Tag Archives: Exxon Mobil Corp.

Air Quality, Bakken Crude, Carbon dioxide, Clean Air Act, Climate Change, Climate change denial, Fracking, Oil industry knew, Tar sands crude

They Knew, They Lied: ExxonMobil and Climate Change

Repost from TruthOut

They Knew, They Lied: ExxonMobil and Climate Change

By William Rivers Pitt, 16 July 2015 00:00
(Photo: Los Angeles Smog via Shutterstock)
Los Angeles Smog – Shutterstock

Between 1956 and 1964, Bell Laboratories produced a number of television specials titled “The Bell Laboratories Science Series.” The topics ranged from an examination of the Sun, to human blood, deep space, the mind, the nature of time and life itself. The programs were produced by Frank Capra, whose films include It’s a Wonderful Life and Mr. Smith Goes to Washington, so the production value of the series was notably superior. Even 30 years later, schools all across the US were still showing these Bell Labs films to students.

In 1958, a chapter in this series titled “The Unchained Goddess” was broadcast. The topic was the weather, and it starred Richard Carlson and a USC professor named Dr. Frank C. Baxter. At one point in the program, Carlson asked Dr. Baxter, “What would happen if we could change the course of the Gulf Stream, or the other great ocean currents, or warm up Hudson Bay with atomic furnaces?” The “atomic furnaces” bit is a quaint throwback to the atom-crazy 1950s, but the response given by Dr. Baxter is what makes this particular film notable.

“Extremely dangerous questions,” replied Dr. Baxter, “because with our present knowledge we have no idea what would happen. Even now, Man may be unwittingly changing the world’s climate through the waste products of his civilization. Due to our release, through factories and automobiles every year, of more than 6 billion tons of carbon dioxide – which helps air absorb heat from the Sun – our atmosphere seems to be getting warmer. It’s been calculated that a few degrees rise in the Earth’s temperature would melt the polar ice caps, and if this happens, an inland sea would fill a good portion of the Mississippi Valley. Tourists in glass-bottomed boats would be viewing the drowned towers of Miami through 150 feet of tropical water.”

Again, this was broadcast in 1958. The fact that climate concerns were being voiced almost 60 years ago is likely surprising to many, but the history and beginnings of the environmental movement in the US date even earlier. Ten years before, in 1948, the first piece of federal legislation to regulate water quality – the Federal Water Pollution Control Act – was passed. President Eisenhower spoke to the issue of air pollution, which had killed nearly 300 people in New York City two years earlier, in his 1955 State of the Union Address. That same year, the Air Pollution Control Act was passed.

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Oil producers, Tar sands crude

Exxon Mobil completes $2B tar sands expansion

Repost from Albany Business Review, Latham NY

Exxon Mobil completes $2B tar sands expansion

By Nicholas Sakelaris, Dallas Business Journal, May 11, 2015, 7:55pm EDT

Exxon Mobil Corp. (NYSE: XOM) announced that the $2 billion Cold Lake Nabiye expansion has started production in Alberta, Canada.

The expansion adds about 20,000 barrels per day to what’s already the largest oil sands operation in Canada. That number could double to 40,000 barrels soon, according to Exxon, bringing the total capacity to nearly 200,000 barrels per day.

Exxon added new steam generation, bitumen processing, field production pads and a 170-megawatt electrical cogeneration plant.

The project was executed by ExxonMobil Development Co. on behalf of Imperial Oil Limited, an affiliate that’s majority owned by Exxon.

Oil Industry, Oil prices

Oil corporations cutting back due to low oil prices

Repost from The Wall Street Journal

Chevron Posts Lowest Quarterly Profit in Five Years

Oil Major to Pare Capital Budget by 13%, End Buybacks to Offset Low Crude-Oil Prices

By Daniel Gilbert and Chelsey Dulaney, Jan. 30, 2015
Chevron
Gas prices are displayed at a Chevron fueling station in Richmond, Calif. in April Photo: Bloomberg News

Chevron Corp. said it would trim ambitious spending plans and stop buying back its shares as the collapse in oil prices erased billions of dollars from the company’s cash flow.

The San Ramon, Calif., company on Friday reported $3.5 billion in profit for the last three months of 2014, down 30% from a year ago and its lowest since the 2009 recession.

It also outlined plans to spend $35 billion this year to find and tap oil and gas, a 13% cut from last year’s budget, in response to oil prices that have slumped more than 60% since the summer to under $50 a barrel.

With less cash coming in, the company is suspending its share buyback program for 2015, which had cost $5 billion a year since 2012. Repurchasing shares shrinks the number available to the public and tends to increase their value. Its shares were down 67 cents at $102.33 in recent trading.

John Watson , Chevron’s chief executive, said the company remains on track to pump the equivalent of about 3.1 million barrels a day by 2017—20% more than its current levels—despite spending less. Oil prices must rise, he said, because companies won’t invest enough to make up for the natural declines of existing oil and gas wells, eventually reducing supplies.

“The projects that are going to meet demand going forward are more complex than 20 or 30 years ago, and so the costs of the projects will be higher, and will require a higher price than we’re seeing today,” Mr. Watson said.

Chevron’s spending plans remain ambitious relative to its rivals and its shrinking cash flow. On Thursday, Occidental Petroleum Corp. said it would spend a third less on producing oil and gas this year; ConocoPhillips said it would chop 15% off its capital budget, on top of a 20% cut in December; Royal Dutch Shell PLC said it would spent $15 billion less than planned over three years. Exxon Mobil Corp. , the biggest U.S. energy company, reports results on Monday.

Chevron generated $6.5 billion from its operations in the fourth quarter of 2014, down 38% from a year ago, but still better than analysts’ expectations. Unless oil prices rebound significantly, that rate of cash generation isn’t likely to cover the company’s spending on exploration and production, plus dividend payments that totaled $7.9 billion last year.

Even before oil prices fell, Chevron had been spending at a deficit, dipping into its pile of cash and borrowing more money. The company’s debt rose to $27.8 billion by the end of 2015, doubling in two years and marking the highest it has been in at least 20 years, according to data compiled by S&P Capital IQ.

The company still has $12.8 billion in cash, but that is about $3.5 billion less than at the beginning of 2014. Patricia Yarrington, Chevron’s finance chief, said it could borrow “tens of billions of dollars” more. And Mr. Watson, the CEO, said that while acquisitions aren’t a priority, “We are actively screening opportunities that are out there and we’ll take advantage of opportunities that we see.”

Overall, Chevron reported earnings of $3.47 billion, or $1.85 a share, down from $4.93 billion, or $2.57 a share, a year earlier. Results included a net $570 million gain on asset sales. Revenue fell 18% to $46.1 billion.

Analysts polled by Thomson Reuters had forecast earnings of $1.63 a share and revenue of $30.65 billion.

Chevron’s bottom line was helped by foreign-currency effects, which have been a drag on many U.S. companies’ results recently. Chevron said foreign currency helped its earnings by $432 million in the quarter, up from $202 million a year earlier.

The pain from lower oil prices was cushioned by Chevron’s business of refining crude into fuels like gasoline and diesel. The refining business, which in recent years has accounted for less than 15% of its profits, provided $1.5 billion in earnings–44% of the company’s total. Refining profits nearly quadrupled from a year ago, due to a combination of better margins and asset sales.

The fall in oil prices masked the company’s success at pumping more oil, as it began reaping petroleum from two major projects in the Gulf of Mexico’s deep waters in the last months of 2014. But overall, Chevron’s oil and gas output slipped about 1% from a year ago. On Friday, the company said production could increase up to 3% this year.

Oil Industry, Oil prices

Bloomberg News: Exxon Mobil Shows Why U.S. Oil Output Rises as Prices Plunge

Repost from Bloomberg News
[Editor:  An excellent analysis – “follow the money.”  Significant quote: “The average cost to operate an existing well in most parts of the U.S. “is about $20 a barrel,” Petrie said. “It might be $5 higher or it might be $5 lower, that’s the out-of-pocket costs that we’re talking about. Until you dip into that and start losing money on a cash basis day in, day out, you don’t think about shutting in” wells.”  – RS]

Exxon Mobil Shows Why U.S. Oil Output Rises as Prices Plunge

By Joe Carroll – Dec 18, 2014

Crude oil production from U.S. wells is poised to approach a 42-year record next year as drillers ignore the recent decline in price pointing them in the opposite direction.

U.S. energy producers plan to pump more crude in 2015 as declining equipment costs and enhanced drilling techniques more than offset the collapse in oil markets, said Troy Eckard, whose Eckard Global LLC owns stakes in more than 260 North Dakota shale wells.

Oil companies, while trimming 2015 budgets to cope with the lowest crude prices in five years, are also shifting their focus to their most-prolific, lowest-cost fields, which means extracting more oil with fewer drilling rigs, said Goldman Sachs Group Inc. Global giant Exxon Mobil Corp. (XOM), the largest U.S. energy company, will increase oil production next year by the biggest margin since 2010. So far, the Organization of Petroleum Exporting Countries’ month-old bet that American drillers would be crushed by cratering prices has been a bust.

Oil Prices

“Companies that are already producing oil will continue to operate those wells because the cost of drilling them is already sunk into the ground,” said Timothy Rudderow, who manages $1.5 billion as chief investment officer at Mount Lucas Management Corp. in Newtown, Pennsylvania. “But I wouldn’t want to have to be making long-term production decisions with this kind of volatility.”

A U.S. crude bonanza that has handed consumers the cheapest gasoline since 2009 has left oil exporters like Russia and Venezuela flirting with economic chaos. The ruble sank as much as 19 percent on Dec. 16 to a record low of 80 per dollar before recovering to close at 68; Russian bond and equity markets also crumbled. In Venezuela, the oil rout is spurring concern the country is running out of dollars needed to pay debt and swaps traders are almost certain default is imminent.

Profitable Wells

U.S. oil production is set to reach 9.42 million barrels a day in May, which would be the highest monthly average since November 1972, according to the Energy Department’s statistical arm.

Output from shale formations, deep-water fields, the Alaskan wilderness and land-based wells in pockets of Oklahoma and Pennsylvania that have been trickling out crude for decades already have pushed demand for imported oil to the lowest since at least 1995, according to data compiled by Bloomberg.

Existing wells remain profitable even as benchmark crude futures hover near the $55-a-barrel mark because operating costs going forward are usually $25 or less, Tom Petrie, chairman of Petrie Partners Inc., said in a Dec. 15 interview on the Bloomberg Surveillance television program.

Shut Ins

That’s why prices that have tumbled 47 percent from this year’s peak on June 20 haven’t prompted any American oil producers to shut down wells, said Petrie, a U.S. Military Academy at West Point graduate who has advised Saudi Arabia, Alaska and the U.S. government on energy issues.

The average cost to operate an existing well in most parts of the U.S. “is about $20 a barrel,” Petrie said. “It might be $5 higher or it might be $5 lower, that’s the out-of-pocket costs that we’re talking about. Until you dip into that and start losing money on a cash basis day in, day out, you don’t think about shutting in” wells.

Benchmark U.S. crude futures rose 0.3 percent to $56.63 a barrel at 9:55 a.m. in New York Mercantile Exchange trading. The futures are still on track for their fourth straight weekly decline.

Once oil companies sink cash into drilling wells, lining them with steel pipes and concrete, blasting the surrounding rocks into rubble with hydraulic fracturing, and linking them to pipeline systems, they have no incentive to scale back production, said Andrew Cosgrove, an analyst at Bloomberg Intelligence in Princeton, New Jersey.

Sunk Costs

Those investments, which represent “sunk costs,” are no longer a drain on cash flow, Cosgrove said. Instead, they generate capital companies use to repay debt, fund additional drilling, pay out dividends and buy back shares, he said.

Exxon, the world’s biggest oil producer by market value, is expected to boost crude and natural gas output by 2.8 percent next year to the equivalent of 4.1 million barrels a day, based on the average of eight analyst estimates compiled by Bloomberg.

That would arrest a two-year production slide for the Irving, Texas-based company, which is spending about $110 million a day this year on everything from rig leases to offshore platforms to refinery repairs. Chairman and CEO Rex Tillerson pledged in March to raise output by an annual average of 2 percent to 3 percent during the 2015-2017 period.

Cheapest Oil

At the same time, Tillerson said capital spending would drop below $37 billion in each of those years, partly because mammoth investments like the Kearl oil-sands development in western Canada and the Gorgon liquefied natural gas project on Australia’s Indian Ocean coast will no longer be absorbing cash.

In the U.S., Exxon spent an average of $12.72 to extract a barrel of oil last year, its cheapest operating region aside from Asia and Europe, company figures showed. Some operators have even lower costs: Continental Resources Inc. (CLR) spends about 99 cents to pump each barrel from its 1.8 billion-barrel discovery known as the South Central Oklahoma Oil Province, or SCOOP. Continental, controlled by Oklahoma billionaire wildcatter Harold Hamm, discovered the SCOOP in 2012.

Laredo Petroleum Inc., an explorer of Texas’s Permian Basin that has more than tripled production since 2010, said this month it will slash capital spending by about 50 percent next year. The company still sees 2015 output expanding by 12 percent. Shares in the Tulsa, Oklahoma-based company jumped as much as 15 percent after the Dec. 16 announcement.

As oil explorers retrench in response to the market’s decline, they will drill more selectively, Eckard said. Seismic surveys will be more closely scrutinized to ensure the best chances of striking crude and only the most-promising opportunities will be greenlighted, he said.

“We’re only going to see the very best wells drilled over the next 12 to 18 months,” Eckard said. “It’s going to be exciting.”