
Currently, ExxonMobil has 48 drilling rigs operating out of the Permian Basin and plans to increase rig count to about 55 by the end of the year.
ExxonMobil’s plan is in sync with its strategy to sustain growth and provide processing and transportation capacity to support production growth.
ExxonMobil carries a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank stocks here.
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