(Bloomberg) — Exxon Mobil Corp. will increase capital expenditures next year as the purchase of Pioneer Natural Resources Co. worth $60 billion, its oil production plans are expanding, threatening to worsen the expected glut of crude oil next year.
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Exxon plans to spend between $27 billion and $29 billion in cash by 2025, North America’s largest energy explorer said in a statement Wednesday. Annual spending will rise to about $30.5 billion over the next five years, up from about $24.5 billion before the Pioneer deal.
Exxon’s prospects are in stark contrast to those of other oil industry players. OPEC cut its 2024 demand growth forecast for the fifth straight month on Wednesday, less than a week after the cartel and its allies extended plans to keep crude out of the market until next year as prices struggle with a threatening surplus. Meanwhile, Chevron Corp. announced last week announced the first cut in annual spending since 2021 as the company prioritizes profits over production.
The budget increase is larger than Wall Street expected and could lead to skepticism among investors, as some investments are embryonic projects, according to RBC Capital Markets.
“Given that some of these areas are still nascent today, we believe the market remains skeptical about the earnings potential until we see further evidence of results,” RBC analysts including Biraj Borkhataria wrote in a note to clients.
Exxon fell 0.5% to $112.08 at 9:32 a.m. in New York, making it the worst-performing oil stock in the S&P 500 Index today.
Exxon expects to pump the equivalent of 5.4 million barrels per day by 2030, the most in the company’s modern history. Cost savings from the Pioneer deal closed in May were increased by 50% to more than $3 billion. The oil driller expects to save $7 billion in operating costs by 2030, which amounts to about half of its dividend payments.
Chief Executive Officer Darren Woods is investing in what he calls “beneficial” projects that can produce oil and natural gas at such low costs that they will be profitable well into the future, even as major economies transition away from fossil fuels, which hurts prices. Nearly all future investments, including those in the U.S. Permian Basin and Guyana, will yield 10% returns at less than $35 a barrel, about half the current oil price, Exxon said.