U.S. Gas Outlook
Arjun Murti – Goldman Sachs asked: On U.S. gas, it looks your production ticked up here in the fourth quarter but obviously the current gas outlook is pretty weak. I take a longer-term view.
Can you provide any comments on your thinking about your U.S. gas rig count and outlook in light of current weak prices?
David S. Rosenthal – VP, IR and Secretary responded: I might just take a moment and kind of address the broader picture of U.S. gas. I’ll start by saying we’ve remained bullish on the future of natural gas as an energy source for those of you that are familiar with our recently released energy outlook.
You know we are very bullish on the demand side of natural gas as energy source in the U.S. and as we all know given the fairly steep decline in conventional gas, unconventional gas will play the dominant role going forward.
In that regard, we are very pleased with our unconventional resource portfolio and look forward to a major participation in that space. Now as we all know, due to record production this year, record storage levels and a relatively mild winter to-date, prices have weakened significantly recently. I can tell you that we have not curtailed any gas production; we’re still running 65 to 70 rigs across the space. But what has changed over the year is we reallocated a large number of those rigs, liquids and liquids-rich plays.
For example, if you were to step back a year and then come forward to today, we’ve actually doubled the percentage of the rigs in that fleet that are drilling either liquids or liquids-rich plays; I mentioned some of those examples in my prepared remarks.
So although the overall size of the fleet has remained about the same, a very substantial portion of those rigs are drilling liquids or liquids-rich plays. Nonetheless, I can also tell you that we are still drilling dry gas wells. We do have a few of those that are required for lease maintenance or meeting other contractual obligations. But we are drilling a number that continue to provide good economics.
As you would expect with a drillable well inventory of over 40,000 wells, we’re able to put those things in order and have a significant optionality and flexibility to drill them. That really gives us an opportunity to maximize the value of that resource over long period of time. If you look at the total market, we continue to be focused long-term, while making the adjustments in our rig fleet ahead of the higher value, higher-margin products.
North American Natural Gas
Katherine Minyard – JPMorgan asked: As we look at ExxonMobil’s portfolio in North American natural gas, what’s the usage been over either 2011 or the fourth quarter just in terms of consumption at the refinery and even the oil sands level?
David S. Rosenthal – VP, IR and Secretary responded: I don’t have those specific numbers. I can tell you directionally in the U.S., one of the benefits we got out of the merger with XTO was an ability to optimize gas feed into all of our refineries along the Gulf Coast and optimizing feed into their versus sales to third parties. I don’t have those specific rates but I can tell you we’ve been able to optimize that to the benefit of our refining economics.
Additionally, we’ve been able to also through integration optimize our feeds, both natural gas for utilities as well as ethane into the chemical business. That’s ongoing and probably if you talk about integration, that’s probably more important than anything that we have going on up in the oil sand space. It is a clear benefit and one we’re taking advantage of.