Exxon to Continue Leaner Spending as Coronavirus-Led Threat Lingers The oil giant is maintaining lower capital investment levels through 2027 and will keep focusing on cost-cutting

Exxon to Continue Leaner Spending as Coronavirus-Led Threat Lingers  The oil giant is maintaining lower capital investment levels through 2027 and will keep focusing on cost-cutting

Exxon’s lower-spending plans have been months in the making and aren’t an immediate reaction to the new Omicron variant. (Photo: Reuters)

Exxon Mobil Corp. said Wednesday it will maintain a conservative budget for the next five years, as the outlook for oil and gas demand remains murky while coronavirus-led economic risks persist and some countries attempt to wean themselves off fossil fuels.

The Texas oil giant, which slashed its spending in 2020 as the world contended with waves of Covid-19, said it is sticking to decreased spending levels for years to come.

Exxon will spend between $20 billion and $25 billion a year on capital investments through 2027, a 17% to 33% decrease from its pre-pandemic plans.

The company reported earnings of $6.8 billion in October, its best quarterly performance since 2017, as global energy demand rebounded faster than anticipated and oil production struggled to keep pace.

But U.S. oil prices fell more than $17 a barrel in November, or about 20%, as investors grappled with the market impact of a release from the U.S. strategic petroleum reserve, and more recently, the risks of the new Omicron variant.

Exxon’s plans have been months in the making and aren’t an immediate reaction to the new variant, but they reflect uncertainty about commodity markets as the world attempts to move past Covid-19.

The company said Wednesday that its spending plans provide flexibility to react to “adverse market conditions.”

Exxon also said the budget furthers its strategy of finding structural cost savings while investing in projects that can generate returns greater than 10%, even if oil prices fall to $35 a barrel.

The company said it expected to double its earnings, compared with 2019, by 2027.

Rival Chevron Corp. said on Wednesday that it too would maintain a conservative budget, saying it will spend $15 billion in capital expenditures in 2022 and invest at similar levels through 2025.

That represents a roughly 25% cut from the California oil company’s pre-pandemic plans to spend $20 billion on capital expenditures.

While some of Exxon’s peers have begun investing in renewable energy, Exxon’s investment plan remains predominantly focused on fossil fuels.

“Where there are no practical alternatives, people will continue to need the products we produce for decades to come,” chief executive Darren Woods said on a call with analysts Wednesday. “Our goal is to produce these products and solutions with lower or in some cases no emissions.”

In 2018, Mr. Woods laid out a plan to spend more than $30 billion a year through 2025 to double profits and pump an additional one million barrels of oil and gas a day.

That plan proved ill-timed, especially after the pandemic caused oil prices to plummet.

Exxon cut its capital budget last year and has said it will spend about $16 billion this year.

The Wall Street Journal previously reported that Exxon’s board of directors is debating whether to continue with several major oil and gas projects, including a $30 billion liquefied natural gas development in Mozambique.

The board’s deliberations reflect pressure the company is facing from investors to restrain fossil-fuel investment to limit carbon emissions and return more cash to shareholders.

On Wednesday, Exxon said it would invest in oil and gas projects in Guyana, Brazil and the Permian Basin in West Texas and New Mexico, but didn’t mention the Mozambique project, called Rovuma.

Mr. Woods told analysts in October that Exxon is committed to the project.

Hedge fund Engine No. 1 waged a successful campaign to win three seats on Exxon’s board of directors in May, arguing that the energy company needs to act faster to remake itself and invest in clean energy.

Exxon said Wednesday it is ahead of schedule on targets to cut the carbon intensity, or emissions as a proportion of total energy produced, from its oil and gas production.

The company said it believes its production business will cut greenhouse gas intensity 15% to 20% in 2021 relative to 2016.

Some environmentalists have criticized the company’s focus on carbon intensity, noting that it can decline while Exxon’s overall carbon emissions still increase.

Exxon said it would cut overall corporate-wide greenhouse gas emissions by approximately 20% by 2030.

Exxon has been considering a pledge to reduce its net carbon emissions to zero by 2050, the Journal previously reported, but made no such commitment Wednesday.

Beginning last year, several large European oil companies including BP PLC and Royal Dutch Shell PLC made “net-zero” pledges, or commitments to reduce the emissions from their operations as well as taking other steps such as buying carbon offsets to neutralize them.

Exxon said earlier this year that it would increase spending on projects to cut carbon emissions to $15 billion through 2027, up from $3 billion through 2025, and said Wednesday it could increase that spending further if government policy changes.

In February, Exxon created a low-carbon business unit to commercialize carbon capture and storage, hydrogen, biofuels and other technologies. But most of those businesses aren’t profitable, say analysts, and need significant public-policy support and technological advances to become so.

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