THE NEW YORK TIMES: Exxon to Lift Output by 25 Percent by 2010

By THE ASSOCIATED PRESS
NEW YORK (AP) — Exxon Mobil Corp. said Wednesday it will plow an extra $2 billion a year into oil and natural-gas drilling, refining and chemicals manufacturing in order to lift output by 25 percent by the end of the decade.
The world's largest publicly traded energy company, which reported the highest profit ever for a U.S. company in 2005, said capital expenditures would rise from $17.7 billion now to almost $20 billion a year between 2007 and 2010. By then, the company plans to pump 5 million barrels a day of oil and natural gas, up from 4 million barrels per day in 2005.
In his first appearance as chief executive at Exxon's annual analyst meeting, Rex Tillerson echoed the disciplined confidence of his recently retired predecessor, Lee Raymond, assuring Wall Street that the Irving, Texas-based company would not stray from its long-term strategy to take advantage of today's high energy prices and record profits.
''We are patient, and we are not opportunity constrained,'' Tillerson said, identifying 22 major projects that would start up between 2006 and 2008 in order to keep the company on a production growth rate that exceeds 3 percent per year.
Oppenheimer & Co. oil analyst Fadel Gheit said ''it's a different skipper, but the same ship on the same course.''
''All they want to do is maintain the same speed,'' said Gheit, who credited Exxon with having the most efficient operations among its peers, so that it outperforms rivals no matter what the price.
Tillerson expressed some concerns, though, about the high price of oil, suggesting that global economic growth was not sustainable at current levels with crude futures trading near $60 a barrel.
''You have to put a question mark around just how long the global economy can live at $60 a barrel,'' Tillerson said during a question and answer session with journalists.
''It puts a lot of pressure on the developing economies. That's China, that's India,'' he said. ''And to the extent it affects those countries, obviously it will affect the U.S. economy.''
Crude-oil futures settled Wednesday at $60.02 per barrel on the New York Mercantile Exchange, falling by $1.56 after OPEC said it would maintain current output levels in spite of concerns expressed by some member countries about rising global inventories. The inventories are needed, analysts say, to offset fears of supply disruptions as extremists target oil facilities from the Middle East to Nigeria and a confrontation escalates over Iran's suspect nuclear program.
Shares of Exxon fell 14 cents to close at $59.71 in trading on the New York Stock Exchange.
While Exxon and its peers have been verbally attacked by some members of Congress seeking a so-called windfall profits tax — an outcry that gained momentum after gasoline prices jumped above $3 a gallon late last year — Tillerson sought to deflect some of the criticism by pointing out that Exxon has invested more money than it has earned over the past 15 years. He said the criticism coming out of Washington only highlights ''how little the working fundamentals of our business are understood.''
Still, the greater political challenges for Exxon could very well be outside the United States, as energy-rich countries such as Venezuela and Russia seek tighter control of their resources and more compensation from outside oil and gas producers. Exxon operates in both countries.
''It's difficult to make any new commitments to major investments in Venezuela,'' Tillerson said in response to an analyst's question about geopolitical challenges. And he said there is ''still a question of the Russian government deciding where they want the foreign investors to play and how they want them to participate.''
Tillerson said some Wall Street analysts believe Exxon has a ''cash problem'' because it had more than $33 billion in cash and equivalents at the end of 2005. He pledged to ''minimize the cash on our balance sheets,'' but said Exxon would not make short-sighted investments and ''we are not going to buy expensive volumes.''
Exxon said it earned roughly $16 for every barrel produced in 2005, meaning its return on capital employed was 40 percent higher than the average of its competitors, including Royal Dutch Shell PLC, BP PLC and Chevron Corp.
Exxon reported net profit of $36.1 billion in 2005 thanks to the jump in prices for oil, natural gas and gasoline.
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