ExxonMobil Plans To Double US Shale Output In 5 Years

Exxon Mobil Corporation (NYSE: XOM) intends to double oil production from its U.S. shale properties over five years by deploying new technologies, per a Reuters report.

The company expects some promising new technologies to significantly improve recovery volumes. XOM seeks to double recoveries and find technologies that can unlock that. Currently, ExxonMobil recovers about 10% of shale resources from its operations.

In 2022, ExxonMobil delayed a target to produce 1 million barrels of oil equivalent per day (MMBoe/d) in the Permian Basin by two years due to difficulties that resulted from the coronavirus pandemic.

Last December, the company announced plans to produce up to 1 MMBoe/d in the Permian Basin by 2027, with 9-11% production growth expected this year. It also plans for a five-year technology development program.

ExxonMobil seeks to focus on two specific areas to improve fracking. The first is to frack more accurately along the well to enable more oil-soaked rock to get drained. The other way is to keep the fracks open for a longer period to enhance the oil flow.

Fracking is a method of blasting water, sand and chemicals underground to split rock and keep it open for oil to flow out. Though the technology gave rise to the U.S. shale boom, only 10% of the oil in a reservoir is recovered using current technologies.

ExxonMobil expects better drilling and fracking methods to be pivotal as production growth from shale fields slows. Developing technology in-house will enable the company to better identify acquisition targets.

Price Performance

Shares of ExxonMobil have outperformed the industry in the past six months. The stock has gained 1.8% against the industry's 1.5% decline.

Zacks Rank & Stocks to Consider

ExxonMobil currently carries a Zack Rank #3 (Hold).

Some better-ranked players in the energy space are Enterprise Products Partners LP EPD and Sunoco LP (NYSE: SUN), each currently sporting a Zacks Rank #1 (Strong Buy), and Murphy USA Inc. MUSA, carrying a Zacks Rank #2 (Buy).

Enterprise Products reported first-quarter 2023 adjusted earnings per limited partner unit of 64 cents, which beat the Zacks Consensus Estimate of 62 cents. This was primarily due to higher contributions from the Natural Gas Pipelines & Services business.

In the first quarter, Enterprise Products generated an adjusted free cash flow of $1,347 million against a negative free cash flow of $1,618 million in the year-ago quarter. EPD recorded a distributable cash flow of $863 million in the same time frame.

Sunoco reported first-quarter 2023 earnings of $1.41 per unit, beating the Zacks Consensus Estimate of $1.21. Better-than-expected quarterly earnings were primarily driven by higher contributions from the Fuel Distribution and Marketing segment.

For 2023, SUN revised its adjusted EBITDA guidance upward to $865-$915 million from the previously mentioned $850-$900 million.

Murphy USA announced first-quarter 2023 earnings per share of $4.80, which beat the Zacks Consensus Estimate of $4.06. The outperformance can be attributed to higher volumes and retail fuel contribution.

MUSA is committed to returning excess cash to its shareholders through continued share buyback programs. As part of this initiative, the motor fuel retailer recently approved a repurchase authorization of up to $1.5 billion following the completion of the existing $1-billion mandate. The move underscores MUSA's sound financial position and commitment to rewarding its shareholders.

Image by Raymond Kotewicz on Unsplash