Here's Why ExxonMobil's Future Production is Set to Soar

ExxonMobil's production fell last year, but it's got a great chance at restoring growth thanks to dozens of planned project start-ups this year.

Mar 31, 2014 at 10:05AM

Integrated oil and gas super-major ExxonMobil (NYSE:XOM) is the biggest energy company in the world, with an entrenched operational network that stretches across the world. As a result, it seems like it might be difficult for a company of this massive size to find a way to move the production needle in a meaningful way.

And yet, that's exactly what ExxonMobil plans to do. Part of it is a matter of necessity, since ExxonMobil's production of oil and gas has disappointed over the past year. To that end, its production dipped 1.5% in 2013, driven by field declines that offset project ramp-ups.

In response, ExxonMobil recently presented to analysts its plan to not just restore production growth, but significantly add to production in the years ahead. Here's why ExxonMobil may be on the brink of record annual production totals for the next several years.

A record year in store
In all, ExxonMobil intends to begin production from 28 major oil and gas projects between now and 2017. Of these, 22 will start-up over the next three years. The company won't stop there; in fact, ExxonMobil pledges another $190 billion in further investments over the next five years to continue to explore for and develop new opportunities.

This year, ExxonMobil plans to start production at 10 major projects to add capacity of 300,000 barrels of oil equivalents per day this year. That represents a record number of new oil and gas projects for a single year. And, considering ExxonMobil's average production stood at 2.2 million barrels of oil equivalents per day last year, these new projects could immediately increase production by approximately 13%.

ExxonMobil's attempts to restore production growth would be a welcome reversal from last year. Disappointing production was echoed across several integrated majors in 2013. Chevron's (NYSE:CVX) oil-equivalent average daily production fall 3% in the fourth quarter. Falling production throughout the year was a primary contributor to its overall upstream earnings dropping 12.5% last year.

In North America, ExxonMobil will focus on growing production from liquids, which are lower-risk and higher-margin projects. One such project is in the Canadian oil sands, and represents a major portion of the company's upstream portfolio.

Betting big on Canadian oil sands
One of the most, if not the most, important upstream projects for ExxonMobil is its Kearl oil sands project in Alberta, Canada. This is truly an enormous undertaking and represents major potential for the company to get its production going in the right direction once again.

ExxonMobil announced it had officially begun production at the Kearl oil sands project one year ago. The initial phase calls for production of 110,000 barrels per day, which in itself represents solid growth in its current North American production. ExxonMobil produced just 320,000 barrels of oil and natural gas in the fourth quarter in its combined Canada and South America segment.

By late 2015, the company believes production capacity will double from initial levels. Over the long term, the possibility presented by the Kearl project is huge. Production is expected to total 4.6 billion barrels over a 40 year time frame.

The Foolish bottom line
ExxonMobil's production fell last year, which makes its new projects critical to restoring growth. Fortunately, it's got a large lineup of projects it's counting on this year and beyond. ExxonMobil has a record number of projects set to begin production this year. Going forward, it's got dozens of planned start-ups through 2017, that collectively have the potential for increasing production by 1 million barrels of equivalents.

One of the most important projects that will dictate ExxonMobil's future production is its massive Kearl operations in the Canadian oil sands. Should everything go as planned, ExxonMobil could see strong production growth this year.

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Bob Ciura has no position in any stocks mentioned. The Motley Fool recommends Chevron. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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