Exxon Mobil: Venezuela's Intimidation Of Exxon Mobil's Ship Shouldn't Affect Growth Plans

Jan. 13, 2019 7:40 PM ETExxon Mobil Corporation (XOM)HES67 Comments

Summary

  • Exxon Mobil recently had a ship it had contracted to explore its territory off of Guyana seized. This brings back memories of Venezuela's 2007 nationalization of Exxon Mobil's assets.
  • Exxon Mobil has intelligently focused its Guyana exploration program on the eastern half of its territory. This should help minimize potential impacts.
  • Even in a potential worst-case scenario, I anticipate that Exxon Mobil will be safe.

Exxon Mobil (NYSE: NYSE:XOM), the largest publicly traded oil supermajor, has recently gotten a piece of bad news that could affect its long-term growth plans. Venezuela’s navy announced the interception of an Exxon Mobil ship off the coast of Guyana. Guyana is a central part of Exxon Mobil’s long-term growth plans.

However, as we’ll see in this article, the long-term effect of such an interception shouldn’t affect the company’s long-term growth plans.

Exxon Mobil - Alpha Gamma

Exxon Mobil Guyana Plans

Let’s start with the bad news that Exxon Mobil has received recently. This is bad news that directly affects the company’s growth plans, and has negatively hurt the company’s stock price. Despite this, I believe that this issue has been overplayed.

Exxon Mobil Guyana Plans - Exxon Mobil Investor Presentation

Guyana is a significant part of Exxon Mobil’s growth plans. Exxon Mobil has increased recoverable resources here to >4 billion barrels, which the company believes provides >10% return at $40 / barrel. The company is focused on a low-cost development using proprietary technology. The company plans to drill 5 exploration wells in 2018, with 20 addition prospects.

The company recently made its 9th discovery and mobilized its third rig in October. The company anticipates the asset will first come online in 2020 and grow production to more than 800 thousand barrels per day by 2026. Several hundred thousands of these barrels will be directly attributable to Exxon Mobil. That means this asset will support an almost double-digit increase in the company’s production.

Exxon Mobil Guyana Production - Exxon Mobil Investor Presentation

The above graph shows Exxon Mobil’s Guyana plans in detail. The company plans to start production in 2020 at just over 100 thousand barrels per day. The company anticipates production almost tripling by 2022, doubling again by 2024, and going up by

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