Exxon Mobil sees dip in oil, gas output this year

NEW YORK - Exxon Mobil Corp said its 2012 oil and natural gas output would drop 3 percentfrom last year even as it increases spending to bring severallarge new projects on line, and its shares fell 1 percent. 
Despite the expected drop in 2012, production shouldincrease by an average of 1 to 2 percent annually through 2016,the company told analysts in New York on Thursday. 
Oil companies like Exxon, Royal Dutch Shell Plc andBP Plc have struggled to increase oil and gas output inrecent years, forcing them to raise their spending to recordlevels to tap into difficult-to-reach fields.  
Exxon, the world's largest nongovernment-controlled producerof oil and gas, saw production rise 1 percent last year to 4.5million barrels of oil equivalent (BOE) per day. 
That modest growth came as the company spent a total of$36.8 billion, just shy of the $37 billion it expects to spendannually for the next five years.  
That spending will go toward nine major project startupsthis year and in 2013, the company said, followed by 12 projectsin 2014, which will help it bring on new production of more than1 million BOE per day over five years. 
"The industry is in a period of high capital investment,"Exxon Chief Executive Rex Tillerson told the meeting.  
Spending on new projects is likely to push the company'sreturn on capital employed (ROCE) this year below the 24 percentof 2011, he said. 
Tillerson also said Exxon is committed to exploring inIraq's autonomous Kurdish region, as well as to expanding itsWest Qurna output in southern Iraq. 
Those contracts signed last year with the Kurdistan RegionalGovernment have been labeled as illegal by Baghdad, which hasthreatened to freeze the company out of its massive fieldsshould it proceed. 
Iraq has set a deadline of the next few days for Exxon Mobil to explain its position on the Kurdish oil agreements, an Iraqigovernment spokesman said earlier this week.  
"Obviously the country has a lot of issues it is dealingwith, and we want to be helpful in that," Tillerson said.  
 
'Attractive' assets 

While Tillerson declined to comment on whether he waslooking at new acquisitions, he said that at current pricesthere were a number of interesting properties on the market inNorth America, and Exxon was seeing "a lot of very attractivethings that are walking through the door." 
Exxon spent $1.7 billion last year to buy two privatecompanies that held large positions in the Marcellus Shalefield, just a year after spending $30 billion to buy U.S.natural gas producer XTO Energy. 
Those acquisitions have turned Exxon into the largestnatural gas producer in the United States, but have increasedits exposure to the weak natural gas prices here. Natural gasfutures fell to fresh 10-year lows this week due to mild winterdemand and bulging inventories of the fuel. 
Tillerson said the company has been shifting its U.S.drilling toward more liquids-rich plays in a "measured" way, butadded that Exxon remains confident that its U.S. gas fields willultimately still benefit the company. 
"We don't have to make a lot of money out of it now. We'regoing to make a lot of money out of it in the years to come," hesaid.  
Tillerson said the overall 2012 output forecast was based onBrent crude prices averaging $111 per barrel. A decline in thatprice to $90 would likely limit the decline to 2 percent, whilean increase to $130 per barrel would make the output declinerise to 4 percent. 
Exxon said its production of liquids would grow 2 to 3percent annually on average through 2016, while its gas outputwould rise 0.5 to 1.0 percent. 
Among the new projects coming on line is the Kearl Oil Sandsdevelopment in Canada, which is expected to begin operationslate this year with an initial production target of 110,000barrels per day. 
Other projects due to start up include four in West Africaand the first phase of the Kashagan project in the Caspian Seaoff the Kazakhstan coast. Exxon owns 16.8 percent of thatproject, which is likely to see output of about 400,000 bpd whenit comes on line. 
Exxon is also building a large liquefied natural gas projectin Papua New Guinea, which is expected to begin shipments in2014 and may be expanded. 
A landslide at a quarry there in January caused 25 deathsand raised worries about the development.  
Exxon shares were down 1.1 percent at $84.90 in afternoontrading on the New York Stock Exchange, lagging a 0.9 percentrise in the CBOE oil companies index.  

(Reuters)