| NEW YORK
NEW YORK Exxon Mobil Corp (XOM.N) said its 2012 oil and natural gas output would drop 3 percent from last year even as it increases spending to bring several large new projects on line, and its shares fell 1 percent.
Despite the expected drop in 2012, production should increase by an average of 1 to 2 percent annually through 2016, the company told analysts in New York on Thursday.
Oil companies like Exxon, Royal Dutch Shell Plc (RDSa.L) and BP Plc (BP.L) have struggled to increase oil and gas output in recent years, forcing them to raise their spending to record levels to tap into difficult-to-reach fields.
Exxon, the world's largest nongovernment-controlled producer of oil and gas, saw production rise 1 percent last year to 4.5 million barrels of oil equivalent (BOE) per day.
That modest growth came as the company spent a total of $36.8 billion, just shy of the $37 billion it expects to spend annually for the next five years.
That spending will go toward nine major project startups this year and in 2013, the company said, followed by 12 projects in 2014, which will help it bring on new production of more than 1 million BOE per day over five years.
"The industry is in a period of high capital investment," Exxon Chief Executive Rex Tillerson told the meeting.
Spending on new projects is likely to push the company's return on capital employed (ROCE) this year below the 24 percent of 2011, he said.
While Tillerson declined to comment on whether he was looking at new acquisitions, he said that at current prices there were a number of interesting properties on the market in North America, and Exxon was seeing "a lot of very attractive things that are walking through the door."
Exxon spent $1.7 billion last year to buy two private companies that held large positions in the Marcellus Shale field, just a year after spending $30 billion to buy U.S. natural gas producer XTO Energy.
Explaining how Exxon's share of production fluctuates with oil prices, he said the 2012 output decline would be 2 percent if Brent crude averaged $90 per barrel, or 4 percent at $130 per barrel.
Exxon said its production of liquids would grow 2 to 3 percent annually on average through 2016, while its gas output would rise 0.5 to 1.0 percent.
Among the new projects coming on line is the Kearl Oil Sands development in Canada, which is expected to begin operations late this year with an initial production target of 110,000 barrels per day.
Other projects due to start up include four in West Africa and the first phase of the Kashagan project in the Caspian Sea off the Kazakhstan coast. Exxon owns 16.8 percent of that project, which is likely to see output of about 400,000 bpd when it comes on line.
Exxon shares were down 1 percent at $84.97 in midday trading on the New York Stock Exchange, lagging a 0.8 percent rise in the CBOE oil companies index .OIX.
(Reporting By Matt Daily in New York; additional reporting by Braden Reddall in San Francisco; editing by Dave Zimmerman, Matthew Lewis and John Wallace)