updated 3/8/2006 11:50:46 AM ET 2006-03-08T16:50:46

Exxon Mobil Corp. forecast Wednesday that its spending on oil and gas drilling, refining and chemicals manufacturing would rise from about $18 billion now to almost $20 billion a year between 2007 and 2010.

The world’s largest publicly traded oil company said in a presentation prepared for Wall Street analysts that roughly three-fourths of that amount would go to oil and natural gas exploration and production, and that this would help boost its output capacity by 2 million barrels a day by 2015. In 2005, Exxon said it produced more than 4 million barrels of oil equivalent.

Exxon CEO Rex Tillerson said the company’s estimated boost in spending “is not driven by short-term swings in commodity prices or earnings,” but rather reflects a methodical completion of projects already waiting in the wings.

“We invest our shareholders money wisely, in projects that remain attractive over the long term,” Tillerson said.

Tillerson said the company is also focused on reducing costs, pointing out that the company found $1 billion worth of operating efficiencies in 2005 and would hit that target again in 2006 — “more than offsetting inflation.”

He said Exxon’s work force is about 14 percent smaller than it was five years ago.

Tillerson said some Wall Street analysts believe Exxon has a “cash problem” because it had more than $33 billion in cash and equivalents at the end of 2005, and because this reduces the company’s potential return on capital employed, a key metric.

While he pledged to “minimize the cash on our balance sheets,” Tillerson said Exxon would not make short term investments and “we are not going to buy expensive volumes.”

Exxon said it earned roughly $16 for every barrel produced in 2005, meaning its return on capital employed was 40 percent higher than the average of its competitors, including Royal Dutch Shell PLC, BP PLC and Chevron Corp.

The Irving, Texas-based company identified 22 major projects that would start up between 2006 and 2008, including development of oil and gas fields in Canada, the Gulf of Mexico and West Africa. Exxon reported net profit of $36.1 billion in 2005 — the highest ever for a U.S. company.

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