Like many global oil majors ExxonMobil is under considerable pressure because of the significant fallout from the COVID-19 pandemic, sharply weaker oil prices and the threat of peak oil demand. There are growing fears that Exxon, because of its tremendous debt burden, is a zombie company. These are generally companies that are not generating sufficient operating income to cover its interest expenses. While Exxon is struggling because of the prolonged slump in oil prices reporting a $2.4 billion loss for the first nine months of 2020 and deteriorating cashflow it is not yet a zombie company. The global oil supermajor has several levers at its disposal to boost profitability and cash flow, key being the improved outlook for oil prices along with Exxon’s globally diversified portfolio of quality energy assets.
November 2020 that it intended to prioritize capital spending for high value assets, key among them being its operations in the Guyana-Suriname Basin located in offshore South America.
Exxon made its first Guyana oil discovery in the offshore Stabroek Block during May 2015. By December 2019, the integrated energy major had commenced production at the Liza oilfield with the capacity to pump 120,000 barrels daily. During September 2020, Exxon made its 18th oil discovery in the Stabroek Block and upgraded its estimate of recoverable oil resources to more than 8 billion barrels.
That month Exxon announced it will proceed with developing the Payara oilfield, in the Stabroek Block, which will come on-line in 2024 possessing the capacity to pump 220,000 barrels daily. By December 2020 Exxon had achieved its production goal for the Liza field and the company anticipates producing more than 750,000 barrels daily from the 6.6-million-acre Stabroek Block by 2026.
This is a highly profitable asset for the integrated oil major, even with weaker oil prices, because of its particularly low breakeven costs. According to partner Hess, which has a 30% interest in the block alongside Exxon’s 45% and CNOOC’s 25%, the Liza oilfield is pumping crude oil at a breakeven price of $35 per barrel, and this will fall further. Hess claims that the breakeven price for the second FPSO to be deployed, Liza Unity which is scheduled to commence operations in 2022, will pump crude at an even lower breakeven price of around $25 per barrel. With an API gravity of 32 degrees and 0.58% sulfur content, the crude oil produced from the Liza field is relatively easily and cost effectively refined into high quality low sulfur content fuels. That will ensure that it does not sell at a significant discount to the international Brent price benchmark.
Source: Yahoo Finance