The two major U.S. oil companies contracted their global footprint

In 2022, the global oil giants can be described as making a lot
of money.
But ExxonMobil and Chevron, two of the largest U.
S.
oil companies, said they were ready to shrink their global
footprints.
For now, the two companies have relented on large international oil projects and instead focused on more lucrative assets
closer to home.

Sell off overseas assets

In 2022, ExxonMobil sold or plans to sell assets in Chad, Cameroon, Egypt, Iraq and Nigeria, as well as some legacy assets
in the United States and Canada, according to FactSet.
This makes 2022 the year for which the company has sold the most assets since 2018
.

Since 2018, ExxonMobil has sold at least $15 billion worth of assets to reduce its global presence and focus on its most valuable assets
.
According to S&P Global Market Intelligence, ExxonMobil's oil and gas production in 2021 was down nearly 18%
compared to its peak production in 2011.
In 2011, ExxonMobil worked on dozens of projects around the world, with most of its revenue coming from outside the United States
.
Neil Dingman, an analyst at Truist Securities, said the days when ExxonMobil managed numerous international projects are over
.

The biggest case of ExxonMobil's withdrawal from overseas operations last year occurred in Russia
.
After the Russian-Ukrainian conflict, ExxonMobil tried to withdraw from a large oil and gas project that has been operating in Russia since the 90s of the 20th century, after which the Russian government completely cleared ExxonMobil's interest in the project, causing significant losses to the company
.

Meanwhile, Chevron's international oil and gas production fell 3%
in 2022 after concessions in Thailand and Indonesia expired.
In 2022, Chevron withdrew from Myanmar
.
Previously, the company has sold assets
in Azerbaijan, Denmark, the United Kingdom and Brazil, among others.

ExxonMobil had 18 percent less land reserves for active wells in 2021 than in 2010, and Chevron 40 percent
less in 2021, according to FactSet.
However, with the cost cuts, the profits of both companies increased
significantly.
Wall Street analysts expect both companies' profits in 2022 to be the highest since
2008.

Investment focused on the Americas

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

Market participants expect ExxonMobil and Chevron's Western Hemisphere-focused investment strategy to continue for several years
.
Currently, both companies are prioritizing increasing shareholder returns and cutting costly drilling projects in remote areas
.
The two companies have retreated from Southeast Asia, West Africa, Russia and parts of Latin America, both proactively and reactively, but in any case, the era of both companies expanding around the world is over
.

Respect investor choice

Ben Cahol, a senior fellow at the Center for Strategic and International Studies, a Washington-based think tank, said: "At present, ExxonMobil and Chevron are rarely going to new regions
.
This is a natural consequence of
investors demanding higher returns.
”

Previously, Chevron and ExxonMobil had been looking for oil globally to increase their own reserves, and investors would value
oil companies based on reserves, a key metric, Kahol said.
However, the advent of U.
S.
shale has eased oil companies' concerns
about obtaining oil supplies.
Since then, shareholder opposition to excessive spending in the sector has led oil companies to shrink their global footprint
even further.

In December 2022, ExxonMobil said that The company will spend up to $25 billion a year by 2027, in line with previously announced plans but below pre-pandemic levels
.
The company also plans to cut costs
by $9 billion by the end of the year compared to 2019.
Chevron said spending would increase 25 percent this year to $14 billion, though still well below its pre-pandemic budget
.

In December 2022, Chevron CEO Mike Voss said that strategies with low payout levels would win back investors
.
Many investors have fled the energy sector
after years of low returns due to excessive spending.
The energy sector of the S&P 500 outperformed the S&P 500 as a whole last year, with the energy sector up about 59% in 2022, while the S&P 500 fell 19%
for the year.

However, Kevin Holt, a portfolio manager at investment firm Invesco Investments, said it was too early to talk about oil companies winning back investors, and most institutional investors were still shunning oil companies
.
"Institutional investors don't think the industry will abide by capital discipline, and it will take some time
for investors to believe that oil companies have permanently changed their spending habits," Holt said.
”