It's possible that to be the head of investor relations at ExxonMobil , you have to go through the CIA's interrogation training so you don't specifically answer anyone's questions during its conference calls. It's almost comical to listen to analysts ask specific questions, only to get deflected with broad-stroke comments. Ultimately, ExxonMobil's conference calls boil down to two things: "We are always looking to control costs," and "We have a long-term vision for this company."
Every once in a while, though, a couple nuggets of information make listening in on these conference calls worth it. Here are five things that really stood out as key elements related to ExxonMobil's future. All comments are from Exxon's vice president of investor relations, Jeff Woodbury.
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1. We're getting pretty good at producing shale developmentA major critique of ExxonMobil and its other large integrated peers was that they were unable to achieve the cost efficiencies some of the independent oil and gas producers were in U.S. shale drilling. It looks as though that's starting to become a myth, because this company has been able significantly lower its capital costs. Says Woodbury:
This is one thing that really sets ExxonMobil apart from its peers. The other integrated majors that reported this past quarter showed that they all took significant losses on their U.S. operations, whereas ExxonMobil's operations took only a $47 million loss for the quarter. One thing that's also working heavily in ExxonMobil's favor is that is has some large legacy acreages in places such as the Permian Basin, which gives it a significant cost advantage in exploration and development costs since it doesn't need to pay royalty fees and other elements involved in acquiring acreage today.
Source: ExxonMobil earnings call presentation.
2. Our shale production plan is more than just "go, go, go"As you might expect, ExxonMobil has taken a much more measured approach to the growth of its shale acreage than what we've seen from other companies. It's able to do so, though, because it has the financial flexibility that so few other companies have. Longer term, ExxonMobil sees the development of its shale acreage as a two-step process. From Woodbury:
This statement hints at the idea that the U.S. natural gas market is at its upper limit in terms of supply and demand. However, once some of the major chemical manufacturing and LNG export facilities come online in the Gulf Coast region, there will be an uptick in demand. In the meantime, it still sees plenty of opportunity in developing its tight oil acreage positions in the Permian Basin and Bakken formation, even in today's market.
3. Our cost savings is happening in other places, tooJust so we're clear that those cost savings are happening outside the shale patch, Woodbury also went on to mention some of the other places where ExxonMobil is realizing cost savings in its capital plans. Many of those cost savings today are coming from lower prices from its suppliers. Here's just one of the important examples he mentioned:
While he wanted to be conservative in his estimate, since putting a precise number on the amount saved across a $34 billion capital investment plan is a little tough, Woodbury estimated that the company has realized 9% long-term structural cost savings across its entire portfolio.
4. We're realizing other benefits from the U.S. shale boomAnother misconception is that by not producing gobs of oil and gas from American shale plays, companies such as ExxonMobil aren't realizing the full potential of this newer opportunity. One thing management wants to remind you, though, is that it can realize other benefits from shale. For example, according to Woodbury:
Today, the lower cost of crude oil from the U.S., not to mention oil sands from Canada, has been immensely lucrative for U.S.-based refineries. So ExxonMobil has been retooling its refineries to handle these kinds of crude instead of other imported sources.
5. The market is down, but we see immense opportunity hereAll around, exploration and production companies have been cutting their capital-expenditure budgets to conserve cash. This past quarter alone we saw many of ExxonMobil's peers announce even deeper cuts to their 2015 budgets than before. ExxonMobil doesn't see this price crash as a long-term existential threat to what it does, and so the company is keeping the "steady as she goes" mantra when it comes to maintaining capital investment through the down cycle in the market. Woodbury:
While it may sting a little now, as prices are really cheap andprofitabilityis a bit lower, maintaining development spending will ensure that the company has plenty of irons in the fire several years fromnow to grow production. If you're willing to wait for the payoff, this issomethingthat should be encouraging to long-term investors in ExxonMobil.
What a Fool believesThe steadfast consistency of ExxonMobil's management team is probably the only thing that resembles calm in today's oil market, and for long-term investors that should offer a certain amount of comfort. The company is perpetually looking to keep its costs low while investing in the future no matter what the short-term outlook is today. Without any certainty as to where oil and gas prices will be in the near term future, this is the best way to look at investing in the oil and gas space.
The article 5 Little-Known Facts ExxonMobil's Management Let Slip This Past Quarter originally appeared on Fool.com.
Tyler Crowe owns shares of ExxonMobil.You can follow him at Fool.comor on Twitter@TylerCroweFool. The Motley Fool owns shares of ExxonMobil. 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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