Mobil Announces 1999 Investment Program of $4.8 Billion
22 January 1999
Mobil Announces 1999 Investment Program of $4.8 Billion
FAIRFAX, Va.--Jan. 21, 1999--Mobil Corporation said Thursday that it expects 1999 capital and exploration expenditures, including cash investments in equity companies, to be $4.8 billion, down about 11 percent from the estimated 1998 spending level of $5.4 billion.Mobil retains flexibility to revise the 1999 spending budget if crude oil prices fail to improve from current depressed levels or if additional attractive investment opportunities develop during the year.
Mobil Chairman Lucio A. Noto said, "The 1999 investment program has been prudently scaled back in view of depressed industry conditions in most of our businesses, and Mobil's commitment to a disciplined level of spending. Projects have been prioritized, with only the most attractive investment opportunities being progressed."
Noto continued, "While discretionary spending has been reduced substantially, the program strikes a balance between projects that provide short-term earnings and cash flow, and projects that will underpin profitable long-term growth. Mobil's strategic growth opportunities will continue to be funded, including several key upstream prospects captured over the last few years.
"At the same time, we have slowed spending on some other projects. Overall, few exploration or producing opportunities have been eliminated."
Of the total 1999 spending budget, $3.6 billion (75 percent) is attributable to Exploration & Producing, with another $0.8 billion in Marketing & Refining, $0.3 billion in Chemical and $0.1 billion related to corporate activities. Spending continues to be focused in international areas.
In Exploration & Producing, projected 1999 investment spending of $3.6 billion would be down approximately $0.4 billion from 1998 levels. The decline reflects lower spending on key projects in Indonesia and Qatar that are nearing completion and stream this year, lower spending in mature, price-sensitive areas such as the US and Western Canada, and reduced exploration activity.
Worldwide oil and gas production is projected to decline slightly in 1999 compared with 1998. Production growth is anticipated in several areas, primarily Eastern Canada, Qatar, Kazakhstan and Nigeria.
However, this growth is anticipated to be more than offset by the impact of reduced spending in mature areas, continued OPEC quotas, and the expected decline in Mobil's production from the Arun field in Indonesia.
- US Exploration & Producing spending is expected to be $0.4 billion, down nearly $0.2 billion from the 1998 level, with reduced expenditures planned for mature onshore programs and Mobile Bay. Spending for the Gulf of Mexico shelf is expected to be about flat, with the Chinook development in the eastern gulf offsetting lower spending in the central and western gulf, as those assets were swapped for Arco's upstream assets in California. The California assets increased Mobil's equity interest in Aera Energy, which is self-funded. Exploration and appraisal activity in the US will continue to focus on our deepwater Gulf of Mexico holdings.
- International spending is expected to be $3.2 billion, down about $0.2 billion from 1998 levels. Major expenditures are planned for the Sable and Terra Nova projects offshore Eastern Canada, the Cerro Negro heavy oil project in Venezuela, Tengiz development and the CPC pipeline in Kazakhstan, expansions in Equatorial Guinea and Nigeria, and several offshore developments in the U.K. and Norway.
- The 1999 program includes worldwide exploration expense of $0.4 billion, down from about $0.6 billion in 1998. While the cutback reflects the weak price environment, the program will benefit from reduced costs for seismic acquisition and lower rig rates. As a result, Mobil is targeting well completions close to the 1998 level of just over 40. Wildcat drilling activity is expected to include the Kashagan prospect in the Kazakhstan sector of the Caspian Sea, OPL 215 in Nigeria, Block B offshore Equatorial Guinea and wells in the Northern North Sea. Several wells will also be drilled in the Makassar area offshore Indonesia, following up on recent discoveries. In addition, key appraisal wells will be drilled at Hebron off the Grand Banks of Eastern Canada and at Llano in the deepwater Gulf of Mexico.
In Marketing & Refining, projected 1999 investment spending of $0.8 billion would be down $0.1 billion from already scaled back 1998 levels. The 1999 program is geared toward asset base protection and the continuation of selective growth programs. Roughly 70 percent of downstream spending is targeted for the marketing side of the business.
Spending in the US is expected to be about $0.4 billion, similar to 1998 levels, and include funding for additional "On-The-Run" convenience stores. International spending is also expected to be about $0.4 billion, down slightly compared with 1998. While Mobil retains a strong position in Asia Pacific, spending there will continue to be restrained in view of weak economic conditions.
Chemical investment spending is projected to be $0.3 billion, down $0.1 billion from 1998 levels. Investments in equity companies include a major expansion of the Yanpet petrochemical complex in Saudi Arabia, and engineering design for a planned grassroots petrochemical facility at Jose, Venezuela. Mobil will also complete the expansion and modernization of the olefin complex at Beaumont, Texas.
For more news and information about Mobil, please see us on the World Wide Web at www.mobil.com/newsroom.
Note: this press release contains forward-looking statements about Mobil's plans for capital and exploration expenditures and about Mobil's projected oil and gas production. Actual expenditures and production may be different due to a number of factors, such as changes in oil and gas prices and economic conditions, the reliability of operating facilities and success in implementing projects. For a further discussion of factors that could cause actual results to differ materially from those expressed in the forward-looking statements, please refer to the section entitled "Forward-Looking Statements" in Mobil's Report on Form 10-Q for the quarter ended September 30, 1998.
INVESTMENT SPENDING
($ Billions)
1998 1999 Incr/
Est. Proj. (Decr)
---- ----- ------
U.S. E&P 0.6 0.4 (0.2)
Int'l E&P 3.4 3.2 (0.2)
--- --- ---
Total E&P 4.0 3.6 (0.4)
U.S. M&R 0.4 0.4 --
Int'l M&R 0.5 0.4 (0.1)
--- --- ---
Total M&R 0.9 0.8 (0.1)
Chemical 0.4 0.3 (0.1)
Corporate/Other 0.1 0.1 --
--- --- ---
Total Corporation(a) 5.4 4.8 (0.6)
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(a) Of Which:
CapEx 4.8 3.9 (0.9)
Cash Inv. in
Equity Cos. 0.6 0.9 0.3