Q3 2021 Exxon Mobil Corp Earnings Call

October 29, 2021

Please standby we're about to begin.

Good day, everyone and welcome to this Exxonmobil Corporation third quarter 2021 earnings call. Today's call is being recorded and at this time I would 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 to our third quarter earnings call.

We appreciate your participation and continued interest in Exxonmobil.

I am Stephen Littleton, Vice President of Investor Relations.

Joining me today are downwards, chairman and Chief Executive Officer, and Kathy Michaels, our senior Vice President and Chief Financial Officer.

The full set of presentation slides and prepared remarks were made available on the Investor Relations section of our website earlier this morning, along with our press release.

During our call. This morning, Dan will provide a few additional opening comments you referenced a select number of slides from that presentation, leaving more time for your questions.

We expect to conclude the call at 930, a M central time.

I would also like to draw your attention to the cautionary statement on slide two.

To the supplemental information at the end of the presentation slides on the website.

I'll now turn the call over to Darren.

Thank you Steven good morning, it's good to be with you today to discuss our strong third quarter results and the progress we are making in growing shareholder value.

Of course to take your questions.

To start by welcoming Kathy do the call her first and what I know will be many I can tell you that cat he has hit the ground running.

Leslie joined the management team and it's been broadly welcomed by the organization.

While early in her tenure, we're already benefiting from her diverse experiences and wise counsel.

Since we posted a full set of slides and our remarks on the website I'll keep my comments brief this morning.

Starting with an overview of the work we are doing to position the company to sustainably grow shareholder value.

Our first priority was to significantly grow the value of our base business to achieve industry-leading earnings and cash flow growth. This is work that has been ongoing for some time and is built on the significant changes we have made to our organization.

This is work that has been ongoing for some time and is built on the significant changes we have made to our organization.

And increased focus on fully leveraging all of our competitive advantages and technology scale integration functional excellence and most importantly, our people.

This also allowed us to improve operating performance, drive down cost and develop a portfolio of industry advantaged high-return investments. Our businesses are driving returns and generating cash to maintain a strong balance sheet and fund future investments.

Our businesses are driving returns and generating cash to maintain a strong balance sheet and fund future investments.

The work we began in 2018 to develop opportunities in carbon capture. And later low emission fuels plays to our competitive strengths positions us to build a successful low carbon solutions business and take a leading role in driving to a lower carbon future and hard to decarbonize areas.

And later low emission fuels plays to our competitive strengths positions us to build a successful low carbon solutions business and take a leading role in driving to a lower carbon future and hard to decarbonize areas.

At the same time, we have to ensure our plans are robust to a wide range of future scenarios, including net-zero pathways. And the continuing use of hydrocarbons.

And the continuing use of hydrocarbons.

Our low carbon solutions business draws on the same core capabilities and competitive strengths used in our established businesses. This gives us optionality and builds resiliency into our plans.

This gives us optionality and builds resiliency into our plans as.

As the future takes shape and demand shift across our businesses, we will maintain our advantage. Now I'll turn to our third quarter performance.

Now I'll turn to our third quarter performance.

The value of the organization is hard work I just highlighted is showing itself as the market recovers in the third quarter, we delivered excellent operational and financial performance with improved earnings and cash flow. We significantly improved our cash position reduce total debt, regressed key projects and set a number of best ever operational milestones.

We significantly improved our cash position reduce total debt.

<unk> key projects and set a number of best ever operational milestones.

Earnings for the quarter were $6.8 billion. Year to date earnings surpassed $14 billion on the strength of our upstream portfolio and industry-leading chemicals and downstream businesses.

Year to date earnings surpassed $14 billion on the strength of our upstream portfolio and industry, leading chemicals and downstream businesses.

Last year during the pandemic, we work to improve our cost structure by $3 billion versus 2019.

That progress continued in the third quarter, our structural costs are now $4 $5 billion lower than 2019 on an annual basis. With a clear line of sight to continued improvements. Strong earnings and sound Capex management resulted in cash flow after CAPEX and dividends of $5.2 billion.

Strong earnings and sound Capex management resulted in cash flow after capex and dividends of $5 $2 billion.

We paid down approximately $4 billion of debt during the quarter and increased the dividend, maintaining 39 consecutive years of annual dividend growth. Good progress in improving the earnings power of our business, coupled with solid operating performance and our rapidly improving market provides a good foundation for developing our future plans.

Good progress in improving the earnings power of our business, coupled with solid operating performance and our rapidly improving market provides a good foundation for developing our future plans.

We will finalize our plans over the course of November and will provide additional details in early December. I'd like to take the opportunity of this call to provide a brief overview of some key planned priorities and objectives. Starting with our operations.

However, I'd like to take the opportunity of this call to provide a brief overview of some key planned priorities and objectives.

Starting with our operations.

In 2020, we delivered industry, leading performance in safety and reliability. Our go-forward plans intend to sustain that leadership position.

Our go forward plans intend to sustain that leadership position.

We also established objectives to significantly reduce emissions intensity by 2025. Our focus in this effort more than paid off. We now expect to meet our objectives this year and are working to significantly raise the bar and reset our 2025 objectives.

Our focus in this effort more than paid off we now expect to meet our objectives. This year and are working to significantly raise the bar and reset our 2025 objectives.

We're also ahead of schedule on our work to improve our cost structure, we expect to deliver more than $6 billion and structural savings by 2023.

We continue to find additional synergies and greater efficiency throughout our new organization. We expect to keep our capital spend within the previously communicated range of $20 billion to $25 billion. This represents a significant reduction versus our pre-pandemic plans.

We expect to keep our capital spend within the previously communicated range of $20 billion to $25 billion. This represents a significant reduction versus our pre pandemic plans.

But with the changes we've made to our businesses, our new project organization and improved use of technology, we expect to deliver the same growth in earnings and cash flow as our pre-pandemic plans. Offsetting the pandemic induced delays.

Offsetting the pandemic induced delays.

In addition, we can free up funds to grow our low carbon solutions business and further accelerate efforts to reduce emissions. From 2022 to 2027, our cumulative capital investment and emission reduction projects is expected to be $15 billion.

From 2022 to 2027, our cumulative capital investment and emission reduction projects is expected to be $15 billion.

This year, we made substantial progress in restoring the strength of our balance sheet. By year-end, we expect to be well within the debt to capital range of 20% to 25%.

By year end, we expect to be well within the debt to capital range of 20% to 25%.

On Wednesday, we announced an increase in our dividend, adding to what is already a very attractive yield. In addition, given the improvements in our business and market conditions, we are expanding shareholder distributions by up to $10 billion over 12 to 24 months through a repurchase program beginning next year.

Our plans are being built from the bottoms up with strong line ownership and our commitment to deliver. They are flexible and can be adjusted to adverse market conditions. They strike a strong balance across our capital allocation priorities, drive continued efficiencies and significantly grow earnings and cash flow.

They strike a strong balance across our capital allocation priorities.

Drive continued efficiencies and significantly grow earnings and cash flow.

Competitively positioning us for a wide range of future scenarios, including net-zero pathways. We look forward to sharing more details with you later this year and into the first quarter of next year. With that, I'll now turn it back to Steven.

We look forward to sharing more details with you later this year and into the first quarter of next year.

With that I'll now turn it back to Steven.

Okay.

Thank you, operator, please open the phone lines for the first question.

Thank you. The questions and answer session will be conducted electronically. If you'd like to ask a question, please do so by pressing the star can you 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. Your first question will come from the line of Jeanine Wai with Barclays. Why is your line maybe on mute? It looks like she disconnected. We'll take our first question instead from Doug Leggate with Bank of America.

Your first question will come from the line of Jeanine Wai with Barclays.

And Ms. Why your line maybe on mute.

It looks like she disconnected.

We'll take our first question instead from Doug Leggate with Bank of America.

Thanks, and good morning, everyone and welcome Kathy. I'm looking forward to working with you over the next several years, hopefully. Don, I wanted to kick off just with a comment on the command Euro strength against the [ludacris] question you were facing yesterday. I'm not sure all of us could have stood up to the same level of patience through that testimony.

Forward.

With you over the next several years hopefully.

Don I wanted to kick off just with a comment on.

Command Euro strength against the Lytic Chris' question, you were facing that yesterday.

I'm not sure all of us.

Up to the same level.

<unk> testimony.

And at least usually it's my first question, which is you've got a new board. Or at least a refreshed board and you've now come out with this updated low-carbon investment strategy going forward.

Which is Europe.

You've got a new board.

Or at least a refreshed board on you've now come out with this updated.

Cognizant guests investment strategy going forward.

I'm just curious when the new board members have got to look at the relative investment opportunities you have, the carbon intensity of those returns to catch III cash margin expansion opportunities and so on.

Relative investment opportunities you have the carbon intensity of those returns to catch III cash margin expansion opportunities and so on.

I'm just curious how perceptions of the new board members relative to what external projections might be hydro has evolved as you had the chance to present your strategy to those folks.

What external projections might be hydro has a evolved as you.

The chance to present your strategy to those folks.

Thank you Doug and good morning.

I think let me just start with maybe a little broader comment on the board and the discussions we've been having which I would tell you. We've got additional diversity of perspective on the board, it's bringing a very engaged board across the entire group and a lot of good constructive discussions.

We've got additional diversity of perspective, and the board, it's bringing a very engaged board across the entire group and a lot of good.

Constructive discussions.

To your point, I think as folks come into the company and look under the hood and get an understanding of how we approach and look at these businesses the opportunities that we have and how our advantages manifest themselves and those opportunities. I think there's a generally describe it as sound solid consensus crossed the board in terms of the recognition of the strength of the portfolio that we have in our recognition of the industry-leading.

In terms of the recognition of the strength of the portfolio that we have in our recognition of the industry leading.

Our position that our investment in our projects have. I would also say and as you know you mentioned low carbon investments, we launched that business earlier this year, but if you'll recall from our Investor day.

I talked about that in the context of ventures that we establish starting back in 2018 and looking at carbon capture opportunities. And then a little later on the low emission fuels, opportunities and what we're focused on there was how do we find these investment opportunities to help drive lower emissions going forward, but do that in a way that's accretive to the shareholders and one that distinguishes us from the rest of industry and so it's really looking for a formula that leverages, our existing competitive advantages.

These investment opportunities to help drive lower emissions going forward, but do that in a way that's accretive to the shareholders and one that distinguishes us from the rest of industry and so it's really looking for a formula that leverages, our existing competitive advantages.

Yeah.

And what we tried to share in the Investor day last year, and we'll continue to talk about and spend more time talking about at the Investor Day next year, as we think we have found a really good mix of opportunities that are very well aligned with our core capabilities. And therefore, as we move forward can invest in both our established businesses.

A really good mix of opportunities that are very well aligned with our core.

Capabilities and therefore, as we move forward can invest in both our established businesses.

Given some of the policy that exist around the world there are opportunities to invest in low carbon solutions business and still generate a very solid return from that. And then as we move in the growth manifest itself across that portfolio, because we are drawing on those same capabilities, we have the ability to shift resources between those and make sure that we're responding to the developments in the marketplace and that strategy that discussion that we've been having.

Solid return from that.

And then as we move in the.

The growth in <unk>.

<unk> itself across that portfolio, because we are drawing on those same capabilities, we have the ability to shift resources with between those and make sure that we're responding to the developments in the marketplace and that strategy that discussion that we've been having.

With the board I think is recognized as a unique capability that this company has or our global footprint gives us exposure to a very broad set of markets. And as those markets develop somewhat uniquely with respect to the transition we can adjust our approach in those markets selectively.

To make sure that we're on the front end of that and taking advantage of the opportunities as they develop so I think there's a strong recognition of the advantages that we bring to this space as a whole.

A strong recognition of the advantages that we bring to this space as a whole.

Well, thanks for the detailed answer. I don't want this to be my follow up is the district quantification. So that $15 billion is about 8% I guess consistent with I think the other US peers. So we shouldn't expect a big strategic pivot here is on the European models. Is that fair?

I don't want this to be my follow up is the district quantification. So that $15 billion is about 8% I guess consistent with I think the other U S. Peers. So we shouldnt expect a big strategic pivot here is on the European models that's out there.

Yes, I think that's right and you know Doug. I've been pleased with what I would say as a broader and growing recognition of the challenges in addressing this space and the number of solutions that are going to be needed and in particular, a number of areas that we don't have complete solutions, yet and the need for companies like Exxon Mobil to help develop those and so we as. You know resisted what we think are some of the more let me call it commodity.

This is.

<unk> been pleased with what I would say as a broader and growing recognition of the challenges in addressing this space and in the number of solutions that are going to be needed and in particular, a number of areas that we don't have complete solutions, yet and the need for companies like Exxonmobil to help develop those and so we as.

You know resisted what we think are some of the more let me call it commodity.

Opportunities in this space and focused on where we don't have good solutions and where we can leverage a unique capability and therefore generate what we think will be unique returns in that portfolio that we're talking about today and we're leveraging our proprietary technology to boost our returns there. And so our approach here is not going to be what I would call a industry standard. It is going to be advantaged projects like we've tried to generate in the rest of the portfolio. I think as you think about that 15 billion as part of its around our growth projects and making sure that we are building resiliency into those growth projects by putting in the necessary investments in technology to lower the greenhouse gases. So those projects become that much more robust and the returns that we're showing for those projects comprehend that spend to lower the emissions. And then we've got new opportunities that we're pursuing that take advantage of some of the policy that's out there and generate returns. And then we're building and seeing what I would say the development of a much larger scale projects that going to require additional policy and we're doing the work and anticipate of that recognizing that as that policy front develops we will be in a position to take advantage of that with projects that we've developed in anticipation of it.

Industry standard is going to be advantaged projects like we've tried to generate in the rest of the portfolio I think as you think about that 15 1 billion as part of its around our growth projects and making sure that we are.

building resiliency into those growth projects by putting in the necessary investments in technology to lower the greenhouse gases. So those projects become that much more robust and the returns that we're showing for those projects

The necessary investments in technology to lower the greenhouse gases. So those projects become that much more robust and the returns that we're showing for those projects.

comprehend that spend to lower the emissions and then we've got new opportunities that we're pursuing that take advantage of some of the policy that's out there and generate returns. And then we're building and seeing what I would say the development of a much larger scale projects that going to require additional policy and we're doing the work in

As a patient of that recognizing there.

that as that policy front develops we will be in a position to take advantage of that with projects that we've developed in anticipation of it.

Thank you for my follow up if I may I'd like to ask Kathy a question if that's okay. And also commence Stephen for the prepared remarks, with the slide deck that's a terrific integration. Your disclosure. Kathy, my question for you is. As an outsider so to speak coming.

And also commence Stephen for the prepared remarks, with the slide deck Thats a terrific integration.

Your disclosure. Thank you for that my question for you is.

As an outsider so to speak coming in.

Do you see as the appropriate capital structure dividend policy, dividend in metrics like coverage and so on for a company like Exxon Mobil, how should we expect you to be on that shareholder return your dividend policy and so on going forward? Obviously, the buyback you mentioned as part of a lot smaller.

Shareholder return your dividend policy and so on going forward, obviously, the buyback you mentioned as part of a lot smaller.

So I take a step back and say how do we think about capital allocation for the business, Doug, and I would start with first of all we've got to invest in the advantaged projects that we have that are in very strong returns and that's from Guyana to things like Biofuels and Mr. Cohen of project right now.

Obviously, we've been very focused on maintaining a strong dividend. I think the company did a great job as it went through the pandemic really protecting that dividend and that is a priority for us.

We've got to have a strong balance sheet and you've seen our focus over the course of this year and strengthening the balance sheet in this quarter, we reduced debt by about $4 billion. After we consider those priorities if we've got available cash.

After we consider those priorities if we've got available cash.

We'll then look to distribute that to shareholders anybody. We've seen that in the buyback announcement that we had. I think it's important also to just recognize that the company looks to have a balanced approach and maintain flexibility, you would have seen the company reduce its capital spending pretty significantly.

Spending pretty significantly.

In part to protect the dividend as the pandemic was ensuing. And so we do have flexibility as we think about capital allocation, but those are our priorities. Obviously, share repurchase programs are an efficient way to distribute capital to shareholders, but that's how we think about it.

Ted to distribute capital to shareholders, but that's how we think about it.

First off, welcome again, and thanks for taking my questions. Thanks, Doug. Alright, I will go back to Jeanine Wai with Barclays.

Thanks, Doug.

Alright, I will go back to Jeanine Wai with Barclays.

Hi. Good morning, everyone. Thanks for getting me back in the queue, apparently I don't know how to operate in my work phone anymore after maternity leave so thank you.

Alright.

Good morning. So maybe just following up on Doug's question about asking it in a little different way. Can you just talk about how the new board is weighing evidence that increased oil and gas investment is probably warranted not just from Exxon, but globally?

Again, so what's becoming essentially a mandate from investors to allocate capital to the energy transition and how does that seemingly dual mandate kind of square thee current medium term capex range that we know you reiterated it but we understand that low carbon solution and emission reductions that will now have a larger share and that kind of CAPEX spend is extending beyond the medium-term range.

Low carbon solution and emission reductions that will now have a larger share and that kind of capex spend is extending beyond the medium term range.

Yes.

I'll start off with that and then Kathy has got anything to add ill pass it onto her. But I think you talked about a dual mandate and that's really the challenge that we face as a company and I think more broadly as a society, which is clearly a drive to move to a lower emissions energy system, and a lower emissions future. But at the same time recognizing that the need for energy today is real and continuing to grow and I think striking that balance and thoughtfully moving forward and trying to make sure that as you're transitioning from one source to another that you do in a way that doesn't penalize populations and compromise people's standards of living. You see a little maybe evidence of the challenge there when you look at what's happening in Europe, and some of the constraints as we've come out of the pandemic.

Lower emissions energy system, and a lower emissions future, but at the same time recognizing that the need for energy today is real and continuing to grow and I think.

Striking that balance and thoughtfully moving forward and trying to make sure that as youre transitioning from one one source to another that you do in a way that doesn't penalize.

Populations and compromise People's standards of living you see a little maybe evidence of the challenge there when you look at what's happening in Europe, and some of the constraints as we've come out of the pandemic.

The depletion business and the lack of investment that the industry broadly had in 2019 going into severely into 2020. And still coming out of that in 2021, and then the growing the growth and demand you put those two together or lack of demand lower supply growing I mean. Lower supply and lower investments and then the growth in demand you get these pinch points. And so I think the board and management, we're very conscientious of that and recognize our challenge is to leverage our perspective, the experience that we have in this space our understanding of it and to try to strike the appropriate balance and make sure we're moving forward at a pace and in fact, leading industry as we drive to this lower emissions future, but not leave whole communities behind and penalize them with respect to their standards of living and access to affordable and reliable energy. And the investments that we're making I think strike that balance.

Had in 2019 going into severely into 2020 and still coming out of that in 2021, and then the growing the growth and demand you put those two together or lack of demand lower supply growing I mean.

Lower supply and lower investments and then the growth in demand you get these pinch points and so I think the board and management, we're very conscientious of that and recognize our challenge is to leverage our perspective. The experience that we have in this space our understanding of it and to try to strike the appropriate.

Balance and make sure we're moving forward at a pace and in fact, leading industry as we drive to this lower emissions future, but not leave.

A whole.

communities behind and penalize them with respect to their standards of living and access to affordable and reliable energy. And the investments that we're making I think strike that balance.

I've been very pleased that the work that we started back in 2018 in 2019 and through 2020. Difficult to see during the pandemic with the collapse in demand, but I think today as we come out of that and you see the market recovery, the benefits of those structural changes that we've made are manifesting themselves. We are able to generate the same kind of value with a lot less capital and a lot less expense and that's been because of the work we've done with our organization and the emphasis on leveraging our competitive advantages and foremost among those are our people and the work that they've done through this timeframe. And the technology that we brought to bear in some of this work.

Difficult to see during the pandemic with the collapse in demand, but I think today as we come out of that and you see the market recovery the benefits of those structural changes that we've made are manifesting themselves were able to.

To generate the same kind of value with a lot less capital and a lot less expense and thats been because of the work we've done with <unk>.

Our organization and the emphasis on leveraging our <unk>.

Competitive advantages and foremost among those are our people and the work that they've done through this timeframe and the technology that we brought to bear and some of this work.

If you look at the capital portfolio that we had coming into the pandemic. None of the projects, we haven't dropped any of the projects we're still moving those forward as you know, we paused them, but if you look at the spend associated with those projects, we've actually managed to bring that spend down. That's a testament to our new projects organization. So a lot of good work manifesting itself.

None of the projects, we haven't dropped any of the projects we're still <unk>.

Moving those forward as you know, we paused them, but if you look at the spend associated with those projects, we've actually managed to bring that spend down.

That's a testament to our new projects organization. So a lot of good work manifesting itself.

And the results that you're seeing and in the future that we're laying out the ability to do what we said we were going to do more efficiently and then expand into the lower carbon area, where we're finding with the work that we've done opportunities in that space as well.

Okay, great. Thank you and then I guess my second question or second question is on the share repurchases. So for the repurchases over the next 12 to 24 months. How did you decide on the up to $10 billion level and the two-year timeframe? And I guess, we're just curious about what conditions will determine the pace and the ultimate amount.

The pace and the ultimate amount.

Sure. So I mean overall, we decided the amount and the pacing kind of looking out at our future plans and what our expectations were against the capital allocation priorities that I kind of walked through earlier. Relative to the free cash flow that we're expecting we're going to generate. Now obviously market conditions have a lot to do with exactly what that's going to turn out to be hence the range that we provided and the range and timing that we provide it. But I think you should start off thinking about that kind of ratable over that two-year range that we discussed and then we will assess market conditions in terms of adjusting the pace of the program over time.

Relative to the free cash flow that we're expecting we're going to generate now obviously market conditions have a lot to do with exactly what that's going to turn out to be hence the range that we provided and the range and timing that we provide it but I think you should start off thinking about bad <expletive>.

Kind of ratable over that two year range that we discussed and then we will assess market conditions in terms of adjusting the pace of the program over time.

Alright. Your next question will be from Phil Gresh with J P. Morgan.

Hey, good morning. First I wanted to get your thoughts on asset sales first. As the slides highlight, you're making some progress in certain opportunities there. In the past, you've talked about a broader $15 billion program pre-Covid.

First I wanted to get your thoughts on asset sales first.

As the slides highlight youre, making some progress in certain opportunities there.

In the past you've talked about a broader $15 15.

$15 billion program pre Covid.

And I'm just wondering how you're thinking about asset sales as part of the portfolio optimization or streamlining over the long term? And does a $15 billion plan still hold as we look out these next few years?

As we look out these next few years.

Hey, good morning, Phil. Thanks for the question, Yes, I would tell you the work that we did prior and announcing that divestment was really around high grading of the portfolio and what we laid out was what we thought was the opportunity. That portfolio set in terms of the assets that we're looking at hasn't changed from the standpoint of anything coming out in fact, what I would say is as we continue to evaluate where we can better leverage our competitive strengths and high grade that that portfolio. I think you'd see the opportunity set that underpins that divestment portfolio grow, and then, of course, our ability to execute those opportunities and high grade the asset portfolio will be a function of obviously, finding buyers who put a value on that is consistent with what we think we need in order to take that out of the portfolio. So that's work going on, I would tell you we did a lot of work last year maintaining our push this space, but not. I'm not willing to really push anything out to a market, where we didn't see the value that we expected to get. I think as the market's now recover much more attractive market to sell into and we're seeing you know the kind of buyer response and valuations that we think are more consistent with what we're looking for. So my view is we will see continued progress in that space and I would expect it to pick up here compared to certainly 2020, when the market was much more challenging.

Prior and announcing that.

Divestment was really around high grading of the portfolio and what we laid out was what we thought was the opportunity that portfolio set in terms of the assets that we're looking at.

As hasnt changed from the standpoint of anything coming out in fact, what I would say is as we continue to evaluate where we can.

Better leverage our competitive strengths and high grade that that portfolio I think you'd see the opportunity set that underpins that divestment portfolio grow and then of course, our ability to execute.

Those opportunities and high grade the asset portfolio will be a function of.

obviously, finding buyers who put a value on that is consistent with what we think we need in order to take that out of the portfolio. So that's work going on, I would tell you we did a lot of work last year maintaining our push this space, but not. I'm not willing to really push anything out to a market, where we didn't see the value that we expected to get. I think as the market's now recover much more attractive market to sell into and we're seeing you know the kind of buyer response and valuations that we think are more consistent with what we're looking for. So my view is we will see continued progress in that space and I would expect it to pick up here compared to certainly 2020, when the market was much more challenging.

Pushing this space, but not.

I'm not willing to really.

Pushing anything out to a market, where we didn't see the value that we expected to get I think as the market's now recover much more attractive market to sell into and we're seeing you know the kind of buyer response and valuations that we think are more consistent with what we're looking for so my view is we will see continued progress.

In that space and I would expect it to pick up here compared to certainly 2020, when the market was much more challenging.

Got it okay. If I could ask just one more question on the buybacks. The strength in chemicals right now, the improving downstream environment. It would seem like you should be able to cover your dividend at about $50 Brent. You're looking at 2022, even if CAPEX were higher in that $20 billion to $25 billion range.

If I could ask just one more question on the buybacks.

The strength in chemicals, right now the improving downstream environment.

It would seem like you should be able to cover your dividend at about $50 Brent.

Youre looking at 2022, even if capex were higher in that $20 billion to $25 billion range.

And then if I were to layer in 5 billion of buybacks. That'd be about $10 in the oil price. So it would seem like the ratable plan could be covered at maybe 60 Brent. Obviously, prices are higher than that so.

That'd be about $10 and the oil price. So it would seem like the ratable plan could be covered at maybe 60 Brent.

Obviously prices are higher than that so.

I'm just curious if you think that math is reasonable and if it is right that maybe excess cash could still go to either more buybacks or towards more balance sheet deleveraging. And just how you think about those priorities. Thank you.

If it is right that maybe excess cash could still go to either more buybacks or towards more balance sheet deleveraging and just how you think about those priorities. Thank you all.

Again, I'll start off and then if Kathy has got anything to add I invite her to chip in there. I would say. Your breakeven calculations are significantly higher than what ours are and of course, one of the issues is we haven't had the opportunity to take you through the plan it's in development and the reviews that we're having with our board. So that's I think to come but the work that we've been doing and what I've referenced here so far on the call with respect to the Opex reductions that we're seeing and the opportunity frankly that we see going forward. The capital productivity that we are now demonstrating and I'd put that really in two buckets, one is the project organization, which.

I would say.

Youre breakeven calculations.

Our.

Significantly higher than what ours are and of course, one of the issues is we haven't had the opportunity to.

Ill take you through the plan its in development and the reviews that we're having with our board. So that's I think to come but.

The work that we've been doing and what I've referenced.

Here.

so far on the call with respect to the Opex reductions that we're seeing and the opportunity frankly that we see going forward. The capital productivity that we are now demonstrating and I'd put that really in two buckets, one is the project organization, which.

Opex reductions that we're seeing and the opportunity frankly that we see going forward and.

The capital productivity.

We are now demonstrating and I'd put that really.

In two buckets, one is the project organization, which.

I continually refer back to but to me it's been such a huge success to leverage what were very strong organizations across the corporation, centralizing that bringing it together and making sure that we're putting the best resources in the target on the projects that best fits the need. Their capability is really resulting in some significant capital efficiency improvements. And the other thing, the other bucket would be technology, we laid out a plan.

<unk> is really resulting in some.

Significant.

The capital efficiency improvements and the other thing I. The other bucket would be technology, we laid out a plan.

And I'll just focus on the Permian for now, but we laid out a plan there to pre-invest, to do a lot of delineation to understand what we had there. We were working on bringing in some technology doing quite a bit of trialing and testing, which again required some upfront capital. We'd put it in a way if you recall, what I called the long ball game, which is leveraging Exxon Mobil's strengths into our Permian and moved from what was considered a short game in the Permian to a long ball.

To pre invest to do a lot of delineation to understand what we had there we were working on bringing in some technology doing quite a bit of.

Trialing and testing, which again required some upfront capital we'd put it in a way if you recall, what I called the long ball game, which is leveraging Exxon mobil's strengths and to our Permian and moved from what was considered a short game and in the Permian to a long ball and.

And that's paying off and we're seeing that work that we're doing out in the Permian, deliver same value for a lot less spend and that's a function of that organization and the work that they've been doing to really drive their efficiencies, but also to fully leverage the capability of the broader Exxonmobil Corporation and our technology portfolio. So.

The work that we're doing out in the Permian.

Deliver.

Same value for a lot less spend and thats a function of that organization and the work that they've been doing to really drive their efficiencies, but also to fully leverage the capability of the broader Exxonmobil Corporation and our technology portfolio. So.

That's how I would say, we're going to be able to do everything we've talked about and frankly, depending on how the market is as you know. Hard to call the market and we built some plans with some pretty wide ranges and were robust to some very low price environment going forward that won't compromise the capital allocation balance that we've talked about. And if we find the market is higher than that low side, we will have additional cash and resources to work on and give that challenge to Kathy, but maybe I'll let her talk about that for a minute. So just one other thing that I addressed which you referenced and that continuing to strengthen our balance sheet and we clearly intend to do that and so at the end of this quarter our leverage ratio landed at I think technically 25.3.

Hard to call the market and we built some plans with some pretty wide ranges and where robust to some very low price environment going forward that won't compromise.

Capital allocation balance that we've talked about and if we find the market is higher than that low side, we will have.

Additional cash and resources to work on and give that challenge to Kathy, but maybe I'll, let her talk about that for a minute. So just one other thing that I addressed which you referenced and that continuing to strengthen our balance sheet and we clearly intend to do that and so at the end of this quarter our leverage ratio landed.

I think technically 25.

Uh huh.

And we've talked about the fact that as we look at the fourth quarter, we expect to move into a more comfortable zone within that range and further reduce debt in the fourth quarter. As we look out to next year, we do have debt coming due which we would expect to retire and so I would expect to see a bit of a further reduction in debt kind of moving towards the lower end of that range over time. So again, we're looking to strike the right balance and on the share repurchase side, what the commodity cycle looks like as we enter 2022 is going to have a lot in determining what the rate and pace of this share repurchase program looks like.

Kind of moving towards the lower end of that range over time. So again, we're looking to strike the right balance and on the share repurchase side, what the commodity cycle looks like as we enter 2022 is going to have a lot in determining what the rate and pace of this share repurchase program looks like.

I appreciate the additional thoughts thanks. Thanks.

Thanks Bill.

Yeah.

And next we'll go to Devin Mcdermott with Morgan Stanley.

Hey, good morning. Thanks for taking my question. Good morning Devin.

Good morning Devin.

So the first one to ask on is just on some of the cost and efficiency trends, you've done a really good job of executing on some of the structural savings that you've talked about previously and then the latest message is now to exceed the $6 billion target by 2023. I was wondering if in light of that you could comment on whether or not you're seeing any inflationary trends across the portfolio be it through labor inflation, service cost inflation and the extent you are some of the ability to offset that as we look into 2022 and beyond.

<unk> trends across the portfolio be it through labor inflation service cost inflation and the extent you are some of the ability to offset that as we look into 2022 and beyond.

Sure, Devin. I would tell you I don't think we're immune to the pressures that are impacting just about every other business out there all around the world and so we are certainly seeing some aspects of that in our business. If I start with the big spend area with respect to our capital and projects. I think somewhat, maybe counterintuitive the fact that we were working on those going into the pandemic, when we went into the pandemic I think we took somewhat of a long-sighted approach with respect to we didn't just step out of those projects. Instead, we worked with our partners and contractors to think about how we put these projects on pause and then bring them back up in a thoughtful way as and when the market would enable that. And so the work that we did last year and working with our partners allowed us to give them some certainty around work and opportunities going forward, and we were able to lock in some of the market factors at that point in time, so in the capital space I think we've done a pretty good job and be pretty well-positioned to offset a lot of those are not experienced a lot of those inflationary pressures. And the base business I mean, certainly the higher price of energy is impacting our manufacturing.

Some aspects of that in our business if I start with the big spend area with respect to our capital and projects.

Somewhat.

Maybe counterintuitively. The fact that we were working on those.

Going into the pandemic when we went into the pandemic I think we took.

Somewhat of a long-sighted approach with respect to we didn't we didn't just step out of those projects. Instead, we worked with our partners and contractors to think about how we put these projects on pause and then bring them back up in a thoughtful way as and when the market would.

Enable that and so the work that we did last year and working with our partners allowed us to give.

Give them some.

Certainty around.

work and opportunities going forward, and we were able to lock in some of the market factors at that point in time, so in the capital space I think we've done a pretty good job and be pretty well-positioned to offset a lot of those are not experienced a lot of those inflationary pressures. And the base business I mean, certainly the higher price of energy is impacting our manufacturing.

Market factors at that point in time, so in the capital space I think we've done a pretty good job and be pretty well positioned to offset a lot of those are not experienced a lot of those inflationary pressures and the base business I mean, certainly the higher price of energy is impacting our manufacturing.

We're advantaged in that space generally because most of our facilities are more energy efficient than our competitors and so well that's raising cost across the board with that advantage.

We're able to kind of stay below where the rest is and of course, you know market prices move in these commodity markets based on the marginal cost of the suppliers, but the last barrel supply. So that's we're able I think thats being offset with the margins and then I'd say more generally what's left with respect to supply chain and inflationary pressures.

With the organizations that we have in place and them up and running now and then and a much richer environment with higher margins and more activity, they're able to take the efficiencies and the synergies that we've captured with the new organization and the different approaches that we're now taking and apply that in a more let me call it target-rich environment. So we're able to find those efficiencies and offset a lot of the inflation.

able to find those efficiencies and offset a lot of the inflation.

Different aspects happening in different parts of the business, but generally that inflationary pressure we're managing to basically cope with it and still deliver on the earnings growth that we set for ourselves the target we set for ourselves.

Different aspects happening in different parts of the business, but generally that inflationary pressure.

We're managing to basically.

Cope with it and still deliver on the earnings growth that we.

Set for ourselves the target we set for ourselves.

Great. That's very helpful and my second question's on the Permian and very strong results in the quarter pretty sizable increase in the production expectation for this year as well. I was wondering if you can talk a little bit more about some of the trends you're seeing there from an operational improvement in capital efficiency standpoint.

I know you did some of the pre-investment that you mentioned before that is helping on the efficiency side here. And also the cadence of kind of spend and activity as we look into 2022.

So the cadence of kind of spend and activity as we look into 2022.

Sure, well, as you know we had this contiguous acreage that we recognize would be advantage with respect to trying to develop what would be I'll call it a more manufacturing approach in the Permian. So you'll recall, we made some upfront investments around one delineating that acreage to make sure we knew what we had because I think as Neil has talked in the past about not all of that acreage is the same, the reservoirs are different as you move around that the area out there and so making sure that we were thinking focusing on the areas where we had the highest productivity. But at the same time, making sure that any area that we approach that we optimized everything in the subsurface and we're going for just a high initial rates, but instead looking at maximum recovery.

Contiguous acreage.

That we recognize would be advantage with respect to trying to develop what would be I'll call. It a more manufacturing approach in the Permian. So you'll recall, we made some upfront investments around one delineating that acreage to make sure. We knew what we had because I think as Neil has talked in the past about not all.

of that acreage is the same, the reservoirs are different as you move around that the area out there and so making sure that we were thinking focusing on the areas where we had the highest productivity. But at the same time, making sure that any area that we approach that we optimized everything in the subsurface and we're going for just a high initial rates, but instead looking at maximum recovery.

The area out there and so making sure that we were thinking focusing on the areas, where we had the highest productivity, but at the same time, making sure that any area that we approach that we optimized everything in the subsurface and where were going for just a high initial rates, but instead looking at maximum recovery.

And that's that's paid off we invested in the corridor, we invested in the infrastructure to make sure that we are in a position to once we focused in on and identified the areas. We wanted to develop that we could do that in a very cost efficient way.

Focused in on and identified the areas. We wanted to develop that we could do that in a very.

Cost efficient way.

And that is now paying off as you look at what we're doing in the Permian. It is much more of a manufacturing mindset and very focused on efficiencies and you're seeing that in the results and some of the metrics that are out there and then the third areas and it continues to I think a yield benefits is, thinking about how we bring our fundamental science and technology capabilities from the broader organization, from somewhat from our corporate research group and bring that into play here in the Permian and in the unconventional space. And that is paying off as well we've gotten, I think some very positive results from some of our technologies that we brought into the field. We're continuing to trial new technology. So my expectation is we'll continue to see that manifest itself. And better production and better capital efficiency. And that those would be the three pieces of the equation that I think are resulting in the performance that you're seeing.

That are out there and then the third areas and it continues to I think a yield benefits is, thinking about how we bring our fundamental science and technology capabilities from the broader organization, from somewhat from our corporate research group and bring that into play here in the Permian and in the unconventional space. And that is paying off as well we've gotten, I think some very positive results from some of our technologies that we brought into the field. We're continuing to trial new technology. So my expectation is we'll continue to see that manifest itself. And better production and better capital efficiency. And that those would be the three pieces of the equation that I think are resulting in the performance that you're seeing.

Our fundamental science and technology capabilities from the broader organization from somewhat from our corporate research group and bring that into play here in the Permian and in the unconventional space and that is paying off as well we've gotten.

I think some very positive results from some of our technologies that we brought into the field. We're continuing to trial new technology. So my expectation is we'll continue to see that manifest itself.

And better production and better capital efficiency in that those would be the three pieces of the equation that I think are resulting in the performance that you're seeing.

With respect to the overall activity. What we're trying to do is make sure that we stay within the boundaries of what I just talked about and not as we kind of maximize what we can do within that space, making sure we don't get ahead of the technology work that we're doing, and making sure we don't get outside those core doors and some of those optimized areas of production. And that's the balanced in the debate that we are striking and we may see you know a couple more rigs come on here as we go forward and staying within that same philosophy.

What we're trying to do is make sure that we stay within the boundaries of what I, just talked about and not as we.

Kind of maximize what we can do within that space, making sure. We don't get ahead of the technology work that we're doing and making sure we don't get outside those core doors and some of those optimized areas of production and Thats. The balanced in the debate that we are striking and we may see a you know a couple more rigs come on here as we go forward and staying within that same philosophy.

I wouldn't see us starting to venture out into other areas that are outside that optimized spacing plan until we've done the work to optimize plans around that next tier of opportunities out there. Great, congrats on the great results. Thanks for taking my questions.

That next tier of opportunities out there.

Great well congrats on the great results. Thanks for taking my questions.

Yeah.

Next we'll go to Sam Margolin with Wolfe research.

Good morning. Thank you good morning. Sam. First question is on back to the capital program and I recognize that we're in front of the board process and things are still being hammered out, but I think the way that the market is conceptualizing the range is that the spend for the underlying asset base today, including the growth projects is probably tighter than the range that you've communicated. And the top end of the range is sort of like a rainy day fund for special opportunities that arise either in the low carbon. Severe or otherwise. Do you think that's a fair assessment as we kind of think about 2022? And I think it flows into an earlier point about breakeven as well how do we think about the outflow on Capex within the range, which obviously influences that commodity price breakeven assessment.

Sam.

First question is on back to the capital program and I recognize that we're in front of the board process.

Things are still being hammered out, but I think the way that.

The market is conceptualizing the range is that the the spend for the underlying asset base today, including the growth projects is probably tighter than the range that you've communicated in the top end of the range is sort of like a rainy day fund for special opportunities that arise either in the low carbon.

Severe or otherwise do you think that's a fair assessment as we kind of think about 2022 and I think it flows into an earlier point about breakeven as well how do we think about the outflow on capex within the range, which obviously influences.

Commodity price breakeven assessment.

Sure. So obviously this year our capital spending has been purposefully constrained and we think we're going to come in I'd say at the lower end of that 16% to $19 billion range we've provided. We are expecting higher Capex in the fourth quarter and a significant increase as we head into 2022. What underpins that is further investment in Guyana focused on theory yellowtail appraisal, in Brazil is now moving into the start-up of drilling and sell more significant spending heading into there.

Are expecting higher capex in the fourth quarter and a significant increase as we head into 2022.

Underpins that is further investment in Guyana focused on theory yellowtail appraisal.

<unk> in Brazil is now moving into the start up of drilling and sell more significant spending heading into there we are.

We obviously paused a number of downstream and chemical projects those are restarting and so we'll start to see that spend in the fourth quarter and tick up pretty significantly into 2022. And I'd also mentioned that you know as we look to accelerate our reductions in greenhouse gas emissions intensity specifically.

We will be spending a bit more in that area. So if you think about how that is going to cause us to kick up, I would say that clearly will put us in that 20% to 25 billion range. And then clearly we would leave ourselves some level of flexibility in that range for things that we can't fully anticipate as we sit here today.

Thanks, that's very helpful. And then just a follow up on carbon capture. The reconciliation bill is in the process now, there've been a few different drafts that have come out each with it seems like distinct kind of carbon capture language and incentives in them.

The reconciliation Bill is in the process now there've been a few different drafts that have come out each with.

It seems like distinct kind of carbon capture language and incentives in them.

As you think about Exxonmobil as plan and proposition in that asset class. How are the early returns that you've seen in these draft bills and do you think there are sufficient to drive a real acceleration in activity for you there?

Well, the way I would look at Sam I think trying to predict what's coming out of that political process, I don't if it's as hard or harder than trying to predict where prices are going to go. So maybe just spend a little bit of time talking about the philosophy that we have taken with respect to developing the low carbon business and again I would start with foundationally the work that we're doing has to leverage some advantage, we want to make sure that the investments that we're making here.

No if it's as hard or harder than trying to predict where prices are going to go. So maybe just spend a little bit of time talking about the philosophy that we have.

We've taken with respect to developing the low carbon business and again I would start with foundational a the work that we're doing.

<unk> has to leverage some advantage, we want to make sure that the investments that we're making here.

We bring some unique value to and expect that unique values and manifest itself. And value for our shareholders and so that's the foundation. This carbon capture venture that we started back in 2018 in the low emission fuels and it was how do we take advantage of the portfolio of technologies that we have in those skills and capabilities of our people to find ways to do this that are different and better than the rest of industry. So that's the foundation and then as a philosophy. Making sure that we develop a portfolio that is accretive with existing policy.

And value for our shareholders and so that's the foundation.

This carbon capture venture that we started back in 2018 in the low emission fuels and it was how do we take advantage of the portfolio of technologies that we have in those skills and capabilities of our people to find ways to do this that are different and better than the rest of industry. So that's the foundation and then as a philosophy.

Making sure that we develop a portfolio that is accretive with existing policy.

We're not betting on the come not thinking that something is going to pop here and then developing projects that ultimately disappointed us and so that.

And given that we've got a really I think broad footprint, we're able to tap into different policies around the world and there are a number of governments since we launched low carbon solutions that have reached out to us and want to work with us to understand how we can what we can bring to the equation to help advance some of their objectives and so.

Those discussions are happening, but I would say there is a fundamental layer of investment that is accretive with existing policy don't look don't need more help. Than there is the other tier where.

More help than there is the other tier where.

They certainly would not be regret investments, but we would need to see some additional policy to us to make those, to kind of give us the returns that we would expect given the resources we're bringing to bear with for those projects. And those are those or another we need to develop those now because if we wait until the policies in place will be behind the game and so we're being very thoughtful around developing those projects. It also informs what we're going to need and so that we can very clearly articulate to policymakers all around the world, what would be required and it starts it's down what I would call that learning curve. To better inform policymakers and then position us to respond to the policy as and when it comes because I think one thing is very clear in order for society to achieve this longer-term ambition. We're going to need different policies additional policies around the world, we want to help lead the industry.

To kind of give us the returns that we would expect given.

The resources, we're bringing to bear with for those projects and those are those or another we need to develop those now because if we wait until the policies in place will be behind the game and so we're being very thoughtful around developing those projects. It also informs what.

what we're going to need and so that we can very clearly articulate to policymakers all around the world, what would be required and it starts it's down what I would call that learning curve. To better inform policymakers and then position us to respond to the policy as and when it comes because I think one thing is very clear in order for

society to achieve this longer-term ambition. We're going to need different policies additional policies around the world, we want to help lead the industry.

We're going to need different policies additional policies around the world, we want to be help lead the industry.

And the drive to lower emissions and to take advantage and influence some of those policies.

Thank you very much.

Sure.

Next we'll go to Roger Read with Wells Fargo.

Yes, good morning. Good morning, Roger. Just wanted to. I'll be a little bit follow up on sort of the questioning that Phil was doing earlier as we think about. The 2025 goal. Roughly $30 billion in earnings if we take this quarter and annualize it and I realize that's just playing with math more than trying to force you into a corner, but you'd be at about $27 billion and yes prices are higher on the commodity front versus the $60 real.

Good morning, Roger.

Just wanted to.

I'll be a little bit follow up on sort of the questioning that Phil was doing earlier as we think about.

The 2025 goal.

Roughly $30 billion in earnings if we take this quarter and annualize it and I realize that's just playing with math more than trying to force you into a corner, but you'd be at about $27 billion and yes prices are higher on the commodity front versus the $60 real.

But what I wanted to understand as we look at the cash Opex reduction that's pretty identifiable then you have the portfolio and growth component, where would you say you are on the portfolio and growth component today, and how should we think about that maybe stair stepping in over the next couple of years again against the sort of <unk>.

$60 real environment.

Let me just start in terms of how we. Think about that and make sure that we're holding ourselves and the organization to. Our standard that doesn't require market help so the comment that we're making with respect to doubling. The earnings and cash flow potential of the business, we try to normalize for price environment. So we're not going to take any help from the market or assumed help from the market, but instead assume. Constant price basis, and make sure that the work that we're doing are structural improvements and so that if the markets there and. And consistent then we'll double that if it's higher.

Think about that and make sure that we're holding ourselves and the organization to.

Our standard that doesn't require market help so the comment that we're making with respect to doubling.

The earnings and cash flow potential of the business, we try to normalize for price environment. So we're not going to take any help from the market or assumed help from the market, but instead assume.

Constant price basis, and make sure that the work that we're doing are structural improvements and so that if the markets there and.

And consistent then we'll double that if it's higher.

Even more than that and if it's slower we'll still be in a very.

Robust position in so that's kind of how we think about it in this year's certainly this quarters margins are not consistent.

The basis that we're using for a longer term. We are we are getting some advantage and from the market. Today. We don't assume that is something that manifests itself through the plan and so that's I think.

<unk> Foundation to evaluate the comments that we're making.

Talked about the trucks efficiency, that's obviously a huge part.

And as I said, when we get through the plan get that endorsed and when we come out and start speaking in and take you through their Investor day, we'll spend more time, explaining where some of those savings are coming from that'll be a really important contributing factor and then with respect to the projects and the businesses I think as you look across each of those the.

We are delivering what we expected in fact in many cases.

Delivering more than we had anticipated for the things that we started off I'll give you just a couple of examples if you look at investments that we've already made in the Gulf coast and our chemical plants those are running well above the AAR basis reliability and throughput is much higher than we expected so that's delivering more value.

Rotterdam Hydrocracker are in Europe, and that was a new to the world technology.

Grading very low value streams into high value lubricant products that is performing a very.

Very well and delivering well above the basis, and so and if you look at our chemicals business and the high performance products.

So a lot of the growth and value that we see in that business comes from continuing to penetrate the market with these.

Differentiated high value products in the chemical organization is doing a great job of continuing to grow that and to demonstrate the value of those technical benefits to our customers.

They in turn can realize some benefit from those products. So those are all working very well and finally in the downstream.

You know a lot of work to make sure that we are.

Driving efficiencies into that business and then squeezing upgrading every molecule we can into the higher value segments of the projects that we've talked about in that space are doing just that just high grading.

The molecules and getting more value and when you combine that with reduced.

Cost.

<unk> business is a better position and of course, the lubricants business again, a differentiated high value technology driven product. They are really doing very very well growing their business and this year. We've seen record earnings in there. So if you look across one of the advantages of having such a diverse portfolio as it gives us a lot.

Out of <unk>.

Strength and levers to pull to grow value and so you see that in all of them and then of course the final point I would make is and I've been making throughout this call is we're able to deliver those a lot of those projects and those benefits at a much lower cost a lot less capital and so that's playing into the benefits that we've laid out in the deck.

Okay, great. Thanks, and then follow up question.

LNG markets has gone well.

Been really strong I guess, let's say global global gas.

We know that over the last couple of years, you seem to be some hesitancy from Ken.

Consumer side on signing term contracts, you're you've got some projects, obviously that are potentially ready to go and some others that are in process and I was just wondering.

Any clarity you can offer in terms of changing customer behavior willingness to sign a term.

Contracts in the LNG market right now.

Yeah, No I think certainly if anything what I would suggest.

First is that some of the challenges that they're seeing in the global.

Gas market just reinforces the importance of.

Secure sources of supply and a reliable source of supply and so I don't we haven't seen what I would say is any material shifts in terms of how.

The market and the consumers in those markets are looking at the opportunities in this space and our portfolio is heavily weighted to long term contracts you know about 80%. So we'd expect that to continue to be the case.

Thank you.

Beth.

All right next we'll go to Neil Mehta with Goldman Sachs.

Good morning team.

Darren you guys have a unique perspective into the state of global oil and liquids demand given your large downstream footprint.

Your perspective of where you see us real time in the demand recovery, how do you see the path forward and then how that ties into whether we're gonna see refining margins back to mid cycle or above in 2022.

Yeah. Thanks, good morning, Neil.

So what I would say is we are definitely seeing around the world. Our recovery with respect to economic activity and of course with that comes the recovery in energy demand.

Our recovery with respect to economic activity and of course with that comes the recovery in energy demand.

I would say that it.

It's kind of stops and starts so to speak as you move around the world with some of the.

Variance that we're seeing with Covid kind of slow things down and then pick back up again, but generally as you look around the world seeing a recovery. If you look across what I would say the primary transportation fuels.

I'd say road transport.

Commercial transport heavy duty transport those are getting back to where they were historically and so I would say the recovery you can clearly see that recoveries in place.

Thing Thats lagging, which I'm sure we all recognize given our own personal circumstances as air travel is lagging that recovery. It is improving continues to improve quarter on quarter. We saw an improvement this quarter and so I think ultimately when you see that demand balance.

Recover and when I say demand balance I mean across a barrel of crude as it moves into the transportation markets, it's going to require air travel to get back to where it was.

And it'll just be a function about how how strong that economic growth is that drives that the activity and then the demand and that of course be balanced with the amount of capacity available to meet that.

That demand so.

And its always supply and demand balance would be the primary factor there's been a lot of refinery closure. So a lot higher rate and there has been these high energy prices through our gas and LNG is going to put some additional pressure on some of the less advantaged refineries. So I think we've got to see how that plays out but our view is this that the downstream business.

When it has a peak or goes through a tight supply demand balance it doesn't last very long. So we're really gearing that business up to be successful in it.

Very low margin environment, and we are leveraging and focusing our efforts.

On refineries that are integrated with our chemicals business and integrated with our lubricants business. So that we are.

Arent dependent and reliant upon just the fuels market, but instead of a much more diversified.

Product slate that taps into some of the higher value products.

And then I would just comment as we look at industry utilization is kind of approaching I'll call. It the lower end.

Of what the 10 year range would look like so as Jack recovers here slowly over time.

Sure I can give us some further opportunity for improvement.

Thanks, Tim that the follow up is on the on the clean energy announcement today. So the $15 billion of capital how should we think about the returns associated with that and is there a target that you have in mind I'd go back to one of your competitors inventory transition day, where they said $10 billion of capital.

And maybe $1 billion of cash flow in the out years. So do you anticipate providing a quantification of cash flow associated with this $15 billion of investments and how do you think about the hurdle rates in terms of those investments and tie into that as you think about biofuels versus <unk>.

Versus hydrogen versus carbon capture is there anything that really stands out is is having outsized economic return at this point.

Sure. So I would start with by taking a step back and saying, we expect double digit returns across all of our business and we don't look at this business really any differently. If I look specifically at the capital that I'd say is targeted towards the low carbon solutions business, so different from the emissions reductions.

We're making across our own portfolio, either our existing business or the growth projects and looking to offset those incremental emissions that would come with growth projects. What I'd say is we look at that and say we think we can see really strong double digit returns coming from there now we have a lot of biofuel projects that are embedded there.

Which are supported by current policy the Kona project up in Canada would be a great example of that.

Clearly we are seeding some investments Darren referenced the Houston hub project, where we have to see those investments today.

<unk> capture doesn't need a fuller policy support we referenced that kind of earlier in the discussion today, but if we don't start to see the planning for those investments will be behind when the policy support coms and it's clear if we're going to make more progress towards a lower carbon future more policy support does have to come.

So that is how we're thinking about it and we see great opportunities in the space that we're targeting where we think the company really brings advantage, though carbon capture hydrogen.

<unk>. This is our current focus and we think we're going to be able to prosecute those projects end and earn good returns.

I would add to that Neil.

If you think just take Biofuels as Kathy mentioned distress Kona project now that's not what I would say is an industry standard Biofuels project, where we're leveraging.

Our process.

Technology, our catalyst technology too.

Try to change.

The value proposition, there and that's true with what we're looking at and hydrogen.

And obviously, we've got some work that we're doing in carbon capture so in all those areas.

Just coming back to and the challenge with given the organization. The standard we're holding ourselves to as we got to find a way to do this meet this demand this need of a lower carbon lower emissions future, but do it in a way that's advantaged and therefore brings value to shareholders and that we are not letting go of that we are making sure that the organization.

And we're going to do both.

And or equation.

Very clear thank you guys.

So operator.

We probably have time for one more question okay.

Okay. So we'll take our last question from the line of Paul Cheng with Scotiabank.

Thank you good morning.

Good morning quick question piece.

Good morning.

Firstly as for caffeine than that maybe.

Maybe let me add my welcome to the <unk> line.

You're not the first person.

So I joined the company Management Committee.

And also with that quite frankly for the past 30 years.

Excellent Dan have been official CFO role.

Hum.

How can you draw on the uptake you've been there for several months.

How are you thinking about the poor SaaS.

Paul J D.

And then as far as the criteria do you see room for change or adjustment or that you think the current process.

Good then you don't really have any changes that need to be made.

So thats the first question.

For the second question.

When we're looking at your Capex has always been for at least that for the past 18 months at 2025 been at both the next several years.

So you can maintain that but your.

Spending for the low comp and it's going to be increased by Colgate roughly $2 billion a year.

Davis, maybe 500 $600 million to say two and I'll hop in there now.

So the incremental spending is all being salt because you're doing better.

In other business and be able to.

Squeeze what is shaping up or is that something that could see project has been pushed out yet they all know what are those and what the.

The low carbon business say, you're talking I think 10% plus return is that going to be.

And I apologize that you push and what we voted that yes.

Most of them upbeat, yes noticeable missing in your press release when you were talking about this that you take the investment can you give an update on that thank you.

Okay, well I will start in and I guess, the first thing that I would say is.

I've been really pleased with how the organization has actually welcomed me you can imagine coming into a company like Exxonmobil I would say I was a little bit anxious about what the receptivity would be and both at the management Committee I'd say across the senior leadership team and across the company our.

People have just been really welcoming which has been terrific.

The other thing I would say is as I look at many of the company's processes I'm really pleased by how rigorous and thorough they are.

Exxonmobil puts a lot of work behind things before it comes out.

And then makes decisions and talks about those things and so you mentioned RFID process, which I think is incredibly rigorous and the company added some time back a process that they call red Blue team, which is.

Literally putting really smart people and kind of competing them against each other to say hey, as we're gonna F. E. This project tell us what a different perspective is on whether the project could be even better than what our base economics are and tell us what a different perspective might be in terms of what some of that I call. It.

Risks might be in the project and have we evaluated all of that and that's a process where I'd say, we take all of those learnings and then the base economics, how we're managing the risks of the projects.

Just get improved to an even greater level. So I'd say I've been really pleased just by that thorough work that's done across the company and I take that even into a different area. We havent talked about in on the call, but obviously, a net zero with the topic of the day. The company is clearly doing a lot of work in term.

Its own scenario analysis, we talked a lot about the announcement, we made in increasing our investment in the low carbon emission space and again, all I would comment on is that the rigor of the work that you see at the company is incredible.

The work that we're doing on a site by site location by location basis.

Staring at.

Our our kind of cost curves and the plans and how we're going to reduce our own carbon footprint. You know I. Just think is incredibly thorough and detailed and it's what enables us to really stand strongly behind our plan. So anyway, I've been really pleased and really.

Really happy with just how the organization has accepted me as an outsider.

Yes.

To add Paul I think.

<unk>.

It doesn't feel like Kathy has been asked to hear quite frankly, I mean, she's come in and joined the team and.

I'm not sure that anybody in the management committee thinks of are any different than the rest of us. So it's been a I think a really nice nice fit and she brings in a different perspective, which is very valued and it's added to the discussions and the debates that we've been having and we're going to continue to have.

With respect to the questions that you've asked me I didn't quite catch the last one but I'll address your first.

Around the incremental spending and how given we haven't changed the range, but it feels a little bit like the portfolio mix is changing how do we how do we where did that come from how do we think about that and so.

What I would tell you is probably three three components of how with our evolving plans in the work that we're doing in particular, the additional spend in low carbon solutions, how we're doing that within the <unk>.

Same band of the range of capital that we've projected or giving all of you for their savings is clearly one of them and I've mentioned that quite a bit throughout the call. So I won't go back around that again, but that has made a difference the ability. If you remember what we said we wanted to do is double earnings and double double cash flow and that's been the object.

If it hasnt been a volumes game it hasnt been.

Capital spend game is around how do you do that and do it most effectively and as we've found ways to do it more effectively that's allowed us to take off some of the capital spending.

So that's a that's an important component of it.

There are there have been some shifting as there always is in this space and so if you think about some of the LNG projects. There's been some movement on that Mozambique, and the work that we've been doing there in collaboration with total with some of the issues that we've seen in Mozambique that has slipped some but we're still committed.

Committed to that project, we see that as a <unk>.

A valuable opportunity, but we're gonna have to do that in the timeframe available to us with some of the constraints that we see today. So there is some movement in some of those projects obviously, we delayed.

The downstream and chemical projects those are coming back up again, but that shifted the pattern a little bit so theres some of that in there and then the third bucket I would say as you know we always left ourselves some headroom.

And that headroom is continues in there. So we've got flexibility whenever I mean, there's always I think the question out there about where we had 20, where we hit 25, I'd say, we're somewhere somewhere around there and it moves from year to year, and we give ourselves a little bit of space recognizing that things are going to move around very difficult to predict some of the scheduling and.

And movement around there. So that's how I would think about it are those three buckets and frankly the way we judge that is ultimately does that movement.

Inhibit our ability to deliver on the value proposition that we laid out and that was one of the points that why we really want to emphasize that we are going to deliver on the earnings and cash flow growth, which is what we have been driving the organization to do because we believe ultimately that underpins.

Growing our tsi total shareholder returns so.

And the last point Cathy Yeah, Yeah, I think you kind of already touched a little bit upon what I thought was your last question Colin and that was about Mozambique Coral project is clearly moving forward and you touched upon that project that we applaud simply because of the security situation on the ground, which will continue to look at and revisit over time.

Dale you guys are still committed that because I think there is some market Zumba dance.

What did you want to appear to be in that project.

Yeah, I wouldn't put a lot of faith in the market rumors that you hear as you know Paul Theres a lot of people talking most of them don't have a good understanding of the discussions that we're having and now we see that as a very.

Competitive resource it's large we've got opportunities with total that we've been working on they're committed to the project. We got a really good working relationship with them as well as our other partners in our existing.

I think we'll continue to develop that we think that's going to be very competitive in the long term and something thats going to be needed. So yeah. We're committed to continue to be committed to that.

Thank you.

Okay.

Kathy Thank you for joining us and for all on the call. Thank you for your time and thoughtful questions. This morning.

I hope you enjoy the rest of your day, Thank you and please be safe.

This concludes today's call and we thank everyone again for their participation.

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