Q1 2022 Exxon Mobil Corp Earnings Call

Good day, everyone and welcome to this Exxon Mobil Corporation first quarter 2022 earnings call. Today's call is being recorded at this time I'd like to turn the call over to the Vice President of Investor Relations. Mrs. Jennifer Driscoll. Please go ahead ma'am.

Good morning, everyone welcome to our first quarter earnings call. We appreciate your interest in Exxonmobil.

<unk> me today are Darrin was our chairman and Chief Executive Officer, and Kathy Michaels, our senior Vice President and Chief Financial Officer.

The slides and our prerecorded remarks were made available on our investors section of our website earlier this morning, along with our news release.

In a minute Darren will provide opening comments and reference a few slides from that presentation. Then we'll conduct a question and answer session.

Back to conclude the call by about 930, a M central time.

Let me encourage you to read our cautionary statement, which is on slide two please.

Please note. We also provided supplemental information at the end of our earnings slides, which are posted on our website.

Now I'll turn the call over to Darren Woods.

Good morning, and thanks for joining us today.

As we laid out at our most recent Investor day, our goal is to sustainably grow shareholder value through the execution of our strategic priorities.

Slide.

As we think about recent events are.

Our job has never been clearer were more important.

We need to meet society's evolving needs reliably and affordably it's.

Consumers and businesses across the globe.

Demanding and what we delivered this quarter.

First we continue to build our competitively advantaged production portfolio.

Bringing new barrels to market today, driven in part by the high value investments, we continue to progress through the pandemic driven downturn in prices.

A prime example of the benefits of our continued investments in Guyana.

This quarter saw the successful startup of Liza phase two.

Production is ramping up ahead of schedule is expected to reach capacity of 220000 barrels of oil per day by the third quarter of this year.

Combined with Liza Phase one will bring our total production capacity and go out to more than 340000 barrels per day.

Our third project IRR is running ahead of schedule.

The startup now likely by year end 2023.

Yellow till the fourth largest project to date on the stable block received government approval of our development plan.

It's on schedule to start up in 2025.

Further adding to our portfolio. We have made five new discoveries. This year that increased the estimated recoverable resources to nearly 11 billion oil equivalent barrels.

Turning to the U S. We continue to grow production in the Permian Basin.

In March we produced about 560000 oil equivalent barrels per day.

On pace to deliver a 25% increase versus 2021.

Looking forward, we're also growing our globally diverse portfolio of low cost.

Apple efficient LNG developments.

Mozambique, the 3.4 million ton per year, coral south floating LNG production vessel.

Commissioned after arriving on site in January .

Coral South is on budget with the first LNG cargo expected in the fourth quarter.

In addition to investing in high value opportunities in our existing businesses.

We're also advancing opportunities in our low carbon solutions business.

During the quarter, we announced plans to build a large scale hydrogen plant in Baytown, Texas.

We anticipate the facility will have the capacity to produce up to 1 billion cubic feet of hydrogen per day.

Combined with carbon capture transport and storage of approximately 10 million metric tons of C or two per year.

This facility will be a foundational investment in the development of the Houston Ccs hub.

But you will have the potential to eliminate 100 million metric tons of C O two per year.

It represents a meaningful step forward in advancing accretive low carbon solutions.

We also reached a final investment decision to expand another important carbon capture and storage project at our helium plant in Wyoming.

In addition, we received the top certification ever management of methane emissions at our Poker Lake development in the Permian.

We're the first company to achieve this certification for natural gas production associated with oil.

At the end of the first quarter, we implemented a series of organizational changes to further leverage the scale and integration of the corporation and prove the effectiveness of our operations and better serve our customers.

We combined our downstream and chemical operations into a single product solutions business.

This new integrated business will be focused on developing high value products improve.

Improving portfolio value and leading in sustainability.

As a result of these changes our company is now organized along three primary businesses upstream product solutions and low carbon solutions.

These three businesses are supported by corporate wide organizations, including projects technology engineering operations safety and sustainability.

Before I cover our financial results I want to provide a perspective on the market environment.

In the first quarter, a tight supply demand environment.

Due to the low investment levels during the pandemic.

Contributed to rapid increases in prices for crude natural gas and refined products.

Clearly the events in Ukraine have added uncertainty to what was already a tight supply outlook.

Brent rose by about $22 per barrel or 27% versus the fourth quarter.

Today natural gas prices remain well above the 10 year historical ranges driven by tight global market conditions and ongoing European supply concerns.

The same tight supply demand factors have also pushed refining margins near the top of the range.

Chemical margins in Asia have fallen sharply with product prices lagging the steep increases in feed and energy costs.

In our case U S ethane feed advantage provided a significant positive offset versus this global view.

With that market environment as the backdrop, let me turn to our first quarter financials.

Earnings totaled $8 8 billion, excluding identified items the after tax charge associated with chocolate one.

As you know we are discontinuing our soccer one operations in Russia.

Which represented less than 2% of our total production last year about 65000 oil equivalent barrels per day.

And about 1% of our corporate operating earnings.

As the operator, our priority continues to be the health and safety of our people.

And the protection of the environment.

Of course, we remain in full compliance with all U S. Sanctions are closely coordinating with the U S administration.

Turning to structural savings.

We continue to drive further efficiencies.

Now delivering more than 5 billion of annual savings versus 2019.

Capex totaled $4 9 billion for the quarter in line with our full year guidance of $21 billion to $24 billion.

Cash flow from operations was $14 $8 billion, maintaining our strong balance sheet.

Our debt to capital ratio remains near the low end of our 20% to 25% target range.

Net debt to capital ratio dropped to about 17%.

We returned $5 8 billion to shareholders of which about two thirds was in the form of dividends and.

And the remainder share repurchases consistent with our previous program.

We said during our corporate plan update in December that we expect to repurchase $10 billion of our shares.

This morning, we announced an increase to the program.

Up to $30 billion in total through 2023.

This move reflects the confidence we have in our strategy.

Performance, we are seeing across our businesses and the strength of our balance sheet.

Before I leave you with a few key takeaways, let me share one other decision. We made this month with respect to our workforce.

Continuing investing in our people and maintaining a strong culture, our core strategic priorities and are essential to achieving our long term objectives.

As part of that effort.

We are tripling the number of employees eligible stock grants by bringing in high performing employees at earlier stages of their careers.

Our goal is to increase our people's ownership in the company and importantly in our financial and operating results.

Secondly in June we will implement a 3% off cycle compensation adjustment in the U S to maintain competitiveness.

Our compensation and benefits programs are a key element of our total value proposition that enables us.

To continue to attract and retain the best talent in the industry.

Let me leave you with few key takeaways, we had a strong first quarter and I'm proud of the organization's progress.

The impact of weather on the upstream volumes in derivatives and timing impacts in the downstream obscured a strong underlying performance.

We anticipate an absence of these impacts and strong refining margins will position us very well in the second quarter.

We are making outstanding progress on our high value growth developments in Guyana, the Permian and LNG.

Our new Corpus Christi chemical complex is up and running ahead of schedule and generated positive earnings and cash flow in its first quarter of operations.

We have strengthened the balance sheet and are creating value for shareholders through an attractive dividend and increase share repurchases.

We are advancing hydrogen biofuels and other low carbon solutions consistent with our intention to lead in the energy transition.

Leveraging our competitive advantages of scale integration and technology.

Finally, we are evolving our organization from a holding company to an operating company to better serve our customers evolving needs and grow long term shareholder value before we take your questions I want to acknowledge the very real impact the high prices are having on families all around the world.

You may recall that we anticipated this in 2020 with industry investment levels, well below those required to offset depletion.

That's why we worked so hard to preserve our capital expenditures during the depths of the pandemic.

Sure that additional production was available to meet the eventual recovery in demand.

Today that long term focus is paying off with growing production of industry advantaged supply.

We are continuing to focus on the fundamentals.

Through our ongoing investment in advantage projects and low emission initiatives.

To ensure that we can continue to meet the critical needs of people all around the world reliably and affordably.

Well into the future.

Thank you Dan.

One last piece of housekeeping I wanted to mention is that ahead of the segment reporting change next quarter. We plan to provide you annual and quarterly information for the past five years using the new reporting segment to assist you with your modeling.

We plan to post the new data on our website around mid June .

Also please note that starting with this call we ask our analysts to limit themselves to a single question. So that we can fit in questions from our people.

However, you may remain on the line in case clarification is needed.

And with that operator, please provide the instructions and then open the phone lines for the first question.

Thank you Mr. Driscoll the question and answer session will be conducted electronically if you'd like to ask a question. Please do so by pressing the starkey followed by the digit one on your Touchtone telephone.

Again, we request that you limit yourselves to one question so that it may take as many questions as possible.

We'll take our first question from the line of Phil Gresh with J P. Morgan.

Yes, hi, good morning, Darin and Kathy.

Good morning.

So I guess my question is a little bit of a two part question then.

The buyback 30 billion over two years.

Previously you talked about I think 10 billion, mostly in 2022, so should we assume the 30 billion essentially ratable $15 billion. This year and then if that's the case it still seems like Theres a lot of excess cash potentially building up at strip prices. So how do you think about any excess cash debt reduction et cetera, given where the electric.

<unk> is versus targets down thank you.

Great. Thanks, very much. So look we don't know exactly how long the strong market conditions that we're seeing today are going to persist and we learned some pretty tough liquidity lessons during the pandemic. So our cash balance has been building a bit you would see that it was $11 billion as we ended the quarter. So you should expect.

With the backdrop of the strong market conditions that even with the higher buyback program that we announced this morning, we would be building our cash in the near term potentially between 20 to 30 billion overtime, and so that really addresses our need for flexibility and Watson.

Boy uncertain environment, and ensuring that we will continue to appropriately invest in the business.

And sustain the share repurchase program that we talked about through 2023 in terms of just how to think about the pace of the program.

Up to 30 billion through the end of 2023.

We obviously got $2 1 billion in this quarter, you should think about us looking to get up to a ratable pace.

That roughly we'd be looking to get $15 billion a year again looking to sustain the program kind of more consistently.

This two year period. So that's how I would think about kind of roughly where we see our cash balance and just looking to maintain a lot of flexibility on what's a pretty uncertain environment.

We did learn some real lessons during the pandemic, we used to try and hold our cash balance call. It.

Between three and 5 billion then you know run a lot of commercial paper and when the pandemic hit that was quite problematic for the company. So we're going to be a little bit more conservative here in the near term.

Your next question comes from the line of Jeanine Wai with Barclays.

Hi, good morning, everyone. Thanks for taking our question.

Good morning, My question is.

Broadly to your global gas opportunities can you talk about how you see the evolution of the U S market and how do you see certified gas playing a role in U S supply and I guess do you intend to really look for a global outlet for a portion of your U S gas and we understand that Golden pass that provides a great opportunity.

Capture the spread but now maybe are you thinking about some other opportunities Besides Goldman Sachs. Thank you.

Youre welcome Janine and good to hear from you again, just maybe abroad.

Comment on the LNG business obviously.

We are seeing across each of our sectors.

<unk> had a pretty profound effect with respect to deferring and delaying capital spending and therefore additional capacity.

Capacity coming on and as the pandemic has subsided.

Demand has recovered and we're seeing very tight markets and we're seeing that play out really around the world, obviously a significant impact.

And then with.

With the Ukraine situation, there that has added significant additional level of uncertainty.

Around supply and so I think a very dynamic marketing very high priced market.

And what we've seen in response to that is basically very full capacity utilization all around the world maximizing.

The amount of LNG moving you know obviously, we've got our coral.

LNG starting up later this year, which will help contribute to an ease some of that tightness and then you mentioned Golden pass which is important.

Leg of our strategy of making sure that we have access to LNG supplies that we can.

To supply demand all around the world and that's a very important part of our strategy now as you're going forward is making sure that we've got barrels that we can then move in trade in the marketplace.

And move across the different regional demand centers and so I think we're going to continue to look for opportunities in LNG is an important part of the portfolio. We've got opportunities in PNG that were.

We're progressing obviously, our additional investments in Mozambique.

Or in the future as well and so I think it'll be a very important foundational layer of.

Apply in a really important part of our overall business offering.

And I would just add you asked a little bit about that top rating that we got on methane management and poker Lake in the Permian and we would say, we really see a market over time building.

For lower emission products and that really plays into that and we would certainly hope that we would also start to see a premium.

No its lower emission products right and we'd say that's consistent across our business, but we definitely are looking to play into that going forward, yes, I would just add to that.

Obviously that would be a benefit but it's certainly not the main driver with respect to making sure that our operations have very low <unk>.

<unk> and very low.

Emissions and so that's a core part of our commitment and running these facilities and to the extent the market pays a premium for that that's that's an advantage that we will look to take.

To take advantage of.

And your next question comes from the line of Devin Mcdermott with Morgan Stanley .

Hey, good morning, Thanks for taking my question.

Good morning.

I wanted to ask about some of the structural cost reduction goals you continue to make good progress there, but the question is can you can you add a little bit of color around what youre seeing just broad cost inflation labor it otherwise and how if at all does that impact some of those goals and targets over time.

Sure. So I'll start out with just saying we feel good about the progress that we're continuing to make.

In the fourth quarter, we had said we had gone to about $5 billion in structural cost savings relative to 2019, we're now at $5 4 billion. So I'd say overall, we feel really good about that progress obviously.

We have now put in place a new organizational structure, which should drive incremental efficiencies on top of just driving better operation faster speed to market better deployment faster deployment of resources to the highest opportunities across the company.

Not immune to inflation, obviously, and we would see a fair amount of both energy and feedstock inflation coming through the business in certain areas that put a little bit of pressure on margin overall in terms of how we're managing that it flows through two parts.

The operation. So one is on Capex, we feel really good about where we're at there because during the pandemic, we really took the opportunity to extend.

Contracts on work that was coming forward, so I'd say, while the shorter cycle work programs, obviously have some inflationary pressure. The teams are working really hard to offset that overall I'd say, we really try and lever our master service agreement self managed kind of procurement will utilize a diverse.

Set of global contractors across the globe and trying to really manage inflation. So through the quarter right now I'd say, we're doing a pretty good job of offsetting it but it's obviously something that we're watching really closely.

Yeah, I would just emphasize report to Kathy made I think one worth remembering that this longer term view that we took during the pandemic and trying to maintain a level of investment we also recognize that as.

<unk> recovered and demand.

Picked up that we would potentially see inflation and so we were very focused on in anticipation of that trying to lock in some of the some.

Some of the pricing and savings during the low points that we could then take advantage of.

Early on in the recovery wishes.

They've made and the final point I would make is with the new organization.

It's working hard in our in our leadership team is working hard to offset inflation and.

Yeah all of that we think we've got a pretty good handle here certainly in the short term.

Obviously, we'll see how the market develops.

Alright next question will come from the line of Neil Mehta with Goldman Sachs.

Yeah, good morning team.

Question, we wanted to focus on was around downstream and Darin you know the refining business really well given your leadership role there over the years and so I'd love you to kind of characterize how youre seeing the crack and refining market environment, which is obviously extraordinarily strong and then put that in the context of the quarter, which was <unk>.

Softer in downstream, but to your point I think a lot of that was timing effects and it feels like things should sequentially move in the right direction as you move into <unk>. So the big picture question around the refining macro and then tie it into how youre thinking about the sequential move in your earnings power from here.

Sure.

Neil.

I can start and I feel like we're going to be a little bit of a broken record with respect to the anchoring a lot of what we're seeing in the market today across our sectors with the pandemic and Youll recall as we were going through that.

Deep.

Downcycle, where demand for fuels products dropped significantly.

There was a lot of refinery rationalization in fact, right refineries were shutting down at a much much higher rates than historical averages.

Times, if not higher.

And so you had a lot of capacity coming out of the marketplace. There were new facilities that were planned or in progress primarily in the middle East and out in Asia, those got deferred and delayed because of the crunch and so you've got I think this period of time, where you've taken a lot of capacity out and new capacity that was planned or in progress has been.

<unk> delayed and so we've got a period with lower supply and then of course as demand has picked up that has led to this very tight market and the higher margins that we're seeing what's compounded that then is the important role that Russia plays and supply markets around the world and with the uncertainty associated with that.

<unk> and potential impacts of additional sanctions that's put I think additional concern and anxiety in the marketplace, which is leading to a very very high margin environment. One frankly that I don't think is.

Sustainable one and into good good for economies around the world. So.

I think we're not we're in a bit of a very tight timeframe and as you talked about the first quarter. Obviously, we saw that evolve over the first quarter with kind of rising margins January February March and now into April .

Very high margins and so I think that's something that we're going to see for quite some time certainly here this year and into next depending on obviously you work with how demand plays out final point I'll make would you would you touched on is Youre right. This quarter reflects that ramp up of margins. So you're not really seeing the healthy healthy market there that we're experiencing.

Right now in the first quarter results that will I think manifest itself in the second quarter and then some of the timing impacts.

We expect to see unwind, maybe I'll, let Cathy just touch on those sure I'm happy to do that and just to add is that our our marks refining margin was about $4 higher than the average in the quarter. So that's kind of reflecting that ramp up that Darren just mentioned and then obviously in our prepared script you would've seen us.

Talk a fair amount to timing impacts that impacted profitability in downstream for the quarter I think everybody understands that mark to market on open derivative. So I won't talk about that but we had another $590 million of other timing differences about $400 million of that was also tied to derivatives.

At 200 million that associated with cargoes were the derivatives actually closed in March and then they reversed when the physical deliveries occurred in April So I'd say the way you should think about that is we took a $200 million bad guy.

In March and we will see a $200 million good Guy in April .

We also had $200 million associated with settled derivatives that we just used to ensure pricing of our refinery crude runs as ratable right. The way you should think about that is it's kind of a wash over time, sometimes that pricing mechanism gives us a positive in a quarter, sometimes it gives us a negative in it.

Order over time, it's just awash and then the last impact that we talked about was just commercial pricing lag right and the way I would think about that as we were in a steep rising price environment over the quarter and so we had pricing that was a little bit lagging if we're in a stable environment that pricing will catch up.

If pricing kind of turns to a downward curve than we'd actually get a little bit of a benefit. So that's how I'd think about it is you're trying to do.

Model that evolution into the second quarter here.

<unk> line is obviously, we're carrying a lot of positive momentum as we stand here today.

Thanks, guys.

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

Thanks, Good morning, everyone. Let me first of all thank the Investor Relations team.

Better presentation of results so thanks for that.

Jennifer, but but I'm also we're losing our question here, so I'll temper the enthusiasm.

Thank you.

So guys my question.

And coffee is on your balance sheet.

And going back some years I guess, a couple of years ago, you talked about don't expect X on to go back to the days of zero net debt, we're going to have a more efficient balance sheet I just wonder if you can frame out for us today than what we should expect that to look like because obviously thought speaks to.

We will forward cash distributions buybacks cash on hand, the whole thing and obviously dividend policy. So that's my question for today. Please.

Yes, Thank you Doug and good morning to you and I. Appreciate your your a couple of months to the IR team I know they've been working hard to make sure that they're improving the transparency and giving you. The information that you need to help understand what we're doing here and the business results that we're achieving.

To your point on the balance sheet and you'll remember we started back in 2018 was this counter cyclical approach, where we lean on the balance sheet. During the depths made those investments with the with an eye on the fundamentals and the expected recoveries and to take advantage of the ups with investments and facilities in the ground.

And then reinvest.

And lean into the down cycles, and I would tell you.

Generally speaking that continues to be an ambition of ours and part of our strategy is to try to drive the counter cyclical investment approach, which as you know has worked out very well for us and is paying off in today's market.

What I would say one philosophy, obviously it is tempered by just the availability of cash and how deep and high the swings in the commodity cycle.

And so I think part of that balance sheet and I'm gonna toss it to Cathy here in a minute let her make some comments on it but part of that is just going to be a function of where you're at in the cycle and how severe that cycle is and so there will be periods I think where you see some movement in both cash and then how the balance sheet is structured.

And based on where we're at and where the revenues are and I would also tell you, though that it's not what's not going to change as being very focused on making sure that any investment that we make is advantaged across the cycle.

And Youll recall my definition of disciplined investing is not an absolute level, but more of making sure that in each where you spend money that youre convinced that you'll be the low cost supplier with an advantaged versus the rest of the industry that will be successful as you move through the cycle Cathy Yeah, and then the only thing that I would add to that Doug is occasionally I get the question I wanted to just go in.

Kind of pay to pay off all of the debt you have as a priority and I'd say, we're really comfortable with the level of debt that we have and obviously our gross debt to cap is at the lower end of the range that we talked about.

And we said, we're going to carry a little bit of a higher cash balance just reflective of the volatility that we've really seen in the market. So yeah. That's how I think you should think about it but we're very comfortable with our level of debt and just being able to kind of manage at that level through the cycle.

Okay. Thanks folks.

Yes.

Next we'll go to Stephen Richardson with Evercore ISI.

Good morning. Thank you. Another question on the downstream if I could Darrin I wonder if I could ask on the circular polymer efforts and some of things youre talking about in terms of recycling in the plastics business.

There is I guess the question is the overall approach between you know mechanical and molecular recycling and how are you seeing that.

That market evolve and as this conversion.

Of existing facilities or.

New reactors and then also what are your expectations for the returns in that business kind of through cycle.

Sure. Thank you, Steve and I think you touch on I think a really important part of our strategy as we look at going forward not only in the plastics and plastics recycling, but also in biofuels.

And I think what people have thought about with respect to our refining footprint and the size of that footprint that as fuels traditional fuels demand declines at those assets become disadvantaged and frankly, given the integration that we have with those facilities. If you think about our chemicals and refining facilities integrated.

As you are now reflected in our product solutions business. The fact that we've got based auction.

Kent facilities integrated with those where they are rarely robust platforms with large scale and low cost.

And what we see as the opportunity that as demand shifts to convert those facilities to produce more lower emissions fuels from biofuels and to utilize existing equipment for advanced recycling of plastics and that's what you've seen us do in baytown with conversion of some of our.

Heavy cracking facilities on the refining side used to recycle waste plastic and we've got pretty pretty ambitious plans in that space. We like what we see there. It gives us products that have all of the same attributes as Virgin products, but obviously without the same with the.

<unk> recycled waste and so we like the molecular recycling, that's where we're focusing we think we can bring an advantage there with one of our facilities, but too.

Our technology and then three with our marketing.

Organization with respect to the marketing of those products. So we feel generally good about that we've got plans to drive that recent advanced recycling to 500000 metric tons by 2026 should have 30000 metric tons in place by the end of the issue here. So I think in total we like what we see there the market today is interested in those products.

And there is a premium out there so right now I think that.

It looks pretty attractive I suspect with time.

That may I'm, you know the market will stabilize but we think it's going to be a pretty healthy market for some time to come.

Thanks very much.

Awesome.

Next we'll go to Jason <unk> with Cowen.

Hey, good morning, Thanks for taking my question I wanted to ask a question about your international gas footprint and the maintenance cadence.

It seems like you've mentioned in the slides that.

Gas production is.

Could it be higher.

And it typically is in <unk>, but you do have higher scheduled maintenance so.

I'm wondering if any of that maintenance is in the European gas footprint and then more broadly if you are seeing in the industry in Europe .

More tempered declines from European gas into the summer just given where prices are and if you expect that to be a feature of the market moving forward. Thanks.

Yes, good morning, Jason Yeah, I think you've touched on the point that we made in our second quarter outlook with respect to seasonality, which which is historically, we've seen going into the second quarter, a significant drop in demand for gas and given where the markets are at today and the level of an inventory.

<unk> around the world our expectation is we're not going to see the same level of demand change quarter on quarter, and we tried to indicate that in our outlook to suggest that you won't see the same level.

Seasonality.

Going forward I think and as I said earlier with response to <unk> question.

We do see this market being fairly tight here in the short term obviously the industry is working hard to supply that but it will the time cycle on investments and bringing additional supply on is fairly long.

In the context of where demand is at today and the tightness in the marketplace. So I think that's going to continue to.

He was just for a while and you know.

As you move as demand declines I think we will see.

Supply start to move into inventory and so that purchases will move from meeting current demand out in the marketplace to meeting the demand to fill inventory to make sure that inventories are well positioned as we move through the summer and then back into the fall and into the winter season that the markets are well supplied.

A final point I'd make there is obviously with what's happening Ukraine. There is a wildcard there that.

I think most economies and governments around the world and to make sure that they're trying to mitigate the potential implications of.

That supply disruption by by having good inventory levels.

Okay.

Alright next we'll go to Sam Margolin with Wolfe Research.

Good morning, how are you.

But.

Question on.

Actually just a longer term sort of capital allocation question in the context of what's become kind of conventional wisdom that N. Ocs around the world are very interested in accelerating activity here and bringing new resource to market, but the majority of <unk> with the exception of a few.

Rely on foreign investment in partners like Exxon Mobil in the industry on the independent operator side has framed.

Stable spending view over the long term, which has been something that's been very helpful for investors to have that multi year.

Capex range. So I'm just wondering your perspective on how that squares.

You know if.

If the industry is going to get pulled into the.

The imperative of N O sees to spend more and do more or if.

You think these steady ranges of Capex are achievable, even even within that context. Thank you sure I'm happy to take that Sam. So first of all I would just remind you that we do have capex guidance. That's out there obviously for this year, it's 'twenty one to 'twenty four and we've talked about kind of through 2027 and a range of <unk>.

25, now within that we have.

I always try to leave ourselves a little bit around understanding that there's these opportunities that can come up in the future and obviously, we've made some investments in the type of opportunities.

You're talking about in the past and by the way Golden pass as you know a.

The JV that we have with our with foreign investment that sits behind it as well. So I'd say, we don't feel any particular pressure I just referenced back to what Darren said earlier, which is we spend capital when we have confidence behind the projects and the returns that those projects are worn offer right and where.

I'd say, a very very disciplined debt pressure testing those projects to make sure their resilience across our I'd say wide set of market environment, given the cyclicality that we have in the business. So we feel great about the opportunities that stand in front of US right. Now obviously, we've got a low cost of <unk>.

<unk> barrels that we're investing in Guyana are the Permian, Brazil, Darin mentioned, the LNG projects that we're moving forward, which we feel really good about obviously, we've got in the product solution space investments that we continue to make to support.

Growth in high value products, right and you know to keep I'd say optimizing our downstream circuit. So we feel good about that if theres opportunities, where we feel like there's good returns to be earned we will certainly look at potentially participating in those opportunities, but we're going to be very.

And our approach as you should expect from us and I would just add to that Sam If you look at the work we've been doing with our organization and the changes that we've made.

Infrastructure consolidation of capabilities across the corporation one of the changes we announced in April 1st was a technology organization that combined technical skills and capabilities in the engineering capabilities across the corporation. We've seen really good results doing that and the projects area. We think we've got a re.

<unk> opportunity in the technology area to realize similar benefits in terms of effectiveness.

On top of whatever efficiencies that might come from that work.

I would say that effectiveness in that concentration of that technology and really getting the organization to focus on where we can add unique value and growth.

<unk> advantage is going to be a really important part of continuing to be a valued partner within ocs and others all around the world. Our strategy here is to make sure that we are in central partner.

That win and Ocs and other resource holders are want somebody who can effectively and efficiently develop the resource and do it in a sustainable manner that the first name to come to mind as Exxonmobil and we bring unique capabilities and I would tell you I have enormous confidence.

That's what's going to happen.

Things that we can see in the pipeline and the opportunities that we have in front of us to become more effective at what we do and I think are huge I'm looking forward to getting to leveraging that.

Opportunities in the future.

Alright next question will come from the line of Brian <unk> with RBC.

Hi, Thanks for taking my question.

I had a question on Guyana, they the fourth Ipso would you just sanctions was la 250000 barrels a day I'm just wondering in your base case plans are you assuming a similar size so that for the later Ah <unk>.

At that rate and if I could.

I see second question a few days ago. There was announcement from the D O E around additional export.

Export capacity from Golden pass them I was wondering if you could just help me understand whether that was just a administrative thing whether that was you. So really looking at the project or some kind of future proofing ahead of Debottlenecking there. Thank you.

Yeah sure I on Guyana Raj I would tell you that as you know we are having tremendous success with respect to our discoveries there and the characterization of that resource.

I would just say that our teams have been very focused on making sure. We have a good characterization of that resource, which will then be a really important part of how we choose to develop that resource in a cost effective way to make sure that the cost of supply and obviously the returns for those projects lead industry and so on.

As we look at that these bigger.

Production facilities make a lot of sense when you have the resources to support them because it brings your unit cost down brings down your cost of supply as we look at extending those developments in other areas of the resource base it'll be a function of what we find but I would say we would lean towards these larger developments and we'll obviously.

Lean towards extending some of the current developments that we have and taking advantage of.

Whatever synergies, we might have with those facilities and so I wouldn't say, there's a single recipe here, it's really tailoring the recipe to make sure that is optimized for the development opportunities that we've got in front of us and that's going to evolve as we better characterize.

The resource base and I will just say with respect to Golden pass that project and the work that we're doing there we feel good about the progress that we're making and we're on schedule.

<unk> is not changing.

Okay. Thank you.

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

Yes, Thank you and good morning.

Good morning.

Maybe to come.

Come back a little bit to the Guiana question and I was wanted to clarify one thing there and then maybe just sort of a contrast to your Permian operations given Permian production is higher today, but yeah on a resource is probably larger as we think about the 11 billion barrels of resource is that is.

Should we assume that's exclusively oil at this point I mean, thats been kind of our baseline given the type of production coming out and then how should we think about the long term gas situation there the opportunity.

When I said versus the Permian kind of thinking about those two as we look to the middle or latter part of the decade.

Yeah.

Good morning, Roger I would I would say the.

The resource is a mix.

And then depending on where you're at within the stable block.

That mix changes our development priorities is weighted towards liquid so I think what youll see in our plans and the way we talk about it is there's a bias towards liquid today and then with time.

We'll see how those developments evolve we're doing some things with the government of Guyana to bring gas onshore to help.

<unk> deliver more cost.

Efficient and environmentally better power to the people of Guyana.

And much lower cost of energy source and a much cleaner energy source and so there is some development guests.

So, but I would say generally liquids weighted and obviously as we move through the field and run the economics will it will develop the resources that optimize capital and.

Returns.

Okay Alright.

Next question will come from the line of Ryan Todd with Piper Sandler.

Good thanks, maybe.

One on capital allocation as we think about your capital budget.

For this year, but over the next few years in the range that you have within those budgets.

Is that should we think about that range is primarily driven by timing or.

Should we is there a possibility of that higher commodity prices.

Should we think of that maybe pushing towards the higher end of the range, but through some combination of.

Of inflation or.

Are there opportunities in the portfolio to deploy.

Little additional organic capital whether it's on.

Sure mid cycle infill drilling tie back opportunities does the higher commodity price or open up the door.

Two a little extra capital to deploy and that opportunity there.

Yeah, I'll I'll just.

To start off and then pass it to Kathy for any additional comments, but I would I think the short answer is no.

And I think we have tried to emphasize I'm looking through the cycles looking at the long term and making sure that the investments that we make are robust to the whole of the cycle you.

You'll remember we were investing pretty heavily win when prices were down in anticipation of longer term fundamentals I would say, while we're in a very tight market today, we're not going to let that.

Distract us from our focus of making sure that we have a low cost of supply.

<unk> industry, leading advantaged projects and so.

That's that remains a focus on the short cycle stuff I think to the extent that we stay within our.

Headedly advantaged approach in the manufacturing process that we've said in the.

<unk> that we set with respect to the facilities that we built.

Pre invested in will continue to optimize around that but we're not going to go outside of that broader strategy.

The long ball game that we're playing in the Permian in the unconventional space, Yeah, and I would say certainly timing over what is a relatively long term care. It is something that we're trying to give a little flexibility for I would actually point to what we talked about on the IRI. Guyana project. You know originally we said that was going to start up in 2024 and now we're saying.

We think it's likely it'll start up at the end of 2023, so that would be an example of you know we have initial planning that we do but obviously accelerating projects. If we can bring them in in a shorter timeframe and obviously on or under budget is something we're always focused on.

Great. Thank you.

Welcome.

Next we'll go to Paul Cheng with Scotiabank.

Alright, Thank you hi, good morning.

Alright.

Firstly, hopefully that also won't use my cotai, yes, I want to compliment I am for the new format on the call as far as the.

Increase the Scotia, we appreciate it.

I have to apologize first because I want to go back into the inflation question.

Kathy.

On if we're looking out for your next several years do you have a number you can share what percent of your cap ex.

It's pretty much that had some pretty fixed pricing and what the sand is going to be subject to the inflation factor and also in your presentation, you talked about the 3% off cycle compensation adjustment could you quantify that helping is that lumber.

Thank you.

Sure. So overall I think we talked a little bit about inflation on capex and the fact that certainly in the near term, we're feeling pretty good because we did a lot of work during the pandemic. So we had caused some projects and during the pandemic. We did a lot of work to actually put the contracts in place like finished the engineering and put the contracts in place.

At a point, where I would say there was some deflationary pressures in the market. So as it relates to our overall capital projects, we feel pretty good over the next couple of years and obviously strategically the timing of when we do the engineering when we go out to procurement, it's something that we're always looking at and taking into <unk>.

Iteration, and then I mentioned, the fact that.

Doing our own procurement globally to make sure that we're getting globally competitive bids or is something else. We do we do spend a lot of money.

Over the years as we're looking forward on the boats associated with the Guyana development and again, we approach that in a really strategic manner. So that we're managing those projects to the lowest cost getting a specific design that we need so that's how I would really yeah.

Discuss what what's happening with regard to inflation.

And I would just add that the.

Salary action that we announced this morning, we're taking wont be material in the analysis that youre doing part.

Our intention would be to continue to deliver on the efficiencies come in it.

And that we had projected in our plan.

Alright, thank you.

Next we'll go to Manav Gupta with credit Suisse.

Hmm.

A quick question here is at the start of the call you indicated that <unk> chemical margins are kind of below mid cycle and I just wanted to understand generally when crude moves up that as support for commodity prices. So the question is going on here some capacity coming on but crude is also moving up so do you expect the margins.

To remain below mid cycle for some time or do you think that higher crude could actually push up the ethylene margins and stuff.

In the non U S region on a go forward basis. Thank you.

Sure Yeah I think.

An unusual.

Time, we've gotten the chemical market, just because we see a level.

The dislocation between what's.

What's happening in Asia, and what we see happening in the Atlantic Basin.

I think we made referenced in the comments that our north American footprint and chemical in the ethane advantage that we have is actually.

To mitigate this broader downturn that we're seeing with the global.

Chemical markets, which are heavily weighted to or weighted towards <unk>.

Downturn that we're seeing in Asia, and I think as you look at crude prices coming up in the marginal supply and olefins being liquid cracker.

And that's the feed that as that crude price goes up your feed goes up you may have to see it goes up and.

So we've got cost increases on your feed and because of some of the logistics constraints and build the ability to kind of connect the market's demand somewhat dislocated and so you've got a oversupply in a market like China, where you see some of the demand coming off with the Lockdowns and logistics constraints. So I think you've got we're in a unique period right now where you are.

Dean.

Some are regional imbalances.

To close those imbalances through logistics and transportation.

But we'll see how long it's going to last but I think ultimately as markets open up we'll see those equilibrate.

Again, I think if crude remains high but my suspicion is that ethane and ethylene cracking will continue to be advantaged and then that will obviously move in as crude prices move with respect to gas prices.

Thank you.

Youre welcome.

Your next question comes from the line of Lucas Herrmann with Exane.

Thanks, very much for the opportunity I just wanted to return to Golden pass to buy more items.

A couple of aspects to the question. The first is just can you expand on the marketing approach.

And how you intend placing volume.

It's a very large project because its approach it which to the best of my knowledge, yes.

Just by way of contracts at this time, so to what extent you still can you pull up the Q P will.

How you'll be looking to market products and just can you give us some indication on the play.

On top of the three trains I presume when you talk about 2024 store plus the first train I guess I'd expect four to six months ago say between the startup with each subsequent train, but any guidance you can give there would be helpful. Thank you.

Sure.

Good morning, Lucas just to start on the back into your question.

Train one is we expect to start up in 2024 and then.

The remaining trains in 2025 and you know what.

The strategic drive behind that investment and that supply point was really getting a global a balanced global footprint with respect to LNG supply and so that Golden pass.

Facility gives us an anchor point within the Americas to take advantage of the U S gas market and the developments that we've seen there in the supply potential that we see in U S gas and so that forms a really important anchor supply pointing and we intend to use that with.

The trading business that we're growing in LNG and use it as a.

82.

Trade and oftentimes bridges some of our other LNG projects are being developed to bridge and supply between those projects that will allow us to optimize and make commitments for projects with flexibility in terms of using.

Golden pass as a supply point and then also just trade in the spot market. So I think it's going to give us a lot of flexibility to supplement our.

Longer term contracts for our bigger projects, but to also participate in the spot market.

So there's no intent to contract some of the bully I mean, what could be a very constructive market for pricing over the next two to three years for those who have supply coming on this matter.

I would tell you that the LNG organization is going to basically.

Develop that portfolio and the <unk>.

Way that they think maximizes the value of it so I wouldn't take anything off the table I'm, just suggesting that as we got a lot of optionality and flexibility and the expectation is the LNG.

Business and individuals running that take advantage of that flexibility.

Maximize the value that's how I would characterize it.

Alright, thanks very much.

Youre welcome.

And it looks like we have time for one more question. So we'll take that from Neal Dingmann with truth Securities.

So thank you all thanks for squeezing me in my question is on the Permian just wanted them currently seeing you all running somewhere around 16 rigs and five spreads I'm. Just wondering will this continue to be around the level of activity needed.

In order to achieve that I think to go around that 25% year over your Permian growth plans that I was just also wondering if you could talk about maybe just broadly the degree of inflation Youre currently seeing there.

Yeah.

Are you there.

Plan that we had and we've talked about with respect to the Permian specifically is somewhere between 10 and 12 are.

Our rigs and then.

Six to eight frac crews something like that.

We're basically.

In line with that plan right now and part of that is making sure that we're the developments that we're pursuing are consistent with.

The base infrastructure, the technology and the <unk>.

Capital efficiency approaches that we've built into that development.

That tends to drive.

What we're doing there I think with and Cathy has touched on.

We again had anticipated the market recovery and some of the tightness and so had developed some contracting strategies and partnering with suppliers to try to mitigate that impact that's paying off we're seeing that advantage here in the Permian Permian eventually that obviously will roll off some of the consumer.

Consumables and some of the labor tightness.

Tightness that we're seeing in the Permian, obviously, that's starting to impact us as well. So we are seeing inflationary pressures expectations that will continue to grow.

The work activity opens up and as some of the logistics constraints get resolved and we're basically we've challenged the team to try to manage that and to make sure that as we look at progressing development and grow that production that we're doing it in a constructive way and not undermining the cost of supply or the advantaged.

Those those barrels.

Barrels.

Where they sit in the supply cost of supply curve for the industry. So I think we're gonna. This disciplined approach that we've talked about is not so much a spin but in terms of efficiency and making sure that.

Every dollar we spend there is productive.

Challenge for that team is to make sure we don't lose productivity of the capital that we're spending.

Well thanks, Dan.

Thanks, Darren and thanks, everybody for your time and for your questions. This morning. We appreciate that we will post a transcript of the call on our Investor website early next week.

Have a great weekend. Thanks.

Yeah.

Got it.

That does conclude today's conference we thank everyone again for their participation.

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