XOM: +4.5mil boe or +10% ROCE.

The Gist: ExxonMobil is expected to outline its production growth plans during tomorrow's presentation highlighting the Upstream strategy. Regardless of the projections, the key question remains: Can the company continue to surpass its 10% cost of capital?

Tomorrow, ExxonMobil will host its Corporate Strategy presentation, with a focus on the upstream segment (HERE).

It's likely that we'll see updates to their long-term production targets.

A review of pro-forma production history for ExxonMobil and its acquired entities reveals that 4.5 million barrels of oil equivalent per day (boe/d) has remained the production ceiling since the mid-1980s.

Production has often approached 4.5 million barrels of oil equivalent per day (boe/d) but has yet to surpass this level on a sustainable basis.

Production peaked in 1974 following the oil embargoes, which led to the nationalization of its Venezuelan assets (Creole Petroleum) and the eventual sale of ARAMCO to the Saudi Royal family.

A historical note: Unlike other Middle Eastern concessions, ARAMCO was not outright nationalized. Instead, it was sold in a series of transactions between 1973 and 1980. It is rumored that the remaining 40% stake was acquired in 1980 for $10 billion, valuing the company at the time at $25 billion. With a current market cap of $1.8 trillion, this reflects a compound annual growth rate (CAGR) of 10% per annum—before accounting for dividend payments. Not a bad investment!

Returning to the present, many are anticipating updates on the company’s production and growth targets.

In Guyana, three additional FPSOs (Floating Production, Storage, and Offloading units) are under construction. These will add a combined nameplate capacity of 750,000 barrels per day (bbl/d) upon completion, adding to the 560,000 bbl of capacity already in place and excluding any performance uplifts already being realized from Liza-1’s Destiny and Liza-2’s Unity. The third FPSO, Payara, was completed in Q4 2023.

I would expect the company will soon begin separately reporting the Guyana segment, currently grouped within the red bars in the above chart. Not since the days of Creole Petroleum has ExxonMobil’s South America presence been so formidable.

Another growth avenue lies in the Permian Basin, where the company initially targeted production of 2 million bbl/d by 2027 when they announced the Pioneer deal.

Assuming minimal degradation in the remaining upstream portfolio—primarily Imperial in Canada and the LNG assets in Qatar, Papua New Guinea, and Gorgon—surpassing 4.5 million barrels of oil equivalent per day (boe/d) seems assured for the first time since 1981.

The more significant question, however, is how returns on capital will shape up with this level of growth on the horizon. This metric is essential, as it continues to drive relative share price performance compared to the broader market, as illustrated below.