ExxonMobil reserve replacement lowest this decade

OREANDA-NEWS. February 23, 2016. ExxonMobil replaced 67pc of its output in 2015, down dramatically from recent years as the US major reduced its proven natural gas reserves amid low prices.

ExxonMobil booked 1bn bl of oil equivalent (boe) of proven reserves in 2015, down from 1.5bn boe in 2014. That's down from decade high at 209pc in 2010, when it added 3.5bn boe of proven reserves.

It has added more than 100pc each year, meaning it replaced more than the amount of oil and gas it pumped, except for 2015. Over the past 10 years, it has replaced 115pc of the reserves it has produced.

A company's reserve replacement rate is an important measure of the sustainability of long-term growth. The rate needs to be more than 100pc at the very least to prevent that reserve base from going into decline.

The decrease came as ExxonMobil cut its natural gas reserves, primarily in the US, by the equivalent of 834mn boe.

ExxonMobil said it "expects this gas to be developed and booked as proved reserves in the future."

ExxonMobil bought independent gas producer XTO in 2010 for \\$31bn plus debt, but the decline in US gas prices since then has hit its profits.

The reserves "represent a diverse portfolio that positions us to create shareholder value as we supply long-term energy demand growth," chief executive Rex Tillerson said in a statement. "We will continue to apply our disciplined, paced investing approach as we develop our industry-leading resource base."

In the latest numbers, "we are seeing Exxon moving away from the "gold standard" of reserves and reserve replacements in lieu of other areas that are making more money and will continue to do so in the near term (downstream)," said Carl Larry, head of business development at consultancy Frost & Sullivan.

With the addition in 2015, ExxonMobil's total proven reserves stood at 24.8bn boe as of the year-end, with liquids representing 59pc, up from 54pc in 2014, it said. The major's reserves were enough to cover production for the next 16 years at current levels. Reserves were added in Abu Dhabi, Canada, Kazakhstan and Angola.

Producers big and small face a growing challenge in coming years of replacing reserves as they sharply lower drilling and exploration plans to weather the prolonged market downturn that has seen oil prices plunge to near 13-year lows below \\$30/bl. Companies are abandoning or deferring expensive and technologically challenging projects such as those in the deep waters of the US Gulf of Mexico (GoM) or in areas including the Arctic.

"More major oil companies are going to have to face a similar reality as we continue to see a low oil price environment," Larry said. "Reserve replacement will not get as high of a priority with the oversupply still not resolved."

Overall, the company's resource base total more than 91bn boe as of year-end 2015, after adjusting for asset sales. The resource base includes proven reserves, plus other discoveries that are expected to be ultimately recovered.