It doesn't take a genius to recall that ExxonMobil
Let's defer judgment on the second issue until we've had an opportunity to reexamine the company's results for 2009 and to look at its plans for the future. After all, I have a soft spot for BP
The metrics that matter
For instance -- looking at a key metric for oil and gas companies -- Exxon replaced more than 133% of its production last year. As you know, the ability to increase total reserves from year to year is a key to separating the wheat from the chaff among energy producers and this marked Exxon's 16th straight year accomplishing a 100% or greater replacement figure. At the same time, its return on capital employed reached 16.3%, outdistancing all of its competitors by at least 50%. And it chalked up a 64% success rate for the 45 wildcat wells it drilled during the year.
I could go on, but as I say frequently to my Foolish friends, investing is about looking ahead, not about information from our rear view mirrors. It therefore seems noteworthy that, as last week wound down, CEO Rex Tillerson told a gathering of analysts that Exxon's capex would likely climb by about 4% to $28 billion. That really wasn't much of a surprise: Exxon had already pegged this year's level in the $25 billion to $30 billion range. But I think it's significant that the company continues to steam along while ConocoPhillips
Stomping on the gas
Further, Exxon expects its oil and gas production to climb by 3% - 4% this year. Indeed, the eight projects that started production last year are likely to add about 400,000 net barrels per day this year. And should the company's pending purchase of gas producer XTO
Clearly, ExxonMobil is shifting at least a portion of its emphasis from oil to natural gas.
In fact, in his remarks, Mr. Tillerson indicated an expectation that the contribution from natural gas will increase "significantly" in the decades ahead. In that regard, the company is actually putting its money where its mouth is. For instance, it completed last week by announcing that it has finalized financing and marketing agreements for a giant liquefied natural gas project in Papua New Guinea.
Further, it is participating with Chevron and Shell
Finding oil in the toughest of places
Looking at its oil production, Exxon is in the same boat with the other majors: It must garner progressively more of its reserves from areas that are technically challenging to reach and therefore expensive. For instance, while it's had success working with the likes of Petrobras
And then there's Iraq, where Exxon was one of several companies to sign production agreements last year. As Mr. Tillerson told the analysts, the company has completed initial evaluations in the West Qurna field there. He also noted that security issues, while still present in the war-torn country, continue to decline. He also refused to discuss possible volumes from the field.
Upstream and downstream challenges
I trust you'll agree that the movement into more unconventional and challenging production sites will be anything but beneficial to ExxonMobil's -- and its peers' -- margins. Add in the issues created by squeezed refinery margins, and you have a bevy of potential difficulties for the integrated companies to attend to. In fact, Exxon's position as the world's largest global refiner is unlikely to protect it from downstream weakness for the next several years.
But despite its potential negatives, my recommendation for Fools is to maintain an energy presence in your portfolios. Given a somewhat longer-than-normal investment time horizon, I'm convinced that Exxon could provide some added value for you.
Fool contributor David Lee Smith doesn't own shares in any of the companies mentioned above. He does welcome your questions or comments. The Fool owns shares of XTO Energy. The Fool's disclosure policy operates in the most difficult of conditions.