The two major American oil companies shrink their global layout

In 2022, the global oil giants will make a lot of money. However, ExxonMobil and Chevron, the two largest oil companies in the United States, said that the two companies were prepared to reduce their business footprint in the world. At present, the two companies have converged in large international oil projects and turned to focus on assets that are more profitable and closer to home.

FactSet data showed that in 2022, ExxonMobil sold or planned to sell assets located in Chad, Cameroon, Egypt, Iraq and Nigeria, as well as some legacy assets in the United States and Canada. This made 2022 the largest year for the company to sell assets since 2018.

Since 2018, ExxonMobil has sold at least $15 billion worth of assets to reduce its global business and focus on the most valuable assets. According to the data of Standard&Poor's Global Market Intelligence, the oil and gas production of ExxonMobil in 2021 decreased by nearly 18% compared with the peak production in 2011. In 2011, ExxonMobil carried out dozens of projects around the world, most of which came from outside the United States. Neil Dingman, an analyst at Truist Securities, said that the days when ExxonMobil managed many international projects were gone.

The largest case of ExxonMobil's withdrawal from overseas business last year occurred in Russia. After the Russian-Uzbekistan conflict, ExxonMobil tried to withdraw from a large oil and gas project that has been operating in Russia since the 1990s. After that, the Russian government completely cleared ExxonMobil's rights and interests in the project, causing heavy losses to the company.

At the same time, after the expiration of the franchise rights in Thailand and Indonesia, Chevron's international oil and gas production fell by 3% in 2022. In 2022, Chevron withdrew from Myanmar. Previously, the company had sold assets in Azerbaijan, Denmark, the United Kingdom and Brazil.

FactSet data shows that in 2021, the land reserves of active oil wells owned by ExxonMobil decreased by 18% compared with 2010, while Chevron decreased by 40%. However, with the cost reduction, the profits of the two companies increased significantly. Wall Street analysts predict that the profits of the two companies in 2022 will reach the highest level since 2008.

According to the plans of ExxonMobil and Chevron, they will spend most of their annual investment budget in the Americas in 2023. Among them, Chevron will spend 70% of its investment budget on oil fields in the United States, Argentina and Canada, and ExxonMobil will also spend 70% of its investment budget on oil fields in the Permian Basin in New Mexico and Texas, Guyana and Brazil.

Market participants expect that the strategy of ExxonMobil and Chevron focusing on the western hemisphere is expected to continue for several years. At present, the two companies give priority to increasing shareholder returns and reducing costly drilling projects in remote areas. The two companies withdrew from parts of Southeast Asia, West Africa, Russia and Latin America, both actively and passively, but in any case, the era of the two companies expanding their territory around the world has ended.