Both of America’s largest oil companies, Exxon Mobil and Chevron, are paring back their foreign operations and focusing on a smaller number of projects closer to home. The Wall Street Journal’s Collin Eaton reports:
The globe is shrinking for Exxon Mobil Corp. XOM -0.89% decrease; red down pointing triangle and Chevron Corp. CVX -0.76%decrease; red down pointing triangle as the two largest U.S. oil companies pull back on big international oil projects and concentrate on a handful of more lucrative assets closer to home.
The two fossil-fuel giants plan to spend most of their annual budgets in the Americas this year, with Chevron saying it will pour 70% of the capital allocated for production into oil fields in the U.S., Argentina and Canada, and Exxon saying it will spend a similar portion of its budget in the Permian Basin of New Mexico and West Texas, Guyana, Brazil and liquefied natural-gas projects.
Their focus on the Western Hemisphere is expected to continue for years as they give priority to growing shareholder returns and cut costly frontier drilling projects. Their retreat from places such as southeast Asia, West Africa, Russia and parts of Latin America—sometimes by choice, sometimes by fiat—marks an era of retrenchment for companies that had spent decades putting stakes in the ground around the world.
“The cases of them going to new countries are few and far between,” said Ben Cahill, a senior fellow at the Center for Strategic and International Studies, a Washington think tank. “It’s a natural consequence of investors demanding higher returns. Companies are being more selective.”
For much of their modern history, Chevron and Exxon scoured the globe for oil to add to their booked reserves, a key metric upon which investors valued them, often entering into partnerships with state-run companies in the most challenging, costly projects. Mr. Cahill said the advent of U.S. shale eased Western oil companies’ concerns about securing oil supplies, and a shareholder revolt against the industry’s overspending a few years ago pushed them to shrink their footprints further.
Last year, Irving, Texas-based Exxon sold or proposed to sell assets in Chad, Cameroon, Egypt, Iraq and Nigeria, along with some legacy assets in the U.S. and Canada, making for its largest number of such sales since 2018, according to FactSet. The company had planned since 2018 to sell at least $15 billion worth in assets as it pared down its global footprint and focused on its most valuable assets.
The company’s oil and gas production was down in 2021 by almost 18% compared with its annual peak in 2011, according to S&P Global Market Intelligence. Around that time, Exxon was pursuing scores of projects across the world and made most of its money outside the U.S. The days of managing numerous international projects are running out, said Neal Dingmann, an analyst at Truist Securities.
“You have investors leaning on you harder than they have in the past,” Mr. Dingmann said. “It’s going to be critical that they prune their other [noncore] businesses.”
Meanwhile, Chevron’s international output fell 3% last year following the expiration of concessions in Thailand and Indonesia. Last year, it vowed to exit Myanmar, citing human-rights violations. Since 2019, it has unloaded assets in Azerbaijan, Denmark, the United Kingdom and Brazil, among other places.
Chevron has held on to some international assets close to home. The U.S. has granted it a new license to pump oil in Venezuela again, after years of sanctions. So far, it has said it won’t make new investments in the country, only maintain existing assets while it collects debt from its state-run joint venture partner. Chevron would have to contend with myriad technical issues at Venezuela’s aging oil fields and take on political risk to expand there.
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