t,1 B$&J$grus{ru$ rug{ws Oil Firms Now Eavor F'rsega Exxon, BP and other energy companies are avoiding expensive engineering projects Bv Senax KuNr Auo Bneorry Olsolv ects that can bring oil or gas to market within a few years is that it allows big companies to avoid being locked in to multibillion investments over as much as a decade, said Ryan Lance, the chief execu- tive of ConocoPhillips, at the annual CERAWeek conference in Houston on Tuesday. "They're not just paying lip service to this," said Luke Parker, vice president of cor- porate ana.lysis at Wood Mack- enzie, a Scottish energy con- sulting firm. "They want to be in a position to future proof themselves against peak oil demand when it comes." The challenge ofthe strategy is that many of the big Western companies have yet to prove that they can consistently tum a profit in a time of lower prices, especially in U.S, shale flelds. Ilcreasing production may prove even more daur,rlrle be- cause the compani.es hate :.. spend bifion:'r.ur :o :eoiace -r-re barrels the5'pump every year. Last week, BP announced plans to drive down its break- ,.ABSOLUTELY, [email protected] Cost Control The world's biggest oil companies have scrambled to reduce the price they need to break even, as the world of $100 a barrel fades. The world's biggest oil compaaies are getting thrifty. Oil prices have made a modest comeback from the Iows hit a iittle over a year ago, but energy companies such as Exxon Mobil Corp. and BP PLC aren't pursuing the extravagant bets they made at $100 a barrel-like commissioning multibillion- dollar projects in Arctic wa- ters and Kazakhstan's Caspian Sea. These companies, including Royal Dutch Shell PLC and Chewon Corp., are putting their money into cheaper, quicker ventures in Texas shale country, the Middle East and Brazil and squeezing more from existing projects world- wide. En<on last week unveiled an ambitious plan to put its U.S. drifiing opportunities in Texas, New Mexico and North Dakota at the heart of its future. By 2025, the company said, its production from these ar- eas could more than triple to the equivalent of 75O000 bar- rels a day. Together with other shale production, that would amount to about a third of Exxon's current output. It is a shift away from the business model long employed by the world's largest oil com- panies, favoring challenging projects that had huge upfront costs that would be paid off over 20 or 30 years. To drive dovrm costs, big oil companies are abandoning such developments in favor of standardization and bolt-on models that take advantage of existing infrastructure. They are returning to oid basirLs to see what they can exfract n ith new technologies and focusing on the lowest-cost prospects. The appeal of cheaper proj- i t.,i t,:,I i. i,,t-- ! r1.l ; a ;* a tu a9- NO cr OH OF TF ConocoPhillips Shell Total SA BPi '?0il price required to generate enough cash from operations to (0ver (aDex and dividends iAs of ...

1. t,1
B$&J$grus{ru$ rug{ws
Oil Firms Now Eavor F'rsega
Exxon, BP and other
energy companies are
avoiding expensive
engineering projects
Bv Senax KuNr
Auo Bneorry Olsolv
ects that can bring oil or gas
to market within a few years
is that it allows big companies
to avoid being locked in to
multibillion investments over
as much as a decade, said
Ryan Lance, the chief execu-
tive of ConocoPhillips, at the
annual CERAWeek conference
in Houston on Tuesday.
"They're not just paying lip
service to this," said Luke
Parker, vice president of cor-
porate ana.lysis at Wood Mack-
enzie, a Scottish energy con-
sulting firm. "They want to be
in a position to future proof
themselves against peak oil

2. demand when it comes."
The challenge ofthe strategy
is that many of the big Western
companies have yet to prove
that they can consistently tum a
profit in a time of lower prices,
especially in U.S, shale flelds.
Ilcreasing production may
prove even more daur,rlrle be-
cause the compani.es hate :..
spend bifion:'r.ur :o :eoiace -r-re
barrels the5'pump every year.
Last week, BP announced
plans to drive down its break-
,.ABSOLUTELY, [email protected]
Cost Control
The world's biggest oil companies have scrambled to reduce the
price
they need to break even, as the world of $100 a barrel fades.
The world's biggest oil
compaaies are getting thrifty.
Oil prices have made a
modest comeback from the
Iows hit a iittle over a year
ago, but energy companies
such as Exxon Mobil Corp.
and BP PLC aren't pursuing
the extravagant bets they
made at $100 a barrel-like
commissioning multibillion-

3. dollar projects in Arctic wa-
ters and Kazakhstan's Caspian
Sea.
These companies, including
Royal Dutch Shell PLC and
Chewon Corp., are putting
their money into cheaper,
quicker ventures in Texas
shale country, the Middle East
and Brazil and squeezing more
from existing projects world-
wide.
En<on last week unveiled an
ambitious plan to put its U.S.
drifiing opportunities in Texas,
New Mexico and North Dakota
at the heart of its future.
By 2025, the company said,
its production from these ar-
eas could more than triple to
the equivalent of 75O000 bar-
rels a day. Together with other
shale production, that would
amount to about a third of
Exxon's current output.
It is a shift away from the
business model long employed
by the world's largest oil com-
panies, favoring challenging
projects that had huge upfront
costs that would be paid off
over 20 or 30 years.

4. To drive dovrm costs, big oil
companies are abandoning
such developments in favor of
standardization and bolt-on
models that take advantage of
existing infrastructure. They
are returning to oid basirLs to
see what they can exfract n ith
new technologies and focusing
on the lowest-cost prospects.
The appeal of cheaper proj-
i t.,i t,:,I
i.
i,,t--
!
r1.l
;
a
;*
a
tu
a9-
NO cr
OH
OF TF

5. ConocoPhillips
Shell
Total SA
BPi
'?0il price required to generate enough cash from operations to
(0ver (aDex and dividends
iAs of Wednesday's market close, ilncludes lvlacondo liabiliiies
Source: Jefferies
even oil price to between $35
and $40 a barrel by 2021, all
while increasing production.
It is a feat the Brinsh oi1 gr-
ant sal's ir cal puJi off by
niainra:mg stricr cash disci-
pline. Cr:nn-a cioltn costs and
:ocusng on projects that gen-
erate sllong refurns even at
crurent prices. BP recently
abandoned ambitious plans to
explore in the Great Australian
<( Current prlce of
Brent crude oili
THE ALL STREDT JOURNAL.
Bight-a potentially huge
source of new supply that still
couldn't compete economically

6. with other project opportuni-
ties. Instead, it invested $2
billion for a 10% stake in oil
fields ir the United Arab Emir-
ates, which has some of the
world's lowest oil-extraction
costs. Going forward, the com-
pany is focusing on "long-lived
cash bricks" of low cost oil
Exxon Mobil says U,S. drilling operations would be central to
its future. Above, a file photo of an Ex
$${ I $E ei $i t{$ qqJ q'$'#$
il*go* t"ntt".Y ln BryloHrL Texas'
WwMffi&
e price
rice of
de olli
,rds
)URNAL.
huge
at still
nically
lrtuni-
.ed $2
in oil

7. r Emir-
of the
'action
e com-
g-lived
ost oi]
and natural gas, sard BP Chief
f*..otiuu fob OudleY during
inlrt.*i.ru at CERAWeek' .
Others are Pursuing a slml-
tar aeenaa. Chiwon CEO John
writln told analYsts TuesdaY
irr"i tt',. company intends to
i"uuti*ot. oi its caPital bud-
eet in Projects that start uP
;;i.kl" and generate higher
;;t**' About three-fourths
n}-it. .o*Prny's $20 billion
.rritrf budger in 2017 will
generate cash within two
vears, Mr. Watson saro''- dtriri it focusing the bulk of
its new investment on deeP
*"t"t Pro:u.ts offshore Brazil
ir,"i itiulit break even at less
iir* S+o u barrel' France's To'
iJ in savs reducing the
break-even level on its ProJ-
ects is "a toP PrioritY'"--
nccoraing to Sanford C'

8. n.tnit"ir, E-uroPe's biSgest oil
;;;;rt.; have slashed caPital
budsets bY $51 billion stnce
irt"ii zots Peak and are ex-
oected to keeP sPending at cur-
i.ni r.u"tt of
-around
$90 billion
a year through 2020, but Pro-
[ri.tio" *tu*o are on the rise'
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