Q2 2021 Exxon Mobil Corp Earnings Call
Good day, everyone and welcome to the Exxon Mobil Corporation's second quarter 2021earnings call today's call is being recorded and at this time I'd like to turn the call over to the Vice President of Investor Relations and Secretary Mr. Stephen Littleton. Please.
Please go ahead Sir.
Thank you and good morning, everyone and welcome to our second quarter earnings call.
We appreciate your participation and continued interest and Exxon Mobil.
And I'm, Stephen Littleton, Vice President of Investor Relations.
Joining me today are Darren.
Chairman and Chief Executive Officer and.
And Jack Williams, our senior Vice president overseeing and downstream and chemicals.
And a moment and Dan will make some introductory comments.
And will then cover the quarterly financial and operating results and then Jack and Dan will provide their perspectives on the business.
Following those remarks, we will be happy to address any questions.
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 2.
And to the supplemental information at the end of this presentation.
And I would I will now turn the call over to Darren.
Thank you Steven and good morning, everyone. Thanks for joining us today.
Steve and takes us through the second quarter results.
We start by covering the significant developments and the quarter.
Starting with the extensive engagement aboard and I had with our shareholders and the months leading up to.
Meeting.
We received some very explicit feedback and we found valuable and.
And are incorporating and our plan is to move the company forward.
And future the directors the management Committee and I look forward to continuing the active shareholder engagement and.
And discussing the good work going on at the company and a pre.
Our annual we're making on all fronts.
Since our annual meeting we welcomed our new directors.
Golf is a high tala and Andy cars and are.
With a number of discussions that included myself, our lead director Ken Frazier Other board members and senior managers of the company.
<unk> and June we began the new members onboarding process width and depth reviews of our businesses and key topics such as our energy outlook and our approach to the energy transition.
Well the board has met virtually on a couple of topics since the annual meeting.
This week was the first and person regular meeting of the board.
We had very substantive and productive discussions across both of the committees and the full board.
And we're informed by the extensive shareholder engagements over the past several months.
I'm pleased to say that without exception our directors are focused on improving the performance of the company.
Dressing the challenges faced.
Just by our industry and increasing long term shareholder value.
There is very good alignment on the importance of leveraging the diverse experience and skills of the board.
The important role Exxon Mobil will have and the transition helping to lead to the development and deployment of critical technologies.
Advocating.
And for necessary policy.
And making strategically and financially accretive investments.
The need to improve transparency and engagement with our shareholders actively listening and more explicitly addressing concerns.
And of course, driving total shareholder return and both the short and long run.
While there's still much to do I think we're working from a very strong foundation.
Exxon Mobil is proud to be a global leader and the industry.
As the energy system evolves with societies needs.
We look forward to continuing our role as a leader.
Helping lead society through the transition leveraging the deep thinking.
Clinical rigor of our 20000, and scientists and engineers and the hard work of all of our people.
Another important development and the quarter was the addition of Kathy Michaels to our management Committee as senior Vice President and Chief Financial Officer.
On behalf of the board and the other members of the management Committee.
And and our entire organization I want to welcome Kathy and express how excited we are to have her on board.
She joins US formally next month and brings significant CFO and Investor relations experience from her time at Diageo.
Iraq's United Airlines and ADT.
In addition.
And actual functions Kathy's portfolio will include corporate strategic planning and.
Investor Relations and number of our global business services like <unk> and procurement.
We look forward to the depth of experience and perspective, she will bring.
While welcoming and Kathy I'd like to also recognize Andy Swaggers retirement.
And which was also recently announced I'd.
And I'd like to take the opportunity to express our gratitude for the many contributions and he has made during his 43 years with the company.
He has certainly earned his retirement and we all wish him and his wife Sherry the very best.
Also of significance in the quarter was the <unk>.
Defining market recovery, which obviously underpins our results.
As you will hear the organization remains very focused on continuing to leverage the changes we've implemented over the last several years and on delivering the plans we discussed with you in March.
And the margin improves we've maintained a disciplined approach.
Continuing with more with less.
We remain focused on delivering industry, leading operating performance continuing to significantly reduce costs advair.
Advancing our portfolio of high return advantage projects.
Executing value accretive divestments.
And rebuilding the strength of our balance sheet.
In addition, and the need for climate solutions beyond wind solar and electric vehicles growth.
We are working to expand our portfolio of strategically and financially accretive low carbon solutions investments.
While still in the early stages I'm pleased with the progress we're making.
Come back to this later in the call.
At this.
<unk> I'll hand, it back to Steven.
Thanks Darren.
I'll now walk through developments since the first quarter.
Across our operating businesses demand recovery has improved results.
And the upstream liquids realizations improved significantly versus the first quarter.
Production was lower.
Sure who to seasonal gas demand in Europe, and higher scheduled maintenance activity, notably in Canada.
We continue to explore and progress development and our advantaged deepwater assets with 2 discoveries announced and Guyana during the second quarter and up.
And third discovery Whiptail announced this week.
We also completed final investment decision for the backlog development offshore Brazil.
And the downstream global demand improved in line with economic recovery.
However, we did see the impact of regional Lockdowns, resulting from Covid outbreaks.
Other words improved demand.
Gasoline and diesel.
Margins continued to be impacted by product oversupply and depressed jet demand driven by lower international travel.
The chemical business achieved record quarterly earnings with strong reliability and high polyethylene and polypropylene margins, specifically in North America and Europe.
Due to continued strong demand tight industry supply and ongoing shipping constraints.
During the quarter, we announced the sale of our global setup prime business to celanese for more than $1.1 billion.
The transaction includes 2 manufacturing sites in Pensacola, Florida and Newport.
Port whales and is expected to close and the fourth quarter.
Earnings improvements across all businesses resulted in increased cash flow from operations, enabling debt reduction of $2.7 billion and the quarter.
Finally, our low carbon solutions business signed 2 of them are used.
Large scale carbon capture and storage project in Scotland and in France.
Let's move to slide 5.4 and overview of second quarter results.
The table on the left provides a view of second quarter results relative to the prior quarter.
Earnings excluding.
The progress and items were $4.7 billion and increase of approximately $2 billion versus the first quarter, primarily due to higher prices and margins and strong reliability.
There was a $700 million hurt compared to the prior quarter from mark to market impacts on OPEC financial derivatives, but woods.
And I didn't know physical trading strategy had not closed.
We expect to realize the full earnings benefit of these trading strategies, when they close and the future.
Consistent with prior disclosures and planned maintenance activity impacted earnings by about $800 million and the quarter.
And was partially offset by lower corporate expenses.
And the pits and favorable tax items.
On the next slides I will cover a brief summary of quarterly results for each business.
Upstream earnings improved more than $630 million compared to the first quarter.
Higher prices and increased earnings by about $1 billion, partially offset.
Expenses by Mark to market impacts of unsettled derivatives.
Tighter supply demand balances increased liquids realizations by 12%.
Gas realizations also increased driven primarily by higher European and LNG gas prices.
Increased plan maintenance primary.
Primarily in Canada, and Australia impacted earnings by $360 million.
Next quarter, we expect lower levels of planned maintenance.
Other items were a help of $310 million and included favorable asset management and 1 time tax items.
On the next slide I will cover.
Offset summary of upstream volumes.
On average upstream volumes decreased by about 200000 oil equivalent barrels per day compared to the first quarter.
Gas and liquids were both lower and the quarter with seasonal gas demand reductions primarily in Europe, lower entitlements due to higher prices.
And the planned maintenance activity that I mentioned earlier.
These impacts were partially offset by improved reliability, primarily in Canada, and the U S and recovery from winter storm impacts experienced in the first quarter.
Moving to slide 8.
Downstream earnings improved.
And by approximately $160 million and the second quarter.
During the quarter margin improved by nearly $600 million, but were partially offset by the unsubtle mark to market impacts I mentioned earlier.
We had our best ever lubricants quarterly earnings driven by improved based on margin.
We have also.
Demand improved, particularly in North America retail fuels.
During the quarter planned maintenance and turnarounds reduced earnings by $220 million.
We optimized the timing of our downstream maintenance and the first half of 2021, which position us well for the containment economic recovery.
And we move through the year.
We also benefited from the absence of the first quarter refinery the terminal converge and provision for our toner, Australia, and Slagging and Norway refineries, which was included and the other factor.
Moving to chemicals on slide 9.
Chemicals.
Seen its best ever quarterly earnings delivering over $2.3 billion more than a $900 million improvement versus the first quarter.
Margin improved by approximately $1.1 billion.
Affecting our continued reliable operations and tight industry supply conditions, particularly.
Heading and the polyethylene and polypropylene markets and North America and Europe.
Planned seasonal maintenance and turnarounds and Europe reduced earnings by $180 million.
The next slide summarizes results versus the second quarter of 2020.
Compared to the second quarter.
Last year earnings increased by $7.7 billion, driven by a total price margin improvement of about $6.7 billion and increased sales of $810 million.
We had $850 million and planned maintenance as we successfully stretch and maintenance intervals.
Out of 2020 and to the first half of this year.
This positioned us well for a continued economic recovery and the second half of 'twenty 'twenty 1.
Structural efficiencies lower corporate and financing expenses and favorable tax items delivered additional earnings benefits.
Slide 11.
11 provides further details on investing and cost management.
Excluding energy and production taxes and cash operating expenses were $18.7 billion during the first half of 2021.
In addition to reducing structural costs by 3 billion knowledge and 2020 the company has captured over.
The $1 billion and further structural savings and the first half of 'twenty 'twenty 1.
Company remains on pace to achieve through 2023 total structural cost reductions of $6 billion relative to 2019.
The cost associated with turnarounds winter storm repairs and other.
Market and activity based factors were a partial offset.
Capital expenditures were $3.8 billion, and the second quarter and $6.9 billion year to date.
Consistent with our plans and we started the year with lower levels of investment to provide flexibility for responding.
Market conditions, we remain on track with full year spending on a lower and of our $16 billion to $19 billion range.
Investments and the second half of the year are expected to be higher due to the timing of spin for major upstream and chemical projects, including Guyana, Brazil pardon.
Permian and chemical performance products.
Moving on to the summary of cash flow on slide 12.
Cash flow from operating activities was $9.7 billion and the quarter.
Excluding working capital effects. This was up about $2 billion from the first quarter, reflecting.
And continued market improvement and ongoing and benefits of our cost reductions.
Consistent with our capital allocation priorities total debt was reduced to $66 billion and the quarter, bringing year to date reductions to over $7 billion.
We ended the quarter with $3.5.
Billions of dollars of cash.
Turning to slide 13, and put a third quarter outlook.
And the upstream we expect higher volumes with lower planned maintenance.
The sale of the U K central and Northern North Sea assets is now expected to close by the end of the year subject to.
And third party approvals.
And the downstream, we anticipate demand improvement with continued economic recovery.
Lower turnarounds and maintenance our plan for the quarter.
And chemical we anticipate some easing and the tight supply demand balance as industry.
<unk> and time improves and additional capacity comes online.
We also expect lower turnaround impacts next quarter.
Corporate and financing expenses are expected to be about $600 million and we anticipate further debt reductions if prices and margins remain at current levels.
With that I will now turn the call over to Jack.
Thank you Stephen and good morning.
We're very pleased with the Companys performance and the first 6 months and this year for a number of perspectives.
<unk> safety reliability earnings cash flow and debt reduction.
And we've also made progress and our efforts to reduce emissions advanced lower carbon solutions and further advance the depth and quality of our portfolio.
I'll spend a few minutes, providing some highlights and perspectives on this progress and let's start with a look at the business environment.
Second core saw a rapidly recovering.
<unk> environment with significant improvement and all our product markets.
Oil and gas prices increased materially since the fourth quarter of last year and.
We're back within the 10 year range, driven largely by economic recovery as the pandemic related restrictions.
<unk>.
Downstream margins moving close.
And Lo and of the 10 year band they continued to be impacted by an unbalanced global refining system.
Resulting primarily from an oversupply distillate from low international jet demand.
Nonetheless U S demand growth gross substantial improvements from the historic lows of the fourth quarter.
Importantly, significant earnings potential remains as the downstream and continues to recover from the lingering effects of the pandemic.
And to build on that point and demonstrate just how quickly things can change chemical prices and margins were far above the 10 year band and drove record earnings.
Chemicals.
Record results were driven by strong base for liability.
Robust demand.
And tight supply for both polyethylene and polypropylene and the North American and European markets.
Looking ahead, although we anticipate lengthening of supply and rising feet across the regions and our outlook.
As for chemical margins to remain strong and the coming months.
Given the dynamic market and record results I'd like to spend a few minutes talking more deeply about the chemical markets and our business.
Starting with a closer look at the current market environment.
The last 18 months had been a testament to the underlying resiliency.
Nichols' ran for chemical products and.
And that's especially true and a surge and global economic recovery as these products are widely needed for food packaging hygiene.
And the recovering automobile sector among others.
This year polyethylene and polypropylene margins across North America, and Europe increased by more.
And demanded and 40% versus the fourth quarter of last year.
And the recovery and Asia had been more challenging due to pockets of COVID-19 resurgence higher supply and.
And increased crude and naphtha prices.
Strong margins and Atlantic Basin are the result of several factors.
First hurricane impacts and late twenties.
More than a honey followed by winter storm here earlier, this year with reduced inventory levels.
And second unplanned industry shutdowns and turnarounds.
Third global shipping constraints and finished products caused by port congestion and container availability and increased shipping costs from age and the U S. And then finally demand growth.
And the U S commensurate with growth in GDP.
Our chemical business has benefited from this tightness with 70 per cent of our polyethylene capacity located in these regions.
A material portion of this is typically exported to Asia, but was redirected to Europe, and North America, enabling us to capture more than our share of demand growth.
The scale global footprint and multitude of product lines, and our chemical business provides competitive advantage and strong earnings potential and amplified and tight markets like today and is also durable and looking at longer Timeframes.
Exxon Mobil chemicals earnings over the past decade, or 80% higher than the industry average.
Average and the first quarter, our earnings were double the industry average and our second quarter result is materially higher than the first.
Our core strategy of our chemicals business is growing technology, driven higher value and performance products.
He's a proven over the test of time to add significant value for our customers versus commodity.
Products.
Our diverse product offerings and global reach are significant advantages.
And mobile chemical is number 1 or number 2 and more than 80 per cent of the markets, where we compete.
It provides resiliency across a wide range of market scenarios and upside and a market like today.
And in addition to the product diversity and went up.
Highlight the benefits we've seen this year from 3 important drivers.
First our ability to optimize feed and unit operations at our integrated facilities and leverage regional feedstock supply chains has generated about $1.4 billion of earnings through the first 6.
Months of this year.
Second as we discussed during Investor day, we've sharpened our focus on making our chemicals business, our leader and cost efficiency and.
As a result costs were down significantly in 'twenty, and 'twenty and even with the higher sales volumes. This year ongoing structural efficiencies such as digital enhancements.
Manufacturing efficiencies and previously announced staffing reductions are expected to support a billion dollars and annual reductions versus 2019.
And third the recent advantage project investments, including the World scale U S Gulf Coast steam Cracker and polyethylene reactors.
And for $600 million and the earnings and the first half of this year.
And there are more advantage projects and flight today that will grow our supply performance products and have an even larger impact on earnings.
These projects will grow our supply and performance products by 70% by 2027 and grow the earnings.
The Liberty you should buy 100% due to the higher value slate of new products.
These products bring significant benefits to our customers they support lower emissions and improve the performance of technologies that enable the energy transition and improve efficiencies.
And those advantages ultimately are reflected.
Contract margins.
For example, polyethylene packaging is lower lifecycle emissions compared to alternatives.
Performance polyethylene like our exceed XP stronger, enabling thinner films for the same applications.
We're developing the capability to produce certified circular polymers and plastics.
As <expletive> waste using our proprietary advanced recycling technology.
And polypropylene used to reduce the weight of vehicles improves fuel economy and battery life.
The projects gain advantage not just from the higher margin products. They produce but also from advantage fee scale.
And and have criteria catalyst technology, and the integration with our existing chemical and downstream facilities and logistics.
Our focus going forward remains on advancing a number of major chemical and also downstream projects that will further strengthen our integrated manufacturing platforms and upgrade our product mix to meet a range.
Oil future demand scenarios.
As you May recall many of these projects were pace to preserve cash during the market downturn last year.
Our global projects organization has done an excellent job managing this activity to preserve long term value.
This group of projects are expected to still be completed within the S. I D.
Range isn't it.
As an aside this is the same organization that will be delivering future carbon capture projects advancing through our low carbon solutions business.
This capability continues to be and enduring competitive advantage and will only increase and importance going forward.
And the chemical business.
Our large corpus Christi chemical complex is ahead of schedule and under budget.
We just announced and mechanical completion of the 3 derivative units, including a mono ethylene glycol unit and 2 polyethylene reactors.
Full site startup is anticipated by year end.
Progress is ongoing.
And at the polypropylene growth project and Baton Rouge startup anticipated next year.
Our baytown and chemical plant expansion will include a new Vista, Max unit and a full range linear Alpha olefins unit is on track for a 2023 startup.
Our China, 1 venture captures the advantage of being located in the world's largest growth.
Market we.
We signed several important agreements to advance the project, including a contract with sinopec or basic engineering design procurement and construction.
And the downstream, we're moving crude to the Wink to Webster pipeline from the Permian Basin and are preparing to ship third party production and the fourth quarter of this year.
And Beaumont process unit modules are on site and we're ramping up construction activity for startup in 2023.
And our Singapore and volume projects are also progressing however, they are a bit further out in terms of full project restart.
Even in the current challenging refining environment.
These.
East downstream projects are still attractive and materially improve the competitiveness of our integrated sites.
If these 4 projects were online at today's margins.
That would be contributing more than $1 billion and annual earnings.
For example, our Singapore as Ed project will produce 20000 barrels a day.
Quality lube based stocks it would have added to our strong lubricants result, this quarter.
Collectively this world class chemicals, and downstream project portfolio delivered 30% returns at 10 year average margins.
And that's more than $4 billion of annual earnings at 10 year average margins and 2.
At 10 year low margins.
We're also benefiting from ongoing attractive upstream investments as well.
Especially in the Permian and development performance continues to improve resulting and rapidly growing value.
We produced 400000 oil equivalent barrels a day this quarter, which was.
Approximately 50000 oil equivalent barrels a day versus the second quarter of last year, excluding the impact of the economic curtailments.
We expect to grow production and a further 40000 oil equivalent barrels per day and the third quarter.
And importantly value is growing even faster.
Operating and development performance.
Continues to improve at a rate exceeding our plans.
Relative to 2019, we've more than doubled the lateral feet, we're drilling per day.
And recently set an industry record by drilling a Delaware basin 12005 hundred foot lateral and just 12 days.
At the end of the second quarter.
And our drilling rates are approximately 3 times more efficient and in 2019.
So in other way to think about this is that the 8 rigs we're running today.
Achieving the same lateral length as it took close to 25 rigs to drill just 2 years ago.
Completions are improving too our frac rates are.
We're around 50% faster.
This has resulted in a reduction in drilling and completion costs of more than 40 per cent.
And on top of that we've also improved lease operating expense by about 35 per cent.
Our environmental performance also continues to improve.
Shaved record low flaring intensity levels.
During the quarter, which was top quartile and the industry.
As we've discussed previously the advantaged short cycle development profile of the Permian gives us flexibility within the portfolio.
The parameter setting our pace of development have not changed.
First delivering positive free cash flow.
It's a broad range of price scenarios.
Second demonstrating we're achieving industry leading capital efficiency.
And third ensuring double digit returns and $35 a barrel or less.
This low price resiliency also applies to our deepwater developments and Guyana.
Lower crime and Brazil.
In Guyana and stay roadblock.
Added 3 new discoveries since the first quarter, including the Whip tell discovery announced this week.
The warrior, 2 well encountered 120 feet of high quality oil bearing reservoirs.
The long tail 3 well encountered 230.
Net pay and both of these results included and newly identified intervals below the zones originally discovered.
Resource quantification is ongoing.
The web till 1 well encountered 246 feet of net pay and.
And drilling is ongoing at the whiptail too well.
<unk> encountered 167 feet of net pay both and high quality oil bearing sandstone reservoirs.
This additional resource will add to the 9 billion oil equivalent barrels we discussed at Investor day.
Other and increasing our confidence and the resource size and quality and the area.
Which of Liza.
And supporting our view of and ultimate Blackwood footprint of 7 to 10 developments.
The projects and progress and remain on schedule with the expected arrival of the Liza phase 2 unity F. P. S O and guianese waters early in the fourth quarter.
IRR.
East or major development on the block is on track for a 2024 startup with top sides construction ongoing.
And pending government approval, we're targeting a final investment decision on yellow until our fourth major development later this year with start up planned for 2025.
The offshore Brazil, we confirmed the final investment decision on the Bakken oil development during the second quarter.
And expect this 220000 barrel a day project startup and 'twenty 'twenty 4.
And it will deliver more than a 15% rate of return at $50 a barrel.
I'll now turn the call back over to Darren to discuss our low.
Carbon solutions business and long term plans.
Thanks, Jack let me shift focus now to the wide range of activities. We are pursuing to ensure Exxon Mobil plays a key role and the energy transition, while continuing to grow shareholder value.
You'll recall that earlier this year, we established our low carbon solutions.
Solutions business to.
And to develop potential carbon capture and storage opportunities using both established and emerging technologies.
And progress commercialization of other lower emissions technologies.
We believe that the depth and breadth of our operating experience history of process innovation project.
Execution.
Subsurface expertise and ability to scale technology.
Is this a competitive advantage and what is expected to be a fast growing market for low carbon solutions.
We also believe that the time is right given the developing market for emission reduction credits and growing recognition.
And of the importance of carbon capture and storage hydrogen and biofuels by both governments and investors all critical for broad scale and commercialization.
And the organization is making steady progress and developing a wide range of attractive opportunities weighted initially towards carbon capture and storage.
Provided a few examples here to give you a sense of the opportunities.
Next year, we anticipate final investment decisions for a large ccs expansion at our la barge facility and Wyoming.
And a new carbon capture technology pilot associated with the Port those project and Rotterdam.
This quarter, we signed an Mou to explore.
For the development of Sidoti infrastructure to help Decarbonize, the industrial basin, and Enormity region of France, and and Mou to participate and the recently announced Acorn and Ccs project in Scotland.
We are continuing to pursue several golf coast opportunities, including our Houston hub concept.
Which are all gaining.
Gaining industry and third party support.
In addition to carbon capture and storage, we're advancing a number of options to produce a low emissions. Biofuels. These include new projects Repurposing existing refinery units co processing <unk> and purchase agreements.
These plans would enable the.
And 40000 barrels per day of low emission fuels by 2020.5.
We also recently completed a successful trial to co process bio feet across our existing refining circuit.
Co processing bio feed as a key technology that can be rapidly scaled to help society quickly lower.
Emissions provided the right policies are in place.
In addition, during the quarter, we expanded a previous agreement with alternative fuels developer global clean energy to annual repurchase up to 5 million barrels renewable diesel. This is basically a drop and lower carbon and fuel that meets all finished product specs.
For todays engines commercial production is expected to begin next year.
And markets, where low carbon fuels policies incentivize the development of lower emission fuels like California and Canada.
Scale opportunities exist.
And the potential to leverage our existing facility footprint proprietary catalyst technology.
And decades of experience and processing challenging feed streams to develop attractive low emission fuels projects with competitive returns.
And effectively design and low carbon fuel standard and the U S could accelerate significant C O 2 reductions and the hard to abate transportation segment.
And our cost much.
Lower than some existing policy.
While we advocate for needed policies, such as a carbon tax or low carbon fuel standard and.
And develop future projects, we continue to lead the industry and developing and deploying new technologies to address another important issue.
Reducing methane emissions.
To that and we.
We have conducted more than 23000 leak surveys and more than 5 million components and over 9005 hundred locations.
We are eliminating high bleed nomadic devices across our U S unconventional production and.
Participating as a founding member and industry initiatives to improve detection and reduction of methane leaks.
Exxon Mobil is also the first company to file an application with the EPA to use airplanes equipped with methane detection technology to conduct large flyover inspections.
And we're evaluating satellite technology and support of our 2025 reduction plans for both methane intensity and absolute and methane emissions.
These ongoing efforts to commercialize low carbon solutions and reduce emissions are central to our long term plan to grow shareholder value.
As markets and policies continue to evolve we will be there playing our part.
Contributing where we bring the most value.
And the near term and begin the development of next year's plan.
<unk> organization is focused on.
Continuing to deliver industry, leading operating performance.
Building on last year's record results and safety and reliability and.
And extending our trend of annual reductions in emissions intensity.
By accelerating the pace of reductions and establishing more aggressive objectives.
And this will enable us to reduce our own emissions at a pace faster than what the countries have committed to under the Paris agreement.
We will also help accelerate our objective of industry leadership and greenhouse gas performance by the end of the decade.
Of course, we remain focus on sustained financial discipline, we are developing plans consistent.
Existing commitments.
And to deliver $6 billion of annual structural savings by the end of 2020.3.
Managed future capital investments, including new low carbon projects within previously announced Capex ranges.
And restoring the strength of our balance sheet, returning debt to levels consistent with a strong double a rating.
And with our because our results demonstrate we've made good progress and improving our competitiveness, but we're not satisfied.
Plans will focus on driving a further step change, we see a significant opportunity to capture scale and integration benefits from our recent reorganizations.
Moving efficiency effectiveness and growing additional cash flow.
The strength and the earnings and cash flow potential of our assets. Our plans will continue to advance high return advantage projects.
And high grade our existing assets through accretive divestments.
Finally.
As I have illustrated.
We're stepping up and accelerating efforts to ensure the company plays a meaningful role and the energy transition.
<unk>.
Our plans will reflect the continuing development and deployment of needed technologies, and where the appropriate incentives are in place.
Creative investments.
As we finalize our plans later this year, we'll provide additional updates with a more detailed review at our next Investor day.
Reflecting back on the past half year, we're pleased with the results of the organization is hard work has delivered and a recovering market.
Made a lot of progress as.
As demonstrated by a year to day performance and we're excited about the opportunities ahead.
We appreciate your participation in today's call.
And look forward to answering your questions.
Okay.
Thank you Darren operator, please open the phone lines.
Thank you Mr Woods, Mr Williams and Mr. Littleton.
Question and answer session will be conducted electronically.
And he would like to ask a question. Please do so by pressing the Starkey followed by the digital 1.
Touchtone telephone.
And that you limit your questions to 1 initial with 1 follow up so that we may take as many questions as possible.
And.
And.
And on your deal first to Phil Gresh with Jpmorgan.
Hey, good morning Darren.
Morning, Phil.
So just going back to your earlier remarks about all the discussions that you've had with the board recently.
I'm curious what your take away from that as to whether.
Yes.
And we will do our incremental thoughts about the best way to drive increased value to shareholders from here.
And I went through some items are at the very end, but.
On the margin do you feel like you've learned anything different from these discussions and.
If you could layer and some thoughts around capex and balance sheet and that.
That'd be helpful. Thank you.
Sure Yeah. Thanks Bill.
And good to hear from you. This morning, Yes, I think the 1 point I would make in terms of a context to the response is it's fairly early and the process as I said in my opening comments, we've only had 1 meeting with the board, but I would tell you that meeting was very.
Bridging the other.
The point I would make is actually.
The New board is formed and a very good time with respect to our.
And our typical cycle with 2 and managing the business, we have just kicked off.
Our our corporate plan process that runs through.
And the end of November and so we with the New Board went through.
And are the basis of the plan and and the objectives that we were setting ourselves. So I had an opportunity for a very rich conversation about that and what we need the organization to deliver this year and continuing this year and into next year and years ahead.
We also have a.
Through.
Biannual strategy process that we have in place, which this year we are doing.
In September and the New Board will basically have an opportunity to really.
Dig into and go through the strategies that we've developed with all of our business, including our new business low carbon solutions and.
And in corporate.
So I expect as we go through this year to get a lot of good conversations about where where the company is going and are the opportunities that are ahead of us and where we want to put our emphasis.
I would say the fundamental approach that we've taken is very I'd say it's.
It's pretty good alignment amongst the board and.
They all recognize that the opportunity for us to take a leadership role in this space and just leveraging the capabilities and advantages. We currently have and so finding.
And the opportunities that fit well with where we can we can add the most value is I.
Think of very aligned objective amongst the board and of course, you've heard me talk about that and I mentioned in my opening comments.
The broader conversation that the societies now having governments are not having around the solution sets needed to address the transition I think opens the door to a much richer conversation about where Exxon Mobil can play.
And and contribute carbon capture and storage hydrogen and biofuels and other areas potentially.
That leverage our strengths. So I think things are lining up very well and within the company and then I would say more externally and the broader environment with respect.
Capex and the balance.
Clay as you mentioned.
I think again.
Good good alignment around the importance of rebuilding the strength of the balance sheet. You know everyone recognizes this is a commodity market with some significant cycles and volatility and making sure that we've got a balance sheet that we can lean on as we move through that volatile.
She'd azure environment and manage the downs as well as the ups is a really important foundational piece of our strategy and I think very good alignment on that and that was reaffirmed and the conversations we had this week with our finance committee and the broader board and I think too given the improvements we've made around capital efficiencies.
Total other work our global project organization has done to really make sure that we can deliver these projects with at a very.
Advantaged cost.
We're very confident that we can do the things that we wanted to do add some additional activities and the low carbon solutions and do all that within.
The range of Capex that we've previously communicated and I think again, good alignment on that and we will confirm that as we move through the planning cycle and have those reviews with the board later this year.
Got it okay and as a follow up just on the spending side and with respect to your comments it sounds like.
And <unk>.
If you were to stick with the $20 billion to $25 billion range, which would be up.
And the mountain from.
The low end of the $16 million to $19 million range. This year.
Should we be seeing more of an acceleration around and energy transition spending.
Kind of embedded and that is that how you envision things moving forward versus.
Versus how you've thought about and the past.
Yeah, well I would I would say that and.
Energy transition spending will be embedded in the range that we've laid out I think though it's.
It's <unk>.
To keep some perspective in this space if you.
If you.
Think about the comments around the broader opera.
And you said opening up and a broader recognition of the need for that opportunity sets and referring to carbon capture hydrogen and so.
That's.
A very rapidly evolving space and so while we've got a really I think good portfolio of opportunities.
Some of them very attractive that the time to.
To transition from the planning and development of those projects to steel and the ground is going to take some time.
We'll be talking about that and the.
The investments that we're planning going forward and then of course, the steel and the ground will come with time across the horizon that we typically talk about and all of that is expected to be within the 2025.
Range.
Range got it thank you.
Phil.
We'll go next to Jon Rigby with UBS.
Thank you yeah.
Can I ask a question on the on the downstream.
Listen to what Jack said about the chemicals and the huge competitive advantage Exxon continues.
And used to demonstrate and chemicals.
But you could turn around that comment and sort of see it and reverse in the downstream where.
The series of Lossmaking quarters is pretty.
Unusual and looks like under performance versus versus your peers.
Are there any takeaways from those quarters that you could share with us around sort of the structural makeup.
And of that business or are you just relying.
On the cycle.
And for those and those earnings and cash flow to recover.
Yeah, Thanks, John and good morning, all I'm going to hand, it to Jack.
He has to get done.
And more specifics maybe a couple of.
A broader comments at your point that it is unusual given the consecutive quarters of challenging results and downstream, but I would also say.
And going through the pandemic and losing over half of the jet demand.
Coming out of the refining circuit is very unusual.
And as well and I think a very discrete.
And unique event associated with the global pandemic. So I think that context is really important to keep in mind as you think about our downstream business and the results.
The other point that I would just make with respect to your comment or question is I.
Here and talk about the downstream and compare across competitors you've got it.
You got to recognize the difference and the footprints and the investments and capital assets that we have I would tell you as you look across our competitive group, we are a much more heavily weighted and refining than some of our competitors.
I think when you obviously and in an environment, where refining margins are structurally down performance is going to look different and I think it's really important and certainly what we focus on is making sure we normalized and understand what aspects are driving the performance and I would say our capital structure and the investments that we've made over.
And so.
A really important part of that I'd also tell you that what I referred to as the physics of this business is and you can't stay at these low levels and continue with the level of supply that has historically existed in the downstream and you see that today.
With.
And the shutdowns that are occurring and the industry and so while that would take some time this market will come back into balance and if it's anything like we've seen and the crude when that economic recovery kicks in and we're in.
See supply and demand tightens I suspect and I think we will see a different level of performance with respect to the downstream.
And with respect to our peers, but obviously that will be a function of debt balance and when that economic recovery comes.
Comes back around again and I'll just make 1 final point.
In terms of and we're not relying on just the cycle we recognize.
The impact of the cycle, but I can assure you that debt downstream organization.
It's very focused on ensuring that we're pulling as many value levers as we can.
And the right way to build sustained and structural and.
Improvements.
That will benefits benefits benefit is obviously and this down cycle, but also and the upcycle.
But without me and you turn it over to Jack I don't have left hand and Jack.
And I didn't want to pick up on the refining exposure versus some of the others. We do have at.
That's the largest refiner, obviously refiner and we do have quite a bit exposure that market and we talked about.
And the fourth quarter, how historical historical low debt was and we are.
And recovery.
Due to the jet demand that's going to take a little bit of time I did mentioned in my prepared remarks that these new investments that we're making will help and the recent ones that we have made have helped the Rotterdam investment.
We made a couple of hundred million dollars this year.
And and that will continue to do.
Seeing some investing to continue to grow advantage and our.
And what is a difficult right now fuels value chain, but but but picking up on the Rotterdam comment our lubricants business has done quite well over the past couple of a couple of years matter of fact, having a record year last year and.
Really strong results so far this.
And so we are though that that is a.
I kind of balances.
Fuels, a tough refining fuels market.
Yeah.
I mentioned the integration of our refining with our chemicals and <unk> 75 per cent of our refineries are integrated with chemicals and other.
Others are and advantage market, so we're making.
Looking share when it make sure that refineries, we have going forward are advantaged.
And that's where these investments are about making sure the ones that we think are.
<unk> advantages, we build on those advantages and.
And then just in terms of Darren comment about kind of the physics of.
And refining.
See about.
Year 3 million barrels a day rationalization over the past past year 18 months. So it is definitely quite a bit above where it has been historically and we'll just have to see how that plays out but we are seeing a slow slower than we hoped recovery.
Funding environment.
And almost you for that and.
Just a follow up I'm Darren.
You mentioned that the stocks you sort of referenced some of the responsibilities.
Kathy will be taking on and when she takes on the role of CFO and thank you.
You indicated IR.
<unk> strategic planning et cetera.
And these unusual very unusual.
Thank you to appoint somebody from outside of the organization and such a senior role and also somebody without.
Oil and gas experience. So I just wondered whether you could just expand a little bit around the sort of qualities and experience that she brings that.
And we'll add value will add to the process.
At the high level of Exxon.
Sure and then.
Maybe just as a I think very important context to understand what's enabled that.
Change or evolution, and and I've talked before I think with all of you about the reorganizations and the consolidations and the changes that we've been making and how we run the business.
You look at the.
And the senior corporate officers and the organization we reduced.
That group by almost 40% over the years in terms of as we simplify the business lineup the value chains.
Reduce the overhead we're able to.
And make significant.
<unk>.
Simplifications and that structure, and then reduced numbers and that also allows us to.
Concentrate and consolidate some of the responsibility so as we've made those changes with time.
We've been able to shape the portfolio of the management committee members and and focus them on.
If youll are areas and so were and are positioned today, where as we've consolidated those responsibilities and focus them.
And that we're creating and management committee position that's much more aligned.
Today with what it would be typical CFO type responsibilities versus the past, where we had much broader.
A number of.
And on corporate businesses, and therefore, a much broader reporting relationship up into Dallas. So that simplification has enabled our ability to focus and bring these portfolios and in line with what would be some more industry standard.
Opportunities, which then led us and through board discussions last.
To start thinking about.
How do we can.
Expand the capabilities the skill sets the experience on the management committee and bring and what we think is some relevant experience into a portfolio thats consistent with and shaped with outside.
Industry experience.
Year and the.
Obviously understanding the industry is going to be an important role that I think we've got a pretty capable team and organization that understands and industry very well it is going to support cash.
Cathy with respect to that as she comes up the learning curve there, but I also think she'll bring and a lot of.
Perspective from the outside that is very relevant to the business.
And along some of those core areas, including <unk>.
Procurement and supply chain and some of the other areas of responsibility. So I think there is that change and our structure and approach to running the business has opened up some nice opportunities and we think bringing and that diversity of thought experience and perspective is actually going to benefit and obviously, we will supplement.
<unk>.
And with.
Our industry knowledge and I think the mix will be a very powerful combination.
Alright and interesting thank you.
Thank you John.
We will go next to Doug Leggate with Bank of America.
Thank you and good morning, everyone Darren.
And that better try not I'm going to try and ask this is eloquently as I can.
And bear with me for a minute.
To address the 100000 barrel in the room, which obviously was the debt.
Board changes.
The press with how does believe that you lost a climate.
But all the discussions we've had.
And with some of your large shareholders.
Yes that was an issue of capital discipline and.
And then dividend protection.
And my question really is not.
Exxon is already a leader and carbon capture and you're already leading through the methane partnership you've been doing a lot of things for a long.
Darren.
And you have gone.
1 of the best portfolios of growth opportunities and the industry that can drive sustainable dividend growth a lot of your peers mismanaged the cycle.
Some might say.
And then a little bit too aggressively the bottom line and as you've still got those opportunities. So can you give.
Ty insurances.
And just pick a bulks and you're not going to sacrifice return is relative on a relative basis across the portfolio.
I think thats, an easy easy answer to give you Doug you know that has been.
Our primary focus for us.
And for a long long time, and certainly when I have been and the job and as you know from past conversations the work that we've been doing to reshape the organization to get more effective at running the business and then importantly.
Recapitalizing the business with advantaged.
Assets and supply has been a really important focus and I think the.
Something that we've done and the past has put us in a very solid position to continue to contribute I think everybody on.
On the board as realistic with respect to the challenges facing society with this transition and the work that's going to be required by everybody ourselves the rest of industry.
Governments around the world other industries and consumers to make changes and that transition and that will take time and I think as you look at.
A lot of other independent third parties assessments. They all recognize that this is a challenging area that's going to require a lot of work and.
<unk> expertise and that our industry has an important role to play and helping with that trends transition, but very importantly, and continuing to meet the need.
For energy and and existing sources of energy and so that's the balance that we're trying to strike and of course.
Think 1 of the and how that transition.
And evolves and the uncertainty associated with obviously, everyone can take a different view on that our view is the way you help manage some of that uncertainty while youre continuing to meet current demand and to make sure that what youre doing is very advantaged and on the left hand side of the cost of supply curve, which is what we've been focused on what we've been talking about so we think.
And really good portfolio of <unk>.
High return projects.
And our advantaged versus the rest of industry and so as time goes on and that uncertainty begins to manifest itself. We think irrespective of how that the shape of that curve, we're still gonna be and a very good position and so I think strong recognition within the board debt.
And that's an advantage that we've created and I think commitment to continue to leverage that advantage as we look at opportunities and this space and transition and the final point I would make to try to reassure you Doug.
And as I think 1 of the.
If you go back 18 months I would say the litmus test.
We've got other and not somebody was committed to.
Helping manage the transition was whether we are investing and solar and wind and of course.
We were concerned about the returns you can generate and that and the value that we bring to that sector.
My sense is.
Over the last 18 months the broader conversation has quickly evolved.
Loved and Theres. This recognition today that more solutions are needed and solutions that fit into our skill set and and solutions, where we have been working on creating advantage. So.
Im confident that as the need for carbon capture is recognized and projects are being advanced in that space, where for biofuels or hydrogen.
First for what the work that we've done and the technology and the fundamentals of carving out advantage. There that we will generate a above industry above average return for the things that we do and that space.
I appreciate it.
Go ahead real quick if you think about the projects and I talked about.
The chemical and downstream projects per.
And in Ghana.
Very very good strong returns industry, leading returns and that.
And I feel as good about that portfolio as I've ever felt in terms of other projects project returns we have Doug. So I think we're pursuing high return stuff.
Got it thank you for the 2 lines.
And for guys my follow up actually Jackie is for you and hopefully its a quick 1 off about 2 lines there.
It really is a follow up on the downstream comment earlier 1 of the questions about.
And consecutive quarterly weakness.
And so my question I guess is.
Chemicals is hitting on all cylinders and and that is helpful to start with your business after.
25 years John.
It's been about optimizing between those 2.
So to the extent and Ken can you characterize to what extent decision was made to maximize chemicals profitability may be detrimental and your system to refining and should we look at the 2 businesses together and I guess, what I'm really trying to get at is.
Coming out of this recovery.
When would you see the investments and refining specific start to show up as improved returns.
Yeah.
Yes, I think you're getting at the value of the integrated sites and the tight integration between our chemicals and downstream switch.
Which is absolutely valuable and weekend.
We can look at those integrated sites and find several hundred million dollars per quarter, a value add real bottom line value add with all these strange moving moving back and forth.
And what we're doing I think and even better job of recent years is looking at that whole portfolio together and for instance, the Singapore project.
<unk> is a both a downstream and chemicals project and you'll see more of those I think where we're evolving both sides of the business and creating additional value. There. So I think that integration we view it as a real strength going forward as you think about the whole energy transition and as we move forward. There I think it's going to be even more valuable as we think about.
Molecule management and.
Increase in the value of all of those molecules coming into our integrated complexes.
I think the other point I'd add Doug is.
Youre right about its a little artificial is split between refining and chemical because you've got molecules flowing back and forth and.
And the only other point I would add to what Jack said, what do you think.
And the area of recycling plastic and some of the work we've been doing for advanced recycling, we're actually using our refinery footprint to recycle plastic and into the chemical business and so.
It is somewhat arbitrary we try to make sure we understand the drivers behind each of those but where you choose to draw the line.
Obviously as an internal choice and we're not thinking about it so much along those lines, it's really around how do you how do you maximize the value of the whole.
That's helpful guys. Thanks for taking my questions. Thank.
Thank you Doug.
We'll go next to Sam Margolin with Wolfe Research.
Good morning.
Thank you.
Morning sampling.
A couple of operating questions for me.
It's pretty clear inflection and upstream U S earnings even compared to sort of the last cycle right when oil prices might have been very strong but.
Extreme had a lot of capital employed and there was differentials.
And all of that seems to be out and upstream net income and the U S is.
And is better than it's been and a long time, so I wonder if that's on plan. It seems like it is because we've invested a lot and infrastructure to enhance that but.
And if thats altering any of your conceptions of sort of capital allocation.
And and Capex tilting here, particularly with respect to the Permian.
Yeah, Let me I'll answer that 1 Sam.
You know I think when you're talking about U S. You're talking about the Permian and that's definitely and the upstream perspective, that's what's going to be driving our results there and I think the slide I showed pretty much and demonstrated.
And Australia, why that why that you're seeing net bottom line earnings improvement.
We're really improving the development efficiency and the Permian.
Really hitting on all cylinders are getting those sorts of efficiency that we've been targeting for for last couple of years.
And and really hitting those 3 priorities we've talked about this.
The increase and cash flow and capital efficiency.
And and really driving down those development golf, so as we look going forward and the Permian.
And we're going to be looking at.
Making sure we hold on to those efficiencies that we've captured.
And making sure that those are sustainable and they.
And to work the technology, there and we see some some additional benefits of technology being applied to that program.
And as we do that and get confidence those benefits are sustainable and we got the technology built in and that will be growing that program over time.
Yeah, I'd add Sam that we are actually ahead of our plan.
With respect to the improvements and the work that we did early on with the delineation and the infrastructure, we've put in above ground, all that spending at the front and to position ourselves.
As we move forward and if you recall the talk we had about technology and what we wanted to do there that's all coming to fruition and then I think as we move forward as.
How do we make sure we're continuing to leverage that effectively and and.
That's an ongoing area of focus and discussion because we see good value there good opportunities, but we're going to make sure that we hang onto the gains and continue to leverage that effectively and.
And so so we have the first train of the large infrastructure.
Infrastructure plant, we have up and poker Lake is full.
And we have that connected door Wink terminal and I think terminal connected all the way into the Gulf Coast. So we have set up that infrastructure now and it's starting to click in terms of bottom line performance.
Thanks, and then just a follow up on asset sales.
You are paying down debt organically.
It helps.
Healthy pace here are asset sales were important and prior calls because they.
They were built into your production outlook too and it created sort of a flat production outlook, even though you were reinvesting a lot and new assets I Wonder if asset sales are still something that is important to the program.
Or if we should think about kind of net production growth with a lower emphasis on asset sales over the next 4 years.
Yeah.
Sam I would tell you that the emphasis has not changed and.
I think the way you've characterized it and exactly how we were thinking about our drive for divestments and asset sales.
And at a pretty early around focusing on concentrating.
Our assets and the areas, where we have advantage, where we can leverage some of our organizational capabilities and so it was really around focusing.
The portfolio and high grading it and that continues to be a really important.
Part of our work.
And there and so that whole divestment discussion that we've had and the past continues to hold you'll recall last year, we said given the market.
<unk> dynamics and <unk>.
Impact of the pandemic that that was probably going to slow the pace of those and it certainly didn't slow our activities and I would tell you today our activities have.
Slowed and what we're seeing now with additional buyer interest and my expectation is as we move forward. If we can find deals space. There will continue and continue to see those things play themselves out.
Thanks, so much.
Thank you Sam.
We'll go next to Roger read with Wells Fargo.
Yeah, Thank you and good morning.
Good morning, Roger.
Coming.
Coming back to some of the opening comments, you had Darren and and some other questions have gone on here as we think about you know new board.
And strategies that you've had maybe some some changes.
Do you think we wait.
And until next March at the Investor day for any sort of new unveiling of what a different board to provide.
Or do you think from what you've seen so far most of what we've heard and makes sense right.
With the balance sheet fix you've already made a lot of changes on the Capex front.
You do have a tremendous.
Backlog of projects across the upstream and the chemicals and downstream as you've highlighted here or do you think you know that were and kind of a stasis and and we simply have to wait 6 months to find out anything new and different.
No I would say I think.
Actually we started a different approach last year that was maybe.
Overwhelmed or mixed up with some of the the proxy action that was going on but we had committed last year to start.
More.
More of a continuum and.
And and talking and and putting less emphasis on the Investor day, Big Bang and more you know what I would say is and are continuing our dialog about where the business is going and so after we had our plan endorsed by the board we put out a press released and gave some highlights and I talked about it and our fourth quarter call and enrolled.
And to the Investor Day, I would tell you that continues to be the new approach.
We want to take I think that was reinforced.
By a lot of the.
And is that we had with shareholders and this desire for continued transparency and you know more engaged dialogues and so we're committed to continuing to do that.
That my expectation was as the board goes through its deliberations as our organization develop plans and options that youre going to see.
A more of a continuum and the discussion and the evolution of those plans going forward I think again I'd just reiterate if you look at the foundation foundational elements of our strategy.
Is really leveraging the strengths of our corporation the technology the ability to scale our projects organization.
Capital capital capabilities that we have a lot of those fundamentals those have not changed.
And the work that we're doing and technology to advance.
What we.
We believe we're going to be important solutions to adjust to address transition to transition that.
And that Hasnt changed in fact, what I would tell you is there's probably even more appetite around that and so if you think about the fundamentals. So what we can bring to the equation and then what's needed given that those remain fairly constant.
And I think I wouldn't see huge shifts and the strategy, but you may see acceleration additional emphasis and areas and continuing to leverage on those cores and how they manifest themselves we're committed to leveraging.
The new perspectives and experience and capability to be brought into the board that was part and in part some of the reasons that we made.
Some of those changes and so we've got a really good experience set today and.
How we leverage that and our thinking and what opportunities that develops I think we'll come out of our strategy and plan discussions and we will talk to you all about that as debt thinking evolves and gets translated into plans and actions.
Great. Thanks, I'm glad it wont be [laughter] months of wondering what's next.
Second question I had for you looking at the upstream performance this quarter, which actually was pretty good and then dovetailing that with the expectation for the additional 3 billion of Opex savings, which I.
And that is recognized the spread across the company, but if we look at your your peer that reported the day.
Okay.
<unk>.
Returned about the same amount of net income on a lower production volume number and I know at any quarter, there's moving parts and doing and exact comparison is a little bit unfair.
Sure.
But it is a meaningful number of equality across 2 different companies and I was wondering as you think about the opex savings to come that $3 billion and Q2 performance kind of where you think you are today and where you think you might be by the end of 2003 when.
And all of that's run through as we think about profitability of the upstream.
Well I would I guess couple.
Thoughts with respect to that to your question Roger first of all I'd link back to the comment that we had and the downstream not all volumes are created equal and.
So.
When you talk about upstream and volumes and I think you really got to step back and look at the mix of those volumes and.
And the resource types that you're in and the location of the resources and so I think again.
While it ultimately is a function of what you deliver and so no excuses there is just.
Understanding that and what levers you have to affected which ties into so I think you start with your portfolio and how do you feel about that and where are the opportunities to improve and our which comes back to the capital we've been investing and the upstream with the view that we got and we're focused on bringing in more profitable higher value barrels and the divestment.
<unk>.
Work that we've been doing which we just touched on which is <unk>.
And the areas the volumes and some of the projects were and asset you feel like and May have a higher value to others and shifting those out of our portfolio. So that high grading of the portfolio and the resulting change and the mix of our barrels and volumes I think they are very.
And important part of the equation and 1 other things we've been very focused on and I would just tell you that is a big driver as you look across the competitive landscape and 1 of the reasons why we've been so focused on that space and then above and beyond that when you think about the organizational construct how you're managing that the focus that you got into and.
Cash along that value chain that has been a very big.
A change that we've made and the organization and I think we're seeing the benefits of that today and how we're running and upstream and my expectation is we'll continue to see.
Additional benefits manifest themselves with time.
And Thats and.
With respect to effectiveness.
And.
Responding more effectively to market signals and delivering value there and it's also a function of efficiency in terms of additional cost reduction. So I would expect to continue to see and have evolving and improving.
Business and the upstream just as I expect to see that and our chemical and downstream business.
Yes.
Great, Thank you and and.
And Roger to the divestments and the Opex and efficiency work, we're doing just the profitability of the investments I mentioned earlier.
There's not any other GAAP.
And it doesn't have a peer out there right now and.
And we have a large position there and and continue to grow and it's going to make a big impact over time.
Thanks Roger.
You operate operating we'd probably have time for 1 more question.
Certainly our last question will be from Jason <unk> with Cowen.
Yeah. Thanks for squeezing me in guys.
I first wanted to come back to shareholder distributions, if I can and it looks like the quarterly.
Dividend has been flat for now.
Couple of years can you just discuss if there was thought and increasing the dividend this quarter what needs to happen to increase the dividend moving forward and maybe connect that to debt levels and connected to that.
Would you consider.
Some sort of shareholder distribution strategy that.
<unk>.
Gave us cash to shareholders.
As oil prices are kind of above any long term trend do you expect.
And then my second question is on chemicals, you know it seems like the segment.
Kind of has and a lack of transparency with 2 respects 1 and the performance.
Performance product earnings and 2 on benefits to greenhouse gas emissions. So on the performance products can you discuss what that's contributing corp.
<unk>.
If there was.
And then kind of an outsized benefit because of the overall chemicals environment strength.
And.
And what kind of a normalized earnings.
It looks like moving forward and that performance products and then related to emissions you.
You mentioned that the.
The performance products really help with emissions reductions but.
But exxon and maybe doesn't get that benefit.
Because.
It's not like a scope 3 reduction or your own emissions reductions is there any thought to supporting kind of emissions reporting scheme that awards Exxon for producing products that helps the world reduce emissions.
And even if it doesn't reduce your own emissions.
Sorry, I know there was a lot but I appreciate it.
Appreciate your questions, Jason and I'm going to let.
Jack talks to the chemicals piece of your question.
I'll address the capital allocation, where I will though just on the chemical ones that we do.
And to look at that in terms of the product emissions and we do recognize the opportunity.
That chemicals brings in terms of helping society achieve that lower emissions and that is something.
Something that we talked about and how involved you know gases and other 1 I would add with respect to the alternatives that are out there today. So it is an important part of the equation that we think about.
And continue to work and.
I'm less focused on you know.
Yeah.
How you take credit for it and we're focused on making sure that it happens, but I'll, let Jack spends more time on that with respect to your account and capital allocation and the dividends and I would tell you that you know the foundational elements of.
Capital allocation remains unchanged with respect to you know, making sure that we're finding high return industry vantage advantaged investments because that underpins basically everything else. We do for the long term, where we're a capital intensive industry and so you better be making sure that you've got a good program of investments and Kevin capital, particularly and the depletion.
And size of the business and maintaining our balance sheet has always been and important part we drew down heavily and that advantage paid off last year and we're going to rebuild that as you said, that's part of our strategy and its shareholders distributions have been.
The third leg of that stool, and an important aspect and so with respect to that question.
And we think we've got a good plan on our investments and in the range and will be invest and going forward, we're making good progress on the debt, particularly given the higher price environments and anticipated and then on distribution and it is part of the conversation and the discussions we've had I would tell you we have always felt a very strong commitment.
Through our base.
Base shareholders too.
To deliver on a dividend and a reliable and growing dividend and that continues to be.
Part of the conversation and I would say the board, we'd like to continue to deliver on that commitment and so we're continuing we're committed to that of a reliable dividend and 1 that grows with time.
And obviously if we're.
And you heard meaning capital and the range that we want we get get our debt back to the levels.
Sure.
And the ability to ride through the cycles and we've got a manageable dividend, that's reliable and growing recognizing anytime you raise the dividend debt, bringing the burden up we.
We're going to continue to do them at the same time, there when it manage that debt total outlay and the dividend and so our buybacks and other distributions become part of that equation, particularly win too.
Redistribute cash so that's all on the table and I think as we move through this year and depending on where price is at.
Maintain those opportunities will grow and.
Relevance and with our capital program is pretty pretty well defined and a debt debt.
We our objective is pretty well defined and you've got this opportunity on the distributions and I think the board will.
We'll continue to evaluate as we go forward.
So back on our performance products.
Yes.
That's about think about that as about a third of our product portfolio and chemicals and I showed you and that's going to grow at 70% by 2027.
And importantly grow earnings more and.
And that's because that 10% to 25% uplift, we generally get on our performance products and I think that was demonstrated if you look at this quarter.
Almost all the chemical companies benefited from the other day and because they had in the quarter, but you saw the earnings power of our chemicals company because of this higher margin because of the technology, we bring and the and those before and products.
And the other advantage those haven't and you think about all of our investments going forward. These investments are focused on generating those performance products and theyre not more capital intensive and this is catalyst technology. So it is not more capital intensive and yet we get we're having we're generating and product that gets a 10% to 25% more margin.
And so you can imagine that those investments, but more profitable as well so it's a key part of our strategy going forward.
And we're just continuing to double down on that in terms of technology improvements and grow and those products preferential to the rest of our chemicals portfolio.
Thanks.
Thank you okay. Thank you and I don't think Darren Jethro joined US on the call and I also wanted to income and goes onto line. We appreciate your interest and up and up to lead to highlight our second quarter results.
And you enjoy the rest of your day, Thank you and please be safe.
And this concludes today's call we thank everyone again for their participation.
Okay.
Yeah.
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