Natural Gas Liquids To Benefit Exxon Stock
Not many oil companies have taken on the approach of increasing their production of natural gas liquids. The market is still strongly focused on oil. However, Exxon Mobil has taken a strong approach to natural gas liquids, and it seems to be paying off. The Trefis Team explains how they have made NGLs work for them.
…The company has aggressively added to its oil and natural gas liquids (NGLs) portfolio in recent months and recently made two major discoveries in the Gulf of Mexico region a couple of months ago. It also has on-going shale gas projects in Argentina, Canada, Columbia, Germany and Poland. This will help Exxon maintain its production momentum in light of low natural gas prices and high crude oil prices…
Increase in Natural Gas Production
In the last quarter, Exxon’s upstream volumes increased by 10% to 4.4 million barrels of energy equivalent/day (mboe/d) as the company produced a higher proportion of natural gas due to the acquisition of XTO Energy in June 2010.
Higher natural gas sales had a negative impact of around $1 billion on the company’s upstream earnings last quarter as gas prices remain depressed due to excess production in the U.S. This also resulted in a slight decrease in its overall profits due to the changes in volume and mix of upstream output. (SeeExxon Heads to $92 Using Oil Profits to Bet on Gas)
Exxon Looking to Expand Liquids Portfolio
In June 2011, Exxon made two major oil discoveries and a gas discovery as a result of its deepwater exploration operations in the Gulf of Mexico, and this should add more than 700 million barrels of recoverable oil equivalents to the company?s reserves. (See Exxon Makes Major Deepwater Find in the Gulf of Mexico) Exxon has maintained a reserve replacement ratio of around 95% for liquids and 158% for its gas reserves which will allow it to maintain its production levels in the future. The company is also pursuing a gas project in China and is drilling its third coal bed methane well in Indonesia. The current high oil prices and a strong liquids portfolio will aid Exxon’s stock upside in the coming months.
Exxon is thinking ahead when it comes to NGLs. Not many companies have shifted their focus like this. Seems to be paying off so far, let’s hope it continues!
Quotes taken from report by The Trefis Team, Read the entire article here.
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