Integrated energy giant ExxonMobil (NYSE:XOM) has been producing less and less oil for three consecutive years. It looks like its growth plans have started to bear fruit, however, with the oil company's U.S. onshore drilling starting to turn the numbers around in recent quarters. While the oil and gas company has other projects on tap, it appears that Exxon's U.S. onshore production is only just getting started. Here's what you need to know.

Going the wrong way

In 2016 Exxon's average daily oil equivalent production fell roughly 1% year over year. In 2017 it dropped roughly 1.7%. And it 2018 it declined an additional 3.8%. For an oil company, producing less and less oil isn't a good trend. And, worse, it appears from the average annual numbers that that problem is getting worse. Add it all up and production fell roughly 6.4% over those three years.

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Luckily, when you get a little closer to the numbers things don't look quite as bad. For example, although average annual production in 2018 was pretty ugly, the numbers started to turn higher in the second half of the year. So production results have actually started improving, and that trend carried over into the first quarter of 2019, when year over year production was up 5%.

The main driver of this improvement has been Exxon's efforts in the onshore U.S. market, where its Permian drilling efforts have started to produce strong results. It has a number of other large offshore projects that have bright futures too, though results there are a little further off. But here's the thing: Exxon's got a lot more room to run in the Permian.

The size of the opportunity

In 2018 Exxon laid out its expectations for its onshore U.S. drilling effort. The plan was to produce 600,000 oil equivalent barrels per day by 2025. By the time 2019 rolled around, the company reported that it had materially changed its projections, increasing the amount of oil it expects to produce to one million barrels per day (a massive 66% increase) and stating that it would reach this new, higher goal one year earlier in 2024.

Exxon entered 2019 producing less than half the one million target, meaning the giant oil company is only around halfway through its U.S. onshore ambitions. So look for a lot more growth in the company's U.S. operations, even as other projects start to come on-line. But that's not the end of this story.

During the company's first quarter 2019 conference call, Senior Vice President Jack Williams explained:

This volumes ramp is supported by strong well inventory. In fact, by the time we reach 1 million barrels a day production level in the Permian, we'd have only drilled about half of our current well inventory.

So Exxon is on pace to double its production in the U.S. onshore space by 2024, and it will have only drilled half of the wells it has planned for the region. That means that production could go materially higher even after increasing by 100% over the next four years or so. And equally exciting, the company believes it can achieve 10% returns in the region even if oil is trading hands at around $35 per barrel.

There are complicating factors, of course, such as ensuring there's enough pipeline capacity to handle that oil. There's little point to drilling wells if the oil produced can't get to market. And the wells the company is drilling in the U.S. onshore space, often called unconventional, don't have the same production profile as other projects -- deepwater wells, for example, take a long time to build, but tend to produce oil at a fairly steady rate for a very long time. U.S. onshore wells can be drilled quickly, but appear to have shorter lifespans, with a strong burst of oil followed by steadily declining results (at least using current technology). So there's a bright future for Exxon's U.S. onshore efforts, even if it chooses to pull back from the current pace of drilling for other reasons. Still, this is a region for investors to watch very closely in the years ahead.