Exxon: Still banking on oil
In an analyst presentation Exxon chairman Rex Tillerson outlines how his company's disciplined business approach will continue to pay off.
NEW YORK (CNNMoney.com) -- Exxon Mobil detailed Thursday just how it plans on keeping the world supplied with oil - and how it'll keep making money doing it.
The world's largest publicly-traded oil company outlined a long list of new investments and strategies to financial analysts at a presentation at the New York Stock Exchange.
Exxon (XOM, Fortune 500) said it brought eight major oil production projects on line in 2008 and that it will bring another nine on line in 2009. During peak production, it expects the new projects to pump about 745,000 barrels of oil a day. The company currently produces approximately 2.5 million barrels of oil each day.
Exxon, like other oil companies, needs the added production to offset declines in its existing fields.
The company was criticized for not investing enough in new production projects when oil prices were high last summer. Instead, Exxon returned huge amounts of cash to shareholders.
The company made a profit of about $45 billion in 2008 on revenue of around $477 billion, a record for any company.
Still finding oil
But despite a focus on shareholders, Exxon's chairman Rex Tillerson said the company found more new oil in 2008 than it took out of the ground, the 15th year in a row its new discoveries have outpaced production.
Moreover, Exxon's strategy of not investing too heavily in expensive projects seems to have paid off now that oil prices have plunged.
Tillerson sees oil prices remanding stagnant or falling in the short term.
He said Exxon's strategy remained unchanged amid the worst recession in decades.
"We have a disciplined approach to our business," said Tillerson. "We don't get too excited at the peaks, nor do we panic in the downturn."
Exxon's international reach
Exxon highlighted exploratory drilling it's doing in the deep water off Brazil. Responding to a question asking if offshore Brazil is the next Saudi Arabia, Tillerson said, "It's no doubt large, but to characterize it as the next Saudi Arabia mischaracterized the resource."
Brazil's newly discovered oil fields lie hundreds of miles offshore and are in deep water, under miles of salt rock. Saudi Arabia's big fields are onshore, under sand and relatively shallow.
But Tillerson noted that the world currently has the ability to produce four or five million more barrels a day than it consumes. Last year, when oil prices hit a record of over $147 a barrel, that excess supply capacity was just one or two million barrels a day.
Other projects Exxon highlighted include an oil shale field in Northwest Canada's Horn River Basin that the company characterized as a "big, emerging play," as well as fields in Libya, Romania, Greenland and Australia, among others.
The company also noted its partnership with the Persian Gulf state of Qatar on developing that country's huge offshore natural gas field - the largest in the world.
Exxon said it's planning on buying more ships to liquefy and transport this natural gas from the Gulf to markets in Japan, Europe and the United States. About half of Exxon's total hydrocarbon production is in the form of oil, and the other half in natural gas.
Despite falling oil prices and concerns over pollution, Exxon said it is pressing ahead with its investments in Canada's oil sands, and projects its production from those operations to eventually reach 300,000 barrels a day, up from under 100,000 a day currently.
Exxon also presented a map of the world and highlighted each country it considered its "long term partner of choice." Over two dozen countries were singled out, including Russia, Venezuela and Iran. Exxon is currently suing Venezuela for seizing its assets, while the Russian government has been accused of strong-arming foreign partners in recent years. Meanwhile, the U.S. government has trade sanctions against Iran, including prohibiting any U.S. company from major investments in Iran's oil sector.
Tillerson said the country's energy policy should be more at the forefront when government officials travel overseas. "Energy supply ought to be part of the early discussions," he said. "What can we do to improve energy security, for the both of us?"
Exxon touted its efficiency in running operations - which outside analysts have given it credit for in the past - by saying it keeps projects running 2% more of the time than its competitors. Exxon said it made about $17 off each barrel of oil in the years 2004-2008, compared with around $14 to $15 per barrel for its competitors.
Investing in alternative energy
Despite criticism from some that the company doesn't invest enough in renewable energy, Tillerson said it will remain a marginal player in those business until they become profitable. "They all rely on a tax subsidies of some kind," he said. "We are not going to be making investments that rely on a subsidy to make them profitable."
While he said he favored the development of renewable energy in general, he said it will be a long time before they make major contributions to the nations energy mix.
"I'm not belittling their objective," he said, referring to the Obama administration's goal of doubling renewable energy production in three years. "The problem is, you just start from a very low base. Over the long term, there will be a switch to a greater percentage of hybrid electric vehicles, but it's going to play out over a very, very long time."