Q1 2024 Exxon Mobil Corp Earnings Call
Good morning, everyone and welcome to Exxon Mobil Corporation first quarter 'twenty 'twenty four earnings webcast.
Operator: Good morning everyone, and welcome to Exxon Mobil Corporation's first quarter 2024 earnings webcast. Today's call is being recorded. I'll now turn it over to Ms. Marina Matsulinskina. Please go ahead.
Today's call is being recorded.
Speaker Change: Now I'll turn it over to MS. Marina Mazzola Skeena. Please go ahead.
Speaker Change: Good morning, everyone.
Marina Matsulinskaya: Good morning, everyone. Welcome to Exxon Mobil's first quarter 2020 earnings call. We appreciate you joining the call today. I'm Marina Matsulinskaya, Director of Investor Relations. I'm joined by Darren Woods, Chairman and CEO, and Kathy Michaels, Senior Vice President and CFO. This presentation and pre-recorded remarks are available on the investor section of our website. These materials are meant to accompany the first quarter earnings news release, which is posted in the same location. Shortly, Darren will give you an overview of our performance. Then we'll take your questions.
Speaker Change: Welcome to Exxon Mobil's first quarter 'twenty 'twenty four earnings call.
Speaker Change: We appreciate you joining the call today.
Speaker Change: I'm Marina Muslim Sky director of Investor Relations.
Speaker Change: I'm joined by Darren Woods, Chairman, and CEO, and Kathy Michael Senior Vice President and CFO.
Speaker Change: This presentation and prerecorded remarks are available on the investors section of our website.
Speaker Change: They are meant to accompany the first quarter earnings news release, which is posted under the same location.
Speaker Change: Shortly there who will give you an overview of out performance then we will take your questions.
During today's presentation, we will make forward looking comments, which are subject to risks and uncertainties.
Marina Matsulinskaya: During today's presentation, we'll make forward-looking comments, which are subject to risks and uncertainty. Please read our cautionary statement on slide two. 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 provide supplemental information at the end of our earnings slides, which are posted on our website. And now, please turn to slide three for Darren's remarks.
Speaker Change: Please read our cautionary statement on slide two.
Speaker Change: You can find more information on the risks and uncertainties that apply to any forward looking statements you know S. SEC filings on our website.
Speaker Change: Note that we also provided supplemental information at the end of our earnings slides, which are posted on the website.
Speaker Change: And now please turn to slide three for Dan's remarks.
Speaker Change: For joining us.
Darren W. Woods: Our strategy and the way our people are executing created significant value in the first quarter. We delivered $8.2 billion of earnings and $14.7 billion of cash flow. Even more important,
Dan: Our strategy and the way our people are executing create significant value in the first quarter.
Dan: We delivered $8 $2 billion of earnings in $2014 7 billion of cash flow.
Dan: Even more important.
Darren W. Woods: We continue to strengthen the underlying earnings power of the company. An important driver of this improved earnings power is our ongoing focus on structural cost savings, which reached $10.1 billion in the quarter versus 2019, furthering our progress towards our goal of $15 billion by 2027. CapEx in the quarter was $5.8 billion as we continue to invest in advantage growth projects that will drive future earnings and cash flow. At the same time, we further strengthened our balance sheet, bringing our net debt to capital down to 3%. The lowest inflation rate in more than a decade.
Dan: We continue to strengthen the underlying earnings power of the company.
Dan: An important driver of this improved earnings power is our ongoing focus on structural cost savings.
Dan: Which reached $10.1 billion in the quarter versus 2019.
Dan: Furthering our progress towards our goal of $15 billion by 2027.
Dan: Capex in the quarter was $5 $8 billion as we continue to invest in advantaged growth projects that will drive future earnings and cash flow.
Dan: At the same time, we further strengthened our balance sheet.
Dan: Bringing our net debt to capital down to 3% the.
Dan: The lowest in more than a decade.
Dan: To reward our shareholders, we distributed $6 $8 billion in cash, including $3 $8 billion in dividends.
Darren W. Woods: To reward our shareholders, we distributed $6.8 billion in cash, including $3.8 billion in dividends, for all of 2023. Exxon Mobil was the third largest total dividend payer in the S&P 500. Only Microsoft and Apple paid more. We also repurchased about $3 billion in shares. Buybacks were temporarily paused until the shareholders of Pioneer voted on the combination of our companies, which they approved on February 7th. Post-close, we expect buybacks to ramp up to a pace of $20 billion a year.
Dan: For all of 2023.
Dan: Exxon Mobil was the third largest total dividend payor in the S&P 500.
Dan: Only Microsoft and Apple paid more.
Dan: We also repurchased about $3 billion of shares.
Dan: Buybacks were temporarily paused until the shareholders of pioneer voted on the combination of our companies, which they approved on February 7th.
Dan: Post close we expect buybacks to ramp up to a pace of $20 billion a year.
Dan: Our ongoing success this quarter reflects the intense focus we have had the past seven years are improving every aspect of our business.
Darren W. Woods: Our ongoing success this quarter reflects the intense focus we have had for the past seven years on improving every aspect of our business. We have developed a strategy tied more directly to our core competitive advantages. We reorganized the company to create a group of centralized organizations that fully utilize the significant synergies between our businesses.
Dan: We developed a strategy tied more directly to our core competitive advantages.
Dan: We reorganized the company to create a group of centralized organizations that fully utilized a significant synergies between our businesses.
Dan: We set and met ambitious plans to improve the fundamental earnings power of the company.
Darren W. Woods: We set and met ambitious plans to improve the fundamental earnings power of the company, and we established a track record of excellence in execution that is second to none. Our focus on shareholder value extends beyond the work we're doing to drive profitable growth. I'll give you three examples from the quarter that demonstrate how we're working to ensure that the value we've created is not diminished through third-party action. First, we filed for arbitration to confirm our rights and establish the value that the Chevron HES transaction places on the Guyana asset.
And we established a track record of excellence in execution.
Dan: That is second to none.
Dan: Our focus on shareholder value extends beyond the work, we're doing to drive profitable growth.
Dan: I'll give you three examples from the quarter that demonstrates how we're working to ensure that the value. We've created is not diminished to third party actions.
Dan: First we followed for arbitration to confirm our rights and establish the value of that to Chevron Hess transaction places on the Guyana asset.
Dan: This will allow us to evaluate options to maximize value for our shareholders.
Darren W. Woods: This will allow us to evaluate options to maximize value for our shareholders. Any responsible management team would do the same. Second, we're continuing our lawsuit against two special interest activists masquerading as investors. We're asking the court to require the SEC's existing rules to be consistently applied in order to restore the integrity of the system. We believe the system will only work properly if the rules are clearly understood and clearly applied to all parties.
Dan: Any responsible management team would do the same.
Dan: Second we're continuing our lawsuit against two special interest Actavis masquerading as investors.
Dan: We are asking the court to require the sec's existing rules be consistently applied in order to restore the integrity of the system.
Dan: We believe this system will only work properly if the rules are clearly understood.
Dan: And clearly applied to all parties.
Dan: And third we successfully defended the pioneer merger against a frivolous lawsuit designed to abuse legitimate legal process.
Darren W. Woods: And third, we successfully defended the Pioneer merger against a frivolous lawsuit designed to abuse a legitimate legal process. These actions are so common they are often referred to as a, quote, merger tax. In our case, however, the court ruled in our favor and sanctioned the lawyer for operating in bad faith.
Dan: These actions are so common they are often referred to as a quote merger tax.
Dan: In our case, however, the court ruled in our favor and sanction a lawyer for operating in bad faith.
Dan: While the results of these efforts may not show up in any discrete quarterly result, they underpin long term value and demonstrate our strong commitment to doing what's right.
Darren W. Woods: While the results of these efforts may not show up in any discrete quarterly result, they underpin long-term value and demonstrate our strong commitment to doing what's right. I'll leave you with a few key takeaways. Our work to improve the fundamental earnings power of Exxon Mobil is continuing apace. By executing with excellence on our strategy, we expect to grow our earnings potential by an additional $12 billion from 2023 to 2027 at constant prices and margins, a growth rate of more than 10% per year. A significant driver of this earnings growth will be our delivery of additional structural cost savings totaling $15 million by 2027.
I'll give you a few key takeaways.
Dan: Our work to improve the fundamental earnings power of Exxonmobil is continuing a pace.
Dan: By executing with excellence on our strategy.
Dan: We expect to grow our earnings potential by an additional $12 billion from 2023 to 2027 at constant prices and margins.
Dan: Growth rate of more than 10% per year.
Dan: A significant driver of this earnings growth will be our delivery of additional structural cost savings totaling $15 billion by 2027.
Dan: In the quarter, we continued to deliver unprecedented success in Guyana.
Darren W. Woods: In the quarter, we continue to deliver unprecedented success in Guyana, with Growing Production creating additional value for our shareholders and the Guyanese people. Our strategic projects, which are another important driver of our planned earnings improvement, helped deliver record first quarter refining throughput and strong performance chemicals volume growth, and there are more projects planned for startup in 2025. All of this is without the contribution of Pioneer, who is positioned to drive earnings, cash flow, and shareholder distributions even higher.
Dan: With growing production and creating additional value for our shareholders and the guy in these people.
Dan: Our strategic projects, which are another important driver of our planned earnings improvement.
Dan: Helped deliver a record first quarter refining throughput and strong performance chemicals volume growth.
Dan: And there are more projects planned for startup in 2025.
Dan: All of this is without the contribution of pioneer.
Dan: With pioneer who is positioned to drive earnings cash flow and shareholder distributions even higher.
Dan: We continue to work constructively with the FTC as they conduct a very thorough review and remain confident that no competition issues should handle the transaction.
Darren W. Woods: We continue to work constructively with the FTC as they conduct a very thorough review and remain confident that no competition issues should hinder the transaction. We've been working diligently on our integration plans, and we're ready to begin executing day one on the significant synergies this combination will create. Looking beyond our planned period into the future, we see attractive, large-scale opportunities to leverage our core capabilities and our existing businesses, as well as in brand new markets with brand new products.
Dan: We've been working diligently on our integration plans and we are ready to begin executing day one on the significant synergies this combination will create.
Dan: So it can beyond our planned period into the future, we see attractive large scale opportunities to leverage our core capabilities in our existing businesses.
Dan: And in brand new markets with brand new products.
Darren W. Woods: Something our competitors can't do. The success of this company and our unique set of competitive advantages is built on our greatest strength and most important advantage. Great people. They're the best team in the business, able to successfully overcome any challenge in their work at ExxonMobil. They're making a positive difference in the world, meeting people's essential needs for energy and products today and far into the future. I'm extremely proud to represent them and cannot thank them enough.
Dan: Something our competitors can't do.
Dan: The success of this company and our unique set of competitive advantages is built on our greatest strength and most important advantaged.
Dan: Great people.
Dan: They are the best team in the business able to successfully overcome any challenge.
Dan: Through their work at Exxonmobil.
Dan: They are making a positive difference in the world.
Dan: Meeting People's essential need for energy in products today and far into the future.
Speaker Change: I'm extremely proud to represent them and cannot thank them enough.
Speaker Change: Before we begin our Q&A session.
Darren W. Woods: Before we begin our Q&A session, I wanted to take this opportunity to introduce Jim Chapman, our new Vice President, Treasurer, and Investor Relations. Jim brings a breadth of capital market and functional experience to this role and is looking forward to working with all of you.
Speaker Change: Wanted to take this opportunity to introduce Jim Chapman, our new Vice President Treasurer and Investor Relations.
Neil A. Chapman: Jim brings a breadth of capital market and functional experience to this role. He is looking forward to working with all of you.
Neil A. Chapman: Thank you.
Marina Matsulinskaya: Thank you, Darren. Now, let's move to our Q&A session. As a courtesy to the others in the queue, we ask all our analysts to limit themselves to one question. However, please remain on the line in case we need any clarification. With that, operator, please open the line for our first question. Thank you.
Neil A. Chapman: Thank you Darren.
Neil A. Chapman: Now, let's move to our Q&A session.
Neil A. Chapman: Each of the others in the queue, we ask all our analysts to limit themselves to one question.
Neil A. Chapman: Please remain on the line in case, we need any clarification with.
Neil A. Chapman: Of that.
Speaker Change: Greater please open the lines our first question.
Speaker Change: Thank you the question and answer session will be conducted electronically if you'd like to ask a question. Please do so by pressing the star key followed by the digit one on your Touchtone telephone.
Operator: Thank you. The question and answer session will be conducted electronically. If you'd like to ask a question, then please do so by pressing the star key followed by the digit 1 on your touchtone telephone. The first question comes from Devin McDermott of Morgan Stanley.
Speaker Change: Okay.
Speaker Change: Our first question comes from Devin Mcdermott of Morgan Stanley.
Devin J. McDermott: Hey, good morning. Thanks for taking my question. And Jim, congrats on the new role if you're on the line. I want to start with Guyana and not on the arbitration process, although I appreciate some of the prepared remarks on that.
Devin J. McDermott: Hey, good morning, Thanks for taking my question and Jim Congrats on the new role if you're on the line.
Devin J. McDermott: I wanted to start on Guyana, and not on the arbitration process. Although I appreciate some of the posted prepared remarks on that but instead just on the operations and growth potential in another really strong operational quarter and then you have now also taken.
Darren W. Woods: But instead, just on the operations and growth potential, you have another really strong operational quarter. And then you've now also taken FID on Whiptail, which is new since the last call and gives us now a line of sight and all the plan development through the end of this 2027 guidance period. And if we step back, as you bring these new FPSOs online, you also have a very active exploration and appraisal program. So I was wondering if you could talk a little bit about that exploration and appraisal strategy here, what you're focused on over the next few years, the additional opportunities you see and how that influences your view of longer-term growth potential post-27 in Guyana.
Speaker Change: <unk>, which is new since the last call and it gives US now a line of sight and all of the planned development through the end of this 2027 guidance period, and if we step back as you bring these new episodes online you're also a very active exploration and appraisal program. So I was wondering if you talk a little bit about that exploration and appraisal strategy here, what you're focused on over the next few years.
Speaker Change: Additional opportunities you see and how that influences your view of the longer term growth potential post 'twenty seven in Guyana.
Speaker Change: Yeah sure good morning Devin.
Darren W. Woods: Yeah, sure, good morning Devin. I'll try to address the broader picture here for you. I'll start though with just following up on the comment you made around the operations and performance of the operations. I think you know, while we build these projects and bring them on in record time, under budget, the value that the organization then drives from them through operational optimization and looking into the bottleneck brings significant additional value.
Speaker Change: I'll try to address the broader picture here for Ya I'll start, though with just following up on a comment you made around the operations performance of the operations I think.
While we build these projects and bring them on in record time.
Speaker Change: Under budget.
Speaker Change: The value that the organization then drives from them through the operational optimization and looking to Debottleneck brings us.
Significant additional value I continue to see opportunities could you do that and to do that as we bring these.
Darren W. Woods: And I continue to see opportunities for you to do that, to do that as we bring these platforms on. So feel really good about the collective effort of the organization to drive value from the plans that we already have in place through 2027. As you say, we're doing more exploration. I think every time we drill,
Speaker Change: Platform is on so feel really good about the collective effort of the organization to drive value of the plans that we already have in place through 2027.
Speaker Change: As you say, we're doing more exploration I think every time we.
Speaker Change: We drill.
Darren W. Woods: We're collecting information that allows us to better characterize that whole block and focus in on potential new areas of opportunity, and that's basically the work that our teams are very engaged in, continuing to collect information, continuing to do seismic, continuing to drill, and through that work, updating our reservoir models, updating our understanding of that block, and then look for new opportunities. And that's going to be a continuous process. So I feel that's the work that we're doing, and as we develop that and learn more, we'll put together more longer-term plans.
Speaker Change: We're collecting information that allows us to better characterize.
Speaker Change: That whole.
Speaker Change: Block and focus in on potential new areas of opportunity and that's basically the work that our teams are very engaged and is continuing to collect information can continuing to do seismic continuing to drill and through that work.
Speaker Change: Update our reservoir models update our understanding of that block and then look for new opportunities and that's going to be a continuous progress so I feel.
Speaker Change: That's what the work that we're doing and as we develop that learn more we'll put together more.
Speaker Change: Longer longer term plans and.
Once we have confidence that.
Darren W. Woods: And once we have confidence that we've got a clear line of sight to how this plays itself out going forward in the future, we'll bring that to the community and share that with all of you. Kathy, anything to add? I just mentioned we had planned kind of four of what I'll call...
Speaker Change: We've got a clear line of sight to how this plays itself out going forward in the future will bring that to them.
Speaker Change: Two commuting and share that with all of you Kathy anything to add.
Kathryn A. Mikells: As mentioned, we had plan of kind of four of what I'll call Wildcat Wells. This year, we did have one discovery of new discoveries loosen.
Kathryn A. Mikells: I just mentioned we had planned kind of four of what I'll call wildcat wells this year. We did have one discovery, a new discovery, blue... We haven't quantified what that is yet, but as you mentioned Darren, most of the drilling that we're doing is more about supporting existing production and the next couple of projects that we have. Great, thanks. The next question is from Neil Mehta of Goldman Sachs. Good morning, Darren, Kathy, and team. Just
Kathryn A. Mikells: We haven't quantified what that is yet, but as you mentioned Darrin most of the drilling that we're doing is more about supporting existing production in the next couple of projects that we have coming online.
Speaker Change: Great. Thank you.
Speaker Change: The next question is from Neil Mehta of Goldman Sachs.
Neil Singhvi Mehta: Good morning, Darren Kathy team that just wanted to build on the comments on structural cost savings. So slide seven is helpful. It gives us a little bit more of a breakdown by each of the four segments of how youre thinking about cost savings to get to the $15 billion, but I was wondering if you could put a little bit more meat on.
And so you can give us examples potentially by segment of things that Youre doing so we can bring bring that story to life.
Neil Singhvi Mehta: The next question is from Neil Mehta of Goldman Sachs.
Darren W. Woods: Yeah, I'll talk maybe about the macro with respect to where the costs are coming from and how they break down. And then I'll let Kathy add any specifics that she wants to.
Speaker Change: Yeah, I'll I'll talk maybe on the macro with respect to where the costs are coming from and how they break down at all.
Speaker Change: Let cathy add any specifics that she wants to but I'd just say Neil if you look at what we've been doing here in the $10 billion.
Darren W. Woods: But I just say, Neil, if you look at what we've been doing here in the $10 billion of structural cost savings that we've achieved to date, It really has to do with the reorganizations that we started back in 2018 and the continued progress we make in centralizing activities, finding areas of synergies and focusing on how do we drive the most value out of those synergies, eliminating areas of duplication, taking expertise and experience that we've had in the past scattered, across the corporation in different silos, putting those into centralized organizations, getting the collective wisdom of that group and experience to focus on some of our toughest challenges. Part of that is making sure that we're the lowest cost supplier.
Speaker Change: Of structural cost savings that we've achieved to date.
Speaker Change: It really has to do with the reorganizations that we started back in 2018 and the continued progress we make and centralizing activities finding areas of <unk>.
Speaker Change: Synergies and focusing on how do we drive the most value out of those synergies eliminating areas of duplication of taking expertise and.
Speaker Change: And experience that we've had in the past scattered across.
Speaker Change: Across the corporation in different silos, putting those into a centralized organizations getting the collective wisdom of that group and experience to focus on some of our toughest challenges.
Speaker Change: Part of that is making sure that we are the lowest cost supplier and so reducing cost is a big challenge that youre organizations looking at in these experts are continuing to look for opportunities to optimize and to strike the balance of.
Darren W. Woods: And so reducing cost is a big challenge that the organization's looking at, and these experts are continuing to look for opportunities to optimize and to strike the balance of higher reliability and safer operations while continuing to find efficiencies. And that's exactly what they've been doing. I think it's important.
Speaker Change: Higher reliability.
Speaker Change: For operations, while continuing to find efficiencies and that's exactly what they've been doing I think it's important.
Speaker Change: To put the cost reductions and context that you know as we've made these reductions our reliability.
Darren W. Woods: To put the cost reductions in context, you know, as we've made these reductions, our reliability has improved. As we've made these reductions, our safety has improved. We have fewer injuries at our facilities all around the world.
Speaker Change: Has improved as we've made these reductions our safety has improved and we have less injuries.
Speaker Change: On our facilities all around the world.
Darren W. Woods: As we've made these reductions, our environmental performance has improved, and so it's a great example of how we can do both of these things with the right experience and capabilities. And so that's, and I think, you know, we're just at the early stages of the last of quantifying the value and developing a clear line of sight to how we can take advantage of the most recent centralized organizations. We'll be going through a planning process this year.
Speaker Change: As we've made these reductions our environmental performance has improved and so it's a great example of how.
Speaker Change: We can do both of these things with the right.
Speaker Change: Experience and capabilities and so that's and I think you know where we've just.
Speaker Change: Early stages of the last of quantifying the value and developing a clear line of sight to how we can take advantage of the most recent centralized organizations will be going through our planned process. This year.
Speaker Change: Now that we've got those organizations in place and working with the rest of the businesses and the other centralized organizations to figure out.
Darren W. Woods: Now that we've got those organizations in place and are working with the rest of the businesses and the other centralized organizations to figure out, you know, what more can we bring to the table, but I'm extremely optimistic that not only will we hit the $15 billion mark by 2027, but I suspect we'll find even more. And then with respect to, I'd say, a macro breakdown, I think the way to think about it is roughly split evenly today between our upstream and our product solutions business. Any specifics you want to add? I guess a little bit more color I'll add.
What more can we bring to the table, but I'm extremely optimistic there.
Speaker Change: Not only will we hit the.
Speaker Change: The $15 billion.
Speaker Change: Certainly by 2027, but I suspect, we'll find even more and then with respect to I'd say, a macro breakdown I think the way to think about it as roughly split evenly today between.
Speaker Change: Our upstream and our product solutions business.
Speaker Change: Any specifics you want to ask I guess, a little bit more color I'll add if I just talk about what went on in the period. We saw most of the year over year incremental savings coming through upstream and coming through energy products in upstream that was driven largely by operational efficiencies and.
Kathryn A. Mikells: If I just talk about what went on in the period, you know, we saw most of the year over year incremental savings coming through Upstream and coming through Energy Products. In Upstream, that was driven largely by operational efficiencies. And in the information that we would have pushed earlier this morning, in terms of the more thorough discussion of the investor relations slides that we published on our website, I talked about an example at Curl where we've basically automated all of our heavy, heavy trucking there and how that drives both, as Darren mentioned, an improvement overall from a safety perspective, but also operating efficiency in the logistics and just efficiency of that trucking operation.
Speaker Change: In the information that we would have pushed earlier. This morning in terms of the more thorough discussion of the Investor relations slides that we.
Speaker Change: Published on our website I talked about an example at Carl where we basically automd.
Speaker Change: Automated kind of all of our heavy heavy trucking there and how that drives both as Darren mentioned an improvement overall from a safety perspective, but also operating efficiency with logistics and just efficiency of that trucking operation.
Kathryn A. Mikells: If I then contrast that with Energy Products, we had a really heavy slate of maintenance this past quarter, and those turnarounds were actually done more efficiently than the same turnarounds the last time the company would have had to have executed them.
Speaker Change: Then contrast that with energy products, we had a really heavy slate of maintenance in this past quarter and those turnarounds were actually done more efficiently than the same turnarounds. The last time the company would have had to have executed them.
Kathryn A. Mikells: And so, you know, that drove structural cost savings for us. If I then try and look forward, you know, what do we anticipate between now and 2027? Part of what I mentioned is that some of these centralized organizations are really responsible for driving savings across the company. And so we have our Global Operations and Sustainability Organization. That organization is using statistical maintenance analysis across our entire footprint in order to drive better efficiency and effectiveness in our planned maintenance activities.
Speaker Change: So that drove structural cost savings, whereas if I try and look forward what do we anticipate between now and 2027 part.
Speaker Change: Part of what I mentioned is some of the centralized organizations are really responsible for driving savings across the company and so we have our global operations and sustainability organization that organization is using statistical maintenance analysis across our entire footprint in order to drive better efficiency.
Speaker Change: And effectiveness in our planned maintenance activity and again as Darren mentioned that should drive improvement in safety and importantly improvement in reliability as well.
Kathryn A. Mikells: And again, as Darren mentioned, that should drive improvement in safety and, importantly, improvement in reliability as well. We set up a Global Business Solutions Organization last year, and they're really responsible for standardizing some of these big end-to-end processes that we have, you know, procure to pay, record to report. Record to Report, as well as our planning activities. And as we standardize those, we can implement more technology in order to improve the automation of many of those activities. When we benchmark ourselves, we know that we're too heavy on manual activities relative to what we would consider best in class, and so that should drive incremental savings.
Speaker Change: Have stood up last year, our global business solutions organization, and they're really responsible for standardizing. Some of these big end to end processes that we have you know procure to pay record to report.
Speaker Change: Hi.
Speaker Change: Record to report as well as our planning activities.
Speaker Change: And as we standardize those we can implement.
Speaker Change: More technology in order to improve the automation of many of those activities. When we benchmark ourselves we know that we're too heavy on manual activities relative to what we would consider best in class and so that should drive incremental savings and then I'll just mentioned supply chain.
Kathryn A. Mikells: And then I'll just mention supply chain, again, another central organization we stood up last year, you know, really trying to now leverage the scale of the entire company. And so, you know, that's all about logistics, right? And how can we leverage our scale to drive more efficient logistics? How can we leverage our scale to drive more effective supply chains, including utilizing more effective procurement?
Speaker Change: Again, another central organization, we stood up last year really trying to now leverage the scale of the entire company and so that's all about logistics and how can we leverage our scale to drive more efficient logistics, how can we leverage our scale to drive more effective supply chain.
Speaker Change: <unk> utilizing more effective procurement and it's also about driving down kind of materials and broader inventory as we just get more efficient and so as we look forward, we have big savings expected kind of coming out of those areas.
Kathryn A. Mikells: And it's also about driving down the cost of materials and broader inventory as we just get more efficient. So as we look forward, we have big savings expected kind of coming out of those areas. Thank you. Big numbers. Thank you, Neil. The next question is from Roger Reed of Wells Fargo.
Speaker Change: Thank you big numbers.
Neil Singhvi Mehta: Q Neil.
Neil Singhvi Mehta: The next question is from Roger read of Wells Fargo.
Roger David Read: Yes, thanks, good morning.
Roger David Read: I'd like to come back to one of the things addressed in the opening comments on the pioneer transaction.
Roger David Read: Based on a Q2 close can you just give us a.
Roger David Read: What you're what final hurdles were actually waiting for here.
Roger David Read: The next question is from Roger Read of Wells Fargo. Yeah, thanks. Good morning. Let's go.
Roger David Read: I know, there's various rules with the FTC and so forth in terms of days just curious what's the well.
Darren W. Woods: Yeah, good morning, Roger. I'll give you just kind of a high level perspective. I'm not going to obviously comment on the specifics of the discussion, the work that we've been doing with the FTC other than to say it has been a constructive engagement. They have, we're working with them cooperatively, supplied an enormous amount of material documents, contracts, line items on production, and sales. And so I think a very thorough review of this transaction should be conducted.
Roger David Read: What gives you the confidence on the key to close here.
Speaker Change: Yes, good morning Roger.
Speaker Change: I'll give you just kind of a high level perspective, I'm not going to obviously comment on the specifics of the discussion and the work that we've been doing with the FTC other than to say it has been in constructive engagement. They are.
We're working with them cooperatively.
Speaker Change: Supplied an enormous somehow to material documents contracts.
Speaker Change: Line items on productions and sales and so I think a very thorough review of this transaction.
Darren W. Woods: As we've said all along, we're very confident that there are no antitrust issues. And I would just say we're very optimistic that we will continue. We'll meet the objective that we set very early to close in the second quarter.
Speaker Change: As we've said all along we're very confident that there are no antitrust issues and I would just say, we're very optimistic that we'll continue we'll meet the objective that we set very are early to close in the second quarter.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Go next to the next question is from Betty Jang with Barclays.
Betty Jang: The next question is from Betty Jang with Barclays.
Good morning. Thank you for taking my question maybe bring in.
Kathryn A. Mikells: Good morning. Thank you for taking my question. Maybe I could ask you earlier about the cost savings, putting that in the context of the $12 billion of earning growth potential you see between 2023 and 2027. Really appreciate the additional color given on the key drivers between upstream, downstream, and structural savings, but I want to ask about the cadence of that earning growth profile, whether that's expected to be rateable through the period, and what do you see as the upside and downside risks to that outlook?
Betty Jang: The question earlier about the cost savings.
Betty Jang: Bring that in the context of the $12 billion of or any growth potential you see between 2023 and 2027.
Betty Jang: Really appreciate the additional color given on the key drivers between upstream downstream Ms drug cost savings, but I wanted to ask about the cadence of that earning growth profile, whether that's expected to be ratable through the period and what do you see as the upside or downside risks to that outlook.
Speaker Change: Sure I'm happy to answer that question and so if you look at.
Kathryn A. Mikells: Sure, I'm happy to answer that question. And so, if you look at overall, we've said 15 billion in cost savings from 2019 to 2027, we've achieved, kind of, on a year-to-date basis, about 10, that means we have about five to go. You know, you wouldn't expect that cost savings or other drivers of improvement are necessarily rateable. I mean, we see different initiatives kind of come quarter to quarter. So I'd say I don't expect it to be rateable, but I expect us to make meaningful cost savings every year.
Speaker Change: Overall, we said $15 billion in cost savings from 2019 to 2027, we've achieved kind of on a year to date basis about time that means we have about five to go.
Speaker Change: You wouldn't expect that cost savings or other drivers of improvement are necessarily ratable I mean, we see different initiatives kind of quarter to quarter. So I would say I don't expect it to be to be ratable, but I expect us to put up meaningful cost savings every year. If you then look at some of the <unk>.
Kathryn A. Mikells: If you then look at some of the other drivers of that earnings growth, I think it's really important, as you think about the EMPS business, that that growth really goes hand in hand with the execution of strategic projects, which also drives our high-value product growth. You know, we expect to about double the volume of high-value products from 19 to 2027. And in 2027, we expect those products to comprise about 40% of our total earnings at a kind of constant margin. This year, we're relatively light on strategic projects in EMPS.
Speaker Change: Other drivers of that earnings growth I think it's really important as you think about the NPS business.
Speaker Change: That that growth really goes hand in hand with execution of strategic projects, which also drives our high value products growth, we expect to about double the volume of high value products from 19% to 2027% in 2027, and we expect those products will comprise about 40.
Speaker Change: <unk> of our total earnings at a kind of constant margin. This year were relatively light on strategic projects in NPS next year in 2025, we will be really heavy and so we'll have the stress Kona renewable diesel coming online we'll be executing.
Kathryn A. Mikells: Next year, in 2025, we will be really heavy. And so we'll have the Strathcona Renewable Diesel coming online, we'll be executing the Resid Upgrade Project in Singapore, and we'll have China One coming on, you know, amongst other things, including increasing our capacity for advanced recycling at certain locations. So we have a lot of activity that will start to bring incremental earnings power in 2025 and beyond. And then I'd say if you look at what's happening in the upstream business, we're continuing to get growth, obviously, out of Guyana and the Permian.
The AR reserve upgrade project in Singapore, and we will have China, one coming on.
Speaker Change: Amongst other things, including increasing our capacity for advanced recycling at certain locations. So we have a lot of activity that will then start to bring incremental earnings power in 2025 and beyond and then I'd say, if you look over at what's happening in the upstream business.
Speaker Change: Continuing to get growth, obviously out of Guyana in the Permian that growth in advantaged assets is a real key driver in terms of overall growth in upstream one of the things you would have seen in our presentation is that on a year to date basis now 44% of our production volumes in upstream are from these.
Kathryn A. Mikells: You know, growth and advantaged assets are a real key driver in terms of overall growth. And upstream, one of the things you would have seen in our presentation is that on a year-to-date basis, now 44% of our production volumes in the upstream are from these advantaged assets, which are a key driver of earnings growth. And then I'd say the other thing to think about in the upstream is that we will start to get production growth.
Speaker Change: Managed assets, which are a key driver of earnings growth and then I'd say the other thing to think about an upstream is we will start to get production growth. So actual volume growth improvement, but that tends to come more strongly in the beyond 2025 period. So hopefully that gives you a good feel for some of the big dry.
Kathryn A. Mikells: So actual volume growth improvement, but that tends to come more strongly in the beyond 2025 period. So hopefully, that gives you a good feel for some of the big drivers and when we would be anticipating them starting to get reflected in our underlying earnings.
Speaker Change: Rivers, and when we would be anticipating them starting to get reflected in our underlying earnings yes, I'll just add to kathy's comments, if you look at cost reductions.
Darren W. Woods: Yeah, I'll just add to Kathy's comments. If you look at cost reduction, which Kathy talked about the value of those contributing to our earnings growth, I think there's not a lot of downside there.
Speaker Change: Which cathy talked about the value of those contributing to our earnings growth.
Speaker Change: Theres not a lot of downside there I think with the structural changes that we've made and have yet to realize the benefits. We've got a pretty good track record now here over the last seven years of actually seeing those.
Darren W. Woods: I think with the structural changes that we've made and have yet to realize the benefits, we've got a pretty good track record now here over the last seven years of actually seeing those what were initially concepts translate into bottom line savings and so we've got a very high degree of confidence and that frankly our challenge in reducing cost or you know driving improvements in the business is not a lack of ideas or opportunities it's it's how we prioritize and execute the highest value of those so we've got a great opportunity set for improving our own business and it's just a question of you know pacing that in a way that maintains the other objectives that we have in the business in terms of delivery day in and day out. On the revenue side of the equation, to Kathy's point, the strategic projects are kind of at the heart, of growing the revenue and the value side on the top line.
Speaker Change: We're initially concepts.
Late into bottom line savings and so we've got a very high degree of confidence in.
Speaker Change: Frankly, our challenge in reducing cost are driving improvements in the business is not a lack of ideas or opportunities. It's how we prioritize and execute execute the highest value of those so we've got our <unk>.
Great opportunity set for improving our own business and it's just a question of pace.
Speaker Change: Pacing that in a way that maintains the other objectives that we have in the business in terms of delivery.
Speaker Change: Day in and day out.
Speaker Change: On the revenue side of equation to Kathy has pointed to the strategic projects are kind of at the heart.
Speaker Change: Growing the revenue and the value side.
Speaker Change: Top line.
Darren W. Woods: And I would say, you know, we recognized going back in time that critical to doing that was advantage projects and then an organization that had the capability to effectively deliver those advantage projects. And then, finally, an organization that was capable of starting those up seamlessly and getting them online quickly. And I think if you look at the big projects that we've brought on to date, all this portfolio of projects we developed back in 2018, we're continuing to execute that.
Speaker Change: And I would say, we recognized going back in time that critical to doing that was advantaged projects.
Speaker Change: And then an organization that had the capability to effectively deliver those advantaged projects.
Speaker Change: And then finally an organization that.
Speaker Change: It's capable of.
Speaker Change: Sure.
Speaker Change: Starting those up seamlessly and getting them online quickly and I think if you look at the big projects that we brought on to date all of this this portfolio of projects. We developed back in 2018, we're continuing to execute at the ones. We brought online we've been very pleased with one with the project execution the technologies organizations contribute contribution to that and then.
Darren W. Woods: The ones we brought online, we've been very pleased with. One with the project execution, the technologies organizations' contribution to that, and then how we've started up and run those. And so I think that gives me a lot of confidence going forward that the model that we put together, the focus that we've put in each of our businesses to contribute their area of expertise to overall corporate success is demonstrating a lot of success, and so I've got a lot of confidence going forward that we'll deliver that, continue to deliver that portfolio that's demonstrated its value to what we've done to date, and so I think I feel pretty confident about delivering, through 2027 and frankly, beyond.
Speaker Change: How we've started up and run those and so I think that gives me a lot of confidence going forward that.
Speaker Change: The model that we've put together the focus that we've put in each of our businesses to contribute their area of expertise to overall corporate success is demonstrating.
Speaker Change: A lot of success and so I've got a lot of confidence going forward that will deliver that continue to deliver that portfolio.
Speaker Change: <unk> demonstrated its value for to what we've done to date.
Speaker Change: I think feel pretty confident about delivering.
Speaker Change: Through 2027, and frankly beyond.
Speaker Change: Great. Thank you, that's a really robust pipeline of projects to watch.
Operator: Great, thank you. That's a really robust pipeline of projects to watch. Thank you for all the detail, and sir. Sure. The question is from Bob Brackett of Bernstein Research. Good morning.
Speaker Change: Thank you for the detailed answer.
Speaker Change: Sure.
Speaker Change: The next question is from Bob Brackett of Bernstein Research.
Robert Alan Brackett: Good morning, I had a question around <unk>.
Robert Alan Brackett: This question is from Bob Brackett of Good morning. I had a question about the use of the phrase.
Robert Alan Brackett: The use of the phrase carbon materials.
Robert Alan Brackett: Seems fairly new deals fairly new deals again pursuing some things in the battery chain could you give us a little more flavor on what you're contemplating there.
Darren W. Woods: Sure. Good morning, Bob.
Darren W. Woods: It's good to hear from you. I think, you know, one of the points we're trying to make is that this company has a very broad suite of capabilities that's anchored, frankly, in technology and a technology that's focused on transforming hydrogen and carbon molecules. And a lot of what we've done to date and the value that the company has generated over the last many decades has been a function of energy and the consumption of those molecules to meet the growing demands for energy.
Speaker Change: Sure. Good morning, Bob Good to hear from you I think one of the points, we're trying to make.
Speaker Change: As.
Speaker Change: This this company has a very broad suite of capabilities, that's anchored frankly in technology and the technology that is focused on transforming hydrogen and carbon molecules and a lot of what we've done to date and the value that's companies generated over.
Speaker Change: The last many decades has been a function of energy and the consumption of those molecules to meet the growing demand for energy, but we also have a very broad portfolio of other products that we make through that molecule transformation expertise.
Darren W. Woods: But we also have a very broad portfolio of other products that we make through that molecule transformation expertise in the chemical business, as well as lubricants and fluids and things that we do out of our refineries. So there's a much broader set of capabilities and products than I think, frankly, people give us credit for. I would just point to Proxima as a great example of some time back, we recognized that the demand for gasoline would attrit, and particularly in developed countries, and the question we challenged our technology organization with was, how can we use these molecules to make other products that are required to meet other needs and society.
Speaker Change: And to the chemical business.
Speaker Change: As well as lubricants and fluids and things that we do have a refinery. So there's a much broader set of capabilities and products and I think frankly, what people give us credit for that.
Speaker Change: I would just point to approximately as a great example of some time back we recognize that the demand for gasoline would would attrit in particularly in developed countries.
Speaker Change: Countries and the question, we challenged our technology organization with.
Speaker Change: Was how can we use these molecules to make other products that are required to meet other needs.
Speaker Change: In Society.
Darren W. Woods: And Proxima, I think while it's early in its development, it's going to demonstrate that we can take that expertise, apply it to a feedstock that will become more and more advantageous with time and make other products that are needed in the world. And that will bring a lot of significant benefits in those applications. The Carbon Ventures and Carbon Materials is a very similar initiative. It's just a little earlier in its construction.
Speaker Change: <unk> I think while it's early in its development is going to be to demonstrate that we can take that expertise and apply it to a feedstock that will.
Speaker Change: Become more and more advantage with time and make other products that are needed to for the world and that will bring a lot of significant benefits in those applications. The carbon ventures and the carbon materials is very similar initiative is just a little earlier and.
Speaker Change: And its construct which you'll look at the world's efforts to decarbonize its clear to us that carbon over time will become.
Darren W. Woods: If you look at the world's efforts to decarbonize, it's clear to us that carbon, over time, will become more and more of an advantageous feedstock. And so the challenge we've given our organization is, What can we do with carbon molecules? How can we meet growing needs and large markets? And they have to be large markets because if we're going to do something that moves the needle for the corporation, we have to do it at scale. And so what we're looking at there is how we can use the capabilities we have in molecule transformation applied to carbon to meet these batteries are just one example. Carbon fibers are another.
Speaker Change: More and more advantaged feedstock and so the challenge we have given our organization is.
What can we do with carbon molecules, how can we meet.
Speaker Change: <unk>.
Speaker Change: Growing needs.
Speaker Change: In large markets and they have to be large market because we're going to do if we're going to do something that moves the needle for the corporation, we have to do it at scale and so while we're looking at there is how do we use the capabilities. We have in molecule transformation applied to carbon to meet needs batteries are just one example, carbon fibers or another there is a.
Darren W. Woods: There's a number of things that today we have applications for, but there's either a performance dimension that needs to be improved or a cost dimension that needs to be improved. And we think we have a line of sight for how we can do that, how we can improve the performance aspects using our technological capabilities and, at the same time, find ways to reduce the cost of production. So it's early days, I would say.
Speaker Change: Number of things today.
Speaker Change: We have there are applications for but theres either a performance.
Speaker Change: Dimension that needs to be improved or a cost dimension that needs to be improved and we think we have a line of sight for how we can do that how we can improve the performance aspects using our.
Speaker Change: Technology capabilities and at the same time find ways to reduce the cost of production. So it's early days.
Speaker Change: I would say.
Darren W. Woods: We put it out there in this call to make sure people are beginning to think more broadly about what this company is capable of and how our future could evolve in a very different direction than where we've come from. And the beauty of how we're positioning ourselves is that we have, and we're using the same core capabilities and advantages. And so it gives us a lot of optionality and flexibility to the extent that these other new markets work out.
Speaker Change: Put it out there in this call to make sure people are beginning to think more broadly about what this company is capable of and how our future could evolve.
Speaker Change: Very different direction, and where we've come from and the beauty of how we're positioning ourselves as.
Speaker Change: We have we're using the same core capabilities and advantages and so it gives us a lot of optionality and flexibility to the extent. These other new markets work out and demand picks up and we see great opportunities, we can shift more resources into that space. If it takes us longer there or say the transit.
Darren W. Woods: And when demand picks up, and we see great opportunities, we can shift more resources into that space. If it takes us longer there, or the transition takes longer, we've got our base business, and we can continue to invest in products that the world needs today. And so we've got the ability to adjust, depending on how things evolve, and depending on what direction the world goes. So I think it's just a great example of, again, anchoring back on some very core capabilities that have very broad adoption.
Speaker Change: <unk> takes longer we've got our base business and continued to invest in products that the world needs today, and so we've got the ability to adjust depending on how things evolve and depending on.
Speaker Change: What direction the World goes so I think it's just a great example of.
Speaker Change: Anchoring back on some very core capabilities that have very broad application and we're excited by what we see is some potentially very high value new markets with some very high value unique.
Darren W. Woods: And we're excited by what we see as some potentially very high-value new markets with some very high-value unique products that we can supply to meet those. Very clear. The question would be the materiality threshold. Should we think about runways to billion-dollar businesses or $10 billion businesses? Or is that too simplistic? No, I think it's a good measure to think about. He's got to be over a billion if it's going to be material. And so we're looking at very large markets, into the billions.
Speaker Change: Products that we can supply to meet to meet those needs.
Speaker Change: Very clear question would be the materiality threshold should we think about runways 2 billion dollar businesses or $10 billion businesses are or is that too simplistic.
Speaker Change: No I think it's a good measure to think about you just got to be over $1 billion, if it's going to be material and so we're looking at.
Speaker Change: Very large markets in the billions.
Speaker Change: Great very clear thank you.
Jason Daniel Gabelman: The next question is from Jason Gabelman of TD Cowen.
Speaker Change: The next question is from Jason <unk> of TD Cowen.
Jason: Hey, good morning.
Kathryn A. Mikells: Hey morning. I had a question about the use of cash and the balance sheet. I think this quarter we're seeing Exxon's net debt to cap move down. Some of your peers are starting to move up as commodities come off a bit. And that's seemingly a bit of a differentiator between you and peers. So I thought it'd just be a good opportunity if you could remind us how you think about utilizing that balance sheet capacity moving forward, given you're still operating from a position of strength, whether it be using it for future M&A, increasing buybacks or other opportunities. Thanks.
Jason: I had a question about uses of cash in the balance sheet.
Jason: I think this quarter we are seeing.
Jason: Exxon's net debt to cap moved down some of your peers are starting to move up.
As commodities come off a bit and that's.
Jason: Seemingly a bit of a differentiator between you and peers. So I thought I'd just be a good opportunity if you could remind us how you think about.
Jason: Utilizing that balance sheet capacity moving forward, given you're still operating from a position of strength, whether it be deploying for future M&A, increasing buybacks or other opportunities. Thanks.
Kathryn A. Mikells: I'm happy to talk about that. As you correctly referenced, our net debt-to-cap has come down. It's about 3% now. Our approach in terms of capital allocation has not changed. It continues to be very consistent. First and foremost, we want to make sure that we're making investments in this business that ultimately drive long-term earnings and cash flow growth. That creates a virtual cycle of us being then able to enhance shareholder returns and return cash to shareholders via dividends, as well as a more consistent share of purchase program. So that's job number one.
Speaker Change: So I'm happy to talk about that as you correctly reference our net debt to cap has come down it's about 3% now.
Speaker Change: Our approach in terms of capital allocation has not changed it continues to be very consistent first and foremost we want to make sure that we're making investments in this business that ultimately drive the long term earnings and cash flow growth that creates a virtual cycle of us being able to enhance shareholder.
Speaker Change: Turns and return cash to shareholders via dividends as well as a more consistent share repurchase program. So that's job number one.
Kathryn A. Mikells: I would mention that CapEx is not ratable. I've seen many people comment on the light CapEx number that we had in the first quarter. We are very much on our plan. Many times, our CapEx is influenced by milestone payments, just as an example, and so it is not ratable. Over the course of the year, we have guided to $23 to $25 billion in CapEx, and that guidance remains. We're very much on plan.
Speaker Change: I'd mentioned that Capex is not red ball.
Speaker Change: I've seen many people comment on a light capex numbers that we had in the first quarter.
Speaker Change: We are very much on our plan many times our capex is influenced by milestone payments just as an example, and so it is not ratable over the course of the year, we have guided to 23% to $25 billion in Capex.
Speaker Change: And that guidance remains we're very much on plan when we think about investing in our business. Obviously, we're very focused on the advantaged slate of investments that we have organically in front of us, but obviously M&A is another type of investment that we make.
Kathryn A. Mikells: When we think about investing in our business, obviously, we're very focused on the advantageous slate of investments that we have organically in front of us, but obviously, M&A is another type of investment that we make. Again, where we see we can make one in one equal more than two, largely by adding synergies to some type of acquisition, and obviously, getting ready to close the Pioneer acquisition would be a terrific example of that. We know a strong balance sheet is a competitive advantage, and so we have continued to really maintain and strengthen that balance sheet. This quarter, we paid down a little over a billion dollars in debt.
Speaker Change: Where we see we can make one and one equal more than Q largely by adding synergies to some type of acquisition and then obviously getting ready to close the pioneer acquisition would be a terrific example of that.
Speaker Change: We know a strong balance sheet is a competitive advantage and so we have continued to really maintain and strengthen that balance sheet. This quarter, we paid down a little over 1 billion in debt Thats part of the reason why you see our net debt to cap ratio coming down.
Kathryn A. Mikells: That's part of the reason why you see our net debt to cap ratio coming down. That gives us a lot of flexibility to ensure that we're consistently investing in the business through the cycle, and it just gives us optionality, understanding that we operate in a very cyclical business. Clearly, we're looking to reward our shareholders, and I think you see that in our very consistent approach to the dividend. It needs to be sustainable, and it needs to be competitive.
That gives us a lot of flexibility to ensure that we're consistently investing in the business through the cycle and it just gives us optionality understanding that we operate in a very cyclical business and then <unk>.
Speaker Change: Clearly, we're looking to reward our shareholders I think you see that with our very consistent approach to the dividend it needs to be sustainable it needs to be competitive it needs to be growing we obviously raised the quarterly dividend in the fourth quarter Bye Bye for Samson continue to review that overtime I would mentioned <unk>.
Kathryn A. Mikells: It needs to be growing. We obviously raised the quarterly dividend in the fourth quarter by $0.04, and we will continue to review that over time. I would mention one thing with regard to share repurchases. We did have the Pioneer vote this quarter, and so we were out of the market for a period of time. We did about $3 billion in share repurchases. A run rate to hit the 17.5, which is what we've guided to this year, would be more like $4.4 billion.
Speaker Change: The thing with regard to share repurchases, we did have the pioneer vote. This quarter and so we were out of the market for a period of time, we did about $3 billion in share repurchases.
Speaker Change: Our run rate to hit the 2017, and a half which is what we've kind of guided to this year would be more like $4 4 billion right. So our program will naturally dial up our execution.
Kathryn A. Mikells: Our program will naturally dial up our execution so that we're on track to complete the 17 and a half billion share of purchase program on a standalone basis. And then I would remind you that we said we anticipate taking that program pace up to 20 billion annually after we close the Pioneer acquisition. So we feel really good about where our balance sheet is at and our consistent capital allocation strategy, and that that will drive long-term returns for shareholders. And I would just say
So that we're on track to complete the $17 5 billion share repurchase program.
Speaker Change: Standalone basis, and then I would remind you that we said we anticipate taking that program pace up to $20 billion annually. After we closed the pioneer acquisition. So we feel really good about where our balance sheet is that and our consistent capital allocation strategy and that that will drive <unk>.
Speaker Change: Long term returns for shareholders and I would just add to kathy's point that and just remind everybody. If you look at.
Darren W. Woods: And I would just add to Kathy's points and just remind everybody, if you look at where we stand today, and JC made the point that we're deviating from our peers in terms of continuing to generate cash and drive down net debt. That's anchored in the strategy that we put in place in 2018, which is to find advantage projects and invest in those to grow the earnings power of the business. And that's now beginning to manifest itself.
Speaker Change: Where we stand today and Jason you made the point that we are deviating from our peers in terms of continuing to generate cash and drive down.
Speaker Change: Net debt.
Speaker Change: That's anchored in the strategy that we've put in place in 2018, which is find advantaged projects and invest in those to grow the earnings power of the business and that's now beginning to manifest itself and so I think you got to have a long term view on this having a robust balance sheet to make sure that we're positioned window when opportunities come along and we see.
Darren W. Woods: And so I think you have to have a long-term view on this, having a robust balance sheet to make sure that we're positioned when opportunities come along and we see clear advantages to invest, that we have the capability to do that.
Speaker Change: See clear advantages to invest that we have the capability to do that.
Thanks for the question Yeah got it thanks.
Operator: Thanks for the question. Yep, I got it. Thanks.
Speaker Change: The next question is from Ryan Todd of Piper Sandler.
Ryan M. Todd: The next question is from Ryan Todd of Piper Sandler.
Speaker Change: Thanks.
Ryan M. Todd: Thanks. Maybe one on chemicals. Your chemicals businesses, the two segments continue to show a kind of modestly better than expected recovery along the bottom or off the bottom here. Is this more of a feedstock tailwind that we're seeing in the near term? Are you seeing any improvements that are noticeable in terms of demand and overall global supply demand? And I guess in the meantime, while things are weak, what are you managing to do with your product mixer operations to drive relative performance there in chemicals?
Ryan M. Todd: And maybe one on chemicals.
Ryan M. Todd: Chemicals businesses.
Ryan M. Todd: Two segments continue to show.
Ryan M. Todd: What kind of modestly better than expected recovery.
Ryan M. Todd: Along the bottom are off the bottom here.
Ryan M. Todd: Is this more of a feedstock tailwind that we're seeing in the.
Ryan M. Todd: In the near term or are you seeing any improvement that are noticeable in terms of demand and overall global supply demand.
Ryan M. Todd: And I guess in the meantime, while things are weak what are you managing to do with your product mix your operations to drive relative performance there in chemicals.
Speaker Change: Yes, sure Ryan I'll take that.
Darren W. Woods: Yeah, sure, Ryan, I'll take that. The first thing I would say is, if you look at the chemical business and the kind of margin indicators that we use to judge the health of the chemical business, we are at a historic low in terms of cycle numbers. And so I think, you know, it's a very challenging chemical market today, as I know many of you know. But even in that very challenging market, we are continuing to deliver very good results.
Speaker Change: Yes.
First thing I would say is.
Speaker Change: If you look at the chemical business and kind of the margin indicators that we use to judge the health of the chemical business. As we are at a historic kind of bottom of cycle number and so I think it's a very challenging.
Speaker Change: Chemical markets today as I know many of you know.
Speaker Change: But even in that very challenged market.
Our continuing to deliver very good results.
Darren W. Woods: And I think if you compare similar, you know, markets that were even close to these bottom of the cycle conditions, we were in a very different place in the past with respect to earnings than we find ourselves today, where we delivered close to $800 million of earnings this quarter, despite the very difficult market conditions. Those market conditions are driven more by supply than demand, but we're continuing to see, you know, growth in demand, not as high as we've seen historically, but continued good growth. And I think, frankly, in the first quarter, we saw some of that pick up.
Speaker Change: And I think if you compare similar markets that are even close to these bottom of cycle conditions. We are in a very different place in the past with respect to earnings and we find ourselves today, where we delivered close to $800 million of earnings this quarter. Despite the very difficult market conditions those market conditions are driven more by.
Speaker Change: Why then demand frankly, we're continuing to see.
Speaker Change: Growth in demand not as high as we've seen historically, but continued good growth in frankly in the first quarter saw some of that pick up the challenge has been the supply that's come on.
Darren W. Woods: The challenge has been the supply that's come on to meet that growth. And so that is depressing overall industry margins. As you know, the investments that we make and the way we run our business is to make sure that we're advantaged versus, you know, the average chemical player. And so even in these markets that are set by, other capacity, the work that we've done to position ourselves, and more advantaged in a more advantaged position in competition continues to deliver a value you can see that with the growth not only in the high value products which are coming on with our with our projects and frankly that growth is in line with what we expected so we're continuing to see the demand for the high value products that we've invested in but we're also seeing in our base volume value in those with respect to how we positioned ourselves and so it's and and we're seeing advantages in the structural structural cost reduction so I would tell you every part of what we've been doing to improve the earnings power of the organization is manifesting itself in our chemical business and showing up and differentiating earnings and feed to your point feed advantages play an important role in that so that's yet again another advantage that we have versus the typical industry player but that is reflective of the broader strategy that we have So I think we feel good about where we're at in a very difficult market.
Speaker Change: To meet that growth and so that is depressing overall industry margins as you know the investments that we make and the way we run our business is to make sure that we're advantaged versus.
Speaker Change: The average chemical player and so even in these markets that are set by.
Speaker Change: Other capacity the work that we've done to position ourselves.
Speaker Change: More advantaged more advantaged positions and competition continues to deliver value and you can see that with the growth not only in the high value products, which are coming on with our with our projects and frankly that growth is in line with what we had expected. So we're continuing to see the demand for the high value products that we've invested in.
But we're also seeing it in our base volume.
Speaker Change: Value in those with respect to.
Speaker Change: How we positioned ourselves and so it's and we're seeing advantages in the structural structural cost reduction. So I would tell you every part of what we've been doing to improve the earnings power of the organization.
Speaker Change: Is manifesting itself in our chemical business.
Speaker Change: And showing up in differentiating earnings.
Speaker Change: To your point feed advantages play an important role in that so thats yet again, another advantage that we have versus.
Speaker Change: Typical industry player, but that is reflective of the broader strategy that we have.
Speaker Change: So I think we feel good about where we're at in a very difficult market.
Speaker Change: Our view is that market those market conditions are going to be with us for a little while here going forward, but we also feel like we're well positioned to be successful there and has that shakes out.
And some of the less.
Darren W. Woods: Our view is that those market conditions, you know, are going to be with us for a little while here going forward, but we also feel like we're well positioned to be successful there. And as that shakes out, and some of the less able competitors have, you know, no success in this space, we'll, we'll see growth continue to move, and eventually, we'll see margins pick back up, and we'll be very well positioned.
Speaker Change: Able competitors.
Speaker Change: Yep.
Speaker Change: No success in this space will we will see growth continue to move and eventually we will see margins pick back up it will be very well positioned.
Speaker Change: And just the other thing I'd add to that is I think if you look at our chemical businesses performance and compare that to peers and other players you see the differentiation and the excellent execution really coming through.
Kathryn A. Mikells: And just the other thing I'd add to that is I think if you look at our chemical businesses performance and compare that to peers and other players you see the differentiation and the excellent execution really coming through. You know we're in clearly bottom-of-cycle conditions right now and yet we're still generating pretty good earnings and cash flow in our chemical business and then I would just mention that as Darren noted you know our footprint tends to be North American weighted and so if you just look at our PE and PP footprint we're heavily North American weighted and relatively lightly weighted to Asia compared to the rest of industry and Asia is especially at very very bottom-of-cycle conditions.
Speaker Change: Clearly bottom of cycle conditions, right now and yet we're still generating pretty good earnings and cash flow and our chemical business and then I would just mentioned that as Darin noted our footprint tends to be north American weighted and so if you just look at our PE and pp footprint, we're heavily north American way.
Speaker Change: And relatively lightly weighted to Asia compared to rest of industry in Asia is especially at very very bottom of cycle conditions.
Speaker Change: Okay. Thanks, both of you.
Speaker Change: The next question is from Stephen Richardson of Evercore ISI.
Operator: Great. Thanks, both of you.
Stephen I. Richardson: Good morning.
Stephen I. Richardson: Darren I was wonder if you could talk a little bit about the baytown projects.
Stephen I. Richardson: The next question is from Stephen Richardson of EvoCorp ISI.
Stephen I. Richardson: And maybe just if you could give us a little bit more on what your view of adequate incentives there would be.
Darren W. Woods: Good morning, Darren. I was wondering if you could talk a little bit about the Baytown project. And maybe just if you could give us a little bit more on what your view of adequate incentives would be. If the PTC on green hydrogen was extended to blue, would that be sufficient to sanction the project? And then, you know, sorry, just as a follow-on to that, you know, as you talk about a level playing field across technology neutrality, is your view that, you know, a new, you know, gray hydrogen ATR should get some sort of incentive? Maybe you could just give us the context of how you're thinking about that project and what it needs to move forward. Thank you. Yeah, sure. I'm happy to do that, Steve.
Stephen I. Richardson: If the PTC on Green hydrogen was extended to blue would that be sufficient to sanction the project.
Stephen I. Richardson: And then.
Stephen I. Richardson: Alright.
Speaker Change: Follow on to that as.
Speaker Change: As you talk about a level playing field.
Speaker Change: Across technology neutrality.
Speaker Change: Is your view that a new.
Speaker Change: Great hydrogen ATR should get some sort of incentives maybe you could just give us some context of how youre thinking about that project and what it needs to move forward. Thank you.
Speaker Change: Yes, sure happy to do that Steve.
Speaker Change: What I would say is.
Speaker Change: Hey.
Speaker Change: That work, we're doing to develop it is I think demonstrating the difficulty of starting brand new businesses and value change, where none exists and that were kind of.
Darren W. Woods: What I would say is, you know, the work we're doing to develop it is, I think, demonstrating the difficulty of starting brand new businesses and value chains where none exist, in that we're kind of simultaneously trying to build demand, trying to build supply, and then, in the early days of this market, establishing financial incentives to do that. And so three core key variables to a successful business are all kind of basically being generated for the first time in this space along this value chain.
Speaker Change: Simultaneously trying to build demand.
Trying to build.
Speaker Change: Supply and then trying to in the early days of this market establish.
Speaker Change: Financial incentives to do that and so three core <unk>.
Speaker Change: The variables to a successful business all kind of basically being generated for the first time in this space along this value chain. So I just put that out there is it's a challenging construct but frankly, one that plays to our strengths and the ability to look along the entire value chain and we are uniquely situated.
Darren W. Woods: So I just put that out there: it's a challenging construct, but frankly, one that plays to our strengths and the ability to look along the entire value chain. And we are uniquely situated to manage each piece of that. There are very few, if any, companies out there that have a portfolio and capabilities that extend end-to-end along this value chain. So I feel good about what we're doing there and the work that we've put in place. And, frankly, it looks to me like a very viable project.
Speaker Change: Weighted to manage each piece of that there are very few if any companies out there that have a portfolio.
And capabilities that extend into end along this value chain.
Speaker Change: So I feel good about what we're doing there and the work that we've put in place and frankly, it looks to me like a very viable project, we are continuing to progress there.
Darren W. Woods: We are continuing to progress this, but it will require that the necessary incentives are in place. And with respect to what's required in terms of incentives, I would say the IRA and the incentives that were developed as part of the IRA are enough to do that. The challenge is taking the IRA, which I believe rightly focused on carbon intensity and incentivizing carbon intensity, translating that legislation into regulation. And if the regulation reflects the intent of that legislation and writes the rules focused on carbon intensity, that will be enough to justify and incentivize and give us a return on this investment.
Speaker Change: But it will require that the necessary incentives are in place.
Speaker Change: With respect to what's required with with incentives I would say the I R E and the incentives that were developed as part of the IRI are enough to do that.
Speaker Change: The challenge is taking the <unk>, which I believe rightly focused on carbon intensity and incentivizing carbon intensity transfer.
Speaker Change: Translating that legislation into regulation.
Speaker Change: And if the regulation.
Reflects the intent of that legislation.
Speaker Change: And write the rules.
Speaker Change: <unk> focus on carbon intensity that will be enough to justify and to incentivize and give us a return on this investment.
Darren W. Woods: That's it. We don't focus so much on the green, the blue, and you know, color schemes. We instead focus on how we can meet what is ultimately the objective here, which is to reduce the CO2 associated with the production of these products. And we think all the work we've been doing in our facilities and our feedstock, and decarbonizing those contributes to that, and so we feel like we're well positioned with the existing set of incentives as long as those incentives are fairly reflected in the regulations and a level playing field. What I mean by that Thank you. Okay. The next question is from John Royall of J.P. Morgan.
Speaker Change: And we don't focus so much on the green the blue in color schemes, we instead focus on how can we meet what is ultimately the objective here, which is to reduce to <unk>.
Oh, two associated with the production of these products.
Speaker Change: And we think all the work we've been doing.
Speaker Change: And our facilities and our feedstock.
Speaker Change: And decarbonising those contributes to that so we feel like we're well positioned with the existing set of incentives as long as those incentives are fairly reflected.
Speaker Change: And the regulations and a level playing field, what I mean by that is staying focused on carbon intensity ignoring colors.
Speaker Change: Great. Thank you.
Speaker Change: Okay.
Speaker Change: The next question is from John Royall of J P. Morgan.
John Macalister Royall: Hi, good morning, Thanks for taking my question.
John Macalister Royall: I just had a question about the refinery sale in France, I know you have.
John Macalister Royall: A very ambitious program for growth in the downstream business, but you have been trimming.
John Macalister Royall: Hydrating, a bit with some asset sales.
John Macalister Royall: Other majors are also reducing their European footprint.
John Macalister Royall: And can you just speak to how strategic remaining European portfolio and could we see some more assets shake out of European downstream.
John Macalister Royall: Yeah, sure. I would tell you what you're seeing with the cell.
Speaker Change: Yes, sure and I would tell you.
What youre seeing with the sell in France is really the latest in what's been a fairly long trend with us focused on.
Darren W. Woods: And France is really the latest in what's been a fairly long trend with us focused on high-grading refineries to refineries that have the capability, You know, to address a broad suite of products and high-value products. And so integrated facilities that make not only petroleum products but also make chemicals and lubricants and basically a broad array of high-value products. And so we've been focused over time on that they need to be advantaged sites. They need to be because we have a cost of supply curve.
Speaker Change: Hi, grating refineries two refineries that are that have the capability.
To be.
Speaker Change: Yeah.
Speaker Change: To address a broad suite of products in high value products, and so integrated facilities that make not only of petroleum products, but also make.
Speaker Change: Chemicals, and lubricants and basically a broad array of high value products and so we've been over time focused on that they need to be advantaged sites. They need to be we have a cost of supply curve. I think you. All have heard me talk about this many times across all of our businesses, but we we look around the world and make sure that our.
Darren W. Woods: I think you all have heard me talk about this many times across all of our businesses, but we look around the world and make sure that our facilities are at a low cost of supply so that as margins move up and down, we never become a marginal supplier. And having an integrated facility helps with that. But it also acts as a hedge to make sure that we're not dependent on any one sector for the success of one of our manufacturing facilities.
Speaker Change: Facilities are.
Speaker Change: On the low cost of supply so that as the margins move up and down that we never become the marginal supplier and having an integrated facility helps with that but it also acts as a hedge to make sure that we're not dependent on any one sector for the success of one of our manufacturing facilities. The reorganizations that we've put in place have helped.
Darren W. Woods: The reorganizations that we put in place have helped greatly with this. And if you think about these integrated facilities, we used to have them split up amongst different parts of the organization, different businesses running them, and, in fact, even different manufacturing organizations running them. Today, that's not the case. Today, they're being run by a single business with a single leadership team.
Speaker Change: Greatly with this and if you think about these integrated facilities, we used to have them split up amongst different parts of the organizations and the <unk>.
Speaker Change: <unk> business is running them and in fact, even different manufacturing organization drawing them today, that's not the case today they are being run by a single business with a single leadership team and so I feel I feel very good about that but it is this continuing I agree we were doing it all the way back when I was president of the refining company. So it's been a long term strategy we're not.
Darren W. Woods: And so I feel very good about that. But it is this continuing high grade. We were doing it all the way back when I was president of the refining company. So it's been a long-term strategy. We're not in a hurry.
Speaker Change: In a hurry, we're taking our time to make sure that we find the right.
Darren W. Woods: We're taking our time to make sure that we find the right buyer that has the right value proposition, one that exceeds our own internal values. And if we can find that, we will then track and transact. If we can't, we'll continue to optimize and improve those refiners to the best of our abilities. But I would say we've worked our way down. The portfolio, we feel pretty good about the position that we're in today, that the refineries that we have in the portfolio are advantaged, have a mix of either feed advantages or product advantages or both, and frankly, our focus has been on making sure they're running reliably, running safely, and running efficiently.
Speaker Change: Buyer that has the right value proposition, one that exceeds our own internal values and if we can find that we will then try and tackle transact. If we can we'll continue to optimize and improve the refiners to the best of our abilities, but I would say we've worked our way down.
Speaker Change: The portfolio, we feel pretty good about the position that we're in today.
Speaker Change: The refineries that we have in the portfolio.
Speaker Change: Our advantaged have a mix of either feed advantages of our product advantages or both and frankly, our focus has been on making sure. They are running reliably running safely running efficiently and the centralized organizations in our global operations and sustainably sustainability organization had been a huge <unk>.
Darren W. Woods: And we'll continue to look at our portfolio. It's always been the case that we're looking to make sure that the value we see in those facilities exceeds the values that others might, and feel good about our position.
Speaker Change: <unk> to help in each of these facilities in our chemical plants or refineries lubricants facilities all.
Speaker Change: Improve their performance run run better run more profitably run safer run more reliably so feel really good about the position that we're in and we will continue to look to our portfolio has always been the case that we're looking to.
Kathryn A. Mikells: And just the other thing I'd add to that is the investment environment is certainly a bit more difficult in Europe. If you go back and look at the additional taxes that were levied on the energy sector at the end of 2022, the additional disclosure requirements that Europe is looking for, or if you look at, you know, regulation around reducing the carbon footprint and not necessarily implementing regulation that's technically technology agnostic and focused on just reducing So that's certainly one of the things that we look at in any place across the globe, you know, as we look to make future investments.
Speaker Change: To make sure that the value we see in those facilities exceed the values that others might.
Speaker Change: Too good about how we're positioned there.
Speaker Change: And just the other thing I'd add to that is the investment environment is certainly a bit more difficult in Europe. If you go back and look at at the end of 2022, the additional taxes that were levied on to the energy sector. If you look at.
Speaker Change: Expanded disclosure requirements that Europe is looking for or if you look at <unk>.
Speaker Change: Regulation around reducing carbon footprint and not necessarily implementing regulation that technology agnostic and focused on just reducing carbon intensity that all makes Europe a much much tougher investment proposition. So that's certainly one of the things.
Speaker Change: We look at in any place across the globe.
Speaker Change: As we look to make future investment decisions.
Speaker Change: Thank you.
Biraj Borkhataria: The next question is from Biraj Borkhataria of RBC.
Speaker Change: Thank you.
Speaker Change: Next question is from <unk> <unk> of RBC.
Operator: It's quite fitting to take the next question from an analyst sitting in London, but I just have one question. You have a lot of LNG coming into your portfolio in the coming years, Golden Pass, Qatar, etc. You have quite a high oil weighting in your current sales mix. Are you looking to diversify over time? Or, you know, would you like to maintain that kind of 80 to 90% oil-linked exposure in your contract base over time?
Speaker Change: But fitting to taking the next question from an analyst sitting in London, but.
RBC: I just have one question you have a lot of LNG coming into your portfolio.
RBC: The coming years, the Golden pass guitar et cetera, you have.
RBC: A quite high oil weighting in the current sales mix are you looking to diversify overtime.
Speaker Change: Or would you like to maintain that kind of 80% to 90%.
Speaker Change: Oil linked exposure in your contract base overtime. Thank you.
Darren W. Woods: Thank you.
Operator: Good morning, Biraj. Thank you.
Speaker Change: Yes, good morning, Brian. Thank you I would tell you we're not as focused on.
Darren W. Woods: I would tell you we're not as focused on an absolute mixed number as much as the advantaged investment opportunities that we can find in those businesses. We see long-term demand for oil continuing, albeit with a much lower emissions footprint as we continue to find ways to decarbonize. We also see long-term demand for natural gas. And so I think as we look at both of those, both the liquids and the gas side of the equation, we see a long-term future for both of those and an opportunity for this company to participate.
Speaker Change: In absolute mix number as much as the.
Speaker Change: <unk> investment opportunities that we can find in those businesses, we see long term demand for oil continuing albeit with a much lower emissions footprint as we continue to find ways to decarbonize.
Speaker Change: Also see long term demand for natural gas and so I think as we look at both of those both the liquids and the gas side of the equation, we see a long term future there and an opportunity for this company to participate if we have advantaged.
Darren W. Woods: If we have advantaged projects that position us on a low cost of supply, and so that's how we think about that. And that advantage position, which manifests itself in cost of supply, as you know, obviously manifests itself in above industry average returns, which is, you know, the objective that we set for ourselves. And so that's how we're thinking about it. And frankly, we'll let the opportunities that we find in these advantaged investments set the proportion of the portfolio that those represent.
Speaker Change: Projects that position us on a low cost of supply and so thats, how we think about that and that advantage position, which manifests itself in cost of supply as you know obviously manifest itself an above industry average returns, which is the objectives that we set for ourselves and so that's how we're thinking about it.
And frankly, we'll let the opportunities that we find in these advantaged investments set the.
Speaker Change: The proportion of the portfolio does represent we will not invest.
Darren W. Woods: We will not invest in a project that I'm not convinced doesn't, one, leverage our core competitive advantages, that two then results in a project which is advantaged versus others, and that three then is on the low cost of supplies. Because as good as the market may look today out the window, we know there are cycles. We don't think the cycles are going away, and so we remain very focused on making sure that we take advantage of the upswings, but we're prepared for the downswings, and we'll be very successful.
Speaker Change: Yes.
Speaker Change: And a project that I'm not convinced doesn't one leverage our core competitive advantages that to then results in a project, which is advantaged versus other and that three then is on the low cost of supplies because as good as the market may look today out of window, we know there are cycles.
Speaker Change: We don't think the cycles are going away and so we remain very focused on making sure that we take advantage of the upswings, but we're prepared for the downswing and we'll be very successful and as we just talked about in the chemical business. Great example of being in the very bottom of a downswing and continuing to generate cash and make good solid.
Darren W. Woods: And as we just talked about in the chemical business, a great example of being in the very bottom of a downswing and continuing to generate cash and make good solid earnings. And that's, that's the ambition we have for all of our businesses.
Speaker Change: Earnings and that's that's the ambition we have for all of our businesses.
Speaker Change: Understood and just as a follow up to that.
Darren W. Woods: And just as a follow-up to that, there's obviously been ongoing security challenges in Mozambique. And, you know, what is your view at this point on whether you'd be interested in doing a second floating facility? Because, obviously, monetizing the onshore part has become very challenging.
Speaker Change: There's obviously been.
Speaker Change: <unk> security challenges in Mozambique.
Speaker Change: And you know.
Speaker Change: What is your view at this point.
Speaker Change: I'd be interested in doing a second floating facility because obviously monetizing the the onshore part has become very challenging.
Darren W. Woods: Yeah, I think, you know, obviously, you rightly pointed out there are security challenges there. But I think there's been a lot of good progress made with respect to that. I think Mozambique, the country of Mozambique, the government of Mozambique, recognizes the importance, not only of the project, but for the people of Mozambique that needs to be addressed and effectively managed. I think they've made good progress in doing that.
Speaker Change: Yes, I think.
Speaker Change: Obviously.
Speaker Change: Really pointed out their security challenges there I think there's been a lot of good progress made with respect to that.
Speaker Change: <unk>.
Speaker Change: Most of them make the country of Mozambique to the government of Mozambique recognizes the importance.
Speaker Change: Not only for the project frankly for the people of Mozambique.
Speaker Change: That needs to be addressed in.
Speaker Change: Effectively manage I think they've made good progress in doing that my view is with time, we've seen this in other places around the world that will get addressed and it will result in an opportunity to invest onshore with respect to onshore offshore we frankly.
Darren W. Woods: My view is with time, we've seen this in other places around the world, that will get addressed, and it will result in an opportunity to invest onshore. With respect to onshore and offshore, I frankly made the point at the beginning of your question, which is that it depends on, you know, the returns that we can generate with respect to investment opportunities and how competitive those supply points are. If we can do that offshore, we obviously will. If it takes going onshore to do that, then we'll focus on onshore, but it will be a function of the Returns of the Project.
Speaker Change: It comes back to the point I made at the beginning of your question, which is it depends on the returns that we can.
Speaker Change: Generate with respect to investment opportunities and how competitive those supply points are if we can do that offshore. We obviously will if it takes going on onshore to do that and we will focus on onshore, but it will be a function of the.
Speaker Change: The returns of the projects.
Speaker Change: Okay. Thank you very much.
Speaker Change: The next question is from Josh Silverstein of UBS.
Speaker Change: Okay.
Joshua Ian Silverstein: Hey, Thanks. Good morning, guys just wanted to see if I can get an update on the timing of the gas to power project in Guyana.
Operator: Okay, thank you very much. The next question is from Josh Silverstein of UBS.
Joshua Ian Silverstein: And we will benefit this may have shed costs in operations in the country and if there are any other projects like this that you guys may be looking at over time. Thanks.
Joshua Ian Silverstein: Yeah, sure. I think this is something that we've been engaged in. The government has been on for quite some time. I think as we look at going into some of these, some of the countries that are on a growth path or a developing path, we look for opportunities for how our footprint and presence in those countries and markets can help the people in the community. And this is a great example of getting the gas that's produced offshore, onshore, so they can, you know, replace what is a relatively inefficient, high emissions power generation system that's fairly unreliable with something that's cleaner, lower emissions, much more reliable, and should be much more cost effective.
Speaker Change: Yeah sure I think this is something that we've been engaged with.
Speaker Change: With.
Speaker Change: The government on them for quite some time I think as we look at going into some of these.
Speaker Change: Some of the countries that are on a growth path.
Speaker Change: Developing path.
Speaker Change: We look for opportunities of how our footprint and presence in those countries and markets can can help for people.
Speaker Change: The community and this is a great example of that of getting the gas Thats produced offshore onshore. So they can replace what is a <unk>.
Speaker Change: Relatively inefficient high emissions power generation system, Thats fairly unreliable with something thats cleaner lower emissions and much more reliable and should be much more cost effective and so think it's a kind of a win win proposition, particularly for the people of Guyana.
Joshua Ian Silverstein: And so I think it's a kind of win-win proposition, particularly for the people of Guyana. So we're working on bringing that gas to shore. Our expectation is we'll have that, you know, brought up sometime end of 2024. Obviously, the government is working on the receiving end of that gas and responsible for putting in the power station. That's an independent project that's in development. We're also working on the distribution system. And so it's really, I think the impact of that will come when we get both pieces together and get that linked up and effectively delivering power to the market.
Speaker Change: So we're working on bringing.
Speaker Change: That gas to shore, our expectation is we will have that.
Speaker Change: <unk> brought up sometime end of 2024.
Speaker Change: Obviously, the government is working on the receiving end of that gas and responsible for putting in the power station. That's an independent project is developing we are also working on the distribution system and so it's really I think the impact of that will come when we get both the pieces together and get that linked up and effectively.
Speaker Change: <unk>.
Speaker Change: Power to the market.
Paul Cheng: The next question is from Paul Cheng of Scotiabank.
Speaker Change: The next question is from Paul Cheng of Scotiabank.
Operator: Thank you. Hi, good morning.
Paul Cheng: Alright, Thank you alright, good morning.
Darren W. Woods: Darren, in the presentation, you talk about direct air capture. Can you give us some idea? And you're saying that you aim to reduce the cost by half, and that won't be sufficient. So what will be needed in order, how much is the actual cost reduction from the current level in order for that to be competitive or that to be a real business for you? And also, can you talk about that, how your approach or technology is different than what is currently in the market, especially one of your competitors in the U.S. They already have a commercial operation ready, and it's going to come on stream very, very soon. Thanks.
Darren.
Paul Cheng: And patient and you talked about the direct air capture.
Paul Cheng: Can you give us some idea and you're saying that you aim to reduce the cost by half and that won't be sufficient so.
Paul Cheng: What will be needed in order to how much.
Paul Cheng: Actual cost reduction from the current level in order for that to be competitive for that too.
Paul Cheng: We will be able to support you and also debt can you talk about that how your approach or technology is different than what's currently in the market, especially one of your competitors.
Paul Cheng: They already have.
Paul Cheng: He says that they have a commercial operation ready to and it's going to come on stream.
Paul Cheng: Very soon.
Paul Cheng: Yeah, sure. Good morning, Paul.
Speaker Change: Thank you.
Speaker Change: Yes, sure good morning, Paul.
Darren W. Woods: Yeah, what I would say with may I start with the last point of your comment, which is, yeah, there are alternatives out there today versus what we're working on. The issue is the cost associated with And we're not looking at what we can commercialize in the short term based on what I would say is a very narrow market of limited customers who are willing to pay a very high price to demonstrate a level of decarbonization.
Paul Cheng: Yes, what I would say with.
Speaker Change: I'll start with the last part of your.
Speaker Change: <unk> comment, which is yes. There are there are alternatives out there today versus what we're working on the issue is the cost associated with them.
Speaker Change: And we're not looking at what we can commercialize in the short term.
Speaker Change: <unk> on what I would say is a very narrow market.
Speaker Change: <unk>.
Speaker Change: Limited customers, who are willing to pay a very high price to demonstrate a level of de carbonization. We're focused on how we can make this technology.
Darren W. Woods: We're focused on how we can make this technology broadly applicable at a cost that society can afford, so we are very focused on the long term, not the short term, and our view is the available technologies today don't meet the cost requirements, and that's, you know, somewhere between the $600,000 per ton of CO2 removed. And our view is, if you try to apply that across the emissions challenge the planet has, the world won' So we've got to find a reduction.
Speaker Change: Broadly applicable at a cost that society can't afford so thats. We are very focused on the long term not the short term in our view is the available technologies today.
Speaker Change: Don't meet the cost requirements.
Speaker Change: That's <unk>.
Speaker Change: Somewhere between the $600000.
Speaker Change: Per ton this year too removed and our view is if you tried to apply that across the emissions challenge the planet has.
Speaker Change: The World Pill.
Speaker Change: Bill to pay for that so we've got to find a reduction or cost we've said an initial.
Darren W. Woods: Our cost, you know, we've set an initial target of cutting the cost in half, just because that is a significant step change, recognizing it won't be enough. But if we can get the technology, if we can develop the technology to a point that we're successful there, that gets us on this path and demonstrates the value of the concepts that we're developing to keep going and drive further down. With respect to the technology and how it compares to what's commercially available out there, I would say, you know, part of the reason why this is proprietary technology is that today it's proprietary.
Speaker Change: The target of cutting the cost in half just because that is a significant step change recognizing that won't be enough, but if we can get the technology.
Speaker Change: If we can develop the technology to a point that we're successful there that gets us on this path and demonstrates the value of the concepts that we are.
Developing to keep keep ongoing and drive further down with respect to the technology and how it compares to what's commercially available out there I would I would say part of the reason why this is proprietary technology is today.
Darren W. Woods: And so I'm going to keep it that way; I would say it is a brand new approach. There are others who are out there working on new approaches as well, which, frankly, we're happy about. You know, this is a tough challenge to break. And I'm not pretending like we're going to be the ones to solve it, but I am confident that we will give it our all, giving it our all by applying our capabilities. Others are also doing that.
Speaker Change: It's proprietary and so I'm going to keep it that way I would say it is a brand new approach there are others who are out.
Speaker Change: They're working on new.
Speaker Change: New approaches as well, which frankly, we're happy about this is a tough challenge to break and I am not pretending like we're going to be the ones to solve it but I am confident that we will give it I'll give it our all applying our capabilities others are doing that.
Darren W. Woods: As I said in my prepared remarks that we posted, you know, if there's a breakthrough, it doesn't so much matter who has the breakthrough; I think we're going to have a role to play. Because once we have a technology that gets to the right cost level, you're going to need global deployment at scale. And my suspected the technology that will be required for future lower cost direct air capture will be different than what we've got today and will require some of the technical capabilities that we have.
Speaker Change: As I said in my prepared remarks that we posted.
Speaker Change: Yeah.
Speaker Change: If theres a breakthrough doesn't so much matter who has the breakthrough I think we're going to have a role to play because once we have a technology that gets to the right cost level youre going to need global.
Speaker Change: Deployment at scale and I.
Speaker Change: I suspect that this technology will be required for the future lower cost direct air capture will be different than what we've got today and will require some of the technical capabilities that we have so I see a role for us in the future. If this nut gets correct. We feel good about what we've seen so far but we're very early into it and.
Darren W. Woods: So I see a role for us in the future. If this nut gets cracked, we'll feel good about what we've seen so far, but we're very early into it. And we're hopeful that we'll make the progress that we're aspiring to and continue to drive the cost down. Your last point you asked me, I think, to me, if you're going to be... If the world is going to be affordable, you've got to get into the hundred-ish dollars a ton of CO2 to start talking about broad deployment around the world. I think that that's ultimately where we need to get to.
Speaker Change: No.
Speaker Change: We're hopeful that we will make the progress that.
Speaker Change: We're aspiring to and continue to drive the cost down.
Speaker Change: Your last point you asked I think to me if youre going to be.
Speaker Change: If the world if it's going to be affordable you've got to get into the 100 ish dollars a tonne of cotwo to start talking about broad deployment around around the world I think that that's ultimately where we need to get to.
Operator: Thank you everybody for joining the call and for your questions today. We will post the transcript of our Q&A session on our investor website next week. Additionally, we look forward to connecting again on May 29th for our Annual Shareholders Meeting. Now, let me turn it back to the operator to close the call.
Speaker Change: Thank you everybody for joining the call and for your questions today.
Speaker Change: We'll post the transcript of our Q&A session on our Investor website next week. Additionally, we look forward to connecting again on May 29 for our annual shareholders meeting.
Speaker Change: Now, let me turn it back to the operator to close the call.
Operator: This concludes today's call. We thank everyone again for their participation.
Speaker Change: This concludes today's call we thank everyone again for their participation.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].