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Exxon: Outlook for Crude Oil, NGL Production - 9346 views
The following commentary comes from an independent investor or market observer as part of TheStreet’s guest contributor program, which is separate from the company’s news coverage. The opinions expressed are those of the author and do not represent the views of TheStreet or its management.
NEW YORK (Trefis) -- Exxon Mobil (XOM) is the largest independent oil and gas exploration and production company in the world, and competes with other major oil companies like BP (BP), Chevron (CVX) and ConocoPhillips (COP).
Exxon Mobil's production of crude oil and natural gas liquids (NGL) declined between 2006 and 2008 due to economic uncertainty. A decline in consumer disposable income and slower investment spending is likely to weigh on oil production going forward.
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Over the past two years, Exxon's crude oil and NGL production has remained stable at around 1.8 million barrels per day. There are several projects (in various phases) lined up for Exxon, but the costs of producing oil are continuously increasing, which could hinder the firm's oil output.
While we expect Exxon's oil production to remain at its current level of about 1.8 million bpd going forward, Trefis members predict that this production will cross 2 million bpd by the end of our forecast period, implying potential upside of 10% to our price estimate for XOM stock.
We maintain a $78.97 price estimate for Exxon Mobil stock , implying downside to market price.
Exonn's Project Profiles
ExxonMobil participated in eight major project start-ups in 2009. Beyond 2009, an additional 54 major projects are in various stages of planning, design and execution. Exxon's current projects are located in Angola (Block 15), Chad/Cameroon (Doha Basin), Colorado (Piceance Basin), Qatar (North Field), Russia (Sakhalin-1) and the U.S. Gulf of Mexico.
Costs of Oil Production Mounting
Oil production involves heavy upfront costs associated with exploring and developing oil fields, in addition to the lifting costs incurred. While technological improvements have made oil discoveries cheaper, costs nonetheless have been rising sharply in recent years. According to data from the U.S. Information Energy Administration (EIA), average finding costs worldwide were $11.38 per barrel of oil equivalent during 2003-2005. This figure rose to $17.23 per barrel of oil equivalent during 2004 to 2006. In some cases, production costs increase so much that it makes sense not to proceed with oil field development, which in turn impacts total oil production globally.
Exxon's projects in the Kipper and Turrum fields in the Gippsland basin off south-east Australia are mired by delays and cost overruns. Exxon owns a 32.5% stake in the Kipper field and has a 50:50 partnership with BHP Billiton (BHP) in the Turrum field. Mercury was found in the reservoir during drilling at Kipper, delaying the project, while the Turrum project is faced with delays related to structural designs. We expect these events to have a significant impact on Exxon's expenses.
See our full analysis and $78.97 price estimate for Exxon Mobil.
Trefis Community Forecast
Trefis community members forecast that crude oil and NGL produced by Exxon will increase from 1.8 million bpd in 2010 to 2.07 million bpd by the end of our forecast period, compared to a flat Trefis estimate at 1.8 million bpd during the same period. The member estimates imply an upside of 10% to our $78.97 price estimate for Exxon Mobil stock.
Trefis members constitute more than tens of thousands of users of the Trefis platform, inclusive of investors, financial analysts, and business professionals who use the Trefis platform to create their own models and price estimates.
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