Exxon's 2013 output to fall before growth returns

NEW YORK: Exxon Mobil Corp said on Wednesday its oil and natural gas production would fall about 1 percent in 2013, but growth will return as more major projects are started over the next five years.

The world's largest oil companies have struggled to increase oil and gas output, forcing them to invest record amounts of capital to tap into difficult-to-reach fields. Those big investments do not yield immediate growth, forcing the companies to focus on wringing the most from every dollar by improving operations through efficiency or technology.

This year, Exxon said it expects to spend $41 billion, a figure that includes its $3 billion purchase of Celtic Exploration. The bulk of that budget is earmarked for exploration and production, the company said.

"I never would have dreamed we'd be spending at this level," Exxon Chief Executive Officer Rex Tillerson told the company's annual analyst meeting in New York.

Projects including the company's 110,000-barrel-per-day Kearl oil sands development and its liquefied natural gas operations in Papua New Guinea are expected to boost oil and gas volumes in coming years for the world's largest publicly traded oil company.

Through 2017, Exxon expects its annual oil and gas output to rise 2 percent to 3 percent. Last year, Exxon's oil and gas production fell 6 percent to average 4.2 million barrels of oil equivalent (boe) per day.

Phil Weiss, oil analyst at Argus, said the company's output forecasts were largely in line with investor expectations.

Exxon's output of higher-priced liquids such as crude oil is expected to grow 2 percent this year. Natural gas production is forecast to fall about 5 percent in 2013, primarily due to lower-than-anticipated output in North America, Tillerson said.

Exxon is also looking for speedier production growth in North America, where it continues to increase investment in unconventional resources like the Bakken formation in North Dakota and the Woodford Ardmore shale in Oklahoma.

Exxon believes the Woodford Ardmore potentially holds more than 1.5 billion barrels of oil equivalent, more than double the oil company's prior estimate.

Tillerson declined to provide much detail about Exxon's disputed drilling plans in Iraqi Kurdistan, but said the company would like to be "engaged" throughout Iraq, a message that has been communicated to the central government in Baghdad.

Since it signed for six oil blocks with Kurdistan last year, Exxon has been at the center of the growing disagreement between Baghdad and Kurdistan that threatens to fracture the OPEC member's uneasy federal union a year after US troops left.

Baghdad's central government is "very pleased" with the work Exxon has done in the West Qurna 1 field, the executive said.

"We want to continue that engagement," Tillerson told analysts.

Shares of Irving, Texas-based Exxon fell 26 cents to $89.35 in afternoon New York Stock Exchange trading.