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Will Exxon's oil production keep shrinking?

The United States is pumping more oil than any other country in the world. And yet ExxonMobil's oil producti...

Posted: Nov 7, 2018 7:35 PM
Updated: Nov 7, 2018 7:35 PM

The United States is pumping more oil than any other country in the world. And yet ExxonMobil's oil production keeps shrinking.

Exxon's output has declined in eight of the past nine quarters. America's largest oil company is expected to disclose another dip on Friday when it reports third-quarter results.

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Shale development

The trend is surprising given the shale oil boom that has turned the United States into an energy powerhouse. US oil output topped 11 million barrels a day in August for the first time ever, according to new government statistics. That's more than either Russia or Saudi Arabia.

But Exxon (XOM) was late to the shale revolution. Instead of drilling in North Dakota and Texas, Exxon plowed resources into expensive projects overseas, including ones in Russia that didn't pan out.

"They missed the boat on the shale boom. They're playing catch-up," said Brian Youngberg, senior energy analyst at Edward Jones.

Exxon spent $5.6 billion in early 2017 to buy assets in the shale oil hotbed of the Permian Basin, which stretches from Texas to New Mexico. The deal was announced two weeks after former Exxon CEO Rex Tillerson stepped down to focus on his nomination as President Donald Trump's secretary of state.

That deal, along with other US shale investments, are starting to pay off. Exxon's production in the Permian Basin and Bakken of North Dakota soared 30% in the second quarter. And Exxon signaled plans to pump more out of the Permian, which has turned into one of the largest oilfields in the world.

Investors are hoping Exxon was able to ramp up production to capitalize on higher oil prices. Even though crude has pulled back in recent weeks, prices last quarter were significantly higher than a year ago.

Higher oil prices allowed Royal Dutch Shell (RDSA) to log a 50% jump in profit on Thursday. BP's (BP) profit more than doubled. Analysts are expecting Exxon's per-share profits rose by just 21%.

Exxon disappointed investors in the second quarter by reporting a worse-than-expected 7% drop in oil and gas production. Analysts are calling for another drop in the third quarter.

"They need to show improvement. The company needs to get back going to increase confidence from investors," said Youngberg.

Others don't think Exxon's recent production declines are a big deal in the long run.

"People in the oil industry know Exxon is the best in the business," said Jerry Bailey, a former Exxon executive who is currently president of oil producer Petroteq Energy.

"They're run by a bunch of guys in the business, not guys in pinstripes on Wall Street," said Bailey, who owns Exxon shares.

Exxon was held back in the second quarter by technical issues, including unscheduled maintenance that sidelined operations. The hiccups were a surprise because Exxon has a history of being a top-notch operator.

In the long run, Exxon has several overseas projects that look poised to eventually grow the company's bottom line. Exxon is most excited by its development in Guyana, which the company estimates contains 4 billion barrels of recoverable oil.

But turning Guyana into a moneymaker will take considerable time and resources -- something investors may not have patience for.

"They're taking the long-term approach," said Youngberg. "I think it will pay dividends, but we won't be seeing it for another three years."

Mississippi Coronavirus Cases

Data is updated nightly.

Cases: 263023

Reported Deaths: 5752
CountyCasesDeaths
DeSoto17675191
Hinds16813331
Harrison14224204
Rankin11167219
Jackson10839190
Lee9050144
Madison8568168
Jones6668114
Forrest6177124
Lauderdale6097192
Lowndes5518120
Lafayette516298
Lamar503965
Washington4923125
Bolivar4104109
Oktibbeha405982
Panola384881
Pontotoc376258
Warren3674103
Monroe3671108
Union355663
Marshall355270
Neshoba3485154
Pearl River3468105
Leflore3111109
Lincoln305688
Hancock291862
Sunflower291475
Tate279662
Alcorn272354
Pike268981
Itawamba268063
Scott259648
Yazoo255256
Prentiss252553
Tippah249250
Copiah249049
Coahoma248054
Simpson242171
Leake237367
Grenada223272
Marion222073
Covington219973
Adams213671
Wayne212634
Winston207371
George204339
Newton199046
Attala196963
Tishomingo194161
Chickasaw189044
Jasper179538
Holmes171768
Clay165837
Tallahatchie156235
Stone151425
Clarke147262
Calhoun140822
Smith129226
Yalobusha122034
Walthall114337
Greene113529
Noxubee112926
Montgomery111636
Carroll106622
Lawrence106517
Perry104531
Amite101426
Webster96124
Tunica88821
Claiborne88325
Jefferson Davis88329
Benton85623
Humphreys84624
Kemper80520
Quitman7089
Franklin69917
Choctaw63213
Wilkinson59825
Jefferson56821
Sharkey45117
Issaquena1606
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Alabama Coronavirus Cases

Cases: 439442

Reported Deaths: 6657
CountyCasesDeaths
Jefferson644371007
Mobile31435569
Madison28158217
Tuscaloosa21492275
Montgomery19873332
Shelby19248132
Baldwin17128189
Lee13137107
Morgan12594142
Etowah12070181
Calhoun11496206
Marshall10420123
Houston8988164
Limestone832081
Cullman8257124
Elmore8183110
DeKalb7871107
Lauderdale7847107
St. Clair7808130
Talladega6445112
Walker6028183
Jackson599145
Colbert548694
Blount546286
Autauga535862
Coffee460764
Dale409685
Franklin374150
Russell354215
Chilton344373
Covington338580
Escambia334544
Tallapoosa3143109
Dallas312996
Chambers303470
Clarke298036
Pike262431
Lawrence253355
Marion253161
Winston233342
Bibb222348
Geneva210247
Marengo208231
Pickens199531
Hale184944
Barbour180538
Fayette177829
Butler173160
Cherokee165131
Henry159525
Monroe152021
Randolph145536
Washington141727
Clay129746
Crenshaw123745
Macon121937
Cleburne121525
Lamar119922
Lowndes114836
Wilcox107922
Bullock103328
Perry99918
Conecuh97822
Sumter90527
Greene77923
Coosa63418
Choctaw51924
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