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Pisani: Exxon's Good and Bad News

About Exxon:

Good news: oil production (upstream) showed production growth. This is a remarkable achievement!

Analysts note that oil field production is declining at an average rate of 6 to 8 percent a year for most wells. That means producers have to find new wells to replace the depleting old ones, whether owned by Exxon or anyone else. Production GROWTH means Exxon is finding new wells.

The bad news:

1) access to resources are tighter and tighter — the Russians kicked oil producers out, the Venezuelans kicked them out, there are fewer and fewer places for firms like Exxon to go.

That's why Exxon bought XTO, a natural gas producer, which has sizeable reserves...in the U.S.! They are coming home, in other words.

2) downstream (oil refining) is a mess: there is overcapacity, there are huge, ongoing environmental pressures, and most importantly of all: A collapse in prices in 2009 (particularly in diesel), which destroyed margins. Exxon LOST MONEY in downstream operations in the fourth quarter.

Compare w/ Other Producers & Refiners:

Chevron

ConocoPhillips

British Petroleum

Marathon

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