It seems a bit odd to consider that just about a year ago, we watched crude oil prices blow past $100 a barrel, bound for an almost 50% increase, before collapsing. Today, light sweet crude for May delivery is trading in the high $40s, and few among us could venture a guess as to where it is headed next. However, in the face of the markedly lower prices, ExxonMobil (NYSE: XOM), the biggest of Big Oil, intends to spend more looking for oil and gas this year than it did last year.
This assessment was delivered late last week by Chairman and Chief Executive Rex Tillerson at the company's annual presentation to analysts in New York. It also came as evidence mounts that some competitors may chip away at their budgets in 2009.
ExxonMobil's approach gave analysts something of a wide berth, predicting that its capital spending would fall within a $25 billion to $30 billion range annually during the five years ending in 2013. Last year, it spent about $26.1 billion.
This year's target is closer to the top of the range, or about $29 billion. The big difference is that this year, with oilfield service costs having backed off in the face of sliding crude oil and natural gas prices, a given amount of expenditures will buy an operator a whole lot more in equipment and rig hands than it would have at this time a year ago.
Nevertheless, not all the members of Big Oil are taking advantage of lower service costs and upping their budgets. BP (NYSE: BP) told analysts last week that it requires $60 oil to fund its projected capex and dividends. ConocoPhillips (NYSE: COP) will decrease spending almost 20% to about $12.5 billion for the year, including about $800 million deployed to a joint venture with EnCana (NYSE: ECA). That also includes a reduction of 4% of the company's work force. Beyond those companies mentioned, Chevron (NYSE: CVX) will likely disclose its plans when it meets with analysts today.
Given all this, ExxonMobil appears to have taken a wise approach to its worldwide quest for oil and gas. It was criticized when prices were headed higher for insufficient spending, both on the acquisition trail and in the exploration arena. But now that prices are lower, it has the opportunity to make more hay in both areas. It'll be interesting to witness the results.
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