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Thursday, April 27, 2017

Exxon is Turning Loose its Shale Unit

From Bloomberg:
In a matter of weeks, crews working for Exxon’s XTO Energy Inc. unit will begin erecting drilling rigs across a patch of southeast New Mexico to exploit the region’s mile-thick strata of oil-soaked rock. ExxonMobil Corp. paid almost $6 billion for the drilling rights in late February—its biggest acquisition in more than six years—but that’s where the parent company’s involvement ends: Decisions on when and how to harvest the crude fall solely on the shale experts at XTO. 
Exxon Chief Executive Officer Darren Woods and his top lieutenants at corporate headquarters in suburban Dallas are intentionally staying out of the way of the tightly knit phalanx of XTO engineers, physicists, and geologists leading the oil major’s advance into shale. Based largely in the Texas cities of Fort Worth and Midland, XTO’s 5,000-person staff has been exempt from many of the centralized bureaucratic and planning structures of their overlords since Exxon acquired XTO for $35 billion in 2010, according to people with knowledge of the arrangements who weren’t authorized to speak publicly. 
Exxon’s policy of benign neglect is one it shares with other oil giants such as Chevron Corp., which has set up its own “dedicated shale team” that operates like a quasi-independent unit, according to Noah Barrett, an analyst at Janus Capital Group Inc. The top-down and heavily structured approaches they use on megaprojects—building a liquefied gas export complex or pumping crude that lies miles beneath the sea surface—won’t work with shale. Rigs and roughnecks must be hired or moved at a moment’s notice in response to emerging opportunities or volatile crude prices. “Historically, the major operators have been slower-moving beasts,” Barrett says. But in the age of shale, “the ability to be flexible is a huge advantage.”
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