$XOM Exxon Mobil Q1 2024 Earnings Conference Call

$XOM Exxon Mobil Q1 2024 Earnings Conference Call

good morning everyone and welcome to Exxon Mobile corporation’s first quarter 2024 earnings webcast today’s call is being recorded I’ll now turn it over to miss Marina matalina please go ahead good morning everyone welcome to exen Mobile’s first quarter 2024 earnings call we appreciate you joining the call today I’m Marina matulin skaya director of investor relations I’m joined by Darren Woods chairman and CEO and Kathy Michaels senior vice president and CFO this presentation and pre-recorded remarks are available on the investor section of our website they are meant to accompany the first quarter earnings news release which is posted in the same location shortly Darren will give you an overview of our performance then we’ll take your questions during today’s presentation we’ll make forward looking comments which are subject to risks and uncertainties please read our cautionary statement on slide two you can find more information on the risks and uncertainties that apply to any forward-looking statements in our SEC filings on our website note that we also provided supplemental information at the end of our earnings slides which are posted on the website and now please turn to slide three for Darren’s remarks for joining us our strategy and the way our people are executing created significant value in the first quarter we delivered $8.2 billion of earnings and 14.7 billion of cash flow even more important we continue to strengthen the underlying earnings power of the company an important driver of this improved earnings power is our ongoing focus on structural cost savings which reached $10.1 billion in the quarter versus 2019 furthering our progress towards our goal of $15 billion by 2027 capex in the quarter was $5.8 billion as we continue to invest in Advantage growth projects that will drive future earnings and cash flow at the same time we further strengthened our balance sheet bringing our net debt to Capital down to 3% the lowest in more than a decade to reward shareholders we distributed $6.8 billion in cash including $3.8 billion in dividends for all of 2023 exom mobile was the third largest total dividend payer in the S&P 500 only Microsoft and Apple paid more we also repurchased about $3 billion of shares BuyBacks were temporarily paused until the shareholders of pioneer voted on the combination of our companies which they approved red on February 7th post close we expect BuyBacks to ramp up to a pace of $20 billion a year our ongoing success this quarter reflects the intense Focus we have had for the past seven years on improving every aspect of our business we developed a strategy tied more directly to our core competitive advantages we reorganized the company to create a group of centralized organizations that fully utilize the sign ific synergies between our businesses we set and met ambitious plans to improve the fundamental earnings power of the company and we established a track record of excellence and execution that is second to none our focus on shareholder value extends beyond the work we’re doing to drive profitable growth I’ll give you three examples from the quarter that demonstrates how we’re working to ensure that the value we’ve created is not diminished through third party actions first we followed for arbitration to confirm our rights and establish the value that the Chevron H transaction places on the Guyana asset this will allow us to evaluate options to maximize the value for our shareholders any responsible management team would do the same second we’re continuing our lawsuit against two special interest activist masquerading as investors we’re asking the court to require the sec’s existing rules be consistently applied in order to restore the Integrity of the system we believe the system will only work properly if the rules are clearly understood and clearly applied to all parties and third we successfully defended the Pioneer merger against a frivolous lawsuit designed to abuse a legitimate legal process these actions are so common they are often referred to as a quote merger tax in our case however the Court ruled in our favor and sanctioned the lawyer for operating in bad faith while the results of these efforts may not show up in any discreet quarterly result they underpin long-term value and demonstrate our strong commitment to doing what’s right I’ll leave you with a few key takeaways our work to improve the fundamental earnings power of Exxon Mobile is continuing a pace by executing with Excellence on our strategy we expect to grow our earnings potential by an additional 122 billion from 2023 to 2027 at constant prices and margins a growth rate of more than 10% per year a significant driver of this earnings growth will be our delivery of additional structural cost savings toing $15 billion by 2027 in the quarter we continue to deliver unprecedented success in Guyana with growing production creating additional value for our shareholders and the the guy Andes people our strategic projects which are another important driver of our planned earnings Improvement help deliver record first quarter refining throughput and strong performance chemicals volume growth and there are more projects planned for startup in 2025 all of this is without the contribution of pioneer with Pioneer we’ll be positioned to drive earnings cash flow and shareholder distributions even higher we continue to work constructively with the FTC as they conduct a very thorough review and remain confident that no competition issues should hinder the transaction we’ve been working diligently on our integration plans and we’re ready to begin executing day one on the significant synergies this combination will create looking beyond our plan period into the future we see attractive large- scale opportunities to leverage our core capabilities in our existing businesses and in brand new markets with brand new products something our competitors can’t do the success of this company and our unique set of competitive advantages is built on our greatest strength and most important Advantage great people they are the best team in the business able to successfully overcome any challenge through their work at Exon Mobile they’re making a positive difference in the world meeting people’s essential needs for energy and products today and far into the future I’m extremely proud to represent them and cannot thank them enough before we begin our Q&A session I wanted to take this opportunity to introduce Jim Chapman our new vice president Treasurer and investor relations Jim brings a bread of Capital Market and functional experience to this role is looking forward to working with all of you thank you thank you Darren now let’s move to our Q&A session is a courtesy to the others in the queue we ask all our analysts to limit themselves to one question however please remain on the line in case we need any clarifications with that operator please open the line for our first question thank you the question and answer session will be conducted electronically if you’d like to ask a question and please do so by pressing the star key followed by the digit one on your touchtone telephone the first question comes from Devon McDermot of Morgan Stanley hey good morning thanks for taking my question and Jim congrats on the new role if you’re on the line um I want to start on Guyana and not on the arbitration process although I appreciate some of the posted prepared remarks on that but instead just on the operations and growth potential yet another really strong operational quarter and then you’ve now also taken FID on whiptail which is new since the last call and gives us now line of sight in all the plan development through the end of this 2027 guidance period And if we step back as you’re bringing these new fpsos online you also have very active exploration and Appraisal program so I was wondering if you talk a little bit about that exploration and Appraisal strategy here what you’re focused on over the next few years the additional opportunities you see and how that influences your view of know longer term growth potential post 2017 Guyana yeah sure good morning Devin I’ll uh try to address the broader picture here for you I’ll start though with uh just following up on the comment you made around the operations performance of the operations I think you know while we build these uh projects and bring them on in in record time um under budget you know the value that the organization then drives from them through the operational optimization and looking to Debon like brings a uh significant addition value and I continue to see opportunities for to do that to do that as we bring these uh platforms on so feel really good about the collective effort of the organization to drive value of the plans that we already have in place through 2027 as you say we’re we’re doing uh more exploration I think every time um we drill we’re collecting information that allows us to better characterize um that whole um block and and focus in on potential new areas of opportunity and that’s basically the work that our teams are very engaged in is continuing to collect information continuing to do seismic continuing to drill and through that work uh update our Reservoir models update our understanding of that block and then look for New Opportunities and that’s going to be a continuous progress so I feel you know that’s that’s what the work that we’re doing uh and as we develop that learn more we’ll put together more uh you know longer longer plans and um once we have confidence that um we’ve got a clear line of sight to how this plays itself out going forward in the future we’ll bring that to um to the community and share that with all of you Kathy anything to add I just mentioned we had planned kind of four of what I’ll call Wild Cat uh Wells this year we did have one Discovery a new discovery blue fin uh we haven’t Quantified what that is yet but as you mentioned Darren most of the drilling that we’re doing is more about uh supporting existing production and the next couple of projects that we have coming online great thanks the next question is from Neil meta of Goldman Sachs good morning Darren Kathy team I just want to build on the comments on structural cost saving so slide Seven’s helpful it gives us a little bit more of a breakdown by each of the four segments of uh how you’re thinking about cost savings to get to the $15 billion but I was wondering if you could put a little bit more meat on the bone so you can give us examples potentially by segment of things that you’re doing so we can uh bring bring that story to light yeah I’ll I’ll talk maybe on the macro uh with respect to where the costs are coming from and and how they break down and then I’ll let Kathy add any specifics that she wants to but I I just say Neil if you look at what we’ve been doing here in the 10 billion dollars of uh structural cost savings that we’ve achieved to dat really has to do with the reorganizations that we started back in 2018 and the continued progress we make and centralizing activities finding areas of um synergies and uh focusing on how do we drive the most value out of those synergies eliminating areas of duplication taking expertise um and experience that we’ve had in the past scattered across the corporation in different uh silos putting those into centralized organizations getting the collective wisdom of that group and experience to focus on some of our toughest challenges uh part of that is making sure that we’re the lowest cost supplier and so reducing cost is a big challenge that the organizations’s looking at and these experts are continuing to look for opportunities to optimize and to strike you know the balance of um higher reliability safer operations while continuing to find efficiencies and that’s exactly what they’ve been doing I think it’s important to put the cost reductions in context uh that you know as we’ve made these reductions our reliability has improved as we’ve made these reductions our safety has improved we have less injuries uh on our facilities all around the world as we’ve made these reductions our environmental performance has has improved and so it’s a great example of how uh we can do both of these things with the right uh experience and capabilities and so that’s and I think you know we’re we’ve just are at the early stages of the last of quantifying the value and and developing a clear line of sight to how we can take advantage of the most recent centralized organizations we’ll be going through a plan process this year now that we got those organizations in place and working with the rest of the the businesses and the other centralized organizations to figure out you know what more can we bring to the table but I’m extremely optimistic that not only will we hit uh the 15 billion um certainly by 2027 but I suspect we’ll find even more and then with respect to I say macro breakdown I think the way to think about it is roughly split uh evenly today between um our Upstream in our product Solutions business C any specifics you want to add yeah I guess a little bit more more color I’ll add if I just talk about Neil what went on in the period you know we saw most of the year-over-year incremental savings coming through upstream and coming through Energy Products in Upstream that was driven uh largely by operational efficiencies and uh in the information that we would have pushed earlier this morning in terms of the more thorough discussion of the investor relations slides that we uh published on our website I talked about an example at curl where we’ve basically uh automated kind of all of our heavy heavy Trucking uh there and how that drives both as Darren mentioned an improvement overall from a safety perspective but also operating efficiency with the logistics and just efficiency of that Trucking operation if I then contrast that with Energy Products we had a really heavy slate of Maintenance in this past quarter and those turnarounds were actually done more efficiently than the same turnarounds the last time the company would have had to have executed them and so you know that drove structural cost savings for us if I then try and look forward you you know what do we anticipate between now and 2027 part of what I mentioned is some of these centralized organizations are really responsible for driving savings across the company and so we have our Global operations and sustainability organization that organization is using statistical maintenance analysis across our entire footprint in order to drive better efficiency and Effectiveness in our planned maintenance activity and again as Darren mentioned uh that should drive Improvement in safety and importantly Improvement in reliability as well we have stood up last year a global uh Business Solutions organization and they’re really responsible for standardizing some of these big endtoend processes that we have you know procure to pay record to report um uh uh record to report as well as our planning activities and as we standardize those we can Implement um more technology in order to improve the automation of many of those activities when we Benchmark ourselves we know uh that we’re too heavy on manual activities relative to what we would consider Best in Class and so that should drive incremental savings and then I’ll just mention supply chain again another Central organization we stood up last year you know really trying to now leverage the scale of the entire company and so you know that’s all about logistics right um and how can we leverage our scale to drive more efficient Logistics how can we leverage our scale to drive more effective supply chain including utilizing more effective uh procurement and it’s also about then driving down kind of materials and broader inventory as we just get more efficient so as we look forward we have big savings expected kind of coming out of those areas thank you big numbers thank you you Neil the next question is from Roger Reed of Wells Fargo yeah thanks good morning um I’d like to come back to one of the things addressed in the opening comments on the uh Pioneer transaction and and the expectation of the Q2 close um can you just give us a idea of what you’re you know what final hurdles we’re we’re actually waiting for here um I know there’s various rules with the FTC and so forth in terms of days just curious what the what gives you the confidence on the Q2 close here yeah good morning Roger I I’ll I’ll give you just kind of a high level perspective I’m not going to obviously comment on the specifics of the discussion and the work that we’ve been doing with the FTC other than to say it has been an a constructive engagement they are uh we’re working with them cooperatively they supplied an enormous amount of material documents um contracts uh line items on Productions and sales and so I I think a very thorough review of this uh transaction as we’ve said all along we’re very confident that there are no antitrust issues use and I would just say we’re very optimistic that we’ll continue we’ll meet the objective that we set very early to close in the second quarter the next to the next question is from Betty Jen with Barkley good morning um thank you for taking my question maybe bring in um the question earlier about the cost savings uh bringing that in the context of the1 billion of earning growth potential you see between 2023 and 2027 um really appreciate the additional color given on the key drivers between Upstream Downstream and structural savings but I want to ask about the Cadence of that earning growth profile whether that’s expected to be rable through the period And what do you see as the upside and downside risks to that Outlook sure I’m happy to answer that question and so if you look at uh overall we’ve said 15 billion in cost savings from 2019 to 2027 we’ve achieved kind of on a year-to date basis about 10 that means we have about five to go um you know you you wouldn’t expect that cost savings or other drivers of improvement are necessarily uh rable I mean we see uh different initiatives kind of come quarter to quarter so I’d say I don’t expect it to be to be ratable but I expect us to put up meaningful cost savings every year if you then look at some of the other drivers of that earnings growth I think it’s really important as you think about the emps business uh that that growth really goes hand inhand with execution of strategic projects which also drives our high value products growth you know we expect to about double the volume of high value products from 19 to 2027 and in 2027 we expect those uh products will comprise about 40% of our total earnings at a kind of constant margin this year we’re relatively light on strategic projects in emps next year in 2025 we will be really heavy and so we’ll have the Strath Kona uh renewable diesel uh coming online we’ll be executing the uh resid upgrade project um in Singapore and we’ll have China One coming on you know amongst other things including increasing our capacity for advanced recycling at certain locations so we have a lot of activity that will then start to bring incremental earnings power in 2025 uh and Beyond and then I’d say if you uh look over at what’s happening in the Upstream business you know we’re continuing to get growth obviously out of Guyana in the peran you know that growth in advant managed assets is a real key driver in terms of overall growth and Upstream one of the things you would have seen in our presentation is that on a year-to-date basis now 44% of our production volumes in Upstream are from these advantaged assets which are a key driver of earnings growth and then I’d say the other thing to think about in Upstream is we will start to get production growth so actual volume uh growth Improvement but that tends to come more strongly in the Beyond 2025 period so hopefully that gives you a good feel for some of the big drivers and when we would be anticipating them starting to get reflected in our underlying earnings yeah I I’ll just add U to Kathy’s comments if you look at Cost reductions um which Kathy talked about the value of those contributing to our earnings growth I think the there’s not a lot of downside there I think with the structural changes that we’ve made and have yet to realize the benefits of we’ve got a pretty good track record now here over last seven years of actually seeing those uh what were initially Concepts uh translate into bottom line savings and so we’ve got a very high degree of confidence and that frankly our challenge in reducing cost or you know driving improvements in the business is not a lack of ideas or opportunities it’s it’s how we prioritize and execute execute the highest value of those so we’ve got a great opportunity set for improving our own uh business and it’s just a question of you know pay facing that in a way that maintains the other objectives that we have in the business in terms of delivery uh day in and day out on the the revenue side of the equation and to Cathy’s point the Strategic projects are kind of at the heart of growing um the revenue and the value side on the the top line and I would say you know we recognized going back in time that critical to doing that was Advantage projects and then an organization that had the capability to uh effectively deliver those Advantage projects and then finally an organization that was capable of uh uh starting those up seamlessly and getting them online quickly and I think if you look at the big projects that we brought on to date all this this portfolio projects we developed back in 2018 we’re continuing to execute that the ones we brought online we’ve been very pleased with one with the project execution the Technologies organization’s contri contribution to that and then how we’ve started up and run those and so I think that gives me a lot of confidence going forward that uh the model that we put together the focus that we’ve put in each of our businesses to contribute their area of expertise to overall corporate success is demonstrating a lot of success and so I’ve got a lot of confidence going forward uh that will deliver that continue to deliver that portfolio that’s demonstrated its value for what to what we’ve done to date uh and so I think uh feel pretty confident about delivering through 2027 and frankly beyond great thank you that’s a really robust pipeline of projects to watch um thank you for all the detail answer sure the next question is from Bob bracket of Bernstein research good morning I had a question around uh on the the use of the the phrase carbon materials uh seems fairly new it feels fairly New Deals again uh pursuing some things in the battery chain could you give us a little more flavor on what you’re contemplating there sure good morning Bob it’s good to hear from you I think you know one of the points we’re trying to make is um this this company has a very broad Suite of capabilities that’s anchored frankly in uh technology and a technology that’s focused on transforming hydrogen and carbon molecules and a lot of what we’ve done to date uh and the value that company’s generated over the the last many decades has been a function of energy and the consumption of those molecules to meet the growing demands for energy but we also have a very broad portfolio of other products that we make through that uh molecule transformation expertise uh into the chemical business as well as lubricants and fluids and things that we do out of our refineries so there’s a much broader set of capab abilities and products than I think frankly what people give us credit for I would just point to Proxima as a great example of some time back we recognized that the demand for gasoline would would at trit and particularly in developed um countries and the question we challenged our technology organization with was how can we use these molecules to make other products that are required to meet other needs in society and proxim I think while it’s early in its development it’s going to be it’s going to demonstrate that we can take that expertise apply it to a a feed stock that will um become more and more advantaged with time and make other products that are are needed for to for the world and that will bring a lot of significant benefits in those applications the carbon Ventures and the carbon materials is a very similar uh initiative it’s just a little earlier and its construct if you look at uh the world’s efforts to decarbonize it’s clear to us that carbon over time will become uh more and more advantaged feed stock and so the challenge we’ve given our organization is what can we do with carbon molecules how can we meet uh uh growing needs uh and large markets and they have to be large markets because we’re going to do if we’re going to do something that moves the needle for the corporation we have to do it at scale and so what we’re looking at there is how do we use the capabilities we have in molecule trans transformation applied to carbon to meet needs batteries are just one example carbon fibers are another there’s a number of things that today uh we have there are applications for but uh there’s either a performance uh Dimension that needs to be improved or a cost Dimension that needs to be improved and and we think we have a line of sight for how we can do that how we can improve the performance aspects using our our um technology capabilities and at the same time find ways to reduce the cost of production so it’s early days I would say uh we put it out there in this call to make sure people are beginning to think more broadly about what this company is capable of and how our future could evolve in a very different direction than where we’ve come from and the beauty of how we’re positioning ourselves is um we have we’re using the same core capabilities and advantages and so it gives us a lot of optionality and flexibility and to the extent these other new markets work out and demand picks up and we see great opportunities we can shift more resources into that space if it takes us longer there or if say the transition takes longer we’ve got our base business and continue to invest in products that the world needs today and so we’ve got the ability to adjust depending on how things evolve and and depending on um what direction the world goes so I think it’s it’s just a great example of uh again anchoring back on some very core capabilities that have very broad application and we’re excited by what we see as some potentially very high value new markets with some very high value uh unique uh products that we can supply to meet to meet those needs very clear I question would be the materiality threshold should we think about runways to billion dooll businesses or 10 bill dollar businesses or or how is that too simplistic no I think it’s a good A good measure to think about he’s got to be over a billion if it’s going to be material and so we’re looking at uh very large markets into the billions great very clear thank you the next question is from Jason gaban of TD Cowan yeah hey morning um I had a I had a question about uses of cash and the balance sheet um I think this quarter we’re seeing uh exons net that the cap move down some of your peers are are starting to move up uh as Commodities come off a bit and that’s seemingly a bit of a differentiator between you and Pier so I thought it’ just be a good opportunity if you could remind us how you think about um you utilizing that balancy capacity moving forward um given you’re still operating from a position of strength whether it be deploying for future m&a increasing BuyBacks or or other opportunities thanks so I’m happy to talk about that as you correctly reference our net debt to cap has come down it’s about 3% now um our approach in terms of capital allocation has not changed it continues to be very consistent you know first and foremost we want to make sure that we’re making investments in this business that ultimately Drive the long-term earnings and cash flow growth that create the virtual cycle of us then being able to enhance shareholder returns and return cash to shareholders via dividends as well as a more consistent share of purchase program so that’s job number one uh I would mention that capex is not rable I I’ve seen many people comment on um a light capex number that we had in the first quarter uh we are very much on our plan many times our capex is influenced by Milestone payments just as an example and so it is not ratable over the course of the year we have guided to 23 to 25 billion in capex and that uh guidance remains we’re very much on plan when we think about investing in our business obviously we’re very focused on the advantaged Slate of Investments that we have organically in front of us but obviously m&a is another type of investment that we make you know again where we see we can make one in one equal more than two uh largely by adding synergies to uh some type of acquisition and obviously getting ready to close the Pioneer acquisition would be a terrific example of that we know a strong balance sheet is a competitive advantage and so we uh have continued to really maintain and strengthen that balance sheet this quarter we paid down a little over a billion in debt that’s part of the reason why you see our net debt uh to cap ratio coming down uh that gives us a lot of flexibility to ensure that we’re consistently investing in the business through the cycle and it just gives us uh optionality understanding that we operate in a very cyclical business and then you know clearly we’re looking to reward our shareholders I think you see that with our very consistent approach to the dividend you know it needs to be sustainable it needs to be competitive it needs to be growing we obviously ra the quarterly dividend in the fourth quarter by by 4 cents and continue you know to review that uh over time I would mention one thing with regard to share repurchases we did have the Pioneer vote this quarter and so we were out of the market for a period of time we did about $3 billion in share repurchases um a run rate to hit the 17 a half which is what we’ve kind of guided to this year would be more like 4.4 billion right so our program will naturally dial up our execution so that uh we’re on track to complete the 17.5 billion share of purchase program on a standalone basis and then I would remind you that we’ve said uh we anticipate taking that program Pace up to 20 billion annually after we close the Pioneer acquisition so we feel really good about where our balance sheet is at and our consistent Capital allocation strategy and that that will drive long term returns for shareholders and I would just add to Kathy’s uh points that U and just remind everybody if you look at um where we stand today and JC made the point that we’re deviating from our peers in terms of continuing to generate cash and drive down uh net debt that’s anchored in the strategy that we put in place in 2018 which is find Advantage projects and invest in those to grow the earnings power of the of the business and that’s now beginning to manifest itself and so I think you got to have a long-term view on this uh having a a robust balance sheet to make sure that we’re positioned when when opportunities come along and we see clear advantages to invest that we have the capability to do that thanks for the question yep got it thanks the next question is from Ryan Todd of Piper Sandler thanks um maybe one on on chemicals any you’re your chemicals businesses the two segments uh continue to show you know kind of modestly better than expected recovery um along the bottom or off the bottom here is this more of a feed stock Tailwind that we’re seeing in the in the near term are you seeing any improvements that are noticeable in in terms of demand and overall Global Supply demand um and I guess in the meantime while things are weak what are you managing to do with your product mixer operations to drive relative performance there in chemicals yeah sure Ryan I’ll I’ll take that um first thing I would say is uh if you look at the chemical business and and kind of the margin indicators that we use to judge the health of the chemical business we are at a historic kind of bottom of cycle number and so I think you know it’s a very challenging uh chemical markets today as I know many of you know um but even in that very challenged Market we um are continuing to deliver very good results um and I think if you compare similar you know markets that were even close to these bot cycle conditions we were in a very different place in the past with respect to earnings than we find ourselves today where we delivered close to $800 million of earnings this quarter despite the very difficult uh market conditions those market conditions are driven uh more by Supply than demand frankly we’re continuing to see you know growth in demand not as high as we’ve seen historically but continued good growth and frankly in the first quarter saw some of that pick up the challenge has been the supply that’s come on uh to meet that growth and so that is depressing overall industry margins as you know the Investments that we make and the way we run our business is to make sure that we’re advantaged versus um you know the average chemical uh player and so even in these markets that are set by uh other capacity the work that we’ve done to position ourselves and uh more advantaged in a more advantaged position than competition continues to deliver a value you can see that uh with the growth not only in the high value products which are coming on with our with our projects and frankly that growth is in line with what we had expected so we’re continuing to see the demand for the high value products that we’ve invested in but we’re also seeing it in our base volume uh value in those with respect to um how we positioned ourselves and so it’s and and we’re seeing advantages in the structural cost reduction so I would tell you every part of what we’ve been doing to improve the earnings power of the organization is manifesting itself in our chemical business uh and showing up and uh differentiating uh earnings and feed to your point feed advantages play an important role in that so that’s yet again another advantage that we have versus uh the typical industry player but that is reflective of the broader strategy that we have so I think we feel good about where we’re at in a very difficult Market um our view is that market those market conditions you know are going to be with us for a little while here going forward but we also feel like we’re well positioned to be successful there and as that shakes out and some of the less um able competitors um have have you know no success in this space we’ll we’ll see uh growth continue to move and and eventually we’ll see margins pick back up and we’ll be very well positioned and just the other thing I’d add to that is I think if you look at our uh chemical businesses performance and compare that to peers and other players you see the differentiation and the excellent execution really coming through um you know we’re in clearly bottom of cycle conditions right now and yet we’re still generating pretty good earnings and cash flow in our chemical business and and then I would just mention that as Darren noted you know our footprint tends to be North American weighted and so if you just look at our PE and PP footprint we heavily North American weighted and relatively lightly weighted to Asia compared to rest of industry and Asia is especially at very very bottom of cycle conditions great thanks both of you the next question is from Steven Richardson of evocore isi good morning um Darren I was wondering if you could talk a little bit about the Baytown project um and maybe just if you could give us a little bit more on what your view of adequate incentives there would be um if a know if the PTC um on green hydrogen was um Extended to Blue would that be sufficient to sanction the project and then you know sorry just as a follow onto that you know as you talk about a Level Playing Field um across and Technology neutral um is your view that you know a new you know gray hydrogen ATR should get some sort of incentive maybe you could just give us the context of how you’re thinking about that project and what it needs to move forward thank you yeah sure I’m happy to do that Steve the um what I would say is you know it’s a it’s a that work we’re doing to develop it is I think demonstrating the difficulty of starting brand new uh businesses in value chains were none exist in that we’re kind of uh simultaneously trying to build uh demand trying to to build um Supply and then trying to in the early days of this Market establish uh Financial incentives to do that and so Three core key uh variables to a successful business all kind of uh basically being generated uh for the first time in this space along this value chain so I just just put that out there is it’s u a challenging construct but but frankly one that plays to our strengths and the ability to look along the entire value chain and we are uniquely situated to manage each each piece of that there are very few if any companies out there that have a portfolio uh and capabilities that extend end to end along this value chain so I feel good about what we’re doing there and the work uh that we’ve put in place and frankly it looks to me uh like a very uh viable project we are uh continuing to progress that uh but it will require that the necessary incentives are in place and with respect to what’s required with with incentives I would say the IRA and the incentives that were developed as part of the IRA are enough to do that uh the challenge is taking the IRA which I believe rightly focused on carbon intensity and incentivizing carbon in intensity uh Translating that uh legislation into regulation and if the regulation um reflects the intent of that legislation and writes the the rules focused on carbon intensity that will be enough to justify and to incentivize and give us a return on this investment uh that’s and we don’t Focus so much on the the green the blue and you know color schemes we instead focus on how can we meet what is ultimately the objective here which is to reduce the CO2 associated with production of these products and we think all the work we’ve been doing um in our facilities and our feed stock and decarbonizing those contributes to that and so we feel like we’re well positioned with the existing set of incentives as long as those incentives are fairly reflected in the regulations in the Level Playing Field what I mean by that is staying focused on carbon intensity and ignoring colors very clear thank you okay the next question is from John Royal of JP Morgan hi good morning thanks for taking my question um so I just had a question about the refinery sale in France um I know you have a a very ambitious program for growth in the downstream business uh but you have been trimming uh and hydrating a bit with Masset sales um other majors are also reducing their European footprint in refining can you just speak to how strategic the remaining European portfolio is and could we see some more assets shake out in European Downstream yeah sure I would tell you um what you’re seeing with the uh sale in France is really the latest in what’s been a fairly long Trend uh with us focused on um high-rating refineries to refineries that are that have the capability to be um you know to address a broad Suite of products and high value products and so integrated facilities that make not only petroleum products but also make um um chemicals and lubricants and and basically a broad array of high value products and so we’ve been overtime focused on that they need to be Advantage sites they need to be we have a cost of supply curve I think you all have heard me talk about this many times across all of our businesses but we we look around the world and make sure that our facilities are um on the low cost of Supply so that as the margins move up and down that we never become the marginal supplier and having an integrated facility helps with that uh but it also uh acts as a hedge to make sure that we’re not dependent on anyone sector for the success of one of our manufacturing facilities the reorganizations that we’ put in place have helped greatly with this and if you think about these integrated facilities we used to have them split up amongst different parts of the organizations the B different businesses running them and in fact even different manufacturing organizations running them today that’s not the case today they’re being run by a single uh business with a single leadership team and so I feel like feel very good about that but it is this continuing High gr we we were doing it all the way back when I was president of the refining company so it’s been a long-term strategy we’re not in a hurry we’re taking our term to make sure that uh we find the right um you know buyer that has the right value proposition one that uh exceeds our own internal values and if we can find that we will then transa transact if we can’t we’ll continue to optimize and improve those refiners to the best of our abilities but I would say we’ve worked our way down um the portfolio to we feel pretty good about the position that we’re in today uh that that the refineries that we have in the portfolio are advantaged uh have a mix of either feed advantages or product advantages or both and uh frankly our Focus has been on making sure they’re running reliably running safely running efficiently and these centralized organizations and our uh Global operations and sustainable sustainability organization have been a huge enabler to helping each of these facilities and our chemical plants our refineries uh lubricant facilities all um improve their performance uh run run better uh run more profitably run safer run more reliably so feel really good about the position that we’re in and we’ll continue to look at our portfolio it’s always been the case that we’re we’re looking to to make sure that the value we see in those facilities exceed the values that others might and U feel good about how we’re positioned there and just the other thing I’d add to that is the investment environment is certainly a bit more difficult in Europe you know if you go back and look at at the end of 201 22 the additional taxes that were levied onto the energy sector if you look at uh expanded disclosure requirements that Europe is looking for or if you look at you know regulation um around reducing uh carbon footprint and not necessarily implementing regulation that’s technology agnostic and focused on just reducing carbon intensity that all makes Europe a much def a much tougher investment proposition so that’s certainly one of the things that we look at in any place across the globe you know as we look to make future investment decisions thank you thank you next question is from baj Batar of RBC quite fitting to take the next question from an analyst uh sitting in London but um I just have one question um you have a lot of um LG coming into your port P folio um in the coming years the golden pass guitar Etc you have a a quite a high oil waiting in in the current sales uh mix are you looking to diversify over time uh or you know would you like to maintain that kind of 80 to 90% um you know oil o linked exposure in your contract base over time thank you yeah good morning barage thank you I would tell you we’re not uh as focused on an absolute mix number uh as much as um the advantaged uh investment opportunities that we can find in those businesses we see you know long-term demand uh for oil uh continuing albeit with uh much lower emissions footprint as we continue to find ways to decarbonize uh we also see long-term demand for natural gas and so I think as we look at both of those both the liquids in in the gas side of the equation we see a long-term future there and an opportunity for this company to participate if uh we have advantaged projects that position us on on a low cost of supply and so that’s how we think about that and that Advantage position which manifests itself in cost of Supply as you know obviously manifest itself in above industry average returns which is you know the objectives that we set for ourselves and so that’s how we’re thinking about it and frankly we’ll let the opportunity that we find in these advantaged Investments set the uh um proportion of the portfolio that those represent we will not invest in uh in a project that I’m not convinced doesn’t one leverage our core uh competitive advantages that two then results in a project which is advantaged versus other and that three then is on the low cost of supplies because as good as you the market may look today out the window we know there are Cycles uh we don’t think the Cycles are going away and so we remain very focused on making sure that uh we take advantage of the upswings but we’re prepared for the downswings and will be very successful and as we just talked about in the chemical business great example of being in the very bottom of a downswing and continuing to generate cash and make make good solid earnings and that’s that’s the ambition we have for all of our businesses understood um and just as a followup to that um there’s obviously been in on going security challenges in in mosan Beek um and uh you know what is your view at this point on whether you’d be interested in doing a second floating facility because obviously monetizing the the onshore part is is become very challenging yeah I think you know uh obviously you you rightly point out there are security challenges there I think there’s been a lot of good progress made with respect to that I think um MOS the country of mosm Beek the the government of Mo mosm Beque recognizes the importance not only for the project frankly for uh the people of mosm Beek that um that needs to be addressed and and effectively managed I think they’ve made good progress in doing that my view is with time we’ve seen this in other places around the world that will get addressed and it we it will uh result in an opportunity to invest onshore with respect to onshore Offshore we frankly comes back to the point I made at the beginning of of your question which is it depends on you know the returns that we can um generate with respect to investment opportunities and how competitive those Supply points are if we can do that offshore we obviously will if uh it takes going on onshore to do that then we’ll focus on onshore but it will be a function of the the um the returns of the projects okay thank you very much the next question is from Josh Silverstein of UBS you thanks good morning guys um just wanted to see if I can get an update on the timing of the gas to power project in Guyana um and what benefits this may have to cost and operations in the country and if there are any other projects like this that you guys may be looking at over time thanks yeah sure I think this is uh something that we’ve been engaged uh with um the government on for for quite some time I think as we look at going into some of these uh some of the countries that are on uh a growth path on a you know developing path um we look for opportunities of how our footprint and and presence in those countries and markets can can help the people uh in the community and this is a great example of that of getting the gas that’s uh produced offshore onshore so they can you know replace what is a uh a Rel relatively inefficient High emissions power generation system that’s fairly unreliable with uh something that’s uh cleaner lower emissions and much more reliable and should be more much more cost effective and so I think it’s a kind of a win-win proposition uh particularly for uh the people of Guyana so we’re working on bringing uh that gas to shore our expectation is we’ll have that um you know brought up sometime uh into 2024 uh obviously the government’s working on the uh receiving end of that gas and responsible for putting in the power station that’s an independent project that’s developing of also working on the distribution system and so it’s really I think the impact of that will come when we get both uh pieces together and get that linked up in effectively delivering uh power to the market the next question is from Paul changen of Scotia Bank uh thank you hi good morning uh Darren in the presentation you talk about the direct air capture um can you give us some idea that and you’re saying that you you aim to reduce the cost by half and that won’t be sufficient so what will be needed in order uh how much is the actual cost reduction from the current level in order for that to be competitive for that to be a real business for you and also that can you talk about that uh how your approach or technology is different than what currently in the market especially one of your competitor in the US they already have a uh they they said that they have a commercial operation ready to and it’s going to come on stream very very very soon thank you yeah sure good morning Paul um yeah what I would say with I may start with the last point of your um comment which is yeah there are there are alternatives out there today versus what we’re working on the issue is the cost associated with them and we’re not looking at what we can uh commercialize in the short term based on uh what I would say is a very narrow Market of um limited customers who are willing to pay a very high price to to demonstrate a a level of decarbonization we’re focused on how we can make this technology uh broadly applicable at a cost that Society can afford so that’s we are very focused on the long term not the short term and our view is the U available Technologies today uh don’t meet the cost requirements and that’s you know somewhere between the $600,000 uh per ton of CO2 removed and our view is if you try to apply that across the emissions challenge the planet has um the the world won’t won’t be able to pay for that so we got to find a reduction our cost you know we’ve set an initial uh Target of cutting the cost in half just because that is a significant step change recognizing it won’t be enough but if we can get the technology if we can develop the technology to a point that that we’re successful there that gets us on this path and demonstrates the value of the concepts that we’re uh uh developing to to keep keep on going and drive further down with respect to the technology and how it compares to what’s commercially available out there I would I would say you know part of the reason why this is proprietary technology is today uh it’s proprietary and so I’m going to keep it that way I would say it is a a brand new approach there are others who out there working on uh new approaches as well which frankly we’re we’re happy about you know this is a tough challenge to break and I’m not pretending like we’re going to be the ones to solve it but I am confident that we will give it all all give it our all applying our capabilities others are doing that as I said in my prepared remarks uh that we posted you know it you know if there’s a breakthrough it doesn’t so much matter who has the Breakthrough I think we’re going to have a role to play because once we have a technology that gets to the right cost level you’re going to need Global deployment at scale and um my I suspect that the technology that’s will be required for the future lower cost direct air capture will be different than what we’ve got today and will require some of the technical capabilities that we have so I see a role for us uh in the future if this nut gets cracked uh we feel good about what we’ve seen so far but we’re very early into it and uh we we’re hopeful that we’ll make the progress that uh we’re aspiring to and and continue to drive the cost down did your last point you asked what I think to me if you’re going to be if if the world’s if it’s going to be affordable you’ve got to get into the 100ish dollars a ton of CO2 to start talking about broad deployment around around the world I think that you know that’s ultimately where we need to get to thank you everybody for joining the call and for your questions today we will post the transcript of our Q&A session on our investor website next week additionally we look forward to connecting again on May 29th for our annual shareholders meeting now let me turn it back to the operator to close the call this concludes today’s call we thank everyone again for their participation

04/26/2024 Q&A: 08:38
Exxon Mobil Corporation engages in the exploration and production of crude oil and natural gas in the United States and internationally. It operates through Upstream, Energy Products, Chemical Products, and Specialty Products segments. The Upstream segment explores for and produces crude oil and natural gas. The Energy Products segment offers fuels, aromatics, and catalysts, as well as licensing services. It sells its products under the Exxon, Esso, and Mobil brands. The Chemical Products segment manufactures and markets petrochemicals including olefins, polyolefins, and intermediates. The Specialty Products segment offers performance products, including lubricants, basestocks, waxes, synthetics, elastomers, and resins. The company also involves in the manufacturing, trade, transport, and sale of crude oil, natural gas, petroleum products, petrochemicals, and other specialty products; and pursuit lower-emission business opportunities, including carbon capture and storage, hydrogen, lower-emission fuels, and lithium. Exxon Mobil Corporation was founded in 1870 and is based in Spring, Texas.
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