ExxonMobil will continue successful operations, says chairman

March 6, 2002
ExxonMobil Corp. Chairman Lee R. Raymond

Sam Fletcher
OGJ Online

HOUSTON, Mar. 5 -- After racking up earnings of $15.3 billion in 2001, the second highest in the company's history, ExxonMobil Corp., the world's largest oil and gas company, doesn't plan to change a thing in its basic operations, Chairman Lee R. Raymond told shareholders at their annual meeting Tuesday in Houston.

ExxonMobil, headquartered in Irving, Tex., was the most profitable US oil company last year, leading the industry in returns-on-capital-employed and generating cash flow of $24 billion that "remains stable, independent of industry lows," said Raymond. The company also reported the second highest earnings ever on its upstream operations, record downstream earnings, and record chemical sales volumes.

As a result, Raymond said, "We don't need to reinvent ourselves." Instead, ExxonMobil will "stay the course" and "remain focused" on maintaining excellence in its basic business operations that continue to yield positive results "regardless of market conditions," he said.

Integrity emphasized

In what has become almost a ritual in public addresses by corporate energy executives since the Enron Corp. financial scandal, Raymond emphasized that ExxonMobil will remain aboveboard in all of its business operations, with "proven management control systems in place."

ExxonMobil undergoes 300 internal audits of its business operations each year, Raymond said. Quoting from the company's official ethics policy, he said, "The corporation does care how results are obtained, and we will support any employee who passes up an opportunity" that might involve a violation of that code.

"As we have all seen, engineered earnings can not be sustained, certainly not over the long term and apparently not even for a short term," he said.

Production growth

Despite recent low commodity prices, ExxonMobil is sticking with plans to increase both its oil and gas production 3%/yearto 2007 in the face of an industry-wide field decline rate of 4-6%. The company's production was up 2% last year.

Raymond reiterated plans to boost 2002 capital spending 10% from $12.3 billion last year. ExxonMobil has 90 oil and gas development projects under way around the world, for which it has $55 billion earmarked for investment over the next few years. The company expects to spend $100 billion spent on upstream projects by 2010.

"ExxonMobil only invests in businesses where we are or have a chance to become the leader," said Raymond during the shareholders' meeting.

At a press conference immediately after that meeting, he acknowledged that the contiguous US represents "a very mature oil province" in which ExxonMobil has reduced its holdings to 175 fields from some 900 at one point. However, Raymond said, "If people have a notion that we'll make a fire sale of our (noncore) assets, they don't know ExxonMobil very well. We don't have a fire sale or a Turkish bazaar."

Alaska gas pipeline

"The two main obstacles to an Alaska gas pipeline is the (construction) cost of the line and the price for the gas," Raymond said. He downplayed the possible construction of a pipeline to move Alaskan gas to the Lower 48 as "something that is discussed about every 5 years."

As for various moves to obtain federal assistance in building that pipeline, he said, "ExxonMobil has never asked for and doesn't expects any federal government intervention to change the fundamental economics of that project."

"ExxonMobil would be the last company to ask the government for anything," said Raymond.


Alaska's North Slope has enough natural gas reserves in place to supply both a pipeline to US markets and any future gas-to-liquids (GTL) project, Raymond said.

A GTL project "would work" profitably at oil prices of $22/bbl, Raymond said, but a newbuild facility to import additional LNG into the US will require gas prices of $3-3.50/Mcf sustained over a period of years.

ExxonMobil has "an extremely strong patent position" for development of GTL, said Raymond. It is currently pursuing a potential GTL project in Qatar, which has the best prospect for becoming the first of its kind, ahead of a similar Alaskan facility, he said.

Qatar Petroleum Co. and ExxonMobil last summer announced plans to conduct a technical feasibility study for a GTL plant in Qatar that would convert North field gas into liquid products (OGJ Online, June 15, 2001).

Contact Sam Fletcher at [email protected]