Exxon Mobil Corporation (NYSE:XOM) Q3 2019 Earnings Conference Call - Final Transcript

Nov 01, 2019 • 09:30 am ET

Previous

Exxon Mobil Corporation (NYSE:XOM) Q3 2019 Earnings Conference Call - Final Transcript

Share
Close

Loading Event

Loading Transcript

Q & A
Operator
Operator

Thank you, Mr. Hansen. [Operator Instructions] First question will come from the line of Doug Terreson with Evercore ISI.

Analyst
Doug Terreson

Good morning, everybody.

Executive
Neil Hansen

H, good morning, Doug.

Analyst
Doug Terreson

Neil, in US Upstream, you mentioned that the key factors this period were realizations, divestitures, output gains, but also higher growth expenses. And on this point, I want to see if we could get more color on the last item, since we can gauge the others to some degree and specifically are these higher growth expenses primarily the Permian? If so, do you consider them to be transitional in nature and when will they become less significant? And then thirdly, are they tracking with your expectations? So three questions on the higher growth expenses item in US Upstream.

Executive
Neil Hansen

Yeah. I appreciate the question, Doug. So just focusing on US Upstream, so if you look at the change in the third quarter relative to the second quarter, earnings declined by roughly $300 million. Most of that was price, so it was about $190 million impact on price in the Upstream. We did have a few other factors, including some downtime and maintenance in non or unconventional -- non-unconventional [Phonetic] assets, including La Barge and Prudhoe Bay, that had an impact as well, and then we did have some higher growth expenses. Most of that does it relate to the progress that we're making in the Permian.

And maybe I can just touch on that really quick. I mean I think obviously, we feel really good about the volume growth that we see out there. The resource continues to respond very well. We're making good progress on the development plan that we have in place, including making sure that we capture the full value of the resource. If you're using our logistics position to bring barrels to our refineries and chemical plants, the pace of development is consistent with the plans that we laid out. I think we finished the third quarter with 55 rigs and roughly 10 frac crews, and as I mentioned, volume growth relative to last year in the same quarter was 72%. But we're early in the development. We've only drilled, I think a few hundred wells and that's on a well inventory in excess of 8,000. So it's pretty early days, but we feel like we're making really good progress, we're leveraging the full strength of the corporation and bringing our unique competitive advantages, the scale, the technology. We're leveraging sophistication in the sub-surface using reservoir modeling, we're bringing drilling engineers from all of the world that have expertise in dealing with some of these environments, and of course, our project management capability.

So I think in terms of pace, I think, the OpEx is where we would expect it to be. Now when we think about the development, we're trying to balance certainly well productivity. We want to do well there, but we're balancing that with ensuring we excel in terms of ultimate recovery and then, of course, capital efficiency. So