Exxon gives Trump an early warm up for victory lap

The company said the billions of dollars in shale spending and increased activity planned for the Gulf of Mexico is a response to permanent corporate tax cuts.
By Daniel J. Graeber Follow @dan_graeber Contact the Author   |  Updated Jan. 30, 2018 at 11:40 AM
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Jan. 30 (UPI) -- After unveiling a multi-billion-dollar U.S. spending spree, Exxon Mobil said Tuesday it aims to triple the production from its Permian shale holdings.

Crediting support from the permanent cut to U.S. corporate tax cuts, the company said it has plans to triple production from Permian shale to 600,000 barrels of oil equivalent by 2025.

"Our geographic and competitive advantages in the Permian position the company for strong growth and long-term value creation," Sara Ortwein, president of Exxon's XTO Energy subsidiary, said in a statement.

The announcement followed a pledge from the head of the company for billions in new spending and a major build-up of operations in the Gulf of Mexico.

"At Exxon Mobil, we plan to invest more than $50 billion over the next five years to expand our business in the United States," Chairman and CEO Darren Woods said in a blog post published on the eve of President Donald Trump's first State of the Union address. "These investments are underpinned by the unique strengths of our company and enhanced by the historic tax reform recently signed into law."

U.S. President Donald Trump signed the Tax Cuts and Jobs Act before leaving for his Christmas holiday. The measure, which extends permanent tax cuts to corporations from 35 percent to 21 percent, passed out of the House and Senate along party lines.

British energy company BP was one of the first energy companies to respond to the overhaul, saying in early January its after-tax earnings from U.S. operations would be supported by the tax cut.

Exxon and BP haven't yet issued their earnings reports for the fourth quarter. Lowering the tax rate means companies may have to revalue some of their liabilities. In a statement on fourth quarter earnings, due Feb. 6, BP said it expected a $1.5 billion one-off non-cash charge from the U.S. corporate income tax reduction.

Exxon in the third quarter said its exploration and production work in the United States resulted in a loss of $238 million, though that was an improvement over the $477 million loss during the same period in 2016. Exploration and production outside the United States led to earnings of $1.8 billion for Exxon, up from the $708 million during third quarter 2016.

Hurricane Harvey, meanwhile, took $160 million off third quarter figures.

Since taking office, Trump has dismantled regulations and offered support for the oil and gas industry, noting that, with crude oil production alone rivaling that of Saudi Arabia, the United States is positioned to become an energy superpower.

Exxon's CEO said that means more jobs and economic expansion across much of the United States. Woods said Exxon "will be investing billions of dollars" in the Permian shale basin in Texas, and plans for a "massive build-out" in operations in the Gulf of Mexico, all operations that would "create thousands of jobs, strengthen the U.S. economy and enhance energy security."

In mid-January, the Federal Reserve Bank of Dallas said production in the Permian shale basin increased by about 66,000 barrels per day between November and December to reach an average 2.73 million barrels per day. For jobs, the entire oil and gas sector in the Dallas Fed's district added 1,600 new entries to their payrolls in November. However, since January 2017, oil and gas extraction added only 1,300 new jobs.

Exxon in the third quarter said its spending on exploration was about 3 percent lower. Its fourth quarter report is due Feb. 2.

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