Q4 2023 Exxon Mobil Corp Earnings Call
Please standby.
Operator: Please stand by. Good morning, everyone, and welcome to the Exxon Mobil Corporation's fourth quarter 2023 earnings webcast. Today's call is being recorded. I would now like to turn the call over to Miss Jennifer Driscoll. Please go ahead, ma'am.
Good morning, everyone and welcome to the Exxonmobil Corporation's fourth quarter 2023 earnings webcast. Today's call is being recorded I would now like to turn the call over to MS. Jennifer Driscoll. Please go ahead ma'am.
Jennifer Driscoll: Good morning, everyone. Welcome to Exxon Mobil's fourth quarter 2023 earnings call. We appreciate you joining the call today. I'm Jennifer Driscoll, Vice President of Investor Relations.
Jennifer Driscoll: Good morning, everyone welcome to Exxon Mobil's fourth quarter 2023 earnings call.
Jennifer Driscoll: We appreciate you joining the call today.
Jennifer Driscoll: I'm, Jennifer Driscoll, Vice President of Investor Relations.
Jennifer Driscoll: I'm joined today by Darren Woods, Chairman and CEO, and Kathy Michaels, Senior Vice President and CFO. This presentation and pre-recorded remarks are available on the Investors section of our website. They're meant to accompany the fourth quarter earnings news release, which is posted in the same location. Shortly, Darren will give you an overview of our 2023 performance. Thelma Pickett.
Jennifer Driscoll: Joined today by Darren Woods, Chairman, and CEO, and Kathy Michael Senior Vice President and CFO.
Jennifer Driscoll: This presentation on pre recorded remarks are available on the investors section of our website.
Jennifer Driscoll: To accompany the fourth quarter earnings news release, which is posted in the same location.
Darren W. Woods: Shortly Darin will give you an overview of our 2023 performance.
Speaker Change: We will take your questions.
Jennifer Driscoll: In conjunction with our recent announcement about acquiring Pioneer Natural Resources, we've included additional information about the transaction on slide, Please be aware that this presentation is not intended to be a solicitation of any vote or approval. During today's call, we'll make forward-looking statements which are subject to risks and uncertainties. Please refer to our cautionary statement on slide three. You can find more information on the risks and uncertainties that apply to any forward-looking statements in our SEC filings on our website. Note that we also provided supplemental information at the end of our earnings slides, including an overview of full-year results, which are posted on the website. Now, I'll turn it over to Darren. Good morning, and thanks for joining us.
In conjunction with our recent announcement about acquiring pioneer natural resources. We've included additional information about the transaction on slide two.
Speaker Change: Please be aware that this presentation is not intended to be a solicitation of any vote or approval.
Speaker Change: During today's call, we'll make forward looking statements, which are subject to risks and uncertainties.
Speaker Change: Please refer to our cautionary statement on slide three.
Speaker Change: You can find more information on the risks and uncertainties that apply to any forward looking statements in our SEC filings on our website.
Note that we also provided supplemental information at the end of our earnings slides, including an overview of full year results, which are posted on the website.
Speaker Change: And now I'll turn it over to Darren.
Darren W. Woods: Good morning, and thanks for joining us.
Darren W. Woods: I want to start with the theme of the quarter, which has been a theme of the year, excellence in execution. Whether it's operating our facilities, building projects, deploying technologies, trading, marketing, sales, supply chain, or any of our other activities, the men and women of Exxon Mobil are setting and holding themselves to very high standards as they carry out their responsibilities.
Darren W. Woods: I want to start with the theme of the quarter, which frankly has been a theme of the year excellent.
Darren W. Woods: Excellence in execution.
Darren W. Woods: Operating our facilities building projects deploying technologies trading marketing sales supply chain.
Darren W. Woods: For any of our other activities.
And women of Exxonmobil or setting.
Darren W. Woods: Putting themselves to very high standards as they execute their responsibilities.
Darren W. Woods: Their hard work and commitment drove the strong results we reported today and are the foundation of our success. At the end of the day, it's all about our people that make the difference and are delivering industry-leading results, and nothing is more important than the safety of our people. Keeping them safe requires intense focus and relentless discipline, 24 hours a day, every single day.
Darren W. Woods: Their hard work and commitment drove the strong results we reported today.
Darren W. Woods: The foundation of our success.
At the end of the day, it's all about our people make the difference and are delivering industry leading results.
Darren W. Woods: And nothing is more important than the safety of our people.
Darren W. Woods: Keeping them safe requires intense focus and relentless discipline.
Darren W. Woods: Four hours a day every single day.
Darren W. Woods: For many years, we've outperformed industry benchmarks for workplace safety. In the last several years, we've been implementing improved systems for managing both personnel and process safety, leveraging best practices from across our company and industry, our own and others. These efforts are paying off with continued improvements in the number and severity of incidents. The discipline needed to consistently deliver industry-leading safety performance manifests itself in all of our work. We see it in our project teams.
Darren W. Woods: For many years, you've outperformed industry benchmarks for workplace safety.
Darren W. Woods: Over the last several years, we've been implementing improved systems for managing both personnel and process safety.
Darren W. Woods: Leveraging best practices from across our company and industry.
Darren W. Woods: Our own and others.
Darren W. Woods: These efforts are paying off with continued improvements in the number and severity of incidents.
Darren W. Woods: The discipline needed to consistently deliver industry, leading safety performance.
Darren W. Woods: [noise] itself and all of our work.
Darren W. Woods: We see it in our project teams.
Darren W. Woods: We're delivering large capital projects at top quintile performance on cost and schedule. We see it in the reliability of our operations, where we achieve record performance in both the upstream and refining. We see it in our environmental performance, where we set several new records, and we see it in the successful management of the transformational reorganizations we've made over the last several years. The results are clear. By any measure, 2023 was an outstanding year.
Living a large capital projects at top quintile performance on cost and schedule.
Darren W. Woods: We see it in the reliability of our operations, where we achieved a record performance in both the upstream and refining.
Darren W. Woods: We see that our environmental performance, where we set several new records.
Darren W. Woods: And we see it in the successful management of a transformational reorganization we've made over the last several years.
Darren W. Woods: The results are clear by any measure 2023 was an outstanding year.
Darren W. Woods: We deliver $36 billion of earnings, strong cash flows, and a 15% return on capital employed. Our strategy, introduced in 2018, coupled with consistently strong execution, is delivering results that lead the industry across a range of metrics. Inc. Earnings & Cash Flow Growth, total shareholder distributions.
We delivered $36 billion of earnings strong cash flows and a 15% return on capital employed.
Darren W. Woods: Our strategy introduced in 2018, coupled with consistently strong execution is delivering results that lead industry across a range of metrics, including earnings and cash flow growth.
Darren W. Woods: Total shareholder distributions and total shareholder returns since 2019.
Darren W. Woods: Total shareholder returns since 2019. The Baseline Year of Our Plan. On a constant price basis, we more than doubled earnings in 2023 versus 2019, demonstrating the improved earnings power of the company. The growth in profitability reflects significant progress in upgrading our portfolio of assets through advantaged projects, divestment of less strategic operations, and Significant Cost Reduction. During the year, our investments generated more than $4 billion of cash proceeds.
The baseline year of our plants.
On a constant price basis, we more than doubled earnings in 2023 versus 2019.
Darren W. Woods: Demonstrating the improved earnings power of the company.
Darren W. Woods: The growth in profitability reflects significant progress in high grading our portfolio of assets through advantaged projects divestment of less strategic operations.
Darren W. Woods: And significant cost reductions.
Darren W. Woods: During the year, our divestments generated more than $4 billion of cash proceeds.
Darren W. Woods: We also announced two value-accretive acquisitions. Danbury, which closed in November, provides opportunities to profitably accelerate our low carbon solutions business with a compelling end-to-end customer decarbonization offer. Pioneer, which is expected to close in the second quarter, will further differentiate our advantaged upstream portfolio. The synergies will create significant shareholder value and accelerate Pioneer's net zero ambitions by 15 years to 2035. In 2023, we made significant advances in a number of innovative solutions. We entered the lithium business, where we see an opportunity to supply approximately 1 million electric vehicles per year by 2030. With economically advantaged production, it has a much smaller environmental impact than today's supply.
Darren W. Woods: We also announced two value accretive acquisitions.
Darren W. Woods: Danbury, which closed in November provides opportunities to profitably accelerate our low carbon solutions business with a compelling end to end customer de carbonization offer.
Darren W. Woods: Pioneer, which is expected to close in the second quarter.
Darren W. Woods: We will further differentiate our advantaged upstream portfolio.
Darren W. Woods: The synergies will create significant shareholder value and accelerate pioneers net zero ambitions by 15 years to 2035.
In 2023, we made significant advances in a number of innovative solutions.
Darren W. Woods: We entered the lithium business, where we see an opportunity to supply approximately 1 million electric vehicles per year by 2030.
Darren W. Woods: With economically advantaged production it has a much smaller environmental impact in today's supply.
Darren W. Woods: In the carbon capture and storage space, we recently completed the construction of a pilot plant to further develop a unique proprietary technology, which has the potential to significantly lower the cost of direct air capture. We also launched Proxima, a thermoset resin with a high value in use for coatings, infrastructure, automotive parts, and wind power, made from low-value components used in gasoline.
Darren W. Woods: And the carbon capture and storage space. We recently completed the construction of a pilot plant to further develop a unique proprietary technology.
Darren W. Woods: Each has the potential to significantly lower the cost of direct air capture.
Darren W. Woods: We also launched approximate.
Darren W. Woods: Thermostat resident with a high value and use for coatings infrastructure automotive parts and Windpower made from low value components used in gasoline.
Darren W. Woods: We also took a further step in reducing costs, leveraging scale and improving effectiveness, and the formation of three new centralized organizations. Global Supply.
Darren W. Woods: We also took a further step in reducing cost.
Darren W. Woods: Leveraging scale and improving effectiveness with the formation of three new centralized organizations global supply.
Darren W. Woods: Trading and Global Business Solutions. This change provides additional opportunities to grow deep expertise across a broad portfolio of critical business capabilities. Today, we're convinced that no other company can match the depth and breadth of development opportunities that ExxonMobil offers. It's no surprise that for the 11th year in a row, we were recognized as the most attractive U.S. employer in the industry for engineering students.
Darren W. Woods: Trading and global business solutions.
Darren W. Woods: This change provides additional opportunities to grow deep expertise across a broad portfolio of critical business capabilities.
Today.
We're convinced that no other company can match the depth and breadth of development opportunities that Exxonmobil offers.
Darren W. Woods: It's no surprise that for the 11th year in a row, we were recognized as the most attractive U S employer in the industry for engineering students.
Darren W. Woods: This is another key competitive advantage. Our plan for 2024 remains anchored in our existing strategy. Building on world-class execution and the performance we delivered last year, we set a high bar for ourselves across all aspects of the business, from safety to operational excellence to financial performance, and have confidence in our team's ability to consistently deliver. For 2024, we expect to invest $23 to $25 billion to grow our portfolio of advantaged low cost of supply assets and further shift our product mix towards higher value, higher margin performance products and reduce emissions, both our own and others. Our plan also continues to structurally reduce costs to achieve $15 billion in structural cost savings through 2027.
Darren W. Woods: This is another key competitive advantage.
Darren W. Woods: Our plan for 2024 remains anchored in our existing strategy.
Darren W. Woods: Building on World class execution, and the performance we delivered last year.
Darren W. Woods: We set a high bar for ourselves across all aspects of the business from safety to operational excellence to financial performance and have confidence in our team's ability to consistently deliver.
Darren W. Woods: For 2024, we expect to invest $23 billion to $25 billion to grow our portfolio of advantaged low cost of supply assets.
Darren W. Woods: Further shift our product mix towards higher value higher margin performance products.
Darren W. Woods: And reduce emissions, both our own and others.
Darren W. Woods: Our plan also continues to structurally reduce cost to achieve $15 billion in structural cost savings through 2027.
Darren W. Woods: We have opportunities to enhance supply chain efficiency further improved maintenance and turnarounds modernized data management and simplify business processes.
Darren W. Woods: We have opportunities to enhance supply chain efficiency, further improve maintenance and turnarounds, modernize data management, and simplify business processes, and Low Carbon Solutions will continue the integration of Denberry and look to add additional customers to our U.S. Gulf Coast network. As we noted during the corporate plan update in December, we're now pursuing more than $20 billion of lower emission opportunities, evenly split between reducing our own emissions and reducing third-party emissions. Overall,
Darren W. Woods: In low carbon solutions will continue the integration of <unk> and look to add additional customers to our U S Gulf Coast network.
Darren W. Woods: As we noted during the corporate plan update in December we're now pursuing more than $20 billion of lower emission opportunities evenly.
Darren W. Woods: Evenly split between reducing our own emissions and reducing third party emissions.
Darren W. Woods: Overall, our portfolio of low carbon investments is expected to generate returns of approximately 15%.
Darren W. Woods: Our portfolio of low-carbon investments is expected to generate returns of approximately 15%. Our upstream portfolio will be further transformed when we close the transaction with Pioneer. By combining the capabilities of our two companies and leveraging the advances we've made in technology, we expect to recover more resources more efficiently with lower emissions.
Darren W. Woods: Our upstream portfolio will be further transformed when we closed on the transaction with pioneer.
Darren W. Woods: By combining the capabilities of our two companies and leveraging the advances we've made in technology.
Darren W. Woods: We expect to recover more resource more efficiently with lower emissions.
Darren W. Woods: We'll provide more detail about this compelling combination at our spotlight event following the close. Our results in 2023 once again demonstrated the strength of our strategy. As I reflect on the past year, I have tremendous pride in what our people have accomplished and a strong level of confidence in our continued ability to lead in the years ahead. I want to thank our shareholders for their continued confidence and support. Now, I'll turn it back to Jennifer.
We will provide more detail about this compelling combination at our spotlight event following the close.
Darren W. Woods: Our results in 2023, once again demonstrated the strength of our strategy.
Darren W. Woods: As I reflect on the past year I have tremendous pride in what our people accomplished at a strong level of confidence in our continued ability to lead in the years ahead.
Darren W. Woods: Finally.
Darren W. Woods: I want to thank our shareholders for their continued confidence and support.
Darren W. Woods: Now I'll turn it back to Jennifer.
Thank you Dan.
Jennifer Driscoll: Thank you, Darren. Now, we'll move on to our Q&A session. As a courtesy to others in the queue, we ask all of our analysts to limit themselves to one question. However, please remain on the line in case we need any clarification. With that, operator, let's open the line for our first question. Thank you, Mrs. Driscoll. 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 1 on your touchtone telephone.
Now, let's move to a Q&A session as a courtesy to others in the queue. We ask all of our analysts to limit themselves to one question. However, please remain on the line in case, we need any clarification with that operator, let's open the line for your first question.
Speaker Change: Thank you Mr. Driscoll for question and answer session will be conducted electronically.
Jennifer Driscoll: Like to ask a question. Please do so by pressing the star key followed by the one on your Touchtone telephone.
Operator: The first question comes from Neil Mehta of Goldman Sachs. Yeah, good morning, Darren team, and congrats on the strong results. My question was around structural cost savings. So we're at $9.7 billion versus 2019 and targeting $15 billion by 2027. Can you talk about the progression over the next couple of years? What are the key buckets and milestones we should be watching out for as it relates to those cost savings? Sure. Thanks, Neil. Good to hear from you again.
Jennifer Driscoll: The first question comes from Neil Mehta of Goldman Sachs.
Neil Mehta: Yes, good morning, Darin team and congrats on the strong results.
Neil Mehta: My question was around structural cost savings. So we're at $9 $7 billion versus 2019, and targeting 15 billion by 2027 can you talk about the progression over the next couple of years what are the.
Neil Mehta: Key buckets and.
Neil Mehta: And milestones, we should be watching out for as it relates to those cost savings.
Speaker Change: Sure. Thanks, Neil good to hear from you again.
Darren W. Woods: Maybe I could start with a little bit of perspective. If you think about where we have been driving efficiencies and what lies behind the improvements in structural costs, we've made tremendous changes in the organization, and we've been doing that each successive year. We're still in the early stages of taking advantage of all the changes that we have made going back in time, with our global technology organization, with our product solutions organization, and Frankly brought refining together with our marketing and then together with chemicals, and so a lot of restructuring, a lot of opportunities in all the organizations. We see a path to significantly improved effectiveness in executing the business, and to your point, a significant path to efficiency. On top of that, we just launched our global supply chain organization, www.xomobil.com. You know, 9.7 is a reflection of the hard work coming from the reorganizations that we've done, and we're early in that, and then we've got additional reorganizations. To help you to make a gainful $50,000 a year, visit www.exxonmobil.com.
Speaker Change: Maybe just start with a little bit of perspective, if you think about.
Where are we have been.
Driving efficiencies and what lies behind the improvements in structural costs, we've made tremendous changes in the organization.
Speaker Change: And we've been doing that each successive year.
Speaker Change: Sequenced with respect to what needs to come first second and third to make sure that we can effectively manage that we're still in the early stages of taking advantage of all the changes that we've made going back in time.
Speaker Change: With our global Technology organization with our product solutions organization that frankly brought refining together with our marketing and then together with chemical and so a lot of restructuring a lot of opportunities in all of the organizations see a path to significantly improved effectiveness and executing the <unk>.
Speaker Change: <unk> and.
Speaker Change: And to your point the.
Speaker Change: Significant path to efficiencies on top of that we just launched our global supply chain organization, We just launched our global business solutions organization and our trading organization. So.
Speaker Change: They're early in their process and all of them see significant opportunities for efficiency, So I would say.
Speaker Change: You had a $9 seven as a reflection of the hard work coming from the reorganizations that we've done and we're early in that and then we've got additional reorganizations.
Speaker Change: Take advantage of that $15 billion that you referred to is not a target. It is in our plans and the plans reflect what the organizations are working on so what are some of the areas.
Speaker Change: <unk> seen a lot of benefit today by a centralized approach to enhancing our maintenance and our turnaround processes.
Darren W. Woods: We've taken a lot of cost out with respect to that, and we see an opportunity to bring further cost reductions there. The supply chain organization brings a huge opportunity. You know, in the past, we had very fragmented supply chain organizations across all of our businesses.
Speaker Change: We've taken a lot of cost out with respect to that we see an opportunity to bring further cost reductions there the supply chain organization brings a huge opportunity in the past we had very fragmented supply chain organizations across all of our businesses. We've now consolidated all of that.
Darren W. Woods: We've now consolidated all that. We see a lot of opportunities to bring together our data and our processes and harmonize those and do those consistently across all of the organization. And then a lot of continuing optimization within the base business, taking advantage of the new construct and learning from one another.
Speaker Change: We see a lot of opportunities to bring together, our data and our processes and harmonize those into <unk>.
Speaker Change: Those consistently across all of the organization and then a lot of continuing optimization within the base business, taking advantage of the new construct and learning from one another that's a huge part of the go forward a reduction so.
Kathryn A. Mikells: A huge part of the go-forward reduction. I would just tie all that to, you know, the ongoing change and the fact that we now have a good line of sight across all of our organizations around the best way to do things and the most efficient. I'll hand it over to Kathy if there's anything to add to that. You know, the only other thing I would add is how we're looking to leverage technology to both drive incremental efficiencies and, just as important, drive effectiveness. So things like how we use artificial intelligence and chat boxes in our customer care centers, which gives our customers better service. And obviously, that drives decisions on how we use predictive analytics in things like driving, maintenance, and turnarounds to top. www.globalonenessproject.org So, you know, bringing together our information technology organization with our engineering and research organization will just further enhance how overall we as a technology. Transcripts provided by Transcription Outsourcing, LLC. Thank you, Kathy.
Speaker Change: Would just tie all that too.
Speaker Change: The ongoing change in the fact that we now have a good line of sight across all of our organizations around the best way to do things in the most efficient ways to do things.
Speaker Change: Hand, it over to Kathy if theres any anything to add to that.
Kathryn A. Mikells: The other thing I would add is how we're looking to leverage technology to both drive incremental efficiencies, but as importantly to drive effectiveness. So things like how we use artificial intelligence and chat box and our customer care centers, right, which gives our customers that our service and obviously that drives efficiencies.
Kathryn A. Mikells: For the company, how we use predictive analytics and things like driving maintenance turnarounds to top kind of quintile tight performance are similarly, how we use those predictive analytics and our drilling and fracking centralized operation here in Houston So.
Together.
Kathryn A. Mikells: Information technology organization with our engineering and research organization will just further enhance.
Kathryn A. Mikells: Overall, we as a technology company fundamentally try to use technology to both drive efficiency, but obviously to drive value in the business.
Darren W. Woods: Thanks, Darren. You bet. Thank you, Neil.
Speaker Change: Thank you Kathy Thanks, Dan.
Speaker Change: Thank you Neil.
Operator: The next question is from Doug Leggate of Banks America. Thank you. Good morning, everyone.
Speaker Change: The next question is from Doug Leggate of Bank of America.
Doug Leggate: Well, thank you and good morning, everyone.
Doug Leggate: Darin.
Darren W. Woods: Darren, 2018 was a long time ago, obviously, and a lot has changed since you pushed the doubling of cash flow from 25 to 27, including much greater and perhaps faster progress in Guyana. So I guess my question is, where do you think we are in 2024 in moving towards a doubling of cash flow target? And specifically, what should we read about your CapEx comments in terms of the timing of Guyana as part of that target? Good morning, Doug.
Doug Leggate: 2018 was a longtime ago, obviously and a lot has changed since you pushed the doubling of cash flow from 25 to 27.
Doug Leggate: Including much greater perhaps faster progress in Guyana. So I guess my question is where do you reduce suggest we are in 2024 and moving towards doubling its cash flow targets and specifically what should we read about your capex comments in terms of.
Doug Leggate: The timing of.
Doug Leggate: Guyana is part of that target.
Speaker Change: Yes, good morning, Doug. Thanks for the question for maybe I'll start with the back end of your question around the Capex.
Darren W. Woods: Thanks for the question. Maybe I'll start with the back end of your question around the cafe. I mean, it should be clear, hopefully it's clear, we've provided guidance in a range for CAPEX to give you a perspective of, you know, when we start the year, based on the plans that we put together the previous year, where we think we're going to end up in our spend across the year. Obviously, as we go through the business, each of the businesses are clear on their objective to find the value of creative opportunities So we've got an ongoing process. If we see an opportunity that we weren't aware of at the time of putting together the plan, we're not constraining our activities based on... www.xomobil.com what's required for that capital and then that there's value behind it and there's an advantage in it, so that's how we manage. What we talked about in the release with respect to our capex in 2023 Obviously, we've given you some guidance that we believe reflect where we'll end up. But as we work out the opportunities, we're very focused on that. I think the short term, what we've done with Guyana, and what you're seeing today in PI-R, well, we brought that online, and frankly, in January, well ahead of our plans, reached nameplate capacity.
Should be clear I, hopefully, it's clear we've provided guidance in a range in capex to to give you a perspective.
Speaker Change: When we start the year based on the plans that we've put together the previous year, where we think we're going to.
Speaker Change: Ended up.
Speaker Change: Our spend across the year, obviously as we're going through the business each of the businesses.
Speaker Change: Our clear on their objectives to find value accretive opportunities and to capture those as quickly as possible. So we've got an ongoing process. If we see an opportunity that we weren't aware of.
Speaker Change: At the time of putting together the plan, we're not constraining our activities based on some artificial number or the guidance that we've put out we're very focused on making sure that it's going to be an effective use of capital that we can efficiently execute.
Speaker Change: What's required for that capital and then that theres value behind it and there is an advantage in it. So that's how we're managing what we talked about in the release with respect to our Capex in 2023 reflects just that.
Speaker Change: Incremental optimizations as we're going through the year and my view is we'll continue to do that.
Speaker Change: As we go forward into the plan years.
Speaker Change: Obviously, we've given you some guidance that we believe reflect where we will end up.
Speaker Change: But as we work the opportunities we're very focused on that I think the short term and what we've done with Guyana youre seeing today and by our when we brought that online and frankly in January well ahead of our plans reached nameplate capacity and part of that was around the optimization of the drilling and making sure that we had what we needed to bring that up.
Darren W. Woods: And part of that was around the optimization of the drilling and making sure that we had what we needed to bring that up quickly. In terms of the broader objective to get to 2027, I mean, we're on that plan, and we're actually delivering the value that we laid out in 2018. So, I feel really good about the progress we've made. We noted in the release that... If you look at just from 2019, the year before the pandemic, www.exxonmobil.com, we've grown earnings on a compounded annual basis by more than 40%. We've grown cash flow from operations. Almost 20% greater than 15%.
Speaker Change: Quickly.
Speaker Change: In terms of the broader.
Speaker Change: Objective to get to 2027, I mean, we're on that plan and we're actually delivering the value that we laid out in 2018. So after a really good about the progress you've made we noted in the release that.
Speaker Change: If you look at just from 2019 the year before the pandemic.
Speaker Change: The advances that we've made in the business on a flat price take margin take price out of it.
We've doubled the earnings capacity of the corporation from 2019 to 2023.
Speaker Change: We've grown earnings at a compounded annual basis by 40% greater than 40%, we've grown cash flow from operations.
Speaker Change: Almost almost 20% greater than 15%. So I think significant progress we've demonstrated to work that we're doing the projects that we've put in place the reorganizations that we've executed the cost that we're cutting out of the business are all driving us towards this improved valuation and frankly the plans we have.
Darren W. Woods: So I think significant progress. We've demonstrated that the work that we're doing is effective. The projects that we've put in place, the reorganizations that we've executed, the costs that we're cutting out of the business, are all driving us towards this improved valuation and, frankly, the plans we have going forward. The targets that we've laid out, what we've communicated in our December company plan release, Basically, those are our plans, and we feel that we're right on track, if not slightly ahead. Kathy, anything to add to that?
Speaker Change: Going forward are going to continue to do that so.
Speaker Change: The targets that we've laid out what we communicated in our December company plan release based.
Speaker Change: Basically those are plans and we feel that we're right on track if not slightly ahead of delivering on those Kathy anything to add to that yes, I mean, Doug I'll, just try to grind back to those numbers a little bit more just so you understand it on an earnings basis, we actually more than doubled earnings on again that constant price basis that we used in our corporate plan.
Kathryn A. Mikells: Yeah, I mean, Doug, I'll just try to grind kind of back to those numbers a little bit more, just so you understand that on an earnings basis, we actually more than doubled earnings on, again, that constant price basis that we used in our corporate plan, which Darren is referring to in the numbers that he just mentioned. So I would absolutely say we are ahead of our... In terms of what we're achieving, and it's that earnings improvement that is flowing through to cash flow. And so as you think about cash flow, our earnings expectation in the corporate, Hello. Ahead of Plan. Transcription by CastingWords. I think we would concur.
Kathryn A. Mikells: Which darrin is referring to in the numbers that he just mentioned so I would absolutely say.
Kathryn A. Mikells: We are ahead of our plan in terms of what it is that we're achieving and is that earnings improvement that is flowing through to cash flow and so as you think about cash flow our earnings expectation and the corporate plan.
Kathryn A. Mikells: In terms of doubling it out to 2027.
Kathryn A. Mikells: Well ahead of doubling it and then those earnings flow through to the cash flow.
So I would describe us as being.
Kathryn A. Mikells: Ahead of plan in terms of where we stand today and feeling very good about the future.
Speaker Change: I think we would concur. Thank you very much indeed.
Operator: Thank you very much indeed. The next question is from Devin McDermott of Morgantown, Maryland. Hey, good morning.
Speaker Change: Okay.
Speaker Change: The next question is from Devin Mcdermott of Morgan Stanley.
Devin J. McDermott: Hey, good morning, Thanks for taking my question.
Darren W. Woods: Thanks for taking my question. So I've gotten some inbounds this morning just on the 2023 spending, and Darren, you kind of alluded to it in your response to the prior question. You're able to pull forward some CapEx for Guyana and Permian in 4Q. I was wondering if you could talk a little bit more about the drivers of that, the types of efficiencies that you're seeing, and what specifically you're able to accelerate, and then how that influences your outlook for spending and production for both assets in 2024. Well, if you think about, and good morning, Devin, you think about the complexity of what the organizations are dealing with, and in particular, the upstream, that as we go through the course of the year, and they're drilling in there, and they're collecting data, and we're seeing production, we've got a real-time optimization loop that takes the experience that we've had and builds it back into our go forward plan. So it is a very dynamic process.
Devin J. McDermott: So I've gotten some inbounds. This morning, just on the 2023 spending and Darren you kind of alluded to it in your response to the prior question you were able to pull forward some capex for Guyana, and Permian and <unk> I was wondering if could talk a little bit more about the drivers of that after the efficiencies that you're seeing and what specifically youre able to accelerate and then how.
That influences your outlook for spending in production in both out for both assets in 2024.
Well, if you think about <unk> and good morning, Devin you think about the complexity of what the organizations are dealing with and in particular the upstream that as we as you go through the course of the year.
Devin J. McDermott: And theyre drilling and they're collecting data and we're seeing the production we've got a real time optimization looped it takes the experience.
Devin J. McDermott: That we've had and build it back into our go forward plans. So it is a very dynamic process and.
Darren W. Woods: And we've got, to Kathy's point, a lot of technology to make sure that we're learning from all the data that we're collecting as we go, and that we're adjusting our plans to optimize value. And I would tell you, the organization understands, it has an obligation, www.exxonmobil.com, when we decide to spend money, we know that spend is going to be productive spend and that we're going to be efficient in executing that spend. And beyond that, they're not constrained.
Devin J. McDermott: And we've got.
Devin J. McDermott: To Kathy's point, a lot of we're using a lot of technology to make sure that we're learning from all the data that we're collecting as we go and that we're adjusting our plans to optimize value.
Devin J. McDermott: I would tell you the organization understands it has an obligation.
Devin J. McDermott: To drive value and define the value opportunities and to make sure that.
Devin J. McDermott: When we decide to spend money that we know that spend is going to be productive spend and that we're going to be efficient in executing that spend and beyond that they're not constrained if they find that they were going to hit a constraint or we're going to hit something thats not incorporate in the plans we have a conversation about that so I would tell you. It is a very well controlled <unk>.
Darren W. Woods: If they find that we're going to hit a constraint or we're going to hit something that's not incorporated in the plans, we have a conversation about that. So I would tell you it is a very well-controlled process. Your point about capital coming forward in the fourth quarter, I would tell you the decisions that we made... that led to going a little above the guidance weren't made in the fourth quarter. Those were made as we were going through the year with a recognition that if we took some of the steps, as we were going through the year, that as we got to the end of the year, those numbers would grow and potentially butt up. Slightly above the guidance, we made the decisions as we went, and it's a very dynamic process. So I think that's how I would think about it. We're going to continue doing that going forward. Obviously, the Permian, we continue to learn with the technologies that we're bringing in there, the techniques that we keep evolving.
Speaker Change: <unk> you.
Speaker Change: Your point about capital coming forward in the fourth quarter I would tell you the decisions that we made.
That led to.
Speaker Change: Going a little above the guidance Werent made in the fourth quarter. Those were made as we were going through the year with a recognition that if we took some of the steps.
Speaker Change: As we were going through the year that as we got to the end of the year those numbers would grow and potentially but up slightly.
Speaker Change: Slightly above the guidance and we made the decisions as we were going.
Speaker Change: And it's a very dynamic process. So I think that's how I would think about it that we're going to continue doing that going forward. Obviously, the Permian we continue to learn with the technologies that we're bringing in there the techniques that we keep evolving. So my expectation is we will continue to adjust.
Darren W. Woods: So my expectation is we'll continue to adjust as we go to maximize the value of the production and what we're learning through the technologies that we're deploying and then with Guyana. We don't underestimate the complexity of these reservoirs and the challenges the organization has. So as they're drilling and gaining information, we're optimizing that as we go as well. And if we see an opportunity to advance... The development and bring it forward and bring NPV with that will take that, and so I would just tell you it's hard to predict because what are you going to learn? I mean, if we knew that now, it wouldn't be learning. We'd know it.
Speaker Change: As we go to maximize the value of the production and what we're learning through the technologies that we're deploying and then with Guyana and we don't underestimate.
Speaker Change: To meet the complexity of these reservoirs and the challenges the organization has so as their drilling and gaining information we're optimizing that as we go as well and if we see an opportunity to advance.
Speaker Change: The development and bring it forward and bring NPV with that we'll take that and so I would just tell you it's hard to predict because what are you going to learn.
Speaker Change: I mean, if we knew that now it wouldn't be a learning it we know it.
Darren W. Woods: It would be built into the plan, so it's hard to really predict the learning piece of it. Anything to add, Kathy?
Built into the plan. So it's hard to really predict the learning piece of it and anything to add Cathy I'd just say if you look at the specifics of what we delivered as a result of actually spending a little bit more on Capex. I think you see that just goes hand in hand to how we drive value for shareholders. So.
Kathryn A. Mikells: You know, I'd just say, if you look at the specifics of what we delivered as a result of actually spending a little bit more on CapEx, I think you see that just goes hand in hand with how we drove value for shareholders. So in the Permian, we guided to 600,000 kind of oil equivalent barrels. We came in at 620. In Guyana, we had said 380.
Speaker Change: Permian, we had guided to 600000.
Kind of.
Speaker Change: Oil equivalent barrels we came in at 620 in Guyana, We had said to $3 80, we came in at 390 right.
Speaker Change: You think about where we're at in Guyana today, and we've got prosperity.
Kathryn A. Mikells: We came in at 390, right? And, you know, you think about where we are in Guyana today and, you know, we've got Prosperity, the third boat, which is in the Piara development, already up to nameplate capacity as we stand here today. And that's because we made the decision to drill more wells to ensure that we could get that boat up to capacity as quickly as possible. And our organization absolutely delivered on that. So those were the right economic decisions that drove value for our shareholders. Great.
Speaker Change: Third, though which isn't the Prs development already up to nameplate capacity as we stand here today and Thats, because we made the decision to.
Speaker Change: To drill more wells to ensure that we could get that boat uptick capacity as quickly as possible in our organization absolutely.
Speaker Change: Livered on that so those were the right economic decision that drove value for our shareholders.
Speaker Change: Great, Yes, I agree the strategy certainly yielding great results. Thanks, so much.
Speaker Change: Okay.
Speaker Change: The next question is from John Royall of J P. Morgan.
John Royall: Hi, good morning, Thanks for taking my question.
Darren W. Woods: Yeah, I agree. This strategy is certainly yielding great results. Thanks so much.
John Royall: So my question is on <unk>.
John Royall: Express some confidence that you can ultimately get above the nameplate is as you have on the first two platforms.
Operator: The next question is from John Royals of JP Morgan. Hi, good morning. Thanks for taking my question. So my question is about Payara.
John Royall: Should we expect kind of a continuous ramp towards a higher number or does it run closer to the nameplate for a period of time and then further unlock happens kind of more in a step change.
Operator: You've expressed some confidence that you can ultimately get above the nameplate, as you have on the first two platforms. Should we expect a kind of a continuous ramp towards a higher number, or does it run closer to the nameplate for a period of time, and then further unlock happens kind of more in a step change?
Speaker Change: Yes, good morning, John Thanks for the question I think.
Speaker Change: Just maybe.
Speaker Change: Step back and talk a little bit about the process organization does his best design the projects for the capacities that we wanted to deliver and then as they hand the cap the projects group hands off to the operating group. There obviously as he began operation testing to see where are we at with respect to constraints in every.
Darren W. Woods: Yeah, good morning, John. Thanks for the question. I think, you know, just maybe, step back and talk a little bit about the process. The organization does its best to design the projects for the capacities that we want to deliver. And then as they hand over the cap, the project group hands that off to the operating group. They're obviously, as they begin operations, testing to see, you know, where we are with respect to constraints.
Speaker Change: The advantage that we have here is that we've tried to stick to some consistent design.
Speaker Change: This design one build many.
Speaker Change: Concept, we've tried to to the extent possible maintained consistency from.
Speaker Change: From.
Speaker Change: Vote to boat, obviously as the subsurface and the complexity of the developments change we have to make adjustments. So it's not quite a cookie cutter approach, but we tried to maintain a level of consistency one because that keeps your capital costs down.
Darren W. Woods: And every, you know, the advantage that we have here is that we've tried to stick to some consistent design, this design one, build many concept. We've tried to, to the extent possible, maintain consistency from boat to boat. Obviously, as the subsurface and the complexity of the developments change, we have to make adjustments. So it's not quite a cookie-cutter approach, but we have tried to maintain a level of consistency. One reason is that that keeps your capital costs down.
Speaker Change: But two it allows us to take the learnings from the previous boats and apply it to the one we just startup advance.
Things faster to do things quicker and a great example for prosperity.
Speaker Change: Is how quickly we managed to bring that unit up and get flaring down and get to nameplate capacity that was we did that essentially a record times, which is a reflection of the fact that the organization as they've been bringing these units these production units.
Speaker Change: Online that Theyre learning and then taking those learnings and forwarding it to the next post and my expectation is you'll see us move faster and faster as we go difficult to predict exactly what that ramp up looks like or the step changes. If you will because it'll be a function of what they bring into.
Darren W. Woods: But two, it allows us to take the learnings from the previous boats and apply them to the one we just started up and advance things faster to do things quicker. And a great example for prosperity is how quickly we managed to bring that unit up and get flaring down and get to name plate capacity. We did that essentially at record times, which is a reflection of the fact that the organization as they've been bringing these units in. We are very excited about the production that we have moved forward to give out 120 primitives. It will be a function of what they bring in, and the next constraint that they overcome to make sure that we can continue to run those.
Speaker Change: Whats the next constraint that they overcome to make sure that we can continue to run those.
Speaker Change: The facility safely within all the operating limits, but at the same time maximize their value and so I would say take the previous ramp ups as a basis and then our expectation is the organization will find ways to do it even better.
Speaker Change: And then if you don't mind.
Speaker Change: Just going to add because I know everybody is now going to be modeling.
Speaker Change: This is Kevin on slide.
Kevin: For the year. So this is just a reminder that at some point in the second half we're working on the gas to energy projects right and laying the pipeline down to bring that gas from Liza, one and Liza two onshore.
Darren W. Woods: Those facilities will safely within all the operating limits but at the same time maximize their value. And so I would say take the previous ramp-ups as a basis, and then our expectation is the organization will find ways to do it even better. And then, if you don't mind, I'm just going to add, because I know everybody is now going to be modeling what Guyana is going to look like for the year.
Kevin: It basically kind of plug it into the power plant that ultimately will drive down cost for consumers in Guyana, and we will be taking Liza one and Liza two offline for a period of time as we kind of hook them up to that.
Kathryn A. Mikells: So this is just a reminder that at some point in the second half, we're working on the gas-to-energy project, right, and laying the pipeline down to bring that gas from LESA 1 and LESA 2 onshore, you know, to basically kind of plug it into the power plant that will ultimately drive down costs for consumers in Guyana. And we will be taking LESA 1 and LESA 2 offline for a period of time as we kind of hook them up to that pipeline. So that's just a reminder that we'll have a little bit of downtime at some point during the second half. Thank you. The next question is from Bob Brackett of Bernstein Research. Good morning, all.
Kevin: Pipeline. So that's just a reminder, that we will have a little bit of downtime at some point in the second half.
Speaker Change: Thank you.
Speaker Change: The next question is from Bob Brackett of Bernstein Research.
Robert Alan Brackett: Good morning, all at the risk of over simplifying if I think about 2023. It was a very strategy focused year Denver, a pioneer lithium if I look at 2025, it's a major project delivery year 'twenty 'twenty four is this a year of execution or could there be.
Robert Alan Brackett: Some level of strategic interesting moves that we should think about.
Operator: At the risk of oversimplifying, if I think about 2023, it was a very strategy-focused year: Denbury, Pioneer, lithium. If I look at 2025, it's a major project delivery year. 2024, is this a year of execution? Or could there be some level of strategic, interesting moves that we should think about? Yeah, good morning, Bob. I would just say you have oversimplified it. I would start with, every year is a year of execution.
Speaker Change: Yes, good morning, Bob I would just say you have overseas.
Speaker Change: I will start with every year is a year of execution and I.
I think it's the fact that we have managed it maybe.
Speaker Change: In comparison to some of our peers to make it look easy.
Speaker Change: And have executed I think at a high level make no mistake. The organization that is continues to be a real challenge across all of our operations and I. Thank the men and women of Exxonmobil have done an outstanding job of consistently executing to a very high standard as I said in my prepared remarks, so I don't want to take anything away from that and I also don't want to suggest.
Darren W. Woods: And, You know, I think it's the fact that we have managed, maybe in comparison to some of our peers, to make it look easy and have executed, I think, at a high level, make no mistake, the organization, that is a, continues to be a real challenge across all of our operations, and I think the men and women of ExxonMobil have done an outstanding job of consistently executing to a very high standard, as I said in my prepared remarks, so I don't want to take anything away from that, and I also don't want to suggest that we, for amendment, take that for granted or take our eye off of that ball, and so that's job number one. Even in bringing these projects online, that takes a tremendous amount of focus and discipline from an execution standpoint. So that is job one.
Speaker Change: We for a minute to minute take take that for granted or take our eye off of that ball and so that's job number one and.
Speaker Change: Even in bringing these projects online that is it takes a tremendous amount of focus and discipline from an execution standpoint, so that is job one and then obviously the strategy.
Speaker Change: That is also.
Speaker Change: And emphasis every year, it's just as we've always talked about it's really a function of can we find the right opportunities the right equation there.
Speaker Change: That brings value to our shareholders.
Speaker Change: If it's M&A, it's got to be one plus one has to equal three or more if it's a project. That's got to be advantage has got to position ourselves in the very far left hand side of the cost of supply curve and so.
Speaker Change: We've laid out what we know of and what we see ahead of US certainly in the capital standpoint, but as the organization continues to execute and continues to look for ways to translate the strategy into bottom line value, we find new opportunities and then we don't hesitate to go after those if they meet our criteria with respect to the advantages and they are within our ability to do.
Darren W. Woods: And then, obviously, the strategy, you know, that is also, As we've always talked about, it's really a function of, It brings value to our shareholders and, you know, if it's M&A, it's got to be, you know, one plus one has to equal three or more. If it's a project, it's got to be an advantage. We have got to position ourselves, you know, on the very far left-hand side of the cost of supply curve. And so, we've laid out what we know and what we see ahead of us, certainly from the capital standpoint. But as the organization continues to execute and continues to look for ways to translate the strategy into bottom-line value, we find new opportunities, and then we don't hesitate to go after those if they meet our criteria with respect to the advantages and they're within our ability to effectively execute.
Speaker Change: Affectively execute so I wouldn't say 2024, theres any different emphasis and there was in 2023.
Speaker Change: Project piece of it.
Speaker Change: Frankly, that's the way the projects have been developed and kind of the work that's required to deliver those.
Speaker Change: Led to that 2024 year of execution, but I wouldn't read more into that than just the scheduling of the projects.
Speaker Change: Very clear thanks.
Speaker Change: You bet. Thank you Bob.
Speaker Change: The next question.
Speaker Change: <unk> is from Ryan Todd of Piper Sandler.
Ryan Todd: Great. Thank you.
Ryan Todd: Maybe if I could ask one with the Denver a deal now closed.
Ryan Todd: Can you talk about what we might see over the course of the next year or two particularly on the on the carbon capture business.
Ryan Todd: Should we start to see announcements or notable signs of acceleration or efforts on that side.
Speaker Change: Yes, sure I think the Danbury acquisition.
Speaker Change: Just maybe a slight update on that first as we brought.
Speaker Change: Clothes that we've been going through the integration process and frankly continue to be very pleased with what we see as the opportunities to integrate that with the work we're doing around our low carbon solutions business in carbon capture so we see huge potential.
Darren W. Woods: So, I wouldn't say 2024; there's any different emphasis than there was in 2023. The project piece of it. Frankly, that's the way the projects have been developed and the kind of work that's required to deliver those has led to that 2024 year of execution, but I wouldn't read more into that than just the scheduling of the project. Very far, thanks.
Speaker Change: In terms of linking together all of the opportunities to reduce emissions high concentration emissions, along the us Gulf coast and along that pipeline system. So the team is doing a lot of work.
Speaker Change: Around developing the business there are a lot of work with potential customers around how we can help capture.
Operator: You bet. Thank you, Bob. The next question is from Ryan Todd of Piper Sandler. Great, thank you.
Speaker Change: <unk>.
Speaker Change: Their emissions and a lot of work around the operations and improving and growing the capacity of that pipeline. So all that's ongoing my expectation is with time when we as we negotiate the opportunities with customers we will see.
Darren W. Woods: Maybe if I could ask one, with the Denbury deal now closed, can you talk about what we might see over the course of the next year or two, particularly in the carbon capture business? Should we start to see, you know, announcements or notable signs of acceleration or efforts on that side? Yeah, sure. I think, you know, the Danbury acquisition.
More and more.
Speaker Change: Does that bring emissions into that pipeline, that's certainly the plan, but I would tell you.
Speaker Change: We're very focused on building this business for the long term. If you think about what we're trying to do there with respect to addressing the risk of climate change and significantly reducing emissions for third parties.
Darren W. Woods: You know, just maybe a slight update on that first is, you know, we brought in, we've closed it, we've been going through the integration process, and frankly, we continue to be very pleased with what we see as the opportunities to integrate that with the work we're doing around our low carbon solutions business and carbon capture. So we see huge potential. In terms of linking together all the opportunities to reduce emissions, high concentration emissions along the U.S. Gulf Coast and along that pipeline system.
Speaker Change: That's a business that doesn't exist today anywhere in the world, we're trying to make sure that.
As the first mover here that we established a very strong foundation for business that we expect to be around for decades to come and so my guidance to the team is while we want to move quickly to reduce emissions and to.
Speaker Change: Get customers into grow that the volume of emissions, reducing we don't want to do that and sacrifice the value opportunity here and so we're striking that balance and I think what youll see happen is we will bring on customers and grow that business.
Darren W. Woods: So the team's doing a lot of work around developing the business there, a lot of work with potential customers around how we can help capture. There are missions and a lot of work around the operations and improving and growing the capacity of that pipeline. So all that's ongoing. My expectation is that with time, as we negotiate opportunities with customers, we'll see more and more deals that bring emissions into that pipeline. That's certainly the plan.
Speaker Change: In a way that is value accretive and generate the returns that we need for the capital in that business.
Speaker Change: Okay. Thank you.
You bet.
Speaker Change: We will go next to the rise of Borgata area with RBC.
Speaker Change: Hi, Thanks for taking my my question.
Speaker Change: I had a question on gas realizations, because they were well ahead of at least what we had modeled.
RBC: Using the kind of rules of thumb on the portfolio mix you put out before so is it just a case of.
RBC: The trading contribution coming into that number or is there something else driving that and then just one quick clarification on the underlying cash flow from operations again that was.
Darren W. Woods: But I would tell you we're very focused on building this business for the long term. If you think about what we're trying to do there with respect to addressing the risk of climate change and significantly reducing emissions for third parties, that's a business that doesn't exist today anywhere in the world. We're trying to make sure that, as the first mover here, we establish a very strong foundation for business that we expect to be around for decades to come. And so my guidance to the team is, while we want to move quickly to reduce emissions and get customers and to grow the volume of emissions we're reducing, we don't want to do that and sacrifice the value opportunity here. And so we're striking that balance, and I think what you'll see happen is we'll bring in customers and grow that business in a way that is value-accretive and generates the returns that we need for the capital. Thank you. You bet. We'll go next to Biraj Borkhataria with RBC.
RBC: Head of where the earnings would have suggested it would have been so is there anything one off in nature and the <unk> number that we should be aware of for <unk>. Thank you.
RBC: Yes, I'll, let I'll, let Kathy address the cash flow thing and I'll, just say from a from a gas realization standpoint.
Kathryn A. Mikells: I don't think Theres anything unique in terms of what was realized as we went through the quarter. Obviously, we've been growing our trading business and that is going to manifest itself in our results, we're going to see that in our our energy business, we're going to see that in.
Kathy Michael: Our gas businesses, so that will continue to kind of and as volatility changes and opportunities in the market.
Kathy Michael: Change, we will see that kind of ebb and flow, but we expect to see with time, a continued growth structural improvement.
Kathy Michael: And the earnings with the work that we're doing in the trading space and then I think quarter on quarter, we're going to see.
Kathy Michael: <unk> is in and mix as we move across the quarters and so we will see some variation there, but I don't.
Operator: Hi, thanks for taking my question. I had a question on gas realizations because they were just well ahead of at least what we had modeled using the kind of rules of thumb and the portfolio mix you put out before. So is it just a case of, Transcripts provided by Transcription Outsourcing, LLC.
Putting anything structurally other than the trading work that we've been doing with to our realizations and I'll hand, it to Kathy for any other comments on that and the cash flow and so I'll just speak specifically to cash flow from operations and I. Thank you.
Kathryn A. Mikells: You're referencing the quarter, but I'm happy to talk about the quarter and the year.
Kathryn A. Mikells: Cash flow from operations. If you look at the quarter was $13 7 billion. If you exclude working capital we would have been at $15 9 billion you are mentioning a beat relative to the street and so was there anything unusual going on.
Kathryn A. Mikells: Yeah, I'll let Kathy address the cash flow thing. And I'll just say from a gas realization standpoint, I don't think there's anything unique in terms of what was realized as we went through the quarter. Obviously, we've been growing our trading business, and that is going to manifest itself in our results. We're going to see that in our energy business. We're going to see that in our gas businesses. So that will continue to kind of, and as volatility changes and opportunities in the market change, we'll see that kind of ebb and flow. But we expect to see, with time, continued growth and structural improvement in earnings with the work that we're doing in the trading space. And then I think, you know, quarter on quarter, we're going to see changes in mixed as we move across the quarters, and so we'll see some variation there. But I don't, I wouldn't put anything structurally other than the trading work that we did with Tara Reel. And I'll hand it to Kathy for any other comments on that.
Kathryn A. Mikells: As I look at People's models, I think sometimes they struggled to get depreciation amortization rates. So that's the only thing I'm going to speak to you and when we have a quarter, where we're taking impairments then we get.
Kathryn A. Mikells: An increase kind of in terms of the noncash add back that flows through to cash flow from operations and we obviously took an impairment in the quarter. So that's my best guess as to anything that might be nuanced otherwise no nothing particularly unusual going on.
Okay understood. Thank you.
Kathryn A. Mikells: The next question is from Sam Margolin with Wolfe Research.
Sam Margolin: Hello, Good morning, Thanks for taking the question.
Sam Margolin: I'd like to come back to Capex, if possible just because.
When the organizations performing so well as it is there is it feels like theres always going to be opportunities to pull something forward or for <unk> or for people throughout the organization to kind of pursue their incentives.
Sam Margolin: And spend a bit more and obviously this is something that's been a topic in the industry for a long time and so particularly.
Kathryn A. Mikells: Cash Flow. Yep. And so I'll just speak specifically to cash flow from operations, and I think you're referencing the quarter, but I'm happy to talk about the quarter and the year. You know, our cash flow from operations, if you look at the quarter, was $13.7 billion. If you exclude working capital, we would have been at $15.9 billion. You're mentioning a beat relative to the street, and so was there anything unusual going on?
Sam Margolin: Particularly like as we look at your Permian results. It looks like you are.
Sam Margolin: 23 wells are still improving and everything is getting better. So I guess the question is how do we think about this with respect to your planning when it feels like there is always going to constantly be opportunities for you to add kind of nickels and dimes to capex to to do some quick hit high return opportunities. Thank you, yes. Good morning.
Speaker Change: Sam I would.
Speaker Change: I guess I would take exception to the characterization that you've laid out there it's not a function of the organization throne additional nickels and dimes, we have pretty focused work programs to drive value here and.
Kathryn A. Mikells: As I look at people's models, I think sometimes they struggle to get depreciation and amortization right, so that's the only thing I'm going to speak to. And when we have a quarter where we're taking impairments, then we get an increase, kind of in terms of the non-cash add-back that flows through to cash flow from operations. And we obviously took an impairment in the quarter. So that's my best guess as to anything that might be nuanced; otherwise, no, nothing particularly unusual. Okay, understood. Thank you. The next question is from Sam Margolin, Wolf Research. Hello, good morning.
Speaker Change: Frankly, any discussion about spending.
Speaker Change: Additional money or making additional investments above and beyond.
Speaker Change: What we've planned for has to come to the management Committee.
Speaker Change: And so we've got pretty tight.
Speaker Change: <unk> controls around making sure we understand what's the value proposition how unique is the value proposition.
Speaker Change: This is not something we just turned loose to the organization and they start drawing on ammonia as and when they see the opportunities to do that so that's I think the characterization that it's hard to hang on to this I would I would.
Operator: Thanks for taking the question. I'd like to come back to CapEx, if possible, just because, you know, when the organization is performing so well as it is, it feels like there are always going to be opportunities to pull something forward or for people throughout the organization to kind of pursue their incentives and spend a bit more. And obviously, this is something that's been a topic in the industry for a long time. And so particularly, as we look at your Permian results, it looks like your 23 wells are still improving, and everything's getting better. So I guess the question is, you know, how do we think about this with respect to your planning when, you know, it feels like there's always going to be opportunities for you to add kind of nickels and dimes to CapEx to do some quick and high-return opportunities? Thank you. Yeah. Good morning, Sam. I would, I guess I'd take exception to the characterization that you've laid out there.
Speaker Change: I would point to the success that we've had to date, where we've delivered what is a very accretive advantaged set of capital projects.
Speaker Change: I think our track record demonstrates that we are not about going after volume or going after marginal <unk>.
Speaker Change: Investment opportunities these things have to be unique to hurdle to get into the capital plan is pretty high.
Speaker Change: We have if you look across the industry, we have a clear understanding of cost of supply, we know where we sit on the cost of supply curve, we know as new projects or opportunities come forward. We look at those in terms of where they sit from a competitive standpoint. They have to have a structural advantage to have to be robust and resilient to bottom of cycle conditions. If you lay off.
Speaker Change: All of those conditions on it is a fairly tight funnel that people have to get there their spend through and that doesn't change that has not changed.
Speaker Change: And so I would just say if we spend additional money.
Speaker Change: That money is going to deliver more than what was in the base plan frankly, because it's on the margin.
Speaker Change: And I'll come back to at the end of the day.
Darren W. Woods: It's not a function of the organization, you know, throwing additional nickels and dimes. You know, we have pretty focused work programs to drive value here. And frankly, any discussion about spending, www.larryweaver.com And so we've got pretty tight controls around making sure we understand what the value proposition is, how unique the value proposition is. This is not something we just turn loose to the organization, and they start throwing money around as in when they see the opportunities to do that. So that's I think, you know, the characterization that it's hard to hang on to this. I would, I would, I think I would point to the success that we've had to date where we've delivered what is a very Creative Advantage Set of Capital Projects. I think our track record demonstrates that we are not about going after volume or going after marginal investment opportunities. These things have to be unique.
Speaker Change: We're not judging ourselves by basing by hitting some number that we've our guidance that we've given from a year ago, we're judging ourselves on the ability to generate.
Speaker Change: Advantage.
Speaker Change: Projects and again I'd just point you to the results that we're delivering to.
Speaker Change: To grow earnings on a compounded basis at twice what the nearest competitor has done or to grow cash flow from operations at twice what the next nearest competitor has done it doesn't come.
From.
Speaker Change: Away from investing in things that don't have the advantage that I just talked about so I think our track record and the results that we're delivering demonstrated approach that we've taken here is working.
Speaker Change: And we're not going to we're not going to vary off of that approach.
Speaker Change: Understood. Thank you.
Speaker Change: Yes.
Speaker Change: Add one more comment and that is we are.
Speaker Change: Most take for granted.
Speaker Change: Any projects, we've actually been able to pull forward and deliver.
Speaker Change: Either on time or.
Darren W. Woods: The hurdle to get into the capital plan is pretty high. We have, if you look across the industry, we have a clear understanding of the cost of supply. We know where we sit on the cost of supply curve. We know as new projects or opportunities come forward, we look at those in terms of where they sit from a competitive standpoint. They have to have a structural advantage. They have to be robust and resilient to the conditions of the bottom cycle.
Speaker Change: Ahead of time and <unk> is a great example of that it was originally targeted.
Speaker Change: <unk> started up in 2024, and we were able to pull it forward. We were then able to pull forward incremental well drilling in order to get that of PSL upter operating nameplate capacity and an extraordinarily short amount of time I'd say this is one of the area.
Speaker Change: Is that really differentiates exxonmobil from other companies are.
Darren W. Woods: If you lay all those conditions on it, it's a fairly tight funnel that people have to get their spend through, and that doesn't change. That has not changed. So I would just say, if we spend additional money, that money is going to deliver more than what was in the base plan, frankly, because it's on the margin. And I'll come back to, at the end of the day, we're not judging ourselves by basing, by hitting some number that we've, or guidance that we've given, you know, from a year ago; we're judging ourselves on the ability to And again, I just point you to the results that we were delivering. You know, to grow earnings on a compounded basis at twice what the nearest competitor has done, or to grow cash flow from operations at twice what the next nearest competitor has done, doesn't come from investing in things that don't have the advantage that I just talked about. So I think our track record and the results that we're delivering demonstrate that the approach that we've taken here is working, And we're not going to bury that approach.
Speaker Change: Tap really top performance and execution and pulling projects forward is always a positive economic decision right because.
Speaker Change: We're going to end up.
Speaker Change: Getting the benefit of the profits from those projects sooner or later, so very much a decision left aligned with driving value, which is what sits behind all of our decision making.
Speaker Change: Thank you.
The next question is from Jason gave almon of TD Cowen.
Jason Gabelman: Yeah, Hey, good morning, Thanks for taking my questions.
Jason Gabelman: I first wanted to get your take on the outlook for the chemicals market going forward.
Jason Gabelman: 2023 was a bit of a trough year.
Jason Gabelman: Some of the industry participants are saying, maybe we're getting close to turning the corner.
Jason Gabelman: And that would be meaningful given all of the underlying investments that Exxon has made in the chemicals business.
Jason Gabelman: Just wondering.
Jason Gabelman: Your view on that.
Jason Gabelman: That's all from margin improvement and seeing the whole horse of some of those industrial companies.
Speaker Change: Sure. Good morning, Jason Yeah, I think I would concur with your characterization of 2023 is being.
Darren W. Woods: And then I'd just add one more comment, and that is, you know, we almost take for granted how many projects we've actually been able to pull forward and deliver, you know, either on time or ahead of time, and Payara is a great example of that. It was originally targeted to start up in 2024, and we were able to pull it forward. We were then able to pull forward incremental well drilling in order to get that FPSO up to operating nameplate capacity in an extraordinarily short amount of time. I'd say this is one of the areas that really differentiates ExxonMobil from other companies, our top, really top performance and execution, and pulling projects forward is always a positive economic decision, right, because we're going to end up getting the benefit of the profits from those projects sooner or Thank you. The next question is from Jason Gabelman of TD Cowen. Yeah, hey, morning.
Speaker Change: Kind of at the bottom of the trough at trough it was definitely a challenging year.
Speaker Change: Well below I think the bottoms of previous cycles, but I would say that and we're quite proud of the fact that the investments that we've brought on where earnings and cash positive in the bottom.
Speaker Change: Of the cycle, which frankly is exactly in line with.
Speaker Change: I was just talking about the strategy that we have and the criteria that we require for our projects that they have to be robust bottom of cycle conditions and in the chemical business. We definitely demonstrated that the projects that new projects that we've brought on are brought onto had some run time in our earnings and cash positive even in these very challenging conditions.
Speaker Change: I think like many others in the chemical industry, we'd like to see us come out of the trough and when we do our expectation is that.
Capital that we've brought on and we will obviously be performing even better with better margins.
Speaker Change: I would say as well with respect to turning points. We have seen some we certainly saw in the fourth quarter. Some slight improvements there is still a lot of capacity that's come on out there we're still seeing reasonably good growth, particularly for Exxonmobil and our performance product category, we have set some pretty aggressive <unk>.
Operator: Thanks for taking my questions. I first wanted to get your take on the outlook for the chemicals market going forward. 2023 was a bit of a trough year. You know, some industry participants are saying maybe we're getting close to turning the corner, and that would be meaningful given all the underlying investments that Exxon has made in the chemicals business. So just wondering your view on kind of a market improvement and seeing the full force of some of those investments come through. Sure. Good morning, Jason. Yeah, I think, you know, I would concur with your characterization of 2023 as being, you know, kind of at the bottom of the trough. It was definitely a challenging year.
<unk> to grow our high performance high value chemical products, and we're seeing that happen. So we feel really good about the pipeline and the development of our sales.
Speaker Change: And then the question is when does the broader industry churn and you start to see margins improve.
Speaker Change: Our expectation is 2024 might be.
Speaker Change: <unk> better than 2023, but we're not expecting.
Speaker Change: Significant.
<unk> and the vector, but more of a gradual one as we work our way through that.
Speaker Change: All the supply that's come on in the recent years and some of the supply that will come on in 2024 and 2025, So I think it'll be a gradual recovery, but frankly, one that we feel.
Speaker Change: Very.
Speaker Change: Comfortable with based on the advantages that we have with our capacity the advantages that we have with our footprint and the flexibility we have to optimize on feed and product. So.
Darren W. Woods: Well below, I think, the bottoms of previous cycles, but I would say that, and we're quite proud of the fact that, you know, the investments that we've brought on were earnings and cash positive at the bottom of the cycle, which, frankly, is exactly in line with the strategy that we have and the criteria that we require in our projects, that they have to be robust to bottom of the cycle conditions. And in the chemical business, we definitely demonstrated that the projects, the new projects that we've brought on that have some run time in them are earnings and cash positive, even in these very challenging conditions. So, like many others in the chemical industry, we'd like to see us come out of the trough, and when we do, our expectation is that the capital that we've brought on will obviously be performing even better with better margins. I would say, as well, with respect to turning points, we have seen some, we certainly saw in the fourth quarter, some slight improvements. There's still a lot of capacity that has yet to come on out there.
Speaker Change: We're we're positioned for this kind of market I think the results demonstrate that and we're going to ride it and see where the market goes.
Speaker Change: Got it thanks.
Speaker Change: Yet.
Speaker Change: The next question is from Paul Cheng of Scotiabank.
Paul Y. Cheng: Alright, Thank you good morning.
Paul Y. Cheng: Good morning, everyone and then Catherine I wanted to ask about the trading operation.
Thank you.
Paul Y. Cheng: Hey, Barry good trading year for you in a long enough.
Paul Y. Cheng: Sure.
Speaker Change: Can you help to maybe quantify that.
Speaker Change: The benefit for the year.
Speaker Change: Whether you're in terms of maintenance of Bono in terms of improvement in the.
Speaker Change: Return and with the debt.
Speaker Change: You think that a <unk>.
Speaker Change: And after more than the last two three years, what have you learned.
Speaker Change: Is there anything that you would see going.
Speaker Change: Going forward in your trading operation and whether you see the first quarter.
Optimized based on opportunities set.
Speaker Change: Similar to what you're seeing in the fourth quarter or getting.
Darren W. Woods: We've still seen reasonably good growth, particularly for Exxon Mobil in our performance product category. You know, we have set some pretty aggressive targets to grow our high-performance, high-value chemical products, and we're seeing that happen, so we feel really good about the pipeline and the development of our sales. But the question is, when does the broader industry turn, and you start to see margins improve? My expectation is 2024 might be, you know, marginally better than 2023, but we're not expecting a significant change in the vector, but more of a gradual one as we work our way through all the supply that's come on in recent years and some of the supply that will come on in 2024 and 2025.
Speaker Change: Getting worse or getting better.
Speaker Change: Yes.
Yes, Thank you Paul and good morning all.
Paul Y. Cheng: Give you a perspective and then let cathy build on that.
Cathy: And maybe just to go back in time, a little bit we talked about the trading opportunity within exxonmobil for quite some time I think there was some skepticism out there as to whether we could actually build that business, but the foundation of our trading operations is a function of the global footprint that we have the Spanish.
Cathy: The businesses that we have the integrated nature of the businesses that we have that we felt like gave us a physical footprint.
Cathy: And presence in markets all around the world to two effectively trade on and to build a business from that footprint and obviously, the perspectives and insights that come with operating that footprint in those mix of businesses in that.
Darren W. Woods: So I think it'll be a gradual recovery but, frankly, one that we feel very comfortable with based on the advantages that we have with our capacity, the advantages that we have with our footprint, and the flexibility we have to optimize feed and products. So we're positioned for this kind of market. I think the results demonstrate that, and we're going to ride it and see where the market takes us. Got it. Thanks for that. The next question is from Paul Cheng of Scotiabank. Thank you. Good morning.
Cathy: I would say as we've grown our trading capability on that premise optimizing our assets building on our assets that.
Cathy: It has proven to be very effective at that.
Cathy: That strategy is bearing out and that we see continued opportunity to grow that.
Cathy: I think as we've talked about here, we were going to take a very measured approach.
Cathy: We werent in a hurry weren't going to rush through this we're going to make sure that what we do.
Cathy: Is structurally sound that we're not in that we're managing the risk as well as capturing the rewards and we've been doing that so.
Cathy: 2023, I think was off of the highs we saw in 'twenty 2022, because of where the market's at but still reflected I think very solid contributions based on the capabilities of the organization that we've been building and we've got more to do there my expectation is that you will see.
Operator: Darren and Kathryn, I want to ask you about the trading operation. I think it seems like it's been a very good trading year for you and a lot of your peers in Europe. Can you help us to maybe quantify that? What is the trading benefit for the year, whether in terms of millions of dollars or in terms of improvement in the return, and whether you think that is repeatable? And after more than the last two or three years, what have you learned?
Cathy: Improved trading results.
Cathy: Bedded.
Cathy: And our businesses, because frankly those that trading organizations.
Objective is to.
Darren W. Woods: Is there anything that you will do differently going forward in your trading operation? And whether you see the first quarter optimization opportunity set as similar to what you saw in the fourth quarter, or is it getting worse or getting better? Thank you.
Cathy: Enhance the value of the businesses, we're not we don't want a trading organization is competing against the base business. We want a trading organization, that's working with the base business to optimize value for the corporation and Theyre doing that and those earnings accrue to the businesses that they are trading on behalf of but I am very pleased.
Darren W. Woods: I'll give you a perspective and then let Kathy build on that. And maybe just to go back in time a little bit, you know, we talked about the trading opportunity within Exxon Mobil for quite some time. I think there was some skepticism out there as to whether we could actually build that business. But But the foundation of our trading operations is a function of the global footprint that we have, the span of the businesses that we have, the integrated nature of the businesses that we have that we felt gave us a physical footprint and presence in markets all around the world to effectively trade on, and to build a business from that footprint and, obviously, the perspectives and insights that come with operating that footprint and those make a business. And that.
Cathy: <unk> with what we saw in 2023, obviously the market volatility is going to have a function.
Cathy: Will function heavily or play a heavy function year on year in terms of what we actually deliver.
Cathy: But structurally we've got a really sound base that we're growing and I think we're going to continue to see improvement in that space Kathy anything to add yes.
Kathryn A. Mikells: The only other thing that I'd add to that is if you looked at our trading results on a year on year basis Cowen upstream we were lapping.
Kathryn A. Mikells: Kind of a big mark to market gain.
Kathryn A. Mikells: In 2022, right so that impacted our results and I've mentioned time and time again that quarterly results, especially as a result of that movement and mark to market.
Kathryn A. Mikells: Ebb and flow and sometimes we get price price timing nuances in the quarter.
Darren W. Woods: I would say as we've grown our trading capability on that premise, optimizing our assets, building on our assets, that it has proven to be very effective, that that strategy, is bearing out and that we see continued opportunity to grow that and I think as we've talked about here we were going to take a very measured approach and we weren't in a hurry weren't going to rush through this we're going to make sure that what we do is structurally sound that we're not and that we're managing the risk as well as capturing the rewards and we've been doing that so 2023 I think was off of the highs we saw in 22 2022 because of where the market's at but still reflected I think very solid contributions based on the capabilities of the organization that we've been and we've got more to do there. My expectation is that you will see improved trading results in embedded, and our businesses, because frankly, those that trading organizations objective is to enhance the value of the businesses. We're not we don't want a trading organization that's competing against the base business. We want a trading organization that's working with the base business to optimize value for the corporation. And they're doing that and those earnings accrue to the businesses that they're trading on behalf of.
Kathryn A. Mikells: As we came to the end of this year those price timing nuances that we saw in the third quarter had fully unwound by the fourth quarter.
Kathryn A. Mikells: So I think we start the year overall in a pretty good place.
Kathryn A. Mikells: Okay.
Kathryn A. Mikells: Catherine.
Catherine: Yes maam.
Catherine: And in terms of what's the contribution of trading for the year.
Catherine: No, we don't disclose that and I think actually all of our peers have a pretty high sensitivity to suggest.
Catherine: Competitive sensitivity in terms of disclosing that number but I think darrin.
Put overall things into a good context switches last year was record earnings for the company and it was record trading earnings and so we had a strong result, this year and trading but it was down a bit on a year over year basis, and then I mentioned, specifically in upstream that we were lapping favorability in terms of mark to market.
Catherine: Favorable gain in in 2022.
Speaker Change: Okay. Thank you.
The next question is from Neal Dingmann of truest.
Neal Dingmann: Hey, good morning, Darren and team. My question is on the Permian specifically you are continued record production to play it appears at least from what Im seeing going forward. Your pro forma Permian activity is likely to continue trending higher and I'm just wondering maybe Darren how you'd respond that maybe any critics, who suggest to all U S companies should instead maintain.
Neal Dingmann: Flat production in order to I guess.
Neal Dingmann: Saudi and the others, maybe more so.
Darren W. Woods: Yes. Thanks for the question no I would I would just tell you. There is we're not going to run the business to a peace and extra external.
Darren W. Woods: But I'm very pleased with what we saw in 2023. Obviously, the market and volatility is going to have a function will function heavily or play a heavy function year in year in terms of what we actually deliver. But structurally, we've got a really sound base that we're growing and I think we're going to continue to see. The only other thing that I'd add to that is if you looked at our trading results on a year-on-year basis, you know, in upstream we were lapping kind of a big mark-to-market gain in 2022, right, so that impacted our results, and I've mentioned time and time again that quarterly results, especially as a result of that movement in mark-to-market, you know, we'll kind of ebb and flow and sometimes we get price timing nuances in the quarter.
Darren Woods: Yes.
Speaker Change: Remember out there I think.
Speaker Change: The way we look at it is can we find.
Speaker Change: It comes back to every dollar that we choose to invest and spend do we see a return ROE convinced that were effectively spending that money and they're spending.
Speaker Change: Spending inefficiently, that's the criteria that we're using that as the plans that we've built we expect to grow.
Speaker Change: Our volumes in 2024.
To about 650 <unk>.
Speaker Change: And then we're going to continue that growth through to the targets that we've laid out in 2027 of about 1 million barrels a day close to a million barrels a day so.
Speaker Change: That's the plan that we have we are executing to that plan and as we've said before year on year, it's not straight ratable.
Growth it'll be lumpy growth, but over time, it will average about 13%.
Darren W. Woods: As we came to the end of this year, those price timing nuances that we saw in the third quarter had fully unwound by the fourth quarter, so I think we start the year overall in a pretty good place. Kathryn, is there a number you can share in terms of what's the contribution for trading for the year? No, we don't disclose that.
Speaker Change: We haven't seen anything to date that would say that's going to change obviously as we bring pioneer in.
Speaker Change: Into the fold will bring their production and then look to kind of optimize across.
That portfolio that both companies have and as we've said before that once we close on that.
Kathryn A. Mikells: And I think actually all our peers have a pretty high sensitivity to just, you know, competitive sensitivity in terms of disclosing that number. But I think Darren put overall things into a good context, which is that last year was record earnings for the company, and it was record trading earnings. And so we had a strong result this year in trading, but it was down a bit on a year over year basis. And then I mentioned specifically in upstream that we were lapping favorability in terms of mark to market favorable gain in 2020. Okay, we will. Thank you. The next question is from Neil from Truist. Morning, Darren and team.
Speaker Change: We'll come back out and have a spotlight will share what what the implications of bringing these two companies together and the impact on our Permian production.
Speaker Change: Yes, it makes a ton of sense. Thank you.
Speaker Change: You bet.
Speaker Change: The next question is from Lucas Herrmann of BNP Paribas.
Lucas Herrmann: Yes, thanks very much.
Lucas Herrmann: With one company options to talk with you.
Lucas Herrmann: Following on from the timing question actually Darrin. When you were asked about what's the pace of growth in 2024 in the Permian I think at the time of the capital.
Lucas Herrmann: Fortunately one of the comments you made.
Lucas Herrmann: I'll ask build drilled uncompleted wells.
Speaker Change: I was just wondering whether you could talk a little bit around yes.
Operator: My question is about the Permian, specifically your continued record production to play. It appears, at least from what I'm seeing going forward, your performer Permian activity is likely to continue trending higher. And I'm just wondering, maybe Darren, how you'd respond to maybe any of the critics who suggest all U.S. companies should instead maintain flat production in order to, you know, I guess, appease Saudi Arabia and the others, maybe more so. Yeah, well, thanks for the question.
Speaker Change: Concept of building inventory why the need YY put more wells into inventory.
Speaker Change: Is it very simply adding flexibility to the business in order to maintain that production profile coming forward. So what's the thinking thank you sure yes.
Speaker Change: Happy to do that and you remember correctly, we did say we were going to build some more ducks and I would I would.
Speaker Change: Think about that.
Speaker Change: And you used the right word inventory life like any inventory that we have in the business, which is if you're optimizing what is a pretty complex system of drilling and fracking.
Darren W. Woods: No, I would just tell you there we're not going to run the business to appease an extra external member out there. I think the way we look at it is, can we find a return on every dollar that we choose to invest and spend, do we see a return, are we convinced that we're effectively spending that money, and we're spending it efficiently? That's the criteria that we're using; those are the plans that we've built. We expect to grow our volumes in 2024 to about 650 KBD, and then we're going to continue that growth through to the targets that we've laid out in 2027 of about a million barrels a day, close to a million barrels a day. That's the plan that we have. We're executing according to that plan. And as we've said before, year on year, it's not straight rateable growth. It'll be a lumpy growth.
Speaker Change: Managing simultaneous ops and how you schedule all of that and how it interfaces with each other and the planning piece of it you want to have a little bit of inventory that allows you to continue at a pace and manage around some of the complexities and potential conflicts that you have in developing.
The acreage and Youll recall that what we are doing in the Permian and the Delaware in particular is this manufacturing approach, where we're laying out.
Speaker Change: Yeah.
Speaker Change: Sure.
Speaker Change: The spines and then executing like a manufacturing organization down that and so it is a very.
Speaker Change: Paste and.
Speaker Change: Continuum of act of work in production and so there are.
Speaker Change: Constraints that you hit as you as Youre doing that consistently across all that acreage and having some ducks available to us allows us to when we run into an issue with what we're doing.
Darren W. Woods: But over time, it'll average about 13 percent. And we haven't seen anything to date that would say that's going to change, obviously, as we bring Pioneer in. Electrical Engineering, www.exxonmobil.com, The Impact on Our Permian Productions. It makes a ton of sense. Thank you, you bet. The next question is from Lucas Herman of BNP Paribas. Yeah, thanks very much.
Speaker Change: In the immediate vicinity, we have some other opportunities to continue the production. So we use it like any other inventory.
Speaker Change: Obviously, the trick is to get that inventory level right you don't want a bunch of capital sitting there.
Speaker Change: That isn't earning its return this we think we've got to an optimized level that allows us to keep a very efficient.
Operator: And it's nice to have the opportunity to talk with you. Following on from the Permian question, actually, Darren, when you were asked about the pace of growth in 2024 in the Permian, I think, at the time of the capital budget release, one of the comments you made was, you know, a desire to build drilled uncompleted wells. And I just wondered whether you could talk a little bit about the concept of building inventory, you know, why the need to put more wells into inventory? Is it very simply adding flexibility to the business in order to maintain the production profile going forward? So, what's the thinking? Thank you.
Speaker Change: <unk>.
Speaker Change: I would say manufacturing process running versus a focus on production and production process.
Speaker Change: Okay. Thank you that's helpful.
Speaker Change: Yes.
Speaker Change: We have time for one more question. Our final question will be from Jeffrey <unk> from Tudor Pickering and company.
Jeffrey: Good morning, everyone. I appreciate the time going back to carbon capture I was interested in the comment early on about the pilot plant and the potential to lower the cost of direct air capture yes, I imagine there are limitations on what you can share just given as you mentioned the proprietary nature of the tech here, but with other key players in the energy space, particularly on the service side exploring new technologies for this.
Jeffrey: Just thought it'd be great to get any commentary you can speak to one key learnings so far from this pilot plant and the magnitude of potential savings.
Darren W. Woods: Sure. I'm happy to do that. And you remember correctly, we did say we were going to build some more ducts. And I would I would think about that. And you use the right word inventory, like, like any inventory that we have in the business, which is, you know, if you're optimizing what is a pretty complex system of, you know, drilling and fracking, and, you know, managing simultaneous ops, and how you schedule all that, and how it interfaces with each other and the planning piece of it, you want to have a little bit of inventory that allows you to continue at a pace and manage around some of the complexities and potential conflicts that you have in developing. The Acreage.
Jeffrey: You see the most opportunity to improve the cost structure and what kind of capital investment that I guess, the low carbon solutions business overall might evolve over the near term.
Speaker Change: Yes, sure I think and.
Speaker Change: Rightly so pointed out to proprietary in nature. So I will limit some of the details of what we're talking about there, but maybe just.
Speaker Change: From a broader context standpoint.
Speaker Change: We're convinced that carbon capture.
Speaker Change: Is going to play a really important role in helping society meet its ambitions to get to net zero or to make certainly significant reductions in carbon emissions. We think it makes a lot of sense.
Speaker Change: Two rather than tariff and throw away.
Speaker Change: The existing infrastructure in the industries that we have in place that are intensive energy users that we find a way to deal with the problem, which is the emissions and so I think carbon capture plays a role there the technology that we have today frankly wasn't developed.
Darren W. Woods: And you'll recall that what we are doing in the Permian, in the Delaware in particular, is this manufacturing approach where we're laying out the spines and then executing like a manufacturing organization down that. And so it is a very paced and, you know, continuum of work and production. And so there are, you know, constraints that you hit as you're doing that consistently across all that acreage, and having some conduits available to us allows us to when we run into an issue with what we're doing in the immediate vicinity, we have some other opportunities to continue production, so we use them like any other inventory. Now, obviously, the trick is to get that inventory level right; you don't want a bunch of capital sitting there that is We think we've got to an optimized level that allows us to keep a very efficient, I'd say manufacturing process running versus a focus on production and production processes. Thank you, it's helpful. Red.
Speaker Change: For this application it has a use.
Speaker Change: It can be.
Speaker Change: Deployed today for high concentration streams, but as you move down.
Speaker Change: The emissions profile and get to lower and lower concentrations of Sidoti streams.
Speaker Change: Existing technology's challenge and so <unk>.
Speaker Change: It becomes very expensive for every tonne of carbon that you reduce and so the challenge is use the existing technology today for these high concentrations teams streams, where you can make the economics work, but then find a lower cost method.
Speaker Change: To deploy for these less concentrated streams, there's still make it economic so thats been the challenge that we're working on are recognizing that the existing technology was designed for a different purpose.
Operator: We have time for one more question. Our final question will be from Jeffrey Lumjon from Tudor Pickering and Company. Good morning, everyone.
Operator: I appreciate your time. Going back to carbon capture, I was interested in the comment early on about the pilot plan and the potential to lower the costs of direct air capture. I imagine there are limitations on what you can share, just given, as you mentioned, the proprietary nature of the tech here, but with other key players in the energy space, particularly on the service side, exploring new technologies for this, just thought it'd be great to get any commentary you can speak to on key learnings so far from this pilot plan and the magnitude of potential savings, where you see the most opportunity to improve the cost structure and what kind of capital investment that, I Yeah, sure.
We need a new technology here and we're trying to take advantage of.
Speaker Change: The materials science development things that have happened with materials with nano structures. There is a lot of advances in technology since the.
Speaker Change: The existing technology was developed and so there is a question of how can we better capture.
Speaker Change: <unk> by using advances in the existing technology, we think we've come up with.
Speaker Change: An opportunity to potentially do that but it's early early days like all these technology developments and so we built the pilot plant and we will see and test out some of these new capabilities.
Speaker Change: And test.
The cost effectiveness of capture I would say the first our first step we're looking to get about a cost reduction of about half.
Darren W. Woods: I think, and you rightly pointed out the proprietary nature. So I will limit, you know, some of the details of what we're talking about there. But maybe just from a broader context standpoint.
But I would tell you that's still not enough, but if we can see a significant step change in that cost or path to that cost reduction that gives us hope that we can then continue to advance that and get it back and get it down to something that is more competitive and then economic to deploy across the world and if we can crack that nut.
Darren W. Woods: We're convinced that carbon capture is going to play a really important role in helping society meet its ambitions to get to net zero or to make certainly significant reductions in carbon emissions. I think it makes a lot of sense to, rather than tear up and throw away. The existing infrastructure and the industries that we have in place that are, you know, intensive energy users, we find a way to deal with the problem, which is emissions. And so I think carbon capture plays a role there. The technology that we have today, frankly, wasn't developed for this application. It has a use and can be deployed today for high-concentration streams, but as you move down the emissions profile and get to lower and lower concentrations of CO2 streams, the existing technology is challenged. It becomes very expensive for every ton of carbon that you reduce.
Speaker Change: As I've said, many times before the Holy Grail in addressing emissions as direct air capture.
Speaker Change: And the challenge for the industry.
Is to find ways to do that more cost effectively and frankly, we're at the very early stages of the technology and the technology development. So whether we're successful or somebody else is successful I feel like this is an area worth exploring and I think our technology companies. We've got some great ideas knowhow to scale things know how to optimize.
Speaker Change: <unk> is not only materials, but processes and bringing all that together to see if we can make a step change here is the objective.
Speaker Change: Too early to judge.
How successful we'll be but I certainly feel like we've got the capabilities and should be working hard to try to make advances here.
Darren W. Woods: And so the challenge is to use existing technology today for these high-concentration streams where you can make the economics work, but then find a lower cost method to deploy for these less concentrated streams that still make it economical. So that's been the challenge that we're working on, recognizing that the existing technology was designed for a different purpose. We need new technology here, and we're trying to take advantage of. You know, the material science development, the things that have happened with materials, with nanostructures; there's a lot of advances in technology since the existing technology was developed.
Speaker Change: Great looking forward to your update in this space there. Thank you you.
Speaker Change: You bet. Thank you.
Speaker Change: Thanks, everybody for joining our call today and for the questions. You asked we will post a transcript of the Q&A session on our Investor website. Later this week or early next week have a nice weekend, everybody and with that I'll turn it back to the operator that concludes our call.
Speaker Change: This concludes today's call we thank everyone again for their participation.
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Darren W. Woods: And so there's a question of how can we better capture CO2 by using advances in the existing technology. We think we've come up with an opportunity to potentially do that, but it's early, early days, like all these technological developments. And so we built a pilot plant, and we'll see and test out some of these new capabilities and test, you know, the cost effectiveness of CAPTURE.
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Darren W. Woods: I'd say the first step, we're looking to get a cost reduction of about half. But I would tell you that's still not enough, but if we can see a significant step change in that cost... Our path to that cost reduction gives us hope that we can then continue to advance that and get it back, get it down to something that is more competitive and then economical to deploy across the world. If we can crack that nut, as I've said many times before, you know, the holy grail in addressing emissions is direct air capture. The challenge for the industry is to find ways to do that more cost effectively, and frankly, we're at the very early stages of technology and technological development.
Yes.
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Darren W. Woods: So whether we're successful or somebody else is successful, I feel like, you know, this is an area worth exploring, and I think, you know, our technology companies have got some great ideas, know how to scale things, know how to optimize not only materials but processes, and bringing all that together to see if we can make a step change here is the objective. It's too early to judge, you know, how successful we'll be, but I certainly feel like we've got the capabilities and should be working hard to try to make advances.
Speaker Change: Okay.
Speaker Change: Yeah.
Operator: Great; I am looking forward to your updates in the space there. Thank you. Thanks, everybody, for joining our call today and for the questions you asked. We'll post a transcript of the Q&A session on our investor website later this week or early next week. Have a nice weekend, everybody, and with that, we'll turn it back to the operator to conclude our call. This concludes today's call. We thank everyone again for their participation. Thank you for watching!
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