For ExxonMobil Corp. (NYSE: XOM), maintaining flat production is an accomplishment when the business at hand involves depleting assets that demand replenishment to meet current and future energy needs, according to the company’s chief executive.

Add this to the challenge of operating in a low commodity price environment, while trying to make a profit.

“We are never standing still,” said Rex Tillerson, CEO of ExxonMobil.

The world’s largest publicly traded oil and gas company added 1 billion oil-equivalent barrels of proved oil and gas reserves in 2015, replacing 67% of its production. Its liquids replacement ratio was 219%. This came despite its losing battle to grow profits as a global hydrocarbon oversupply exceeds demand, which has forced many to slow production and push exploration plans—especially in frontier areas—to the backburner.

However, thinking long-term, ExxonMobil is pursuing resources in new areas such as Guyana, while driving production growth. Although the market will dictate near-term moves such as in U.S. shale plays, the company said it plans to add about 450,000 barrels of oil equivalent per day (boe/d) of working-interesting production capacity with the startup of 10 new upstream projects in 2016 and 2017.

Tillerson gave a rundown of what is to come during ExxonMobil’s March 2 analyst day.

  • Phase 1 of the ultra-deepwater U.S. Gulf of Mexico Julia subsea tieback development is expected to start up by mid-2016, adding more than 30,000 barrels per day (bbl/d). The field’s six wells will be tied back to the Jack/St. Malo production facilities;
  • Hebron, located in Arctic waters offshore eastern Canada in the Jeanne d’Arc Basin, should start up by year-end. The oil field is being developed using a stand-alone concrete gravity-based structure designed to withstand sea ice, icebergs and other Arctic conditions. Construction is 77% complete;
  • Pipeline replacement at the North Caspian Operating Co.’s Kashagan project in Kazakstan, where ExxonMobil is a partner, should wrap up this year enabling production to restart in the fourth quarter and
  • The second phase of Sakhalin Odoptu in the Russian Far East is expected to add 55,000 bbl/d of production capacity while developing an incremental 290 million barrels (MMbbl of oil. The plan involves drilling 27 extended reach wells from the shoreline. Six of the wells—all of which will incorporate intelligent completion technology and enhanced reservoir management—will be greater than 8 miles long.

In addition, Tillerson said island construction is complete, drilling is progressing and gross production is up from 560,000 bbl/d to more than 660,000 bbl/d at the Upper Zakum Field offshore Abu Dhabi. The conventional oilfield project, Upper Zakum 750, includes four artificial islands with 173 wells and processing facilities.

“The artificial island concept is saving billions of dollars in development costs by dramatically reducing the development footprint,” Tillerson said. “The production rate will reach 750,000 bbl/d and be sustained for 25 years. Beyond this we are evaluating an opportunity to expand capacity to more than 1 MMbbl/d.”

Unconventional Flexibility

While most of the major projects are international ones, the company hasn’t closed the door on its shale assets in the U.S., where its near-term focus will be on the liquids-rich Permian and Bakken plays.

“We have an inventory of over 50,000 U.S. unconventional drill well locations. This inventory has a significant degree of development timing flexibility and we will progress drilling at a pace supported by market conditions,” Tillerson said. “Net production could grow to an incremental 1 million oil equivalent barrels per day” by 2018.

In an analyst note, Barclays pointed out that ExxonMobil’s U.S. shale resources represent more than 15 billion barrels of oil equivalent (Bboe), of which 9 Bboe is related to its shale gas operations.

“In the current environment, XOM is making low double-digit returns on its producing unconventional assets,” Barclays said, noting ExxonMobil’s production flexibility and its willingness to hold back development, specifically natural gas.

Considering ExxonMobil operates more than 80% of its unconventional U.S. assets, Barclays said the company has that added flexibility.

The firm however, viewed ExxonMobil’s lower-than-expected production guidance—between 4 and 4.2 MMboe/d to 2020 compared to 2015 Analyst Day guidance of 4.3 MMboe/d for 2017—as a negative. “XOM said it would continue to let gas volumes decline as opposed to liquids, especially in the U.S., and so there will be slight mix shift in its production.”

Tillerson said the company is agnostic on the gas-oil mix, concentrating on higher returns.

New Frontiers

Despite tough market conditions, ExxonMobil is still exploring in new areas with high resource potential such as Uruguay, South Africa, Cote d’Ivoire and Guyana, where it recently acquired an operating interest in the Canje Block near its Stabroek Block acreage. Liza-1, the first well on the 6.6-million-acre Stabroek Block, struck more than 295 feet of high-quality oil in 2015.

Liza-2 was spudded in February and acquisition of a 3-D seismic survey across the area—the company’s largest—is nearly complete, Tillerson said.

“We’ve got a 10 5/8-inch hole in the middle of 6.6 million acres, so where the resource could go—obviously, it’s got a lot of directions, which is why it’s so important to get this first well down,” added Mark Albers, senior vice president, upstream, for ExxonMobil. “We’ll sidetrack it to get two appraisals of the resource tested, which is going to be very important.”

But the log looks beautiful, he said, noting the high-quality oil.

“We’re very excited about it, but we have to do our appraisal to see the best way to develop it. … Stayed tuned,” Albers continued. “We’ll drill this well and then three more—at least two of those next three wells will be exploration wells. There may be a third appraisal, just depending on what we see.”

The Liza discovery was one of eight discoveries ExxonMobil made in 2015. In all, the company added 1.4 billion net oil equivalent barrels to its resource base. Proved reserves totaled 24.8 Bboe at year-end 2015 with additions from Abu Dhabi, Canada, Kazakhstan and Angola , unconventional resources in the Permian, Canada and Argentina as well as “by-the-bit” exploration successes in Australia, Iraq, Nigeria and Romania, the company said.

Velda Addison can be reached at