ExxonMobil has "higher confidence" in Gulf of Mexico deepwater finds: CEO

05 30, 2013 by Platts

Spurred on by recent successes in the Gulf of Mexico deepwater, ExxonMobil has a "higher confidence" than it did only a handful of years ago in its ability to make finds in the region, the company's CEO said Wednesday.

"It's fair to acknowledge, we've re-entered [the US Gulf deepwater] in a more active way," Rex Tillerson said at a press conference following the company's annual shareholder meeting.

"What we have done with application of some newer seismic capabilities ... has had a fairly focused effort around re-looking at the Gulf of Mexico with new tools, and making sure we understand the full potential there," he said. That has given the company has a "little higher confidence" that it can be successful there, Tillerson said.

The company, and several others, for a period in the early-to-mid 2000s seemed to de-emphasize the US Gulf, preferring to focus attention more overseas or on other energy operations. Tillerson stressed that not only did ExxonMobil never leave the US Gulf, but it even made discoveries during that quieter period. One such discovery in 2007, Julia, was recently sanctioned for development.

Julia, located more than 30,000 feet below the sea bed in the Gulf's remote Walker Ridge area, will be tied back to the Chevron-operated Jack/St. Malo field. It is expected to come online in 2016.

ExxonMobil scored the largest dollar amount of high bids in Central Gulf Lease Sale 227 in March -- $220 million. The company also offered the sale's second and fifth-highest bids for individual blocks: $66 million for a tract in Keathley Canyon and nearly $52 million for a block in Walker Ridge.

Both are fairly remote areas where the emerging ultra-deepwater Lower Tertiary trend is located. Julia, which ExxonMobil operates co-partnered with Norway's Statoil, is a Lower Tertiary find.

ExxonMobil also has stakes in other recent Lower Tertiary discoveries, such as Lucius and Phobos, both operated by Anadarko.

The company's shareholder meeting for the first time in memory kicked off with few protesters outside the meeting venue, while inside, shareholders voted down proposals that have gained ground or been approved in other oil companies amid a wave of shareholder activism within the industry.

Eight ExxonMobil shareholder proposals were vetoed, most by a wide margin. They included: electing an independent chairman (currently Tillerson serves as both CEO and Chairman); requiring election of directors by a majority, rather than plurality, of votes; limiting current ExxonMobil directors to just two other directorships of large companies unless permanently retired (several company directors serve on multiple major corporate boards); disclosure of lobbying efforts, including payments to lobbyists; and a feasibility study on banning the company from political contributions.

Other proposals would have required a report on environmental and community impacts of natural-gas-well hydraulic fracturing, and adopting quantitative goals to reduce greenhouse gas emissions from ExxonMobil's products and operations. Several of the proposals were also put before the board in previous years.

The majority-vote, independent-chairman and gas-well-fracturing proposals each captured a large minority of support -- 45.3%, 34.9% and 30.2% of shares respectively. That is roughly the same amount of support that the proposals received in 2012.

The relatively quiet ExxonMobil meeting was in contrast to several other annual corporate meetings this year that involved shakeups by shareholder activists pushing for a new board slate and other changes.

For example, earlier this month three such meetings resulted in changes to the board composition of two oil companies and the world's largest driller.

Billionaire investor Carl Icahn pushed for a higher shareholder dividend as well as several new directors for contract driller Transocean. While Icahn's group lost on their $4/share dividend proposal to the $2.24/share offered by the company, it did gain a seat on the board for one nominee.

Minutes before Hess' annual meeting, its board reached an accord with hedge-fund activist Elliott Management: Elliott agreed to withdraw its slate of director nominees and support election of five Hess director nominees, in exchange for accepting three Elliott nominees. A week earlier, Hess had also separately adopted an Elliott-backed proposal to separate the chairman and CEO functions.

Also, shareholders roundly ousted longtime Occidental Petroleum board member Ray Irani, who was also the Los Angeles-based company's former CEO, from his seat. Momentum had built over the preceding months from what many considered an excessive salary, while further tension may have been stirred up when in February, the board said it would seek a successor to current CEO Steve Chazen. Ultimately, Chazen agreed to remain at the company's helm through 2014.