Q4 2020 Exxon Mobil Corp Earnings Call
Good day, everyone and welcome to this Exxon Mobil Corporation fourth quarter 2020 earnings call. Today's call is being recorded at this time I'd like to turn the call over to the Vice President of Investor Relations and Secretary Mr. Stephen Littleton. Please go ahead Sir.
Thank you and good morning, everyone welcome.
Welcome to our fourth quarter earnings call.
We appreciate your participation and continued interest and Exxon.
Okay.
I am Stephen Doberstein, Vice President of Investor Relations.
Before getting started I hope all of you on the call your families and your colleagues are safe and out of it.
Continuing challenges we face as a result of the decline the virus pandemic.
I am pleased to welcome Darren Woods, Chairman of the Board and Chief Executive Officer of Exxon Mobil who'll be joining me for the call today.
Brian covered the quarterly financial and operating results.
Darren will provide his perspectives on 2020.
And updates on our priorities and plans for 2021 and beyond.
Following those remarks, Darren I would be happy to address questions.
Yeah.
Our comments this morning will reference the slides available on the investors section of our website.
I would also like to draw your attention to the cautionary statement on slide two and the supplemental information at the end of this presentation.
I'll now highlight developments since the third quarter of this year on the next slide.
In the upstream gas realizations increased by approximately 40%.
With demand and prices recovering from the lows earlier in 2020 for frankly, the impact of supplier disruptions.
Total weather and crude linked LNG pricing.
Liquids realizations were essentially flat with third quarter.
So october prices, improving as the quarter progressed.
While there were no economic curtailments in the quarter government mandated curtailments increased to approximately 190000 oil equivalent barrels per day.
Despite considerable challenges associated with the pandemic the upstream business matched its best ever reliability performance for the year.
Yeah.
We continue to progress active exploration programs in Guyana, and Brazil, and in the fourth quarter announced a hydrocarbon discovery in Suriname, which extend Exxon Mobil for resource position in South America.
In the downstream, we achieved the best ever personnel and process safety.
As well as record reliability performance for the year.
Industry refining margins remained at historic lows.
<unk> industry rationalization for four times debt 10 year average level of capacity reductions announced in 2020.
We're continuing weak margins, we expect further industry closures.
The chemical business matched a strong operational performance of the upstream and downstream.
So achieving best ever annual safety and reliability performance.
This excellent performance enabled us to fully capture the improving margins driven by sustained strength in packaging and container recovery in automotive and durable product markets.
Across the corporation, we exceeded the operating cost and Capex reduction targets that we laid out in April.
We decisively responding to the unprecedented market conditions in 2020.
Leveraging our global projects organization, we were able to defer spin and optimize projects to preserve the long term value of our industry leading investment portfolio.
Next moving to slide for for an overview of fourth quarter results.
The table on the left provides a view of fourth quarter results relative to the third quarter.
Starting with third quarter 2020, the reported loss of $700 million include.
Included favorable identified items of $100 million.
Driven by the noncash inventory adjustments, we noted in the third quarter.
Excluding these items for third quarter loss was $800 million.
Fourth quarter results were a loss of $28 1 billion <unk>.
Included $20 2 billion of identified items related to impairments.
Earnings excluding identified items were $100 million.
A 900 million per hour improvement from the third quarter.
Fourth quarter results for $200 million lower than the third quarter due to mark to market impacts on unsettled derivatives.
This reflects the impact of marking to market open financial derivatives for which the physical trading strategy has not closed at the end of the quarter.
We expect to realized a full earnings of these trading strategies when they close in the future.
Improvements in upstream natural gas and LNG prices as well as increased liquids production in Guyana also benefited earnings.
Continued strong demand for high value chemicals performance products, coupled with the strong reliability supported chemicals earnings improvement of $200 million.
Finally, as a result of the growing strength of our portfolio.
You remove less strategic assets from our development plans, including certain dry gas resources, notably in North America.
This resulted in a noncash after tax impairment charge of about $19 billion.
On the next slides I will cover a brief summary of quarterly results I will focus my comments on the animal.
Volume business performance, excluding identified items.
Moving to slide five improved prices and margins in the upstream and chemicals increased earnings by $530 million.
The benefit of higher upstream liquids production in Guyana, Canada, and the U S also improved earnings.
This was offset by higher expenses due to the timing of planned turnaround maintenance going to exploration activity.
In the downstream and chemicals are integrated manufacturing sites allowed us to rapidly respond to dynamic market conditions and capture significant feedstock benefits.
For example, we optimized unit that typically produce gasoline to increase production of high value chemical feedstocks critical to the manufacturing of gowns masks and hand sanitizer.
Manufacturing results in the downstream for improved with strong reliability and investments that high grade product yields contributing $160 million to the fourth quarter earnings.
On the next slides I will cover a brief summary of our full year results.
Slide six is a comparison of full year 2020 results relative to 2019.
Results reflected the unprecedented loss in demand driven by the economic impact of Covid, which.
Which in turn significantly depressed upstream and downstream margins.
And responding to pandemic related challenges the organization rapidly reduce costs, achieving $3 billion and structural savings out of a total reduction of $8 billion.
Our manufacturing facilities contributed an additional $1 billion with better reliability and improve product yields.
Moving to upstream volumes on slide seven.
Upstream volumes decreased by an average of approximately 190000 oil equivalent barrels per day compared to 2019.
Volumes were impacted by economic and government mandated curtailments as well as ground again production amendments, which in total reduced volumes by approximately 210000 oil equivalent barrels per day.
Excluding the impact of economic and government mandated curtailments entitlements collagen production limits and divestments volume to increase by about 110000 oil equivalent barrels per day.
This was in line with our original production plans with optimization of maintenance activity, reducing the impact of economic curtailments.
Moving to slide eight.
In April we set a target to reduce 2020 cash operating expenses by 15% and capex by 30%.
We exceeded these reduction targets.
Looking at capital spending we established reductions of 30% the reorganization of our upstream and downstream businesses. A couple of years ago enabled us to accelerate media efficiency capture that we expected from these changes.
Cash operating expenses were down $8 billion versus 2019.
Including structural reductions of about 3 billion debt.
Were delivered through optimization of supply chain and logistics work process simplification and workforce reductions Wheeler.
We leverage our new global projects organization and strong relationship for <unk> to adjust our capital plan differing spin and further optimizing projects.
This allowed us to reduce quarterly spend by $2 billion in the second quarter versus the first quarter, a 25% reduction.
As we continue this work through the year, we reduced capital expenditures by $10 billion.
Greater than 30% versus 2019 and the original plan.
Importantly, we did this while improving safety reliability and environmental performance of our operations.
Let's turn to the next page, where you can see the impact of these reductions on our cash profile.
Excluding the impact of working capital effects fourth quarter cash flow from operating activities was up $600 million from the third quarter.
Gross debt decreased by about $1 2 billion to 67 six premium dollars.
We ended the quarter with $4 4 billion of cash a little above our minimum operating levels.
Turning to slide 10, I'll cover a few key considerations for the first quarter.
In the upstream government mandated curtailments are expected to average 150000 oil equivalent barrels in the quarter.
A decrease of approximately 40000 oil equivalent barrels for the fourth quarter.
Production is expected to be higher in the first quarter due to seasonal gas demand.
In the downstream, we anticipate higher scheduled maintenance and turnarounds to be offset by additional efficiencies.
In chemicals, we anticipate continued demand resilience across packaging hygiene and medical segments with completely recovery in automotive and construction markets.
Scheduled maintenance is expected to be in line with third quarter.
Corporate and finance expenses are anticipated to be about $700 million.
Lastly, at current crude prices and downstream and chemical margins, we expect cash flow from operating activities to cover the dividend and our planned capex, which has flexibility to adjust depending on the business environment.
With that I'll now turn the call over to Darren.
Thank you Steven and good morning, it's good to be on the call I Hope you and your families are safe and healthy.
I am sure I am like many of you happy to close the book on 2020.
And optimistic for the year ahead.
As you know the pandemic has had devastating impacts on people and businesses around the world.
These effects were especially severe in our industry.
And as you consumption collapsed as economies shut down.
Oil prices hit their lowest point in history.
In refining margin fell well below their 10 year lows.
It was the first time in memory that we saw simultaneous lows in each of our businesses.
As I discussed a year ago.
Our response throughout these challenging times was primarily focused on three areas for.
Taking the health and safety of our employees and communities.
Keeping operations running to support Covid response efforts, providing critical energy products.
And aggressively reducing spend while preserving value.
To ensure we remain in the best possible position for the eventual recovery.
We're pleased with how we performed on each of these.
Our employees stepped up and made contributions to those in need of our products from hand, sanitizer, especially products for protective equipment to fuel for first responders.
Through extraordinary efforts, we kept operations running 24, 7%, while achieving strong safety results and exceptional reliability performance.
At the same time.
We leveraged on the ongoing work in reorganizing our upstream and downstream businesses to significantly reduce cost and preserve value in an extremely challenging and uncertain market environment.
We delivered on our cost reduction objectives and outperformed our revised plan.
Which we share with even April.
Going forward, we're continuing to work to reduce cost by leveraging synergies from our line organizations and work processes across the upstream downstream and chemicals.
Further opportunities are being identified to reduce costs to drive cash flow and maintain our capital allocation priorities.
Including paying a strong dividend and maintaining a fortified balance sheet debt, we deleverage over time.
I'll provide more detail momentarily on our successful efforts to drive greater efficiency across our businesses and further improve our cost structure.
I'll also spend time discussing the significant steps, we've taken to reduce emissions intensity and absolute emissions.
And our work to advance lower emission technologies.
Like our newly announced low carbon solutions business.
Collectively this will help position us as an industry leader in greenhouse gas performance, while helping society move to a lower carbon future.
Let me start though by highlighting a few notable achievements from 2020, and what was a very difficult business environment.
During the year of unprecedented challenges our people successfully managed our global operations, ensuring the uninterrupted supply of essential energy and products, while achieving best ever safety and reliability performance.
We reduced cash operating expenses by more than 15%.
Including $3 billion of structural improvements.
Reduced capital investments by more than 30% to $21 billion.
Out compromising advantages or value of our projects.
We achieved our 2020 emission reduction goals for both methane flaring and established new plans for 2025, they are projected to be consistent with the goals of the Paris agreement. These plans are expected to reduce absolute upstream greenhouse gas emissions by 30%.
Permian Basin volumes exceeded our plan at 370000 oil equivalent barrels per day, despite curtailments and reduced investment.
This performance was driven by significant ongoing improvements in operating efficiencies and technology development.
We progressed Liza phase II in Pi are developments in Guyana.
And continued our exploration success with three new discoveries.
Creasing, the recoverable resource estimate on the Stabroek block to nearly 9 billion oil.
Oil equivalent barrels.
Our chemical business set a new record for polyethylene sales, reflecting the growth in demand for performance packaging and strong operating performance of our expanding asset fleet.
We maintained our position as a global leader in carbon capture one we've held for more than 30 years by increasing sequestered cotwo to more than 120 million tons.
Well over twice the next closest competitor and larger than our next five competitors combined.
To put this in perspective 120 million tons is equivalent to taking more than 25 million passenger vehicles off the road in a year.
In 2020, we focused on managing through the impacts of an unprecedented industry environment.
Leveraging the strength of our Corp to progress an industry, leading portfolio of advantaged investment opportunities.
<unk> to long term success for the company.
At the same time, we drove deep structural efficiencies to improve competitiveness.
And position ourselves amongst the industry's lowest cost of supply.
Let me start with our efficiencies.
You may recall that in 2019, we completed our corporate reorganizations moving from functional companies to businesses organized a longer value chains.
This allowed us to reduce overhead and provided end to end oversight for each business, which was a critical first step in streamlining the businesses to structurally reduce cost.
It also allowed us to more effectively prioritize work and focus on the highest value activities.
Consistent organizations across each sector are allowing us to consolidate like activities to fully leverage the corp scale.
Further reducing costs and improving effectiveness.
Our global products organization was established in 2019 as a result of this approach.
This organization has played a critical role in re optimizing our global investment portfolio.
Improving the capital efficiency of each project and when necessary cash.
Effectively deferring work.
As we came into 2020 and the pandemic the organization changes provided the foundation for significantly reducing spend across the businesses.
Expense results are shown in this chart, which is consistent with the chart Steven showed.
Excluding production taxes and energy expenses that are a function of commodity price.
As you can see 60% of the $5 billion reduction from 2019 to 2020 was structural driven.
Driven by reduced overheads and operational efficiencies.
The remaining reductions were temporary driven by lower production and activity deferrals.
During last year's planning process, each organization identified opportunities to convert the short term or temporary expense reductions and to permanent structural efficiencies.
This year, we expect to achieve a further $1 billion of structural efficiencies by 2023, we will achieve a total of $6 billion of structural expense reductions versus 2019.
I expect even further reductions as we take advantage of additional synergies unlocked by consistently organised businesses.
One final point to make on this slide for.
Structural reductions we've shown are independent of the price environment, we find ourselves in.
On the other hand, returning activity and increased expenses between 2020 in 2023 are in large part a function of the price environment.
And lower price environments much of that increase would be further deferred.
Let me now turn to another critical area our capital investments.
Over the past several years, we have been progressing our strategy to high grade our asset base and improve the earnings and cash generation potential of our businesses.
We announced work to divest less strategic assets and had been progressing a portfolio of industry leading investments.
With the pandemic driven losses, we responded quickly to bring capital spending in line with market conditions and an uncertain outlook.
And preserve our strong dividend.
As we enter 2021, our capital plan is at a historic low.
Typically reduced from 2020 levels.
Our capital plan through 2025 reflect three key themes.
Flexibility and discipline.
Value derived from advancing our highest return cash flow accretive projects to deliver increased earnings and cash both near and long term.
Flexibility to respond to a dynamic market. We demonstrated this in 2020 and have developed our plans with this in mind.
And discipline to make adjustments to our capital program, depending on market conditions to support a strong dividend and begin to delever.
Our plans are built on a price basis, consistent with third party outlooks and advance our highest return investments.
And maintain a healthy balance sheet.
And our strong dividend they are robust to a wide range of price scenarios.
And using last year's experience and for.
Flexibility to respond to lower price environments.
And each plan year, we have a level of short cycle unconventional spend which can be reduced in line with market conditions.
We also expect to restart projects that had been suspended across this time horizon, but if necessary can be delayed longer further deferring spend.
We also have a level of early investments debt fund long term growth opportunities. These two can be deferred or suspended.
While each of these reductions impact the value of our plan.
Available as circumstances warrant.
Less flexible spend can also be reduced but at a higher cost. This capital is generally longer cycle more firmly committed or very near completion.
The next slide helps quantify our capital flexibility.
On the left for this graphics, we show available cash from operations for 2021 plant at different Brent prices, assuming the lowest refining and chemical margins experienced from 2010 to 2019.
This is our source with higher crude prices generating more available cash.
As you move right ECR uses.
The current dividend and our 2021 capex from the previous page.
As you can see the breakeven Brent price needed to pay our dividend and invest in our low end of our flexible capital is roughly $45 a barrel.
The Brent price required for $16 billion, which is the low end of our guidance.
And closer to where I expect our actual spend to be in 2021 is $50 a barrel.
For the downstream and chemical margins at the bottom of the 10 year historical range. We can fund our highest return investments in Guyana, the Permian and the chemical business and again paying down debt at Brent prices, just above $50 a barrel.
If downstream and chemical margins were at their 10 year averages for.
Brent breakeven prices would be roughly $5, a barrel lower which would allow us to fund investments pay the dividend and pay down debt at Brent prices above $45 a barrel.
As we look at the market year to date actual prices and margins in total are above our plan, allowing us to progress our investments pay the dividend and began paying down debt in the first quarter.
Obviously, we are very early end of the year and we know the market will change, we're keeping a close eye on developments and will adjust our capital spend accordingly.
Taking a strong dividend and preserving the balance sheet.
Let's shift to a later year in our plan 2025.
By 2025, we expect downstream and chemical margins to be off their lows and closer to a long term average in this case, we use the average margins for 2010 to 2019.
In addition, we will see the full benefits of the structural opex improvements and additional cash from the projects that come online by 2025.
As you can see there is substantially more flexibility in our capital spend as a result, our plants continue to cover the dividend and capital investments at Brent prices as low as $35 a barrel.
At Brent prices above $50, a barrel our capital allocation framework supports our planned investments further debt reduction <unk> shareholder distributions.
So as you can see our plans for robust to a wide range of price environments.
And while we are optimistic that the recent improvements in the macro environment will continue we recognize that much can change over the next four to five years.
If we face a year, where brent prices remain below $50 a barrel on a sustained basis, we would reduce investments to levels more consistent with this year's plan.
Recognizing the market uncertainty, we have attempted to strike the right balance between maintaining a strong dividend.
Fortifying the balance sheet to Delever.
And continuing to invest in high return cash accretive projects.
This last point is critical particularly in a depletion business.
The next chart gives you a good perspective of this.
Our investment strategy is focused on growing earnings and cash flow across a wide range of margin environments.
We are investing in advantaged projects with some of the industry's lowest cost of supply.
Grow earnings and cash flow in a variety of market environments. This graphic helps to illustrate this.
Using IHS crude price and third party margins, we expect the cash flow from project startups over our investment horizon to represent roughly 40% of our operating cash flow in 2025.
This makes it critical point.
Pay a significant long term cost for excessive short term investment reductions.
And industry desert collectively the market pays with much higher commodity prices.
Striking the right balance responding to short term constraints with an eye on the mid to long term <unk>.
<unk> the greatest value.
Of course, an investment portfolio of industry advantaged projects is critical.
Next slide provides a perspective on the investments we are making in developing upstream resources.
Represents the majority of our upstream capital spend.
This chart drafts cumulative upstream capital spend to develop resources from 2021 through 2025.
Against the Brent price required for the investment to generate a 10% return.
Which we deemed our cost of supply.
As you can see our focus on high return lowest cost of supply investments generated portfolio with a cost of supply well below $3 a barrel.
In fact, almost 90% of our investments in developing upstream resources at a cost of supply of $35 per barrel for less.
These investments generated an average return using third party price outlooks in excess of 30%.
So as you can see striking the right balance progressing at very attractive portfolio of investments, while maintaining our strong dividend and fortifying the balance sheet to delever is essential to maximizing value.
Both near term and long term.
When executed in a period, where others are pulling back and construction markets for slack these investments become even more attractive.
When you factor in the flexibility of our short cycle investments in the Permian, where the value proposition continues to grow we are well positioned we have an attractive investment portfolio that we can flex with marketing conditions to strike the right balance across our capital allocation priorities.
Let me now take a few minutes to highlight the progress we've been making in the Permian.
Despite challenging conditions in a rapid change in activity or progress in the Permian exceeded our plan and expectations.
These improvements reflect the hard work for our people.
Organizational changes made in 2019, and the continued evolution of our technology and techniques.
For 2019, we better integrated the experience of our global drilling technology and project organizations with the unconventional operating organization working together they made a step change in performance that continues to improve.
2020 drilling rates were 50% better than our plan and more than 20% better than full year 2019 results.
Drilling and completion costs were 15% below our plan and more than 25% lower than 2019 results.
We estimate that roughly two thirds of the savings were due to improved performance.
As an example.
For a frac stages achieved in a day increased by 30% versus 2019.
As we enter 2021, we continue to see progress in our key performance metrics.
Further growing the value of this resource and improving upon our plans.
In 2020 capital expenditures in the Permian, where 35% below plan.
Despite significant economic curtailments in the second quarter 2020 volumes of 370000 oil equivalent barrels per day exceeded our plan for.
About 100000 oil equivalent barrels per day above 2019.
Going forward with the pandemic related impacts on our balance sheet and market outlook.
We are pacing Permian investments to maintain positive free cash flow to deliver industry, leading capital efficiency and achieved double digit returns at less than $35 a barrel.
Based on our current market price projections, our plans resolved in Permian volumes of approximately 700000 oil equivalent barrels per day by 2025 net.
Demand and prices are lower than current third party outlooks will adjust our plans and a nominal Brent price of $50 a barrel through 2025, we would expect to deliver an additional 100000 oil equivalent barrels per day in 2025 versus 2020 production levels.
Key point here is that we have flexibility and options.
Which I expect to improve with time.
We've been making significant progress on our technology programs, which are contributing to current performance.
The advances we are making I expect continued improvements in productivity.
Growing volumes had even lower cost.
Hopefully the Permian discussion and broader overview of our investment plans provided a useful perspective on the opportunities we have.
And the balance we are attempting to strike across our capital allocation priorities committed uncertain market outlook.
If I can move on to the results we've achieved in lowering our emissions and the plans we have for further reductions, but before I do I'd like to recap some key points.
Our portfolio offers the best collection of investment opportunities, we've had in over 20 years.
Yes, some of the industry's lowest cost of supply projects with strong returns that are robust to low prices.
Coupled with our expense efficiencies our capital program through 2025 improve the earnings power and cash generation potential of our asset base in both the near and long term.
Leveraging our experienced for 2020, we built flexible plan that will allow us to adjust to market developments and potentially lower prices.
If prices move higher than our planned basis. This will allow us to more quickly replenish our balance sheet.
Our plan to strike the right balance growing value, maintaining a strong dividend and a fortified balance sheet is deleveraged overtime.
Let's turn to our work in positioning the company for a lower carbon energy future.
Addressing the risk of climate change is one of <unk> biggest challenges requiring the combined effort and collaboration of governments academia businesses and consumers.
Exxonmobil has spent decades researching new technologies and deploying existing ones to lower emissions and the emissions of our customers.
Today, we remain committed to this with plans to position Exxonmobil as a leader in our industry.
Since its inception, we have supported the goals for the Paris agreement engaging and climate related policies and supporting a tax on carbon.
Since 2016, the year of the Paris agreement, we have reduced our operating greenhouse gas emissions by 6%.
Last year, we met the reduction objectives, we set in 2018.
And in the fourth quarter announced new emission reduction plans for 2025 and are consistent with the goals of Paris.
Our plan to reduce emissions from operating assets and align the company with the World Bank's initiative to eliminate routine flaring.
To reduce the intensity of our operated upstream greenhouse gas emissions. They drive a decrease in methane intensity and a decrease in flaring intensity.
This is expected to reduce absolute upstream greenhouse gas emissions by an estimated 30%.
In absolute methane flaring emissions by 40% to 50% versus 2016 levels.
Our plans continue to invest in lower emissions initiatives, we didn't expect to spend more than $500 million a year. This.
This includes energy efficiency Ccs investments cogeneration research and development.
In renewable purchases an area, where we already make a significant contribution.
Today, we are the second largest buyer of wind and solar power in the oil and gas industry and among the top 5% across all corporations purchasing roughly 600 megawatts, while we don't bring a significant competitive advantage to many wind and solar projects, we can leverage our size to support world scale developments with purchase contracts.
Helping to ensure they are built.
We are also the world's leader in carbon capture responsible for over 40% of the Sidoti captured.
To put this into context, the nature Conservatory announced a campaign in 2008 to plant 1 billion trees.
Our cumulative Sidoti capture has more than doubled that goal.
We're also one of the world's largest producers of hydrogen as the potential for this in the energy transition develops we are well positioned to leverage our experience scale and technology to contribute.
In fact to ensure that we effectively leverage all of our technologies experiences and expertise yesterday, we announced the formation of a new business Exxon.
Exxon Mobil low carbon solutions.
This business will focus on advancing commercial ccs opportunities and deploying emerging technologies as they mature.
I'll come back to our plans for this in a moment as we expect it to underpin our long term strategy and driving emission reductions.
I want to first focus on the progress we've already made.
As you can see in this chart since the inception of the Paris agreement.
Exxonmobil has made significant progress in reducing our greenhouse gas emissions down 6%.
Significantly outpacing the progress made by society as a whole.
Over the past 20 years, we have invested more than $10 billion to research develop and deploy lower emissions energy solutions, resulting in highly efficient operations.
During that time, we eliminated or avoided about 480 million tonnes of Sidoti <unk>.
She is equivalent to the annual emissions of a 100 million cars.
The plans, we announced in December further reduce the intensity of our businesses delivering an expected reduction in emissions at roughly 12% by 2025.
I want to pause here for a minute and emphasize that these are not targets. These reductions are built into our base plants.
In conjunction with the reorganization is completed in 2019, we established a more rigorous process to capture emission reduction efforts at operating units around the world.
Plans developed in 2020 leverage this process and built in additional efficiency steps and accretive investments to deliver these reductions.
Like other plan objectives, the performance of our businesses and our senior management will be evaluated based on achieving these commitments.
I think it is important to point out that our plans are in line with our stated ambitions of the Paris agreement, which you can see on the next chart.
This slide overlays, both global and Exxon Mobil emissions since 2016 with the goals of the Paris agreement.
Hypothetical one five degree and two degrees Celsius pathways.
As you can see our plans are consistent with the stated ambitions.
Of course, the challenge will be maintaining our progress into the future for both Exxon Mobil and society at large.
Day in a set of solutions available in overcoming this challenge is in complete.
There is a gap between what is needed and what is available.
This is illustrated by the 2016 per submissions shown by the Green Diamond, which is an estimate of the signatories nationally determined contributions.
We are working to close this gap and help provide solutions for society. Our investment in R&D is focused on the world's highest day meeting sectors manufacturing commercial transportation and power generation.
Which together account for 80% of global energy related carbon emissions.
For today's alternatives are insufficient.
As I said earlier through 2025, we expect to invest more than $3 billion and lower emissions initiatives, which include energy efficient process technology advanced biofuels hydrogen and carbon capture and storage.
Which is a crucial technology for achieving the goals outlined in the Paris agreement.
Carbon capture and storage is expected to play an important role in addressing emissions from difficult to decarbonize sectors.
He is also generally recognized as one of the only technologies that can enable a negative emissions.
And the two degree scenarios presented by the Intergovernmental panel on climate change is estimated that in 2040, 10% of total energy will require Ccs.
He is also estimated that 15% of global emissions will be mitigated by Ccs.
If carbon capture storage does not progress and play a significant role and decarbonize the economy.
The intergovernmental panel on climate change estimates for societies cost of achieving a two degree outcome with more than doubled increasing the costs by 138%.
In short the world is unlikely to achieve the goals of the Paris agreement without focused action and the innovation and carbon capture and storage.
Unfortunately, according to the IEA is development and deployment our non on track.
This is an area, where we can potentially leverage unique capabilities to make a difference.
Exxon Mobil has been the global leader in carbon capture for more than 30 years.
We believe there is an opportunity to leverage our deep operating experience.
History of process innovation.
Project execution skills subs.
Subsurface expertise and ability to scale technology to uniquely contribute in this area.
In 2018, we formed a carbon capture venture to identify and develop potential ccs opportunities using both established and emerging technologies.
Each group has been working with governments industry academia and tech companies to advance projects today, we have more than 20 opportunities under evaluation.
For the increase in government focus growing market demand and additional investor interest we are increasing our emphasis in this area through the establishment of Exxon Mobil low carbon solutions.
New business will continue to progress the ongoing venture work, while looking to expand other commercial opportunities from our extensive low carbon technology portfolio.
The business will focus its efforts on solutions critical to achieving the ambitions of the Paris agreement work with governments around the world to promote the necessary policies and regulatory frameworks.
And partner with interested parties to achieve improvements at scale.
While new this business will hit the ground running incorporating the existing venture organization and a healthy pipeline of potential opportunities.
We look forward to sharing more information as this effort advances before.
Before we open the lines for your questions, let me close by reiterating our areas of focus.
Delivering world class safety and reliability driving structural cost reductions advancing a flexible portfolio of high return cost advantaged investments made.
Maintaining a strong dividend and fortified balance sheet and reducing emissions, while developing needed technologies to support the ambitions of the Paris agreement.
Our people delivered in these areas last year, despite the unprecedented challenges of the pandemic.
I am absolutely confident they will deliver even more this year and into the future.
I hope I've, given you a deeper understanding of our strategy and plans for 2021 and beyond.
Look forward to providing you with more detailed during our March investor day, and as the year progresses with that we're happy to take your questions.
Thank you for your comments, Dan will now be more than happy to take any questions you might have.
Operator, please open up the phone lines for questions.
Thank you Mr Woods and Mr. Littleton, the question and answer session will be conducted electronically.
To ask a question. Please do so by pressing the star key followed by the digit one on your Touchtone telephone.
We request that you limit your questions to one initial with one follow up so that we may take as many questions as possible.
Okay.
And we'll go first to Doug garrison with Evercore ISI.
Good morning, everybody.
Good morning.
Doug.
Darren Exxon Mobils equity has outperformed S&P energy, an S&P 502 sets of new capital Management plan was announced in November.
And as you guys posted further progress on restructuring exploration and environmental plants too.
Did have some industry help along the way but.
On this point it seems like you're pretty encouraged about the outperformance that you've seen on the structural efficiency component that you talked about earlier today.
And that divestitures, which I know the part of the capital management program, probably recover but in a better price environment. So.
My question is whether or not you agree with my characterization of these two items and also whether or not you have any additional color or specifics on these parts of the capital management program, which make you optimistic about performance in those areas.
Sure. Thanks, Doug Thanks for the question before I answer that let me just take a minute to congratulate you on your pending retirement.
Thank you.
<unk> Avenue in the mix.
Thank you David.
With respect to your comment.
And the delivery of some of the improvements we've made I'll, just maybe step back and.
Provide a little perspective on the journey, we've been on as we looked at the business and.
Focused on the opportunities to improve performance over time, we recognize the need as a day.
A capital intensive industry to make sure that we had a very healthy and attractive set of capital investment opportunities, which is what we focused on any recognize the size of that opportunity and the leverage that it gives us with respect to earnings and cash flow and so as you heard early on with by tenure, that's why that was a focus we generated a very very attractive.
Investments at the same time, we were progressing.
And organizational restructuring.
Lou from this functional organization that we have put in place for the time of the merger of Exxonmobil, which served its purpose as an added a lot of value to time as we bought those two companies together, but with time recognized the need to move to an organization that has a better line of sight and to end on the business in a more direct accountability for profit and loss and we complete.
Did that transition.
In 2019, and I think last year in the March analyst meeting I mention that we were focused on taking advantage of the new organization to drive efficiencies and I would say 2020 delivered on that and as I mentioned in my prepared remarks, we see more opportunity down the road and if actually built into our plans for 2012.
These improved efficiencies and so thats, what I would tell you is the foundation of the plans that we've got and the improvement opportunities that we see going forward.
Independent of where the market takes us.
That obviously as we said back in our third quarter call with where the impact of the pandemic and the price response to the loss of economic activity, we recognize a debt had to be a temporary.
Downturn, just because of the fundamentals associated with the industry and wanted to make sure that we prepared ourselves for what would be an eventual recovery recognizing the timing of that is somewhat uncertain and I would say as we sit here today I would still characterize the somewhat uncertain, although encouraging here over the last several months, but we havent were not taken.
And that to the bank so to speak we're prepared and keeping an eye on how the market develops.
We'll respond accordingly, so I feel good about where we're at today I think we've.
Our company in a position in our organization focused on the right things and then we've got an opportunity set with flexibility that we can execute as we go forward and as I said.
Look at the first quarter. We're ahead of where we thought we were going to abate and we'll already start to Delever and continue to progress our investments. So I feel as good as you can given some of the uncertainty out there with the residual pandemic effects.
Yeah, and then Darren you guys may be the most asset rich company in our sector and you know last year was kind of an impossible year to.
Even think about selling assets probably.
But do you have a lot to work with and so spend a minute on that too on divestitures.
Progressing net plant.
Right I think as you saw last.
Last year, we've been talking about were really trying to focus the activity on the highest value highest return lowest cost of capital at which has meant prioritizing investments in high grading the portfolio. So we announced a day.
<unk> program is something that we haven't historically not done and had been prosecuting the divestments, we've got assets in the market day, but as we said at the time, we announced it and continues to be.
The underlying principle associated with our divestment program, it's a value driven program. So we're looking to make sure that we can find a buyer that values the asset seize more opportunities than we can prosecute with the asset.
What drives the decision obviously last year with all the uncertainty was a whole lot of activity in this space. Although we did make some progress we have mechanisms with respect to deals that can accommodate some of the price uncertainty.
And that's going to continue on I would say as the market recovers and People's views develop a fully XP.
Expect we'll have.
Additional advancements in that program.
Okay, great. Thanks, a lot.
Thank you Doug best of luck.
Okay.
We will go next to Neil Mehta with Goldman Sachs.
Good morning, guys and thank you for the incremental disclosure lots of interesting stepped on Tac I guess.
Question is just wanted to confirm did you say you expect to be on the low end of the $16 billion to $19 billion band. This year and then the follow up around that is we're at 67 $6 billion.
Debt is there an absolute level that you guys are gunning for here when it comes for comes to your gross debt level.
Good morning, Neil Yes, I will confirm that was the comment I made I do expect to be on the lower end of that range and then our plan with respect to debt we've talked about in the third quarter. We we kind of set a hard limit of around 70 billion. We didn't want to go above that and working hard to bring that down expect for that to come down in the first quarter.
And it will continue to work to bring that down to really re.
<unk> build the strength of the balance sheet.
And it's one of the.
Three capital allocation priorities, and we think absolutely critical to underpin the business, we've got going forward and to ride through the cycles that we face and clearly 2020.
With a very deep down cycle, one that frankly, we've never seen before.
I'm pleased that the capital structure, we had in place and our ability to respond to that unprecedented market environment that was very successful we leveraged the use of the balance sheet, obviously, and we're now going to rebuild that to have the capacity we need to.
<unk> to weather the ups and downs for the cycle that we know will happen as we go forward.
Thanks, Darren and the follow up is just your perspective on M&A, Yes last year was a busy one in terms of incremental A&P deal just habits Exxon thinks about the M&A landscape the bid ask right now.
Certainly the Supermajor.
Cycle that we saw the late 19 nineties.
Early two thousands.
Create a lot of value there was some press speculation on that I'm not sure. What you can say, but conceptually do you see the potential for a major a major.
The consolidation or is that too difficult to execute given all the challenges of consummating that's it.
Yes, sure, obviously I'm not going to comment.
Comment on speculation in the press, but what I would say is the approach that we've taken this space has been pretty consistent and we've talked about debt over the years and it's really looking for value opportunities were.
Where there is another company debt.
We can leverage synergies leverage.
Different differences in portfolios that basically have complement one another we look at a lot of things in that whole space and we've been active in that for quite some time and continues to be active to look for opportunities to grow value unique value and thats kind of what drives in our mind the opportunity and as you know we've talked about in the past haven't always.
Found opportunities that we felt with value.
Correctly are valued in line with what would be required to.
Kind of extract unique value true through an acquisition of a merger, but we continue to look in that space in total.
Active program going forward.
And if you don't mind I'd, probably add the other thing.
Things that we look at mailers effect it has to compete against our existing portfolio of projects, which is industry, leading best so when we look at any type of potential acquisition, we look compare relative to some other other investment opportunities, notably in upstream chemicals space.
Thank you Beth thank.
Thank you Neil.
We'll go next to Doug Leggate with Bank of America.
Thank you and good morning, everyone.
Happy new year.
Wonder if I could start off asking you to address.
The other thing Bill.
This is the level.
Commodity costs.
Specifically.
Excellent.
It seems to us disclosure.
For example for carbon capture.
You have options with demonstrable capital flexibility.
I'll also tell you that perhaps has been overlooked Paul So I wonder if you could speak to how you're looking for addressable and local phone losses.
Sure.
Doug and happy new year for you as well.
Say as well.
Last year clearly was.
The unprecedented events something that.
Some dramatic action when the industry as a whole in our company and as we do.
We leveraged the new organization and reconfigured our plans in response to the pandemic and the consequences of that.
We changed a lot of things and operating under a new set of constraints, obviously, drawing down our balance sheet to the point that we did required a different approach going forward and so that was the focus and rebuilding our plans for 2020 and as I've said I think the organization as a whole responded very very well too.
And conditions not only in and operating our businesses in the environment, but at the same time, putting together, putting together a thorough and well thought out plans for how we would go forward.
And.
Accommodate.
The increased uncertainty and the recovery that we knew we had to make coming out of the pandemic.
And frankly.
As we put those plans together, we recognize that was a change from the past in our past plans and wanted to make sure that we effectively communicated that going forward. So we had a very early.
Release at the back end of the year. After the board approved the plans that provided some perspective with the intent of coming into this call and more.
Thirdly, taking the community investment community through more details of that plan and that's what we've been doing here all of the things we've talked about it as you can clearly tell if you look at the materiality of it and it's work.
Work has been underway for quite some time and I would say 2020, a lot of effort by the organization to put those together and our intent is to make sure that we keep the outside community.
Kind of up to date with those plans given the constraints that were operating under.
All right.
Well easy questions losses, so appreciate quality.
Let me just pick up on one issue is non falloff in Charleston flexibility for dividend.
Because it seems your other want to see unequivocal secondly, providing.
On the sustainability of the debt so I wonder if you could just.
Thank you also.
Maybe she'll be a slight changes will put up with capital because you have spent all the money on things as well. It seems was up just about to get that inflection.
To support that perception of dividend and share with you. So I wonder if you could just address those issues and all we can do it.
Sure Yeah I think.
So we've built the plan based on the other three.
Capital allocation priorities that I touched on as part of my.
Prepared remarks and try to optimize.
The value to the corporation recognizing that if you look at the portfolio and the underlying strategy that we embarked on back in 2017 18 timeframe that remains in place the even.
Breath testing the projects and the investment opportunities. We have had we have in the portfolio continue to look attractive in this environment you saw the upstream portfolio, which is the biggest part of our spend.
So that so.
Our intent is to kind of pace debt and investment as we move forward.
Reflective of the market environments, and we structured the capital program again, consistent with the experience that we had last year and the drawdown that we hadn't capital to make sure that we have flexibility to adjust.
Think about what we've put in that flexible.
Bucket.
A large chunk of for a piece of short term debt of short cycle investments in the Permian, where we clearly have flexibility we got.
Paced projects for things that are global projects organization, and we are working to re optimize the capital program I think very cost effectively and working with our EPC partners suspended some of that project, but put them in warm.
Standbys for that we can start those back up again, that's in our flexible spending and as I mentioned, we've got some longer term spend for <unk> to fill the pipeline early on so that we've got things that we can move outside the plan for it so all those things are.
And we can make decisions in real time about whether we continue to progress those or pull back in that area, depending on what the environments and because we can do that and as we pointed out in this chart that we've shown we've got lots of flexibility under different price environment to sustain the dividend. So we feel really good about where we're at today that.
We've got good upside with respect to growing the cash flow as I've showed but at the same time, if we need to in the environment dictates. We can we can pull back I think that's the optimum position as debt.
Other options to have the flexibility to adjust.
<unk>.
We're very keen.
Not to pull things back to a point, where we didn't have plans to take advantage of other portfolio that we had if the market environment was better than what many were thinking last year and so our intent was build plans debt.
Sure.
Best as possible.
What the market expects and then be positioned to pull down if necessary.
Going in with no planned China ramp up is a lot harder than going out with a plan to coming down.
The flexibility when we appreciate the follow up people find so much that they'll appreciate the answers.
Thank you Doug Thank you Doug.
We'll go next to Phil Gresh with Jpmorgan.
Hey, good morning day.
Morning, Phil.
So first question I had perhaps at a signal of the times, but the charts around your flexibility only take the oil price up to $55 at this point, which is notable considering we're at $58 now.
So I'm curious is this message today, where we're supposed to be taking it as an official cap on the capital spending long term in the $20 billion to $25 billion range.
Such that any additional.
Cash flow and an upside case would be fully committed to debt reduction.
You did mention shareholder distributions and one of those slides as well so just any incremental thoughts there.
Sure Phil.
Come back to we don't know where prices are going to go and I think we have not tried.
Sure.
Build plans based on speculating where prices will go instead, what we've tried to do is build plans based on what would a reasonable assumption is and when I say reasonably tests are price basis against kind of third party and where the market generally market is and our expectation is to be kind of within and certainly on the lower end of the price expectations and Thats how.
We build the plan, we recognize when we put that together that those prices probably aren't going to materialize. So it could be higher or lower and so to have flexibility and I wouldn't read anything into how highly went on that chart. I mean, it was just a it was a number that we typically hire those to better off obviously, where we're at.
And I would tell you our first priority.
Beyond the plan, if we see a price environment.
Higher than we had.
We anticipated it would be to continue to delever and to.
Moving to build the strength of the balance sheet, because again I would tell you.
As I've talked about today and in the past balancing across the three capital allocation priorities is absolutely critical and you take different decisions in the short term last year, what we recognize we're in a very deep.
Downturn, one that we also believe would be temporary.
Prioritize the dividend and made sure that we continue to pay that and grew on that on the balance sheet as we come out of that which is what we expected.
Our plan is to rebuild the balance sheet. So that we can be in a position going forward to absorb what other shocks come in the future.
At the same time, we wanted to make sure that we are continuing to invest in these accretive projects because ultimately they are going to underpin the long term success of the corporation. So.
I'd say the key word as we work through last year is balance and I'd say the other one is optionality.
<unk> ability and.
But the plan now reflects what we've talked about today.
Okay got it my follow up question will be around slide 30, and your commentary about how the first quarter is shaping up obviously on this slide the only area, where the margins are well below the low end of the range is on downstream.
And based on your.
Long history in that business and how youre seeing things today.
Specifically for downstream would you say that the margins right now are consistent with the low end of the range and in Canada.
Kind of a $3 billion annualized uplift that youre talking about I recognize you've made a comment that in totality here or there but I'm.
Specifically thinking more about the downstream. Thank you yeah, well each day on the downstream in that chart 30.
We've put a kind of a January estimate, there's still kind of where we're at.
Currently and it's still well outside that historic range.
So I think today, if you look at the industry as a whole across the globe where margins are at it's not a sustainable position just because of the losses that are accruing.
And you know.
You look back in history, I think theres, a theres a certain.
Physics associated with with these businesses to say you can only go so low before youre not covering your cost and your peer leading cash and so you're going to have time to make adjustments in that historical range in my mind kind of set those limits I mean these are commodity businesses.
And if you take a price that goes below the marginal cost of supply it's going to end up.
Costing industry as a whole and eventually players will rationalize and drop out in that for as long as I've been in the downstream business has been long supply and it's a slow process to rationalize.
Tight, particularly as more refineries come on.
The Asia.
So I think it's just what youre seeing there is the time cycle associated with rebalancing the markets and the supply demand balance and obviously demand is off pretty significantly.
What was already kind of marginally long.
Business. So it will be a function of demand coming back and how quickly that recovers and then continued rationalization as Stephen said.
We've seen last year much higher levels of rationalization and my expectation would be if we don't see the margins recover back to within that band that Youll continue to see that.
Okay and do you think we'll get there in 2021 towards the low end at some point.
I think it's very dependent upon how the recovery goes how the economies pick back up again I think.
There's a there's a mixed view that we've tried to be pretty conservative in our planning just recognizing the mechanisms required to rebalance the market. We can get escalate take time my expectation is the second half of the year will look a lot better than the first half.
But exactly where we ended up on that are.
It's tough to tell I think eventually we will get back there.
Back into the share sometime into next year and potentially see.
An overcorrection so to speak as demand continues to pick up and with the reduced supply.
And we will see debt tightness in supply and demand marketplace self out for the downstream is what I would expect.
The challenge is always saying I'm talking about very fundamental things. It's not a question of if thats going to happen, but when and I think that's I think the trick in this game and our view is you know you should recognize is coming but not build a plan based on the hope that it does.
Great. Thanks, Darren if you look for developed markets in March Thank you for.
Bill.
The next to Jon Rigby with UBS.
Thank you. Thank you taking my questions.
For this one is on the the announcement around Ccs.
I mean, it seems to me is that you've taken your time step into it is it considered walk.
<unk>.
And I guess it must be based at least with a view that the prospects for the business there.
And so my question was what do you think has to happen or are you able to describe some of the steps that have to happen.
Both technologically and regulatory fiscal <unk> to.
It gets us where we are now to something that looks like.
A genuine business opportunity.
And then the second question.
As we pulled out for about the same time.
On Capex is it fair to characterize.
The level of Capex that you need to address one of those three.
Objections that you had which is for sustaining the dividend. It was a very long term for capex needs to be in that 'twenty one to 'twenty five.
The current level of spend that you're projecting for 'twenty one is more.
Around about protecting the balance sheet, and therefore, not a sustainable level of capex for the long term consistent with your payout.
Yes sure.
So on the Ccs I think as.
As I indicated and as Ive talked I think.
For for as long as I've been publicly speaking about this is we've recognized that carbon capture storage is a critical element to achieving ambition for the Paris agreement in the.
One other things that we've noticed over time is.
I think the IEA described it as momentum in there.
This space is that we're beginning to see a broader recognition of the importance of that technology I think the industry for a long time is recognized but I think more broadly as being recognized as it is an important part of the solutions debt in terms of achieving the ambition for the Paris agreement. So we have been working for quite some time on.
The technology.
And trying to address the cost side of that to find a technology that was lower and costs, which would then make the opportunities for attractive and accelerated deployment of Ccs and so a lot of work over the years on the what I'd say is a fundamental process technology in a way that can actually constantly.
Great.
And as we look at that portfolio, we have been advancing theres more work to be done there for sure are still technology developments that we've got a progress, but we're now seeing I think with the increased <unk>.
A recognition of the need for this technology.
Governments being more amenable to an understanding of and recognize the need for policy frameworks.
And regulatory frameworks legal frameworks to support.
Established in Ccs were seeing.
Mr demand, where people are interested in investing those types of projects. So I think theres, a theres money, that's looking for opportunities to reduce.
Carbon emissions and then Theres a market growing for us.
Reduction credit so we see a lot of things a lot of market developments and momentum in the market as a whole, which all contribute to building a sustainable business and so we felt like given where things.
Now is the time to.
Bring a more concerted effort in this space and start making sure that we're staffed and we've got people working hard engaging with governments to help move all of those things along if you look at that portfolio of projects that we've got good day, one of the biggest challenges in the policy and regulatory framework space. So that's that's a real.
Focus area I think he's certainly here in the U S. We've got an administration that's interested in progressing in this space, where they're ready to talk with them and help for us.
Some perspective from an industry standpoint.
So we think the Timing's right Yep bandwidth acts of God, we put the right people.
The organization to kind of move that forward.
It'll be I think this is a complex area. There are a lot of variables at play that we've got to bring together and we need to make sure that we've got are.
Senior management focused on bringing those things together.
On your Capex 2021, Capex Youre right you know that is at the low Capex number for us in fact, if you look at the history.
And going back in time since Exxon Mobil merge is the lowest level of capital spend that.
That we've had in any year and so I think it's fair to say just using history as a guide that.
That's probably not a sustainable level of Capex as a response to.
The environment that we found ourselves in in the recovery that we're making coming out of that environment and I think longer term going forward, which is one of the reasons why our 2022 through 2025 range guidance is higher is just a recognition that in a more steady state environment.
Spending seems to be higher to support the growth and to underpin the capital allocation priorities we have.
Makes sense. Thanks. Thank you you.
You bet Jonathan.
We'll go next to Sam Margolin with Wolfe Research.
Good morning, Thank you for calling on me.
Good morning Darren.
<unk>.
I I I did want to dig into commercialization.
I think it's actually a little bit because there's a few.
As you can just sales carbon credits where applicable but it also integrates with.
The rest of the business in an interesting way, particularly gas yet.
Central customer overlap.
And bundling opportunities I know, it's early days, but can you just talk about debt as Ed.
And it's something that's kind of leading the way in this commercialization effort kind of COVID-19 overlaps with the existing David Thanks.
Yes, sure I think the point you make sandwiches.
Maybe I was trying to hit on with Jonathan as you know this market demand in terms of people looking for.
Cleaner options and offsets in <unk>.
Emission reduction steps and so we think theres an opportunity there with that with many of our products in our portfolio and we see that across frankly, all of our sectors for downstream you mentioned gas certainly see that theyre in gas and we see opportunities for.
In terms of our recycling or environmentally improved.
Footprint in the chemical business as well, so I think that as I mentioned the momentum that we're seeing broadly in this space.
Is opening up market opportunities, which we think this business can take.
Get engaged with and make sure that we're contributing where we can buy mentioned these to make a difference in moving the needle there needs to be fairly broad.
Investment.
Over time, and we have a lot of capabilities that lend itself to that not only do we have.
The technology work that we've been doing but we've got a project organization that knows how to scale up of technologies applied and we have a manufacturing footprint that we can take advantage of we've got.
A very good understanding of subsurface and how that works and they've got midstream and pipelines. We you look at the different elements that have to go and to successfully building a ccs business is very consistent with what we do today and very much in our wheelhouse. So we see that as an opportunity and frankly.
The challenge has been.
The development of the market and then each year and again as we see the momentum in that grow and we see that opportunity. So I think that's.
The working what we're focused on doing here.
Okay, and then just as a follow up in terms of scale.
The addressable market here.
Your slide on carbon capture.
Percentage of the total carbon asset targets around 15%.
Let's say Exxon.
19.
Sustainability report you have about 120 million tons of scope, one and two.
Admissions is it <unk>.
14% number that kind of a reasonable scope I call. It like 80 million tons potentially of scalability here or is that kind of the way youre thinking about it.
Well I would tell you you know.
And part forming this moving flow adventure to a full blown business is the one of the advantages within the company is that that brings that business into our planning process, where we can put together marketing and business plans put together annual plans and lay all of that opportunity and I would tell you Sam business.
The year that we will we will do that with this business will give Joe a chance to get a good and a chair and then get his organization focused on.
Operating and business plan, and then translating that into our company plan process and then at the end of the year, we will have it will.
We'll start to kind of track that like we do all the other businesses and so I'd say that's a question that we will answer as we go for it and look at these opportunities may a big.
A big.
Variable in all this is just there's a lot of things that have to come together.
To make these things move in progress and so part of it is a function of how that external market moves partly as a function of how.
Quickly the government respond and putting the right kind of regulatory policy frameworks. So.
I think it's a complicated space, but it's one that you know are very consistent with what we've historically done and so I feel pretty optimistic that we can come in and contribute and actually help in this space.
Consistent with.
Our our competencies and capabilities and so this is a space that we feel like where we can contribute to help society reduce their emissions. So.
But I would say stay tuned theres a lot of work that has to happen here.
And as we develop that we'll be sharing with you how we see that the potential here and how these opportunities are developing.
Thank you so much.
Thank you Sam and operator, I think we probably have time for one more caller.
Yes, it looks like we have time for one more question. Our last question will be from Devin Mcdermott with Morgan Stanley.
Hey, good morning. Thank you for squeezing me in here I appreciate it.
So.
I wanted to maybe post follow up on the line of questioning here on the low carbon business.
For the last few questions within other carbon capture side, but as you mentioned some other opportunities in hydrogen and biofuel oil. So I was wondering if you could just elaborate on the types of projects and technologies that you are focused on advancing there and then as part of that if you think about this.
Low carbon spending we've got planned over the next few years are there pockets of opportunities across these businesses that are starting to compete for capital for legacy upstream.
Chemicals and downstream spending.
The capital program, and where are the biggest opportunities for tangible in the near term for the scale of capital.
Yes, I would say.
So we've got we've had a very active technology portfolio across this whole space you may recall in the past I've talked about our energy centers, we've got around the world, who we've partnered with universities very focused.
And investing in areas, where we see the potential for alternatives.
Biofuels is an area, where we've got a number of different technology drives to for to see if we can develop more cost effective.
Biofuels that work at scale.
A lot of work in process technology.
How do we take existing processes and make them more energy efficient less less.
Less emissions associated with them, so trying to leverage some of the new materials that are out there theres a lot I'd say, we've got a really broad spectrum of opportunities we've been working on and we've got relationships with <unk>.
80 universities, where we're not necessarily sharing that technology work, but we are participating in it and as we see those technologies.
Advanced and look.
And can get higher potentially have a higher potential of those things we would look to try to bring into the portfolio. So we've got what I would say we've cast a pretty wide net around the technology space recognizing that its requiring some level of evolution, if not breakthroughs in technologies for them to be successful and so you can't really plan for that we kind of came for <unk>.
On the pulse of a lot of different technologies with the intent then to as they look more promising.
Bring them into the emerging and then commercial technology space and so that's the work that this new group will be focused on.
And again it's.
Oil complement what we're doing in our carbon capture and storage.
The biofuel work that we've been doing and we've got the.
Our process technology work that we've been doing and a lot of those things overlap with other certainly and of course debt also has hydrogen in the process technology work we're doing.
In the Gcs work together.
Have a lot of overlap with potential for hydrogen generation. So I'd say, that's the space that we tend to be working on from a from a.
Technology standpoint.
And then with respect to the spend and this is a a.
Our long term focus area for our facilities and businesses and you can see from the progress we've made with reducing greenhouse gas. It is not something new it's something we've been after.
Year after year after year end and those opportunities continue to present themselves as I mentioned in my prepared remarks debt with the new organization and processes that we've put in place we've got more direct and better line of sight to those opportunities. So that we can make sure. They are getting funded and moving forward and that's all built into our plans and built into our 2000.
25.
Objectives that we've laid out.
Hey, Thanks, very helpful detail for all but a lot of exciting opportunities my follow up hopefully a quick one here. If you think about just the capital spending range over the next several years reported a 25 billion and contextualize that with the analysis of the slides.
Cash flow contribution in 2025, new projects coming online I was wondering if you could just help us pinpoint what level of spend that you think is required in order to get the whole cash flow across the business flat for multi year. Please understand it's higher than the 2021 standard somewhere within that 20 to 25 billion anyway.
Cash and fine tune that estimate a little bit tricky for maintenance capex for cash flow steady.
Yeah, well I think the other way we tend to look at it as how do you maximize the value.
We don't we won't.
We don't have an objective of trying.
Brian old volumes or any other metric. It comes back to if you gave what are the projects that we have available to us investments what are the returns that we think we can generate from those investment what advantage do they have versus industry and within our own portfolio how robust are they.
The price environment, So I would say that as we look to build up our investment.
Profile is understanding what the value of those investments are and then putting those in the context of the constraints that were operating under to see which ones get funded and how we prioritize them. So I would say 2021 other things given the impacts of coronavirus and.
For our balance sheet as we've really prioritized and focused on the highest value first we still got a really deep portfolio that will continue to advance.
As circumstances allow as the market allows and so that's how we're going to kind of go forward in that range that we'd given in the outer years is indicative of what we think would be required to continue to find that very attractive set of investments.
Come back to though is if the market.
The price environment is not supportive of that.
That will be a constraint that continues to moderate.
That capital and as I've shown are shown on the chart, we've got lots of flexibility, particularly as you move out into the outer years to pull back.
We feel like that's the best thing to do given the environment that we find ourselves in.
Thanks, David continue to pay.
A very strong dividend and maintain a balance sheet, that's going to allow us to ride through the cycles.
And continue invest dose for the three things and I would just say there's no hard formula is responding to the current circumstances and making sure that we're striking the right balance because each of those plays a really important part and the value proposition for the corporation.
Understood. Thanks, again for taking my questions.
Kevin.
Yeah.
Well. Thank you for your time and thoughtful questions. This morning, we appreciate you, allowing us the opportunity to highlight fourth quarter results were.
We appreciate your interest and hope you enjoy the rest of your day. Thank you and please stay safe.
Thank you.
This concludes today's call we thank everyone again for their participation.
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