By Sabrina Valle
HOUSTON (Reuters) - Exxon Mobil (NYSE:XOM) on Wednesday set annual capital spending through 2027 at $20 billion to $25 billion, allocating money to low-carbon projects and extending its previously projected spending rate for two years.
Exxon announced last year it planned to spend $16 billion to $19 billion in 2021 and $20 billion to $25 billion from 2022 to 2025.
Wall Street has been waiting for Exxon to outline a short list of projects it will pursue and detail those it has decided to eliminate. The approximately 55% increase over this year's capital budget could disappoint investors hoping for less spending and higher shareholder returns.
Exxon's higher spending "is designed to create shareholder value," Chief Executive Darren Woods said in a statement. The wide annual range allows for the "flexibility to respond to future policy changes and technology advances associated with the energy transition,” he said.
The plan was approved by a board that includes three new members elected in the spring by investors demanding the company cut spending, boost returns and better address climate concerns.
Ahead of the Exxon's disclosure, oil analyst Paul Sankey said he was worried it would continue spending at the $20 billion-$25 billion annual rate. "Less capex is more cash return," Sankey wrote on Tuesday, saying past spending on production growth "led to falling upstream returns."
Exxon sought to allay fears of overspending. It said more than 90% of its planned oil and gas investments would generate double-digit percentage returns at oil prices of about $35 per barrel.
Much of the spending will go toward deepwater projects in Guyana and Brazil and in the U.S. Permian shale patch, the company said. It did not disclose a target for future production.
Exxon also said it plans to reduce greenhouse gas emissions per unit of oil and gas production by 40% to 50% through 2030, compared to 2016 levels.
Last month, the company pledged to resume share buybacks and will spend about $5 billion a year on top of $16 billion in dividends. Exxon's spending will include a fourfold increase in low-carbon initiatives spending to $15 billion a year through 2027.
The top U.S. energy producer slashed costs after a historic $22.4 billion loss last year. But an oil-price rebound this year has generated profits that let Exxon pay down debt, maintain a hefty dividend and invest in a new low-carbon business.