You'd think it'd be obvious that one of the key tasks of an oil company is drilling for oil. However, oil major ExxonMobil (NYSE:XOM) hasn't exactly been doing a good job of that recently, with production steadily declining over the past five years. The company's share price has also been trending downward during that time. 

But there may be a glimmer of hope for shareholders, and it's coming from an unlikely place: Guyana. The small South American country is only a little bit bigger than the state of Idaho, with fewer people living there than in Delaware. Here's why this tropical oasis might be the key to returning ExxonMobil to outperformance.

Yellow pipes descend into the water at an offshore oil platform

ExxonMobil operates a top offshore block in Guyana, which it hopes will lead to outperformance. Image source: Getty Images.

When the going gets tough

ExxonMobil's annual production declines have been small, but they've been accelerating, which should concern investors. In 2016, the company produced 1% less oil and gas than it had in 2015. Then, in 2017, production fell by 1.7%. In 2018, production tumbled 3.8%, to 3.8 million barrels of oil equivalents per day (BOE/d).

This actually makes sense: Existing wells will usually produce less and less petroleum each year. Unless a company drills enough new wells -- or purchases enough existing wells from a competitor -- its overall production will decline. And during the oil price downturn of 2014-2017, Exxon severely cut back on new exploration wells. Fewer exploration wells meant fewer opportunities to start new production wells, and in the meantime, existing wells produced less. 

Luckily for the company, it began devoting more resources to exploration in 2017, and in 2018, it drilled more exploratory wells than it had the prior year. In 2020, management expects to drill more exploration wells than it did in 2012 for the first time since then. 

Because of this push, Exxon expects production to actually grow in 2020, by about 5%, and continue to increase every year thereafter. And thanks to a renewed focus on deepwater drilling, Guyana is a huge part of this plan. 

Sta-what?

Stabroek was the original Dutch name for Guyana's capital of Georgetown. Today, "Stabroek" is a name for places throughout the country, including a famous historical market, a major newspaper, and a 6.6-million-acre offshore exploration block (about 10,300 square miles). A subsidiary of Exxon holds a 45% interest in the block, while a Hess (NYSE:HES) subsidiary has a 30% interest and a subsidiary of Chinese oil company CNOOC (NYSE:CEO) holds 25%. ExxonMobil, though, is in charge of the drilling operations.

Currently, Guyana has no oil and gas production to speak of, so Exxon's announcement in 2015 of a major oil find in the Stabroek Block got serious attention. Since that first discovery at the Liza-1 well, Exxon has made 13 additional discoveries, making Stabroek one the company's most promising fields. 

The most recent discovery, at the Tripletail-1 well, consisted of 108 feet of high-quality oil-bearing sandstone. While the company didn't release an estimate of how much petroleum it might expect to produce specifically from Tripletail, its Stabroek discoveries to date have exceeded an estimated 6 billion BOE. 

Down the list

Because Tripletail is so far down the list of Exxon's Stabroek discoveries, it's going to be a while before any oil or gas is produced there. There's a lot that has to happen between successful identification of petroleum at a well site and production commencing. Liza Phase 1 -- the first petroleum discovery at Stabroek in 2015 -- just had its floating production storage and offloading ship arrive on Aug. 29, and production won't begin until next year at the earliest. Once it gets going, however, the site will produce 120,000 BOE/d. 

Similarly, the Liza Phase 2 development won't begin production until 2022, and the Payara site -- Exxon's third Stabroek discovery in 2017 -- "could be as early as 2023," according to a company presentation, with each of those two sites producing an estimated 220,000 BOE/d.

Given those dates, it looks like it's about a five- to six-year delay between a discovery and production, which means Tripletail isn't likely to start producing before 2024 at the earliest. And with another 10 discoveries already in the queue, it's possible Tripletail won't see production until close to 2030, if then. 

But ExxonMobil isn't letting up on its Stabroek exploration. It's announced plans to add a fourth drillship to the block in October. Of the three drillships already there, two are drilling new exploratory wells. Investors can expect the list of discoveries at Stabroek to continue growing this year and next.

Hope for a gusher

Exxon's production problems already seem to be clearing up, thanks in part to its leading position in the Permian Basin. However, as its existing wells age, it will need to bring major assets online to make up the difference. The Stabroek Block appears to be exactly the treasure trove the company needed to power its production and ensure it doesn't fall behind in the coming decade. 

For investors, this is a very good thing. Oil exploration is fraught with risks, and many companies have had to write down the costs of unsuccessful explorations in the past. The company's success in Stabroek should reassure investors -- and investors in Hess and CNOOC -- of robust future production growth.