ExxonMobil, partners waive interest on Stabroek investments – Govt

…though entitled to interest under APNU/AFC-signed PSA

To dispel any speculation about ExxonMobil’s earnings from its investments in the Stabroek Block, the Natural Resources Ministry has clarified that Exxon is not receiving any interest.
According to the ministry in a recent missive, Exxon and its co-venture partners CNNOC and Hess Corporation, all agreed to waive receiving interest payments- which they would have been entitled to under the Production Sharing Agreement (PSA) they signed with the former A Partnership for National Unity/Alliance For Change (APNU/AFC) Government.
“Annex C of the PA grants the contractor the right to recover interest and financing costs… as a result, EMGL and the Stabroek Co-Vs would be within their rights under the PA, to charge interest to the cost bank in one of two ways;”
These ways include charging interest on the costs that have not been recovered, currently standing at US$8 billion. Another method they could have used, according to the Ministry, was to fund their operations and investments through bank or parent company loans.

“However, they have never done this. They have only been funded via equity injections and by cash from operations that was not returned to their parent company. Interest could (also) be charged on costs not recovered. The cost bank could have an interest component, but the Co-V’s have also made the conscious decision not to do this to date,” the Ministry added.
Only recently, ExxonMobil had announced its second-quarter earnings of US9.2 billion while adding that its Cash Flow from operating activities was US$10.6 billion and cash flow from operations excluding working capital movements was US$15.2 billion.
In addition, it stated that shareholder distributions of $9.5 billion included $4.3 billion of dividends and $5.2 billion of share repurchases, consistent with the company’s announced plans.
“We delivered our second-highest 2Q earnings of the past decade as we continue to improve the fundamental earnings power of the company,” Chairman and Chief Executive Officer (CEO) Darren Woods stated.
He further stated, “We achieved record quarterly production from our low-cost-of-supply Permian and Guyana assets, with the highest oil production since the Exxon and Mobil merger. We also achieved a record in high-value product sales, growing by 10 per cent versus the first half of last year.”
“We closed on our transformative merger with Pioneer in about half the time of similar deals. And we’re continuing to build businesses such as ProxximaTM, carbon materials, and virtually carbon-free hydrogen, with approximately 98 per cent of CO2 removed, that will create value long into the future.”
However, some of the financial highlights include its year-to-date earnings were $17.5 billion versus $19.3 billion in the first half of 2023. The company also stated that it is on track to deliver cumulative savings totaling US$5 billion through the end of 2027 versus 2023.
EEPGL Vice President and Business Services Manager, Phillip Rietema, had related in July that the oil giant has only recovered some US$20 billion of the US$30 billion investments in Guyana as of the end of 2023 while asserting that the Guyana Government has been getting “the lion’s share of the profits”.
“Under the agreement, you take the revenues that are earned, and then its split between what we call cost oil and profit oil. Cost oil…that is oil that we’re entitled to as the contractor to repay our cost. And so, in the early stage of development, as we are today where we’re investing a lot, up to 75 per cent of the revenues are available for repayment of those costs.”
“Then the remainder is considered profit oil and that’s shared 50/50 between the contractor group and the government. In addition…there’s a royalty of 2 per cent of revenue that is paid to the government and that comes out of the profit oil share of the contractor group. So, the contract is structured in a way that the Government of Guyana, and the people of Guyana are always going to have the lion’s share of the profit…52 per cent of the profit is for Guyana and 48 per cent for the contractor group,” Rietema had outlined.
The Liza Phase One, Liza Phase Two, and Payara projects, which are producing overall more than 600,000 barrels of oil per day, account for the three floating Production, Storage and Offloading (FPSO) vessels operating in Guyana’s offshore Stabroek Block.
ExxonMobil has been present in Guyana since 1999 and initiated exploration activities in 2008. According to the provisions of the 2016 Production Sharing Agreement (PSA) signed under the former A Partnership for National Unity/Alliance For Change (APNU/AFC) Government, 75 per cent of gross revenue goes to cost oil while Guyana gets a total of 14.5 per cent from the remaining revenue and royalty and Exxon gets 10.5 per cent.
Under the new conditions of the model PSA that the People’s Progressive Party/Civic (PPP/C) Government has implemented, the cost recovery ceiling has been lowered from 75 per cent to 65 per cent.
This is in addition to including terms for all future PSAs to feature the retention of the 50-50 profit-sharing after cost recovery; the increase of the royalty from a mere two per cent to a fixed rate of 10 per cent and the imposition of a 10 per cent corporate tax. Additionally, Guyana stands to benefit from as high as US$20 million signature bonuses for the deep-water blocks and US$10 million for the shallow-water blocks based on the model PSA.
The model PSA is being applied to future oil contracts, which will likely be signed once the Government reaches agreements with the companies that were successful at Guyana’s inaugural oil block auction last year.