In New Mexico's Chihuahuan Desert, Exxon Mobil Corp is building a massive s...
EDDY COUNTY, NEW MEXICO - In New Mexico’s Chihuahuan Desert, Exxon Mobil Corp is building a massive shale oil project that its executives boast will allow it to ride out the industry’s notorious boom-and-bust cycles.
The rising investment also reflects a recognition that Exxon, Chevron, Royal Dutch Shell and BP Plc largely missed out on the first phase of the Permian shale bonanza while more nimble independent producers, who pioneered shale drilling technology, leased Permian acreage on the cheap. Exxon’s 1.6 million acres in the Permian means it can approach the field as a “megaproject,” said Staale Gjervik, the head of shale subsidiary XTO Resources, whose headquarters was recently relocated to share space with its logistics and refining businesses. The firm also recently outlined plans to nearly double the capacity of a Gulf Coast refinery to process shale oil.
Pioneer recently dropped a pledge to hit 1 million bpd by 2026 amid pressure from investors to boost returns. It shifted its emphasis to generating cash flow and replaced its chief executive after posting fourth quarter profit that missed Wall Street earnings targets by 36 cents a share. Surging Permian production has overwhelmed pipelines and forced producers to sell crude at a deep discount, sapping cash and profits of independents who, unlike the majors, don’t own their own pipeline networks.
The largest oil firms can also take advantage of their volume-buying power even if service companies raise prices for supplies or drilling and fracking crews, said Andrew Dittmar, a Drillinginfo analyst.The majors’ rush into the market means smaller companies are going to struggle to compete for service contracts and pay higher prices, said Roy Martin, analyst with energy consultancy Wood Mackenzie.
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