Exxon Mobil (NYSE: XOM) recently announced two new discoveries off Guyana in addition to the company’s recently updated estimate of 10 billion barrels. As part of the same support, the company supports 10 development projects. As we’ll see throughout this article, the company’s impressive Guyanese portfolio of assets, combined with a low breakeven point, could allow the company to generate massive profits.
Overview of Guyanese assets
The company’s Guyanese assets are a massive game with several possible expansions.
Presentation of assets in French Guiana – Presentation to ExxonMobil investors
The currently discovered assets are nearly 11 billion barrels spanning approximately 100 miles. The company used a lot of 3D seismic data and drilled what it considers to be many high potential reservoirs, finding an average of 500 million barrels per find. The company has a> 90% success rate in drilled wells.
The company’s 2 most recent discoveries include a well drilled deep to test the theory of new discoveries under previously identified resources. The company continues to drill, in the two extensions of other basins, and in the remainder of its Stabroek block. These drill holes show the massive strength of the company’s Guyanese assets.
Acceleration of production in Guyana
ExxonMobil’s most recent drilled wells have guided up to 10 development projects.
Resource Discovered by ExxonMobil – ExxonMobil Investor Presentation
The company is moving to a production capacity of 1.3 million barrels per day in 2027 on 6 FPSOs (of which 2 have not yet been named). These FPSOs attack about 4 billion barrels of total resources. This involves around 700 million barrels of resources processed by FPSO with a reserve life of a decade. The company is heading towards 1 FPSO / year in 2024 in line with its peak estimate of 10 FPSO.
The company’s âdesign-oneâ âbuild-manyâ approach leads to significant efficiency gains with a break-even point of $ 35 / bbl (Brent) for Liza’s phase 1 and $ 25 / bbl. profitability (Brent) for phase 2 of Liza. Payara should break even at $ 32 / bbl and Yellowtail should be at $ 29 / bbl for investors.
Over the long term, we expect the company’s long-term FPSOs to break even at $ 27-29 / bbl. The first 3 development projects of the company (Liza Phase 1 – (100,000 barrels / day at $ 35 / barrel, Liza Phase 2 – 220,000 barrels / day at $ 25 / barrel, Payara – 200,000 barrels / day at 32 $ / bbl) have a weighted average of $ 29.6 / bbl We expect additional cost improvements to bring it to our $ 27-29 range given that Liza Phase 1 is the most expensive project and half the size.
If the company reroutes past FPSOs to later projects once the reserves are used up, the capital costs for future wells could be much lower (potentially in the high $ 10 / bbl given that Payara has $ 15 / bbl). barrel of initial investment costs). ExxonMobil’s own forecast is around 2.1 million bbl / day in production with a break-even point at around $ 28 / bbl.
Resource potential in Guyana
Guyana also has significant long-term resource potential outside of ExxonMobil’s initial forecast.
Future Developments – ExxonMobil Investor Presentation
ExxonMobil has found its resources massive with around 10 to 15 wells drilled and it has twice as many undrilled prospects than that. The company’s own estimate for the basin’s final resources is> 2 times its current discoveries pointing to 25 billion barrels of resources. That’s a lifespan of 30 to 40 years at 2.1 million barrels / day.
We see the company looking to accelerate this and continue the trend of 1 FPSO / year, if not accelerate it slightly. In our opinion, we see the total production of the basin reaching over 3 million barrels / day, especially when combined with the new assets of ExxonMobil in Suriname etc. which are still under exploration. Including Suriname, the basin is considered to potentially contain over 30 billion barrels.
By the early 2030s, we expect total production to be between 2.1 million barrels and 3.5 million barrels.
Guyana’s income potential
With current Brent prices near $ 83 / bbl, against our breakeven point of $ 28 / bbl, we consider Guyana to have potential margins of around $ 55 / bbl. These incredible margins show the strength of the asset, its low cost, and the strength of ExxonMobil’s unique design approach to its FPSOs, reducing the cost of capital.
This implies, based on our production range of 2.1 to 3.5 million barrels / day, a total basin profit ranging from $ 42.2 billion to $ 70.3 billion, which implies that Pool profits can give the company a P / E of 8 to 14 on its own (when adjusting for the fact that ExxonMobil has a 45% stake in the Stabroek block). This highlights how the asset could be a “business creator” in itself.
ExxonMobil is focused on significant growth. The company’s original plan was to increase profits from $ 15 billion to $ 30 billion from 2019 to 2025.
ExxonMobil Opportunity – ExxonMobil Investor Presentation
The company assumed $ 60 / bbl of Brent at these prices. Since then, oil prices are now at $ 83 / bbl or $ 23 / bbl higher. Considering production estimated at around 4 million barrels / day, which means that at current crude oil prices, profits in 2025 could be $ 10 billion higher. Already, fourth-quarter quarterly profits could annualize to nearly $ 40 billion.
ExxonMobil jumps on shareholder returns. The company has already significantly improved its debt, although it plans to improve it further. The company has $ 52 billion in net debt costing it around $ 2-3 billion in annual interest. The company’s profits in the third quarter of 2021 offset themselves to $ 25 billion and can reach over $ 50 billion at current prices by 2025.
With this strength in earnings, the company’s net debt is incredibly manageable, especially with the potential for further reductions in 2022.
The company has a 5% dividend yield. He recently guided $ 10 billion in share buybacks over the next 12-24 months, giving himself the option to buy back 4% of the shares. At current crude oil prices, the company could do both, earn about 10% for shareholders and have about $ 10 billion remaining. This highlights the strength of ExxonMobil’s overall portfolio.
The risk for the thesis is twofold. First, the company is still betting on exploration for significant growth from Guyana with a doubling of reserves. There is no guarantee that it will find the additional reserves expected. Second, the assumption is that oil prices remain at their current levels. There is no guarantee that this will happen.
Every now and then, companies come up with discoveries, products, etc. of “company manufacturer”. The Guyana basin has a reasonable potential to earn $ 10 billion. Margins at current Brent prices stand at $ 55 / bbl, showing the strength of the portfolio.
ExxonMobil has guided up to 10 FPSOs of production or production of over 2 million barrels / day. With a reserve life of several decades, we consider production to have the potential to reach over 3 million barrels / day. That’s enough for a minimum of $ 42 billion in significant growth gains at current prices.
This asset strength combined with ExxonMobil’s other assets could help support significant rewards for shareholders.