ExxonMobil Keeps Spending Low

Omicron and a Shift Away from Fossil Fuel Drives Spending Plans

Uncertainty surrounding the Omicron variant spilled over into the oil market with ExxonMobil (XOM) announcing it will keep spending at pandemic levels through 2027. The nation’s largest oil company said it’s unclear how demand will fare as the new variant spreads and countries shift away from fossil fuels. As a result, ExxonMobil is planning to spend 17% to 33% less over the next five years than what it planned to spend pre-pandemic.

ExxonMobil’s spending plans are not specifically a reaction to the Omicron variant, but the new strain of the virus does highlight how the oil company still has to navigate the risk of COVID-19. By keeping its spending levels down the company said it can better react to negative impacts of the virus.

ExxonMobil Seeks Growth

The move to keep spending low is also part of ExxonMobil’s strategy to cut costs and invest in businesses that can generate returns that surpass 10%, even if oil prices fall below $35 per barrel. The oil giant expects earnings to grow to two times 2019 levels by 2027.

Exxon said it is focused on producing fossil fuel products with low emissions or no emissions at all. The company said investment dollars will go to projects in Guyana, Brazil, and the Permian Basin in West Texas and New Mexico. Exxon did not mention the $30 billion liquefied natural gas development in Mozambique, which some investors want the company to pull out of.

Green Plans on Track

While ExxonMobil is still committed to the oil and gas market, it is also forging ahead with green energy plans. The company said it is four years ahead of schedule to cut greenhouse gases in its production business by 15% to 20% from 2016 levels this year. It also plans to reduce company-wide emissions by 20% by 2030. Unlike rivals BP (BP) and Royal Dutch Shell (RDSA), Exxon has not been willing to commit to a net-zero future.

The threat from Omicron and a shift away from fossil fuels is prompting ExxonMobil to keep spending low. However, that doesn’t mean it isn’t charting a course for future growth.

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