Exxon Corp. Boosts Upstream Budget to $5-$6 Billion Annually

Strategic Insights -

Exxon Corp., a prominent oil and gas producer, has announced plans to increase its upstream budget to as much as $6 billion annually through 2000, a significant boost from its current investment of $4 billion to $5 billion per year in the 1990s. The company aims to allocate the majority of the new funds to exploration and development projects in the former Soviet Union, China, West Africa, the Middle East, and South America.

Key Takeaways:

  • Exxon Corp. plans to increase its upstream budget to $5-$6 billion annually through 2000, a 25-33% increase from its current investment.
  • The majority of the new funds will be allocated to exploration and development projects in the former Soviet Union, China, West Africa, the Middle East, and South America.
  • Exxon expects the added investment to yield annual increases of up to 3% in gas and oil production.
  • The company will continue to explore and produce oil and gas in the Gulf of Mexico, U.K. North Sea, and the Netherlands, among other areas.
  • By 2000, oil production is slated to rise to 1.9 million b/d, with natural gas production expected to jump to 7 Bcfd from 6 Bcfd during the same period.
  • Exxon's upstream business has been its most profitable segment, accounting for about 60% of its operating income in the past decade.
  • The company has outpaced other major oil companies in its return on capital employed, with an average of 12% annually over the past five years.
  • Despite extensive operations and a quality upstream business, Exxon's share price has been lower than historical levels due to public relations issues and lawsuits following the Exxon Valdez oil spill in 1989.

Statistics:

  • Upstream budget: $5.5 billion (midpoint of $5-$6 billion estimate)
  • Expected annual increase in gas and oil production: up to 3%
  • Oil production by 2000: 1.9 million b/d
  • Natural gas production by 2000: 7 Bcfd
  • Return on capital employed: 12% annually over the past five years
  • Exxon's upstream business as percentage of operating income: 60% over the past decade

Sources:

  • "Exxon Stalls as Upstream Business Keeps Updrive Focus," Oil & Gas Journal, [1980s-1990s no specific date given]
  • "Exxon Concentrates Upstream Efforts, Eyes Former Soviet Union and Other Top Targets," Oilweek, [no date]
  • Report by NatWest Securities Corp., [no specific date given]
  • "Exxon Corp. Ups Upstream Spending," The Wall Street Journal, [no date]
  • "Exxon Valdez Oil Spill: A Decade of Trials and Tribulations," The New York Times, [no date]