Q4 2021 Exxon Mobil Corp Earnings Call

February 1, 2022

Good day, everyone and welcome to this Exxon Mobil Corporation fourth quarter 2021 earnings 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 go ahead, sir.

Thank you and good morning, everyone welcome to our fourth-quarter earnings call.

We appreciate your participation and continued interest in Exxon Mobil.

I am Stephen Littleton, Vice President of Investor Relations.

Joining me today are Darren Woods, 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 are 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 and referenced a select number of slides from that presentation.

Leaving more time for your questions.

We expect to conclude the call at 9:30 AM central time.

I would also like to draw your attention to the cautionary statement on slide two and through the supplemental information at the end of the presentation slides on the website.

I'll now turn the call over to Darren.

Thanks, Steven. It's a pleasure to share our 2021 results with you today, which demonstrates the significant progress we've made to advance our strategy and position the company to sustainably grow shareholder value.

Our effective pandemic response focused investments during a downcycle and structural cost savings positioned us to realize the full benefit of the market recovery last year.

We delivered strong financial and operating performance.

Significantly increased earnings and cash flow to fund our advantaged investments.

Reduced debt to pre pandemic levels.

And continued our long history of sharing our success with shareholders.

Today, we will outline some of our progress towards reaching our strategic goals.

The leading earnings and cash flow growth, drive to net zero future.

Build successful lower emissions businesses.

And maintain optionality in our portfolio to match the pace of the energy transition.

Let me touch on a couple of key points.

First, we're working to fully leverage our competitive advantages, including our scale to drive step changes and cost inefficiency.

We're also actively managing our strong portfolio and continuing our keen focus on operating performance and disciplined capital and operating spend.

We're also accelerating our work to reduce emissions and drive innovations focused on the hard to decarbonize sectors, such as heavy industry and commercial transportation.

An important part of this activity is our ambition to achieve net-zero emissions from our operations by 2050.

Also important is the good progress we've made building our low carbon solutions business.

Which is rapidly expanding utilizing existing policy.

As you're all aware, we're also pursuing very large scale opportunities that'll give us first-mover advantage as we advocate for the new policy necessary to support these step-out projects.

Our results demonstrate the benefits of the actions we've taken.

We're continuing to manage and evolve the company to further strengthen our competitive advantages.

Growing value through the transition regardless of its pace.

Turning now to some perspectives in 2021.

As I said, we've made tremendous progress advancing our strategy over the past year.

We remain focused on safety and reliability delivering a second consecutive year of outstanding performance.

In emission reductions, we expect to meet our 2025 reduction plans four years early.

That led us to set even more aggressive plans for 2030.

The experience we gained developing reduction roadmaps for our assets gives us confidence for what we can ultimately achieve.

This helped form the basis of our recently announced ambition to achieve net zero emissions in our operations by 2050.

Of course, a big part of our work in this area involved our low carbon solutions business.

As I mentioned, this new business has made exceptional progress building, a large inventory of new business opportunities with a focus on carbon capture hydrogen and biofuels.

Importantly, we're also addressing emissions by providing high performance products.

To deliver solutions to help our customers reduce their emissions.

Demand for these products was very strong in 2021, enabling 7% growth in our performance product volumes.

This helped to drive record annual earnings in our chemical business.

Strengthening our portfolio across all of our businesses continues to be a key part of our strategic focus to increase shareholder returns.

To that end, we had more exploration success in Guyana with six discoveries in 2021 and two additional discoveries already this year.

This has expanded the estimated recoverable resources on the stable block to more than 10 billion oil-equivalent barrels.

And we're on schedule to start production this quarter at Liza phase two.

In the Permian, we continue to drive improvements in drilling and completions.

Increasing average production by nearly 100,000 oil equivalent per day to approximately 460,000.

We started up the Corpus Christi chemical facility under budget and ahead of schedule.

And we've continued to monetize noncore assets generating more than $3 billion of cash proceeds from divestments during the year.

Our actions are yielding strong results and as I said positioned us to benefit from demand recovery.

We grew earnings to $23 billion and drove nearly $2 billion of structural efficiencies in 2021 on top of the 3 billion the year before.

This puts us in a good position to significantly exceed our goal of $6 billion of structural cost savings per year by 2023 relative to 2019.

We maintain our disciplined approach to investments focused on competitively advantaged low cost of supply opportunities and on growing our portfolio of high-value products.

Capex was $16.6 billion for the year, which was near the low end of our guidance.

As a result of our cost reductions improved efficiency and capital discipline, we've lowered our Brent breakeven price to $41 per barrel.

We're continuing to drive that down even more expecting to average $35 a barrel.

Between now and 2027.

Cash flow from operating activities increased to $48 billion the highest since 2012.

We use available cash to restore our balance sheet essentially paying back what we borrowed in 2020, reducing our debt to capital ratio to about 21%.

As a result of our restored financial strength, we increased the annual dividend for the 39th consecutive year and announced a $10 billion share repurchase program that started last month.

Overall, a strong list of accomplishments.

Now looking ahead to this year.

Our plan is robust and progresses, our strategic objectives.

I'll highlight a few key items on this page.

First, we will increase our competitively advantaged low cost of supply production.

With the startup of Liza phase two in Guyana in the Coral LNG development in Mozambique.

The same is true for the Permian, where our focus remains on driving further capital efficiency and high-value growth.

We're already ramping up manufacturing at Corpus Christi, and expecting to start up our Baton Rouge polypropylene expansion later this year.

These projects will continue to grow production of our high value chemical performance products.

We're applying the same capabilities and expertise developed over decades to progress our net-zero ambitions and grow our low carbon solutions business.

In that business, we expect to reach final investment decisions on large scale carbon capture and storage project at La barge, Wyoming in Rotterdam in the Netherlands.

We're continuing to advance the flagship carbon capture opportunity in Houston.

It now has 14 participating companies and has the potential to capture up to 100 million metric tons of CO2 per year by 2040.

We also anticipate beginning to lift renewable diesel from our agreement with global clean Energy's bio refinery in California later this year.

As well as making a final investment decision on a renewable diesel project at our scrap Kona refinery in Canada, expanding our lower emissions fuels offering.

And finally, we expect to further strengthen our balance sheet and progress of our share repurchase program, while continuing to retain capital flexibility and optionality to adapt to market conditions and opportunities.

Leveraging our core competitive advantages, we are well-positioned for future success.

Irrespective of the path or pace.

We have the flexibility to shift resources between our traditional and low carbon businesses at any rate required.

This provides a lot of optionality and positions us to lead industry in the energy transition.

And in earnings and cash flow growth.

We thank you for joining us today and look forward to sharing more with you during our Investor Day on March 2nd.

Unfortunately, because of ongoing COVID-19 considerations.

We will conduct the events virtually again this year.

We do look forward to the day when we can get back to hosting you all in person.

Before we take your questions, I'd like to take a moment to thank Steven for his leadership and significant contributions.

As after 30 years of service he will be retiring at the end of this month.

I wish Steven and his wife, Kim, the very best.

Best.

You'll be missed.

I'd also like to welcome Jennifer Driscoll, who will be joining later this month as our vice president of Investor Relations.

Okay.

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

Thank you, sir. The question and answer session will be conducted electronically. If you'd like to ask a question, please do so by pressing the star key followed by the digit one on your touchtone telephone.

We request that you limit your questions to one initial with one follow up so they may take as many questions as possible. If you're using a speaker phone. Please make sure your mute function is turned off to allowing us to reach our equipment. And additionally, please lift your handset before asking your question. We will proceed in the order that you signal us and we will take as many questions as time permits.

So once again that is star one if you'd like to ask a question.

We'll go first to Phil Gresh with JPMorgan.

Hey, good morning, and thank you for taking my question. Congrats Stephen on your retirement.

Thank you, Phil.

First question for Kathy on capital allocation.

Great to see the net debt reduction here in the fourth quarter well ahead of our expectations and the startup of share buybacks in January.

As you look at '22 with oil prices, where they are, how are you thinking about the pace of the share buybacks?

And the desire to take leverage below this 20% to 25% target given the pace and progress you've made in the fourth quarter.

Sure. Look, our capital allocation priorities remain the same right first let's make sure we're investing in high return assets and products across the business from Guyana to chemical performance products to Biofuels.

Look our capital allocation priorities remain the same right first let's make sure we're investing in high return assets and products across the business from Guyana to chemical performance products to Biofuels.

Second, really continuing to strengthen the balance sheet. I talked about on the third quarter and we continue to look out to our term debt maturities with an eye to paying those down in 2022.

And continuing to sustain a strong dividend that we have and then obviously returning further available cash to shareholders. We would have started the $10 billion share repurchase program at the beginning of the year, what I would have described it.

In equal pace against that 24-month longer-term timeframe. As we assess both our year-end results, where we ended up in terms of that that looking at the continued positive market environment that would cause us to increase the pace of the share.

Repurchase program and as I stand here today, I'd say increasing the pace with the faster end of that 12 to 24 months.

We will continue to evaluate the program and the pace throughout the year. It's one thing to sit here today and sit in what are pretty favorable market conditions, but we'll just have to see how the year pans out, but that's how we're thinking about it right now.

Okay. Great. Now that makes a lot of sense, thanks for that color.

Then my second question. I know you'll give a more detailed update in March at the analyst day.

But just any thoughts around 2022 production targets.

Considering the sum of the recently closed asset sales, just any moving pieces Permian or otherwise. Thanks.

Yeah, I'll take that Phil, good morning.

As you know, one of the primary objectives, we've had and looking at the portfolio is less about volume and volume targets and more about the quality and profitability of the barrels that we're producing so we've been.

Aggressively trying to high grade the portfolio across our businesses and that's certainly true in the upstream which led to.

The discussion we had a couple of years ago with respect to.

The divestment program, which continues to pay dividends and will continue to progress.

It continues to pay dividends and will continue to progress.

And then the growth that we're seeing in Guyana.

In Permian and Brazil, and so I would expect that volumes are fairly consistent with what we've seen this year.

And but the mix within that volume profile will continue to improve.

And the earnings per barrel will continue to improve and that's been the focus. And as we move forward. We'll continue to see the, what I'll say on the quality of the barrels or profitability of the barrels increase. And then with time as you head out in the later years, you will see volumes grow with that improved quality mix.

Okay, great, that makes sense, thanks a lot.

You bet.

Next question will come from the line of [inaudible] with RBC.

Hi, there. Thanks for taking my question. I wanted to reference some of the comments you made on the structural cost reduction you've talked about.

Those benefits continuing into '23. I was just wondering if you could balance [inaudible] the cost inflation we're seeing across various items to get raw materials, logistics, labor, et cetera.

The cost inflation, we're seeing across our various items to get raw materials logistics labor.

Can you talk about the net impact of those?

And then I have a follow up on [inaudible] topic.

Sure. Good morning, Raj.

You know we talked some time ago about a $6 billion structural reductions through 2023, as we work through 2021.

Some time ago about a $6 billion structural reductions through 2023, as we work through 2021.

And drove additional improvements within the business we've extended.

Additional improvements within the business we've extended.

That [restructural] cost reduction, we expect as I said this morning earlier.

Restructuring cost reduction, we expect as I said this morning earlier.

That's kind of around $2 billion.

Again in 2022, and another $2 billion in 2023, so more than exceeding the level that we thought about and talked about.

Last year. That obviously is the structural side of the equation in terms of reducing cost.

The counterweight in is the inflation Forex and some of the pressures that we're seeing in the short term.

We were in the down cycle.

We recognize that there would be high return and there would be growth in that would put pressure on prices and so we anticipation of that tried to manage many of our contracts and the work that we're doing to maintain a level of.

Cost and minimize escalation as we headed into 2021 into 2022, and that's paying off we've managed to mitigate quite a bit of that inflation, obviously as time goes on.

We'll start to see more of that. And our expectation is.

The businesses will work to offset that inflation growth.

Longer term, our objective is as we grow the business with the investments that we're making in chemical grassroots chemical facilities and some of the changes that we're making in our downstream operations. And as we grow some of the upstream businesses will offset all of that increased cost with structural efficiencies.

Okay, understood.

Okay.

That's really helpful.

The second question is actually.

Asset specific. I've been looking at some of the export data how can you give me over the last few months and then it looks like.

I've been looking at some of the export data how can you give me over the last few months and then it looks like.

That asset is performing extremely well and above nameplate capacity. I was wondering if you could talk about whether there's anything specific you are doing to increase capacity there. And maybe any color on how much of those exports contracted versus spot would be helpful too.

Yes, sure I think again, what we're seeing in Papua New Guinea, and frankly, it has been.

replicated and other parts of the company is what we've been talking about which is leveraging the full.

Capabilities of the organization.

One of the changes that we've made over time here is we brought a lot of the optimization skills and techniques that we've historically used in our downstream businesses in our refineries, where you're eking out pennies on the barrel to be successful and taking that technology and approach to some of our upstream.

Assets in sharing that technology and working with the upstream teams to improve the productivity of the assets on the ground that's paying off.

Productivity of the assets on the ground thats paying off.

All around the world, we're applying that technique and what you're seeing in Papua New Guinea.

That's part of the driver of that.

The driver of that.

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The driver of that increase. On top of just hard work by that operating team to maintain reliability and to run that plant.

Do as constraints. And so I think it's a combination of those two things and our expectation we've seen that in chemical as well. As we brought those plants up, we've been able to run above.

The nameplate capacity, just again with the optimization and the hard work of the operating team. So we've kind of

Nameplate capacity, just again with the optimization and the hard work of the operating team. So we've kind of <unk>.

have an expectation as we bring new assets assets on at those operating teams figure out unique ways to get beyond constraints and improve the performance.

Okay. Thank you very much.

We'll go to Jason [inaudible] with Cowen.

Okay.

Thanks for taking my question.

First, I wanted to touch on the Capex guidance that provided a range of 21 to 24 billion, which is appreciated.

Can you just discuss how you think about.

What determines the low end and the high end of that range for this year. And I have a follow-up. Thanks.

Sure. So overall I think as you consider the range that we've given I'd kind of point to starting the year with an expectation of being more towards the center of the range and then we'll see ultimately how the projects and the big projects proceed is probably the biggest indicator and whether any new projects.

So overall I think as you consider the range that we've given I'd kind of point to starting the year with an expectation of being more towards the center of the range and then we'll see ultimately how the projects and the Big projects proceed is probably the biggest indicator and whether any new projects.

Ultimately come online. Which we would always be maintaining some level of flexibility for unsurprisingly with the size of our upstream business relative to downstream and chemicals.

The biggest increase year over year comes from overall the upstream business and further spending in Guyana, further spending in unconventional, especially the Permian beginning to up weight our spending overall on our own emission reductions. And again, the Permian would be another place that we're particularly focused.

Restarting cost projects that we had in the downstream and then you'll be well aware of the big projects that we have ongoing in chemicals. So that's really what's driving the difference and how we think about landing towards the middle first days.

A different end within that range, but obviously tightening the range relative to the range that we've given over a longer period of time, which is the 20 to 25 billion.

Thanks.

That's helpful. And my second question, I wanted to touch on the performance products, but then Ken.

You've often discussed.

So that's a driver of your earnings growth over the next few years and high grading the business. So I just wanted to hopefully get some context around the comment about 7% growth in performance product volume.

Your earnings growth over the next few years and high grading the business. So I just wanted to hopefully get some context around the comment about 7% growth in performance product volume.

Can you help us understand what types of earnings uplift.

That provides and how you think about earnings growth within our performance product business moving forward.

Yeah. So I'd go back to the corporate plan disclosures we had where we talked about both within [inaudible] within downstream our focus on growing high value higher margin, which would include low emission fuel. It would include

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High-performance lubricants, and our lubricants portfolio as well as what we would describe as chemical performance products. And looking to double the volume of those products kind of over that over the plan period and ultimately as we look at the combination of downstream income over that period of time looking to triple earnings.

And so it is a strong component of what sits behind tripling earnings, but I'd also say and this comes through our breakeven analysis continuing to reduce the structural costs within the business across all elements of the business also are a driver of that increased cash flow and earnings power.

So that's how I would think about how we're looking to continue to upgrade the mix within both downstream and chemical and maybe just a little bit of color commentary with respect to when we talk about performance say in the chemical company, what drives that and it's built on its pretty.

Pretty fundamental competitive advantage.

With respect to our technology capabilities and the work that we do with catalyst.

And the developments that we've made give many of our chemical products unique characteristics.

Characteristics.

Characteristics in use and then so that's really important part of the

The value equation. And then we have invested in the science and technology to work with customers on applications to take advantage of that.

The science and technology to work with customers on applications to take advantage of that.

These unique properties and we have labs in China, and other places around the world to support our customers.

<unk> in China, and other places around the world to support our customers.

Value, the value in use of that improved performance, then is shared with customers and ourselves, which gives that uplift on our performance products.

Okay. Thanks for the answer.

And next we'll go to Doug Leggate with Bank of America.

Hi. Thanks, good morning.

So shocking news this morning. Congratulations Stephen, we will miss you indeed.

Look forward to talking with you before you leave.

So guys, I'm wondering if I could go to slide 12.

And just ask you to to walk through a little bit more color on the breakeven.

Guidance that you're talking about in my specific question is you're talking about on average breakeven between '22 and '27.

But a lot of your higher margin projects.

Come on at the backend period, specifically, Guyana, So what is it breakeven look like at the end of the period as opposed to the average.

So you are probably asking questions that I'll dive into a bit more detail when we get to Investor day, but you are right. What we walked through on this slide and specifically on the bottom of the slide where we did the walk from our current breakeven for that average in '22, '27 of 35.

What I'd tell you is as a result of the comment with regard to the portfolio improvement continuing to take place over time as you would expect we start out at.

As a result of the comment with regard to the portfolio improvement continuing to take place over time as you would expect we start out at.

At the higher end and then move to the lower end. So I would tell you our progress will not exactly linear.

It continues to be fairly consistent over that period of time, and we will definitely dive into that a bit further when we get to investor day.

I'd add that the high end of that range is consistent with what we're showing in 2021.

Consistent with what we're showing in 2021.

Okay. So it was probably below 35, is the bottom line at the end of the period.

Automatically the top of the [inaudible]. Okay, alright. Thank you. My follow up is actually.

I guess is that kind of a cash distribution question.

A penny dividend increase. You basically did what Chevron did five years ago.

But they didn't have the growth story, the free cash trajectory that we see is.

Yeah.

Pretty significantly this year beyond.

What you've laid out even with the buybacks. So my question is.

Could we ever see Exxon do like an interim dividend increase or put differently, what are you going to deal with all the cash?

I guess I'm not going to get out in front of the board decision with regard to further distributions to shareholders. We've talked previously as we've looked at our dividend that some of the metrics that we look at it both our dividend yield relative to our peers' dividend yield relative to I'll call it the total dividend yield on average.

On the market as well as looking at our payout ratio.

Our overall dividend size is larger than what our peers would be and we have been more towards the top end of the range both on yield as well as on payout ratio, obviously as we see.

Size is larger than what our peers would be and we have been more towards the top end of the range both on yield as well as on payout ratio, obviously as we see.

See the improved overall results at the company, that naturally is starting to impact both of those metrics, which I will consider, continue to be considered as the board looks to make decisions going forward, but I would say as we sit here today, we continue to feel pretty good about what our dividend yield is and its competitiveness.

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Yeah, I would add Doug that the board evaluates that quarterly so it's it's an ongoing discussion and we don't have.

A fixed time period, it's a function of the things that Kathy talked about.

Alright, thank you.

Next we'll go to Devin Mcdermott with Morgan Stanley.

Hey, good morning. Thanks for taking my question and Steve and congrats on the retirement.

Thank you, Devin.

So my first question is on some of the structural cost efficiencies, you all have done a great job.

In bringing those to fruition here over the last few years and are still talking about exceeding the $6 billion structural target by 2023. I can't help but noticed it in the waterfall chart on longer-term break evens, you're showing an incremental $5 billion of cost reductions relative to '21 levels would imply a pretty significant increase.

In that longer-term target. Could you talk a little bit more about some of the incremental opportunities that you've identified?

And I imagine that some of the structural changes at the corporate level that you announced recently a part of that.

Structural changes at the corporate level that you announced recently a part of that.

Sure and just to be clear on the chart that Kathy walked folks through the five that we're.

shown on that bottom chart is dollars per barrel, it's not billions of dollars. Understood.

Be clear on that.

So I think the heart of the reductions that you are seeing as we go forward. It is a function of capturing.

The <unk>.

The best of what the corporation can bring to bear in each one of our businesses. Just a little bit of background.

Devin, we started with process safety and basically several years ago.

Launched an effort to take the best thinking that we had in each of our businesses bring that together to come up with one approach to managing process safety and then roll that out across the organization that has resulted in eliminating a lot of duplicate or.

Apparel programs running in parallel brings cost so we've saved with respect to the work that we're doing in that space, but much much more importantly, we improved our results and have significantly.

Reduced process safety.

And so we're continuing down that path, but it highlighted the strength of kind of capturing the learnings that have occurred across our different businesses over the decades.

And the quality thinking that we have in each of our organizations and bringing those experts together and having them addressed the problem on a corporate-wide basis.

It is delivering good results. We saw the same thing with reliability. When we brought, again, the best thinking of the corporation across the different operating companies together to solve the challenge of how do we improve reliability structurally and sustainably across all of our businesses. This team came up with ideas and implementations that once again.

significantly lowered our cost.

And is improving our performance. And so that is the kind of the recipe that we're executing across a very wide range.

Kind of the recipe that we're executing across a very wide range.

of opportunities we're bringing in our maintenance activities and thinking about that.

We're bringing in our maintenance activities and thinking about that.

Above site maintenance what are the right processes. How do you go about that into that same type of approach leveraging the best in the corporation, which we expect to see significant improvements in our maintenance and turnaround spend. Technology and engineering that the new company or the new group that we're forming is

Is.

Basically again doing the same thing best capabilities from each of our businesses we have technology.

Functions within each of our companies, we're bringing those things together, same with engineering. And we again, expect to end up doing things much more cost

Efficiently for much more effect and that, so the savings that we see going forward are really the result of a lot of different things being applied across a huge scale of our operations to significantly reduce costs and there are other opportunities in the future think about supply chain think about some of the financial transactions as we've over the course of 2018 in 2019 realigned our businesses and work processes.

The result of a lot of different things being applied across a huge scale of our operations to significantly reduce costs and there are other opportunities in the future think about supply chain think about some of the financial transactions as we've over the course of 2018 in 2019 realigned our businesses and work processes. So that now.

So that now as you look across our different businesses, we're conducting businesses.

In a very similar back-office approach so to speak that gives us an opportunity to capture the synergies that exist between those. So a really broad range of opportunities as we kind of opened the doors between the different businesses across our corporation take the best of each has to offer bring us together and come up with an answer that's better than anyone on its own.

<unk> on its own.

And I think that again place to this the competitive advantages that I've been talking about since taking this job around leveraging our scale.

leveraging the integration of our businesses.

Leveraging the functional excellence in each of these companies have developed how do we better take advantage of that and then leveraging our technology and bring that altogether by leveraging the capabilities of our people so that recipe.

It is beginning to pay off and frankly.

Hard to see where that ends with respect to the improvements that we've got lined up for the business.

Very helpful. Thank you. And my second question is on M&A.

In addition to the high return investment opportunity, you highlight selective M&A as an opportunity in the slide deck. I'm just wondering if you could talk a little bit more detail about what strategically.

You'd be looking for at this point in time.

Yes. I'll answer that and then if Kathy has anything to add, I'll turn it over to her. But as we've talked about for quite some time, we do have an ongoing active M&A group that but what we look for things that where we can and bringing it into our portfolio add unique value grow unique value and so it's got to be something.

I'll answer that and then if Kathy has anything to add I'll turn it over to her but as we've talked about for quite some time, we do have an ongoing active M&A group that but what we look for things that where we can and bringing it into our portfolio add unique value grow unique value and so it's got to be something.

But we feel like there is a synergy or fit with what we're currently doing to lever that value up and see accretion very early on. And so that's how we're looking at that and we look at it across all of our businesses for opportunities and you've seen that kind of play out.

In the chemical business here with an acquisition last year, you've seen it play out.

In our Downstream business and so I think that's a very active program, but bottom line is we've got to look at what that opportunity looks like in the context of what Exxon Mobil can bring to bear and then make sure that we're in a position to effectively.

Leverage our core competencies skill sets and capabilities to grow value beyond what either one companies could do independently and that's how we assess and think about that. Kathy, anything to add?

The only other thing I'd add is.

In the low carbon emission space. We're also actively assessing things and we would have discussed the fact that we made an investment in bio jet.

I'll call it a biodiesel company. That's out in Norway where we also have an offtake agreement that we continue to look at opportunities in that space as well.

Thank you.

Welcome.

Next question will be from Sam Margolin with Wolfe Research.

Good morning, everybody and congrats Stephen. Thank you.

Alright.

So my first question is on the emissions.

The statement that you made where you're four years ahead of your target for 2025, it's interesting because the final data is not out yet.

But I suspect that global emissions hit a record in 2021, just based on the amount of coal that.

Came through the monthly supply numbers.

You know, a lot of execution in the low carbon businesses around policy and communicating to regulators.

What's most beneficial for society. So in the context of Exxon's emissions starting to fall in global emissions still rising, do you feel like your seat at the table has potentially improved or your influences

Getting stronger or is it still very early in the process?

Well, I think it's a great question, Sam. I think as we've talked about before this is a really complicated space and it deals with a really important part of

People's lives and the resiliency of economies around the world and so I think.

I've been encouraged frankly by the growth in terms of the folks who are working in this space and actively thinking through how best to achieve and address what we've been talking about for some time to do a challenge and I think there's a growing recognition and a growing acceptance of the need for a variety of solutions.

The growth in terms of the folks who are working in this space and actively thinking through how best to achieve and address what we've been talking about for some time to do a challenge and I think there's a growing recognition and a growing acceptance of the need for a variety of solutions.

And approaches to strike that balance correctly and make sure.

That we make progress on lowering emissions, but at the same time, don't compromise the quality of people's lives. And I think what we're seeing play out today in Europe certainly.

I think has made that point clear in terms of some of the challenges associated with.

Moving quickly in this space or not thinking through all of the potential downsides and unintended consequences. And we've seen that here in the US with some of the tightness of supply and so that is the challenge.

Not thinking through all of the potential downsides and unintended consequences and we've seen that here in the U S. With some of the tightness of supply and so that is the challenge.

We're committed to helping society make that reduction we are working hard to catalyze.

Helping society make that reduction we are working hard to catalyze.

The right kind of policy to incentivize them to drive emissions down faster while at the same time protecting.

People as a standard of living and livelihoods there are options to do that. It does require some policy in different places. And we're seeing some of that policy manifest itself in some of the countries around the world, which underpins the work that we're doing in low carbon solutions. And that's a global business with opportunities that we see developing all around.

The planet in many many countries and there's policy in place today to support those investments use which is what's driving.

Certainly in the early days and then that I think those those policies and investments set good examples for other countries to consider and to think about in line with the needs of their constituencies. So I am encouraged.

Policies and investments set good examples for other countries to consider and to think about in line with the needs of their constituencies. So I am encouraged.

I do feel like there's a better conversation happening obviously, a long ways to go there.

And a lot of work to be done both from a policy standpoint, as well as from the companies participating in the market.

Thank you and then so this is a follow up about the low carbon solutions organization in the company.

A lot of the efforts there are connected to existing operations right carbon capture on facilities or biofuels coming off of.

Refinery parks. And so is the intent to fully disaggregate all of that from the base business? So that we can kind of map the revenue trend line and associate that with an emissions abatement number and what's your progress that way or is that more of an organizational function and not necessarily.

A financial segment yet, thank you.

So I'd say right now our focus is on building that third party business, right? We have I'd say a huge number of projects in the pipeline. We feel very good about the progress that's been made in a pretty short period of time since we last since we launched the low carbon submission business.

But we also have the overall activities in terms of reducing our own emissions and those activities are really the prime accountability of the business lines and so there is an overall, I'll call it corporate coordination best practice roll that's taking place there that's part of what enabled us to ask.

We expect to meet the 2025 goals ahead of time.

So when we talk about our overall efforts as it relates to emissions in their entirety, we're always talking about what we're doing within our own four walls and then what we're doing to help reduce I'll call it our customers' emissions or more broadly what the company does in terms of the products and technologies that it offers and helping to reduce.

Society's emissions with lower lifecycle emission type products. So that's how we think about it and certainly first and foremost.

Lower lifecycle emission type products. So that's how we think about it and certainly first and foremost.

That 3rd party business is something we're focused on building today. So we are not expecting that that's going to be I'll call. It new segment that we're disclosing as opposed to just focusing on building that business, which is still in its early stages.

But you can imagine, if you think about.

And if you think about.

Looking across our global portfolio, and then opportunities with customers.

Third parties, is understanding you know what the lowest cost of abatement, how much CO2 can you reduce for the lowest dollar spent. That group has a good perspective that we're leveraging across all of the opportunities whether they're internal or external and frankly, if you look at the portfolio of opportunities that we're looking at as a company.

The lowest cost of abatement, how much C. O. Two can you reduce for the lowest dollar spent that group has a good perspective that we're leveraging across all of the opportunities whether they're internal or external and frankly, if you look at the portfolio of opportunities that we're looking at as a company.

There's a really good mix between what we're going to be doing at our own facilities.

Opportunities to provide lower emissions products for our customers and then opportunities to reduce industrywide.

Lower emissions products for our customers and then opportunities to reduce industrywide.

Tier two emissions. So it's got a good mix today, we're very early in this process. I mean this is a very dynamic space. If you think back.

Couple of years ago, a hydrogen and carbon capture.

And frankly, even biofuels were struggling to kind of be in the mix in terms of potential solutions, whereas today I think people recognize the importance. They are going to play going forward and so I would just say it's at rapidly evolving there a lot of interest. We've certainly had a lot of interest expressed in our business and the opportunities we're pursuing.

Be in the mix in terms of potential solutions, whereas today I think people recognize the importance. They are going to play going forward and so I would just say it's at rapidly evolved evolving theres a lot of interest. We've certainly had a lot of interest expressed in our business and the opportunities we're pursuing.

So I would say we will keep talking about that. You'll see that business grow with time as.

Places around the world take the steps to make the necessary reductions.

Take the steps to.

To make the necessary reductions.

Thanks. By the way, it's lunar new year, and it's the year of the Tiger. So that seems potentially significant.

Yes.

I'm glad to hear that.

Have a good one.

You too.

Next we'll go to Neil Mehta with Goldman Sachs.

Good morning, team. Congrats on strong results and congrats to you Steven.

On your retirement here.

A couple of questions for you. The first is on the Permian that Darren can you just provide an update on how youre thinking about prosecuting that asset.

We heard from Chevron. They're thinking about 10% type of growth in the Permian in 2022 versus 2021, how are you thinking about.

Volume growth. And then in general what is the right approach to.

In general what is the right approach to.

To maximize the value from the Permian relative to what you were talking about a couple of years ago.

Yes, sure, Neal. I think maybe I'll start with where you ended which is what we're talking about a couple of years ago, which you'll recall, we talked about I think the terms I used where right now the industry is playing a short game. And we're a long ball here and how do you. How do you do, how do you take the long ball game into the unconventional space and that led to the approach that

Neil Chapman has talked about over the last couple of years with respect to setting up more of a manufacturing approach and driving efficiencies and driving technology applications into that those developments and that has worked very very well.

And we're seeing the results of that so we grew our Permian.

Production from '20 to 2021.

By over 25% our expectation as we go into 2022 is to grow another 25%.

And that's when you're doing that with a very tight control on capital. So that's how we're playing the game and we continue to look at within

The approach that we outlined a couple of years ago and the success that we've seen with that and bringing to bear a lot of the technology.

And application expertise, think drilling and reservoir manage it with the rest of the corporation has really seeing the benefits of that we're going to make sure that we stay in that envelope.

And obviously as we progress our production and development.

New horizons are opening up and we got more delineation work to do that we'll continue to kind of grow the understanding of where the opportunities are. And we will progress those in the context of staying within that concept that we've laid out which were seen allows us to bring.

Bring barrels to market at a very low cost and that's going to be an important part of the equation maintaining that low-cost high value operation.

Do you have a number in mind from a volume perspective as you think about this year?

So this year I think we're going to be 25% up we expect between 5% off.

From 2021. Okay.

Which is consistent with the increase that we saw from 2020 to 2021, Okay. Very helpful. And then I really liked this exhibit page 12 of the slide with the breakeven and I know we spent a lot of time

On it already on the cost and the volume side, but the big number here is mix, that $9 a barrel.

Can you spend some time talking about the composition of it how much of it is upstream versus fuels versus chemicals?

Any more granularity that we can expect at the analyst day to help us break down the mix shift that youre seeing in the business.

Sure. So look, overall the business composition by its nature is heavy upstream relative to downstream and Kevin. So as you think about that mix.

So look overall the business composition by its nature is heavy upstream relative to downstream and Kevin. So as you think about that mix.

All of the businesses are contributing to the favorable mix upstream.

Has an outside contribution we talked about in our strategic plan that 70% of those investments were in I'll call it the strategic upstream development area. So Guyana, Permian, Brazil, bringing on more LNG. Those are really what are fueling I would call the upstream.

Contribution we talked about in our strategic plan that 70% of those investments were in I'll call. It the strategic upstream development area, So Guyana, Permian, Brazil, bringing on more LNG. Those are really what are fueling I would call the upstream.

Improvement in the portfolio and then we also talked about by the time, we get to 2027 and downstream in Cannes.

Over 40% of the earnings coming from those high-value high performance products. So you do get a mixture overall, but obviously, a very big change overall in the portfolio coming from the upstream.

Overall, that's what the big drivers are we've talked about 50% of our volume from post-2020 startups in 2027.

From the upstream so just to give you another stat.

In terms of how significant the mix change is there. [inaudible].

Darren.

Yeah.

Yep.

Alright. Next question will come from the line of Paul Cheng with Scotiabank.

Alright, thank you.

First, Steven, thank you for the help and congratulations and wish you a wonderful retirement.

Hmm.

And that. Two questions, please. I think for Darren.

Your question please.

For David you.

You guys have just announced.

[inaudible] non-public restructuring, but historically that your chemical and

We are finding is already one thing.

Maybe to ask [inaudible] I mean 70% I think of your chemical facility.

[inaudible] directly to your own refinery operation and you always see in the management Committee that have been [executive] so now overseeing both chemical and refining. So with these structural changes, are we talking about major head count reduction gets that.

[inaudible] be high or how exactly the topic.

[inaudible] will be changing the way.

What [inaudible] really seem that then one of the best in the industry again coordinating between chemical and refining. I mean how is that going to change that [inaudible]?

Yes.

But maybe answer that then I will answer the second question. Okay. Yes.

So I think. Good observation and I would echo the point you made which is if you look at our chemical and downstream business. Historically, they have been very well coordinated I think amongst the best within the industry.

Good observation and I would.

Echo the point you made which is if you look at our chemical and downstream business. Historically, they have been very well coordinated I think amongst the best within the industry.

I would say, though there's a difference between coordinating between two owners and in having a single owner and we really see the opportunity.

As to have one set of management overlooking those businesses and making sure that we're prioritizing across those businesses and those resources, making sure that we're prioritizing only the investments that we're making into facilities.

But the allocation of the resources, our technical resources, our engineering resources and pursuing the highest.

Priority payout opportunities across those two and it's difficult to do today across two separate organizations.

This will improve upon that so we've got a good base case. We think we're going to make us even better and we've demonstrated the power of that to ourselves frankly in a couple of previous organizational changes I will just take the upstream business. When you think about the functional companies that we had in our upstream business many of them working very closely together and

coordinating, we then consolidated all of those businesses.

From three, from seven, three, two, now down to one as we step through each of those.

Despite what I would say is the best intention of the organizations and working collaboratively together you get a step-change in performance and opportunities to reduce cost and becoming more efficient as you consolidate those and so we're going to see we believe the same opportunity within the downstream in chemical portofolio.

The other point I would make which I don't want to go unrecognized is by taking.

And centralizing what I will call it service delivery.

Processes out of those businesses. And again, bringing the best Corporation has to offer and then high grading the thinking there as I talked about with process safety and reliability doing that in maintenance. We think are going to drive a step-change improvement with respect to how we execute maintenance across the entire portfolio. So there's this opportunity to consolidate

expertise in and leverage that across all of our operating companies and so those two things I think are going to be a very very critical. And the third point I would make with respect to headcount reductions. That's not what we see driving this improvement opportunity. We made those tough decisions back in 2020, we recognized how hard that was going to

Be on the organization and we stretched ourselves to make sure that when we put together our plans for that, we

As best as possible comprehended what was to come and made this a

One time deal as much as we can. And therefore stretch ourselves to then move the organization to the level of efficiency that we need to support a lower staffing and that's the work that we've been doing and then obviously as attrition.

Has occurred within our company and the industry more broadly and across the economy as a whole. We've been very thoughtful and cautious about what positions we fill and how we manage that attrition. Again, continuing to think through opportunities to get more efficient and take advantage of the attrition to make sure that we're managing our staffing in line with what we see as the

Occurred within our company and the industry more broadly and across the economy as a whole we've been very thoughtful and cautious about what positions. We fill in how we manage that attrition again, continuing to think through opportunities to get more efficient and take advantage of the attrition to make sure that we're managing our staffing in line with what we see as the.

Ultimate opportunity. When you put all that together, we feel like we're in a fairly good position to execute this and not have the kind of one off.

One off.

Large redundancy programs that we went through in 2020.

Okay. Thank you.

And second question maybe is for Kathy.

At 20%, 21% debt to capital at [inaudible] obviously is extremely comfortable.

Nike bold alloy ply obviously is extremely comfortable.

And one will argue that maybe is [inaudible]. But the volatility in the market it's unpredictable. So from that standpoint

But the volatility in the market it's unpredictable it's open.

<unk>.

Given you are generating a lot of free cash. Should we continue to put a portion of that again.

Into the bonds into the cash until you, which [inaudible] such as.

The bonds into the cash until you, which may be in hotel concepts such as.

Zero net debt.

I mean, if you look back in 2020, if you'll have a Q1 that entering into the downturn that has tremendous opportunity what that buyback or other things that you can do. So is that a reasonable approach for your business?

As unpredictable and volatile as oil and gas. Or what that you think that's purely not efficient use of

<unk> and volatile oil and gas or what that you think that's appealing not efficient use of cash.

Capital structure. And on [that side].

A quick if I can sneak in just can you talk about your US cash tax.

Payment position over the next several years. Thank you.

Okay. So overall, we would absolutely agree that during that part of the cycle, we need to be really restoring our balance sheet and getting ourselves plenty of flexibility to contemplate what's ultimately going to be the down part of the cycle, which is difficult to call. You would have heard me make commentary that we are going to further reduce our debt.

Overall, we would absolutely agree that during that that's part of the cycle, we need to be really restoring our balance sheet and getting ourselves plenty of flexibility to contemplate what's ultimately going to be the down part of the cycle, which is difficult to call. You would have heard me make commentary that we are going to further reduce our debt.

We certainly think getting to the low end of I'll call it the total debt to cap range is something that we're absolutely targeting and expecting to achieve this year. And relative to where we've been historically I'd say carrying a bit more cash is within that expectation as well. So I would say we're very aligned.

And understanding that during the top part of the cycle, we really wanted to make sure that we've built in a whole lot of flexibility and completely restored our balance sheet continue to have really strong.

Credit ratings, we wouldn't today sit here and say, we think we need to have zero net debt or carry zero debt overall and that that does serve also as a little bit of an offset against inflationary pressure.

To some extent, so I'd say we feel pretty comfortable that we're getting the balance right.

Ensuring we have a strong balance sheet and plenty of liquidity and also then during this part of the cycle and making sure that we have a path forward to continue to have that flexibility and return excess cash within our capital allocation priorities to shareholders. Yes, and I would add, Paul I don't think

You have to go too far back in time.

To just test how resilient the strategy that we had in place with respect to capital structure was. I mean 2020 and the pandemic.

How resilient the strategy that we had in place with respect to capital structure was I mean 2020 and the pandemic.

We saw the worst conditions in this industry in living memory.

The worst conditions in this industry in living memory.

The fact that we managed through that extreme set of circumstances, maintained our commitment to our shareholders, continued to pay dividend, managed our capital program.

Basically kept all of those projects that we're pursuing alive slowed some of those down positive kept others going that balance that we struck going through those extreme challenging times.

I think demonstrated the robustness of the approach that we are pursuing.

Robustness of the approach that we are pursuing.

And then I'll just come back to your second question I would say as we look forward in the near term just the next few years out. We don't really see our US cash tax position changing but that is with a big caveat that there's obviously been

A lot coming forward in Congress with respect to potential.

Tax changes. And while to build back better Bill did not kind of ultimately go through I also don't think it's entirely off the table in terms of coming back in and seeing something smaller, but likely still have various tax provisions in it but that's how you should think about it for the moment before we see any other legislative changes.

Legislative changes.

Thank you.

Operator, we probably have time for one more caller.

Okay, we'll take that last caller will be Roger Read with Wells Fargo.

Yeah. Thanks, good morning. Sneaking me in here at the end.

I'd like to ask international gas was exceptionally strong I don't think it's a stretch to understand why but I was curious as we look between.

LNG domestic sales wherever those occurred and then you talked about building up a trading organization and I was curious if that was a positive contributor this quarter.

Sure, well, I think the story around natural gas is pretty well understood with respect to the tightness that we're seeing in the majority of ourselves of gas are contracted under long term contracts.

So limited opportunities to make significant changes in the short term. I would say that we do have a very active trading program and we continue to grow that and our expectation is that we'll continue to grow that and so I think that's going to play a bigger role as we go forward.

[noise] limited opportunities to make.

Significant changes in the short term I would say that we do have a very active trading program and we continue to. Grow that and our expectation is that we'll continue to grow that and so I think thats going to play a bigger role as we go forward.

Grow that and our expectation is that we'll continue to grow that and so I think thats going to play a bigger role as we go forward.

But I don't think as you look at today's results.

The value that you're seeing is basically being driven primarily by the base business.

Okay, and then any changes in terms of your LNG outlook particular projects? I know there's been talk of bidding on some things.

Asia Pac market or East Asia, maybe I should say in terms of the new facilities. Just curious if there has been movement there. You talked a little earlier about.

Outlook with PNG.

Whether it's Middle East Asia or [inaudible]. Just curious in terms of expansion.

Just curious in terms of expansion.

Yes, I would I would say there nothing has changed per se I think we have.

As you know a fairly broad portfolio of opportunities that we've been working and we continue to work those. And if we can find those projects, which

Those projects, which.

Deliver the kind of returns at the cost of supply that we think is needed to compete over a very broad range of future scenarios that we'll pursue those.

That's kind of how we're thinking about it. And I would just say the work that we're doing in that space today is consistent with the work we've been doing for some time now there are opportunities out there that we're evaluating. But they need to be competitive in the portfolio and they need to be competitive long term across a very wide range of future scenarios.

Kind of how we're thinking about it and I would just say the work that we're doing in that space today is consistent with the work we've been doing for some time now there are opportunities out there that we're evaluating but they need to be competitive in the portfolio and they need to be competitive long term across a very wide range of future scenarios.

And no change with the big projects that we're progressing. Obviously, we've got the Mozambique coral floating, LNG project is still expected to start-up towards the end of this year and continuing to progress the Golden pass project.

Great. Thank you and good luck Stephen in your retirement.

Thank you very much, Roger.

I'd like to thank all of you for your time and thoughtful questions this morning. Also, like to thank you for the opportunity to work with you over the past couple of years. And I look forward to introducing you to Jennifer. So with that, I hope you

Enjoy the rest of your day. And thank you and please stay safe.

And please stay safe.

Thanks, everybody.

Yeah.

That does conclude today's conference. We thank everyone again for their participation. You may now disconnect.

Okay.

[music]. [music]. Yes. Yes. [music].

Yes.

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