Q4 2024 Exxon Mobil Corp Earnings Call
Within the low carbon solutions, we demonstrated strength in commercial interests through additional customer contracts and equity partnerships.
We're the only company in the world today with an end to end system capable of capturing transporting and storing carbon emissions.
At $6 7 million tonnes per year, we've contracted more C O two for transport and storage than any other company by far.
We're also well positioned to meet surging demand from data centers for low carbon power.
And our timetable that alternatives such as nuclear simply can't match.
Oh, the hydrogen lithium front, we announced new equity partnerships and off take agreements that demonstrate the significant market interest. These new businesses are generating.
Our success in 2024 and every other year is due to our people.
It's not just that we recruit the best way that we give them the most challenging assignments to build the best capability, It's our culture our mindset.
When this team takes the field.
We expect to win.
That drive underpins our value creation in 2025 as well.
We will bring online a full slate of major projects to increase profitable volumes make more profitable products and lay the foundation for profitable new businesses.
To name a few will startup yellow tail in Guyana, our fourth and largest development to date.
In the Permian will further improve resource recovery using our next generation cube design and patented lightweight profit.
This is the right kind of growth low cost of supply low emissions intensity and high returns.
At our Singapore refining and chemical complex.
Or is it upgrade project, we use new to the world technology to transform a bottom of the barrel molecules into a new grade of high value lube based stocks.
Will transform high sulfur low value export fuels into higher value diesel for the UK market and our expanded refinery at fawley.
We'll expand our capacity to produce higher value performance polyethylene and polypropylene, our petrochemical complex in China.
And we'll add new advanced recycling facilities at Baytown and to meet the growing demand for certified circular polymers.
Which has the added benefit keeping hundreds of millions of pounds of plastic waste from being burned or buried.
Earlier this month, we sued the California Attorney General and activist groups for defamation and interference in our advanced recycling business.
Is there a filing made clear this.
Suit is about abuse of the public trust and the hijacking of the legal system for financial and political gain.
I want to emphasize that we don't take these actions lightly.
Unfortunately, as another example of what it takes to defend our company and preserve the value we create for our customers shareholders and broader society.
Overall, the major projects, we start up in 2025 will deliver more than $3 billion in earnings potential in 2026 at.
At both constant and current prices and margins.
In this earnings gain excludes the uplift from our Permian growth plans.
As we showed at the corporate plan update.
Mobile is runway of profitable growth extends along into the future.
Our new technology, driven businesses, such as approximate products in carbon materials create huge opportunities to expand beyond traditional fuels and chemicals into higher growth higher margin markets. They are decoupled from commodity price fluctuations.
This year, we expect to start up a new facility that can produce 25000 metric tons approximate products and plan to grow to nearly 200000 tons by 2030.
We're committed to investing in these new businesses in a stepwise fashion.
Progresses in tandem with demonstrated success in the marketplace.
The change in administrations in the U S. I want to say a few words about the right policy framework for successful energy future.
I'll begin by noting that through 2030.
90% of our planned Capex is allocated to established fully functioning markets for energy and products that require no policy support.
Only about 10% is earmarked for nascent lower emissions markets, where market forces have yet to fully take hold.
Case in point is our baytown and low carbon hydrogen project, which requires incentives under section 45 of the inflation reduction act to be economically viable.
We believe these incentives are critical to establishing a fully market based future where hydrogen competes head to head with traditional fuels.
At the end goal is clear a system, where no energy source remains dependent on government subsidies.
Just as energy sources should not be supported by governments in perpetuity, but should not be artificially discouraged either.
The prior administrations moratorium on new LNG export facilities.
And its executive order limiting offshore drilling.
Policy mistakes that the new administration is right to reverse.
Oil and natural gas remain essential to economic growth jobs and national security, both for ourselves and our allies around the globe.
Over the longer term to achieve broad de carbonization.
Government policies should set carbon intensity standards on products.
We believe this is the best way to engage the collective efforts of industry and leveraged competitive market forces.
To drive further innovation reduce the most emissions at the lowest cost.
Policies must remain technology agnostic.
Government should not pick winners and losers.
Intensities standards establish a level playing field and have a strong precedent.
They were most recently used to successfully and affordably reduce sulfur in marine fuel.
In closing I want to say again, how proud I am of the people of Exxonmobil.
How pleased I am that we are creating unmatched value for our shareholders.
Compared to the Ioc's over the last five years, we've grown cash flow from operations at a roughly 15% compounded annual growth rate.
More than double the closest competitor.
We have distributed more than 125 billion in dividends and buybacks.
$30 billion more than the closest competitor.
And we delivered a total shareholder return compounded annual growth of 14%.
600 basis points higher than our closest competitor.
Looking ahead the value creation arc of the company is equally distinguished.
We're going to build an even more advantaged asset portfolio with.
With 60% of our upstream production from advantaged assets by 2030.
That's nearly the same amount as the next largest ioc's total production.
We're going to develop an even more profitable product mix with 8% growth of our high value product sales and product solutions by 2030.
We're going to be an even more efficient operator taken an additional $6 billion in cost out of the business.
We're going to generate even more earnings in cash on a constant price and margin basis.
We will deliver 2030 by 2030.
$20 billion more than earnings and $30 billion more cash flow.
All of which enables us to keep our commitment to sustainable competitive and growing shareholder returns.
With that I look forward to your questions.
Yeah.
Thank you Dara.
Now, let's move to our Q&A session.
As a reminder, we ask each participant to keep it to just one question.
And with that operator, we will ask you to please open the line for the first question.
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 one on your telephone.
The first question comes from Neil Mehta of Goldman Sachs.
Speaker Change: Yes. Thank you so much Darren and good.
Speaker Change: Good rundown there.
Speaker Change: Question I had was really around project startups and specifically.
Speaker Change: Guyana can you give us a sense of the key milestones you are watching for and 25% at this asset how continues to track relative to expectations and Theres been a lot of investor debate. Following the upstream day about what the long term capacity of this asset could look like so any thoughts on terminal plateau would that would be.
Speaker Change: Great.
Speaker Change: Yes sure. Good morning, Neal. Thanks for the question I would say as you look across the portfolio of projects that we've got slated for startup in 2025, we feel really good about where they all are.
Speaker Change: The fact that they're tracking.
Speaker Change: Consistent with what we've talked about publicly.
Speaker Change: In fact, my guess is in the <unk>.
Speaker Change: Many of them will come in slightly ahead of that with respect to yellow tell specifically I'd say, we like we really like what we're seeing there I think that team.
Speaker Change: Who's managing the Guyana developments continues to demonstrate.
Speaker Change: The project after project that.
Speaker Change: Can you just find new ways to innovate and to overcome the challenges and to deliver these things.
Speaker Change: Below below budget, often times and certainly ahead of schedule and my guess will be for yellow tail that will come out a little better than what.
Speaker Change: What we've publicly talked about but I think <unk> 25 is a good number a good date to be thinking about.
Speaker Change: Longer term I know I've been part of the conversation in December about what we project going forward and the capacity versus utilization, while I would say as it gets a challenging to project that far in the future. There's a lot of variables that go into the developments.
Speaker Change: Across all of our upstream portfolio as we're going to move from where we're at today of roughly 10, our reservoirs to roughly 40 by 2030, a lot of optimization that goes around that are managing those reservoirs.
Speaker Change: Loans, obviously, theres a depletion curve that continues to.
Speaker Change: Brand volumes down but at the same time, our teams are working hard on infill and keeping the utilization up and so we've given our best guess or estimate as to where it will be but I would tell you that Neil and myself all of US frankly, including the team who is managing it are challenging themselves to make sure that we're fully fully utilized.
Speaker Change: Those assets.
Speaker Change: My expectation is.
Speaker Change: As we've demonstrated over the last several years, we will probably do better than what we're estimating but I think we want to make sure that we're not over promising and under under delivering and so we've got I think a really sound <unk>.
Speaker Change: Forecast for where those units will be producing and again.
Speaker Change: We're challenging the team and they are challenging themselves to deliver more than that and if I was a betting person, which I am I would bet they'll do it.
Speaker Change: Thanks, Dan.
Speaker Change: Right.
Speaker Change: The next question is from John Royall.
Speaker Change: J P Morgan.
John Royall: Hi, good morning, Thanks for taking my question.
Speaker Change: Good morning, Joe I was I was hoping for an update on your expectations around.
Speaker Change: North American tariffs assuming.
Speaker Change: Those are implemented and assuming they are in place for a material amount of time.
Speaker Change: Upstream and downstream assets in Canada, but.
Speaker Change: So downstream assets in the U S that could be impacted so how should we think about what that could mean for exxonmobil overall.
Speaker Change: Good morning, John Thanks for the question I would tell you the way that we're looking at obviously, there's a lot of noise and speculation in this space and <unk>.
Speaker Change: I would I would put it in the same category.
Speaker Change: As we think about prices and where prices are going.
Speaker Change: Of the day, what we can control is our how effective and efficient we are as operators, making sure that we're producing the highest value products for the kit that we have and efficiently getting it to market and I think that's going to.
Speaker Change: At the end of the day, no matter, where the market moves are theirs.
Speaker Change: There's a cost of supply curve all the work we've been doing over the last eight years has been to drive our production to the low end of the cost of supply curve. So that we have a significant margin versus the you know the last marginal barrel of production that's required to meet the market demand none of that is going to change with tariffs.
Speaker Change: That's all going to get shifted around and our view is we're going to continue to be a very cost competitive low cost to supply source and therefore, we will continue to outperform competition and that's basically how we're we're looking at it as we.
Speaker Change: We kind of Wade through the noise that's out there in the media and the press with respect to all the speculation around policy.
Speaker Change: Thank you.
Speaker Change: You bet.
Speaker Change: The next question is from Betty Jang of Barclays.
Betty Jang: Oh, good morning, I wanted to ask about your data center strategy.
Speaker Change: The expansion of AI in the U S.
Speaker Change: Carbon capture value chain is a key competitive advantage for Exxon.
Speaker Change: Any.
Speaker Change: First in the market for the low carbon gas solutions versus just traditional gas power plants.
Speaker Change: How quickly do you think Exxon kept bring these solutions to the market and and just given.
Speaker Change: With deep sea.
Speaker Change: Do you see any change to frame the conversation with the end customers. Thanks.
John Royall: Yes, good morning, Betty Thanks for the question, Yes, I think you hit on really what is the Nexus of our strategy with respect to data centers, which is our offering.
John Royall: During decarbonize power for data centers, we're not interested as we mentioned in December and going into a utility business like power generation utility returns for power generation would not compete in our portfolio, but leveraging.
John Royall: No. The end to end system that we have for cap, capturing transporting and storing C. O. Two is a huge advantage and brings a lot of value.
John Royall: Or a hyperscale those who are looking to have decarbonize power into manage their emissions and I would say that there continues to be a very strong desire for many of these customers to build data centers that are de carbonized and so.
John Royall: Lot of interest in that space, we're having a lot of continuing conversations we have sites that have been selected we've got we've been doing the work to decarbonize, our natural gas, which would be an important feed.
John Royall: In a low carbon data center and of course, we've got the work we've been doing with our partners around carbon capture and storage and we've got the Green line. So we've got all the pieces.
John Royall: Today, we've been an early engineering for these centers. So we know exactly what has to take.
John Royall: We've got a very as you know a large and successful project organization. This is right in their wheelhouse and so we're acting as a bit of an integrator in the early days to accelerate the schedules, which is really important to many of the customers. Our view is we'll bring this on.
John Royall: Faster than anybody else.
John Royall: In industry and will certainly bring it on faster than any other opportunities for de Carbonization, My guess would be depending on how the discussions go with custom.
John Royall: Customers that we could get.
John Royall: Site up and going by 2028, and then have a decarbonize into 2020 nines, Yeah, I would say, it's rough order of how to think about that but we've we're well into the development phase obviously, a lot of dynamics here a lot of moving parts and variables.
John Royall: In large part on the customer side. So we're there we're available we want to make sure that we've got an offering that meets their needs and when they're ready for them will be ready, but with respect to deep seek I would say that hasnt impacted the conversations to date that we're having with our customers.
Speaker Change: The next question is from Devin Mcdermott of Morgan Stanley.
Devin Mcdermott: Hey, good morning, Thanks for taking my question.
Devin Mcdermott: I wanted to come back to Neal's earlier question on growth, there's a lot in the Q in the near term beyond just Guyana, you highlighted 10 startups with over $3 billion of earnings earnings that also hold the current margins and I appreciate that that guidance, but I'm wondering if you could provide a little bit more detail on the timing for some of the key projects.
Driving that growth as we move through 2025, how the impact earnings through the year and then when do you expect to get to that full over 3 billion run rate. Thanks.
Devin Mcdermott: Yeah sure Devin Thanks for the question I think you're right. It is a busy year with a lot of startups.
Devin Mcdermott: Maybe just kind of walk through the key projects that we've been talking with you all about start with the China Chemical complex. We we mechanically completed that at the end of last year, we've been going through.
Devin Mcdermott: The sequencing and making sure that the <unk> piece of that kit is working.
Devin Mcdermott: Working as designed and we'll bring all that integrated together and my expectation is we will get it started up here.
Devin Mcdermott: Sometime in the first quarter back into the first quarter.
Devin Mcdermott: And falling.
Devin Mcdermott: We're building.
Devin Mcdermott: Conversion facility that produces a low low sulfur diesel my expectation is we will have that in early second quarter.
Devin Mcdermott: You've got two advanced recycling units that we are building a baytown.
Devin Mcdermott: So despite the attorney generals.
Devin Mcdermott: Accusations that these are miss we've actually got two more units starting up one in the second quarter and one in the fourth quarter, which continues to have a see a lot of interest by consumers for a recycled product and so that's that capacity is desperately needed to meet that customer demand.
Devin Mcdermott: We've got all of the modules that we're where we need for the strat Kona renewable diesel are.
Devin Mcdermott: Looking to basically try to get that started up here in the second quarter expect that to happen.
Devin Mcdermott: The other real big.
Devin Mcdermott: Project that we've got is the Singapore reserve upgrade.
Devin Mcdermott: A project that is new to the world technology feel really good about the progress. We've made there we've got all the vessels are loaded with catalyst some of that catalyst is proprietary.
Devin Mcdermott: The largest catalyst slowed we've ever done and we did that successfully and expect to be.
Devin Mcdermott: Mechanically complete sometime here in the first quarter and get into the startup and sequencing and expect to be up and running kind of the back end of the second quarter I would hope.
Devin Mcdermott: Proxima second quarter is when we expect to get some more capacity on and then going forward in time, a lot more capacity coming on as we continue to work with customers and sell into what we think are some very attractive applications, where there's really good demand. So continue to see good progress there.
Devin Mcdermott: And that project is coming along.
Devin Mcdermott:
Devin Mcdermott: Backlog I expect sometime in 2025, probably closer to the third quarter yellow tell third quarter and then as we've said with Golden pass probably the backend of 2025, we expect to see first LNG and mechanically complete kind of around midyear is the timeframe that.
Devin Mcdermott: You run through all of those and then as we mentioned you know on a constant price basis, which we.
Devin Mcdermott: Provide for you guys can kind of see the underlying fundamentals of these projects expect to see more than $3 billion of improved earnings once they're up and running full.
Devin Mcdermott: Consider 2026 and at the same time, you look at the current price margin environment that we're in.
Devin Mcdermott: Which is obviously pretty challenging we're still as you wrap up all of those projects still above $3 billion of earnings contribution so and that's frankly the goal is to make sure that.
Devin Mcdermott: But these projects are resilient to the bottom of cycle conditions, so feel pretty good about that portfolio of projects and where we are.
Devin Mcdermott: Great. Thanks for all the detail you bet. Thank you.
Speaker Change: The next question is from Doug Leggate of Wolfe Research.
Devin Mcdermott: Yeah.
Speaker Change: Oh, hi, everybody. Thank you for having my questions. Thanks for all the details.
Speaker Change: And I think you missed your 25% of Tengiz in your startup list, but.
Speaker Change: But who's counting.
Mike: Mike My question.
Speaker Change: My question specifically is about.
Speaker Change: I hate to be predictable is about your.
Speaker Change: Cash distribution philosophy buybacks versus dividends and I.
Speaker Change: I'm wondering can I position it like this if I look at the buybacks last year on the $20 billion commitment for the next two years you could make a case that youre basically buying back the shares that you issued for pioneer.
Speaker Change: I know, it's always cut and dry does that but I'm curious with the inflection in free cash flow that you clearly have your capacity for dividend growth is substantially greater than the 4% bump that you gave to shareholders now for several years running are you waiting to buy in the pioneer stopped before you step up that dividend is my question.
Speaker Change: And so that's really cool.
Speaker Change: Coincidence right that we moved up our buyback pace.
Speaker Change: In conjunction with pioneer, obviously, because pioneer with giving us incremental.
Speaker Change: Cash flow to be able to do that so that moved up our pace from 2017, and a half to $20 billion annually and we've guided that we expect to be at that pace for this year and next year assuming.
Speaker Change: Continued reasonable market condition.
Speaker Change: It is I would say just a coincidence that that $20 billion means that we will essentially buy back shares from pioneer over a three year period. If we go to look at our philosophy overall in terms of the dividend we have been clear that we look at that dividend and we wanted to be sustainable we wanted to.
Speaker Change: Competitive and we wanted to be growing.
Speaker Change: And we are always looking at it through that lens.
Speaker Change: The share buyback program.
Speaker Change: Secondary benefit.
Speaker Change: Actually reduces the overall dividend.
Speaker Change: And it's in absolute terms as we continue to take shares out of the market, but that's how we look at the dividend philosophy and as you know we've increased the annual dividend for 42 years running which is a claim only 4% of companies in the S&P 500 can make and so we're very.
Speaker Change: <unk> dot and understand the importance of that dividend for our shareholders and we also realized compare to other companies.
Speaker Change: We have a quite large retail shareholder base that.
Speaker Change: And that are very focused on the dividend and so that's how we look at and evaluate things.
Speaker Change: I appreciate the answer I would just fit note that dividend growth per share seems to be the driver of at least <unk>.
Speaker Change: Mechanism for market recognition of value. So that's why we're so keen on this issue, but I appreciate the answers. Thanks so much.
Speaker Change: Thank you Doug.
Steve Richardson: The next question is from Steve Richardson of Evercore ISI.
Hi, good morning.
Steve Richardson: I was wondering Darren now that we've had a little bit of time to sit with the corporate plan update and all the visibility you provided out till 2030 and maybe this is a.
Steve Richardson: Beyond 2025 question, but it seems to us that internal to Exxon the biggest risk to hitting that return on capital employed target.
Steve Richardson: To be on the Capex line.
Steve Richardson: And so I wonder if you could kind of talk about the forward look on capex upside downside risks.
Steve Richardson: Any proportion that you think is you know mark.
Steve Richardson: Indexed versus contractual and it would just seem to us like a lot of the things Youre doing the next couple of years or replication of things that you've already executed in the last number of years, Guyana Permian those types of things.
Steve Richardson: Yes. Thank you Steve I appreciate the question as we talked about as part of the.
Steve Richardson: Corporate plan.
Steve Richardson: Presentation in December if you look at the Capex profile, a large portion of a portion of it is kind of dealing with as you say the things that we've already demonstrated we know how to do and frankly, the capex that we're spending in that space is fairly flat as we continue to grow our volumes and then the cash.
Steve Richardson: And earnings that go with it so as we're advancing I'd say the upgrade of our existing portfolio to two advantaged volumes, we're doing that with a fairly stable and flat capex profile, which we feel really good about and that reflects the continued efficiency that we're finding as we apply technologies and my expectation is.
Steve Richardson: We go forward, we're learning a ton even if you bring in new technology began to apply it where learning on that the technology and finding additional opportunities. So I think we're on a really good trajectory with respect to continuing to grow advantage volumes and continuing to drive capital efficiency and so that's we've laid out our best estimate.
Steve Richardson: Now, but again, what I would say is I really like what we're finding as we deploy these technologies and see the improvements and then on top of that we've got.
Steve Richardson: The lower emissions spend that we've laid out.
Steve Richardson: And the new products that we're looking to.
Steve Richardson: New markets and new businesses that we're looking to establish with the <unk>.
Steve Richardson: Proxima resin system and the carbon material ventures, which again, we see really really.
Steve Richardson: Our high levels of interest from customers, we're continuing with working with them in trials and.
Steve Richardson: Testing out the product we feel good about what we're seeing there those investments, which is really the growth that youre seeing with our capital spend are all conditioned on making sure that those products the value proposition that we believe we have there is realized and.
Steve Richardson: Compensated and generate higher returns for those investments so I'd say those are less.
Steve Richardson: Those are contingent we feel today pretty confident that we will pursue those investments because of what we're seeing today, but we're not going to go ahead with them until we're convinced that the value is there and we will realize that value and the investments and get that generated an advantaged returns and that's how we're thinking about it similarly with the low carbon.
Steve Richardson: We've said before we need policy support that policy needs to be in place.
Steve Richardson: And we need to have customers, who are signing up for the off takes and that work continues and so there is I'd say on top of the steady base.
Steve Richardson: That we've established here in 2020 for all the additional Capex will basically be conditioned on ensuring that we get good returns on that incremental investment in these new businesses and new opportunities anything to add Catherine So the other thing I would just say is we have a huge competitive advantage and our global projects organization. So youre talking.
Steve Richardson: About hey, one of the things as we look out we think about continuing to improve your return on capital employed in the new projects that are coming online that gives us great confidence in the fact that they continue especially in our base business to figure out how to get more and more efficient so guyana would be.
Steve Richardson: Great example of that right, we get more and more learnings in terms of looking at those reservoirs and exactly with the kit is that we need in order to optimize production I think is a significant advantage for us.
Steve Richardson: If you look at the biggest risks I mean, what you spend in bringing a project online is definitely have some risk associated with it and again I think we have competitive advantage. There what you get out of the ground right understanding that I think is really critical in the Permian would be a great example of that the synergies were dry.
Steve Richardson: <unk> and pioneer as we look at recovery rates as we look at implementing new technology like a different approach to proppant I think those all give us really significant confidence in our ability to continue to improve overall capital return we have.
Steve Richardson: Have any advantaged set of projects.
Steve Richardson: That's in a very differentiated position relative to other competitors.
Speaker Change: Thanks, so much.
Speaker Change: The next question is from Jean Ann Salisbury with Bank of America.
Speaker Change: Hi, Good morning, you have two major LNG projects coming online and are a major salary of LNG already and you've also signed some contracts to buy LNG from third parties that may now kind of put the LNG permit ban being lifted have had a better chance of coming online later in the decade can you give more color on your LNG contracting strategy.
Speaker Change: Here and how you see the LNG market in the medium term and oversupplied or not.
Speaker Change: Sure. Thanks for the question.
Speaker Change: I think it is.
Speaker Change: The general context, I'd say as you look forward, we continue to see.
Speaker Change: A really healthy demand an important role for LNG around the world as we go out into the future and you see economies grow and People's standards of living.
Speaker Change: Improve.
Speaker Change: And as countries around the world look to Decarbonize and back out cold LNG is going to play a really important role so that broader theme, we see continuing to play out well well into the 2050 timeframe. So we think LNG is going to be an important.
Speaker Change: Product and continuing to find ways to bring an advantage supply of LNG is pretty critical to our strategy as you know the market today and these projects are underpinned by our long term sales contracts we continue to.
Speaker Change: Progress those contracts in conjunction with the projects that we're developing that continues to be the foundation for the LNG market and so on.
Speaker Change: A majority of the production that we are looking to bring online will be underpinned by long term contracts, which are linked to crude pricing.
Speaker Change: And that I think reflects.
Speaker Change: Really the demand that you're seeing from customers out there in the need for continued gas theres a portion that we're aware of.
Speaker Change: Leaving on contracted to support the work that we're doing with our trading organization and growing that business and as that market grows it becomes more liquid.
Speaker Change: We continue to see opportunities to optimize around that market and extract some additional value through trading and so we're making sure that we've got volume available for that.
Speaker Change: Great. Thank you.
Speaker Change: For the question.
Speaker Change: The next question is from Bob Brackett of Bernstein Research.
Bob Brackett: Good morning, a bit of a follow up on the LNG P, but more specifically around the <unk> cadence this year and next you've got Papua LNG and PNG, you've got <unk> and maybe even coral north in Mozambique, those are very different investments that are <unk>.
Bob Brackett: Adding another well in the Permian, what do you need to see in terms of maybe returns and certainty and maybe even.
Bob Brackett: Local situation to give you the confidence to move forward on those multi decadal assets.
Bob Brackett: Good morning, Bob Thanks for the question.
Bob Brackett: You're right that each of these projects are somewhat unique.
Bob Brackett: However, what I would tell you is the constant here in terms of how we are evaluating and deciding to go forward is making sure that their for their low cost of supply. So the competitive supply sources in the market. So that as we move forward irrespective of how the market develops in the highs and the lows that we have.
Bob Brackett: An advantaged.
Bob Brackett: Cost of supply vis vis the.
Bob Brackett: The rest of the supply curve in some of our competitors. So that that's a critical component and with that comes in.
Bob Brackett: An advantage project.
Bob Brackett: And advantaged returns and so that is fundamental to what we're looking at with each of these and you know as Kathy mentioned earlier in the call.
Bob Brackett: The project organization that we had brings a huge advantage in this space to help US drive these projects to the left hand side of the cost of supply curve I'd also add that our technology organization that we've established and the focus that they are putting on and working with the projects organization is another advantage that helps kind of drive that to the left hand side of the cost of supply curve.
Bob Brackett: So that's I would say that the primary.
Bob Brackett: Variables at play here, obviously, we look at the stability of the area that we're in we've got a really long history of managing that exposure and risk we feel pretty good around what we're seeing in the local communities that were looking at and the steps that we can take to make sure that we can develop a long term success.
Bob Brackett: For business, there and a stable environment. So I think that piece of it while certainly something that we need to manage and be aware of.
Bob Brackett: Isn't impacting isn't the largest variable with respect to how we think about moving forward on these projects.
Bob Brackett: Very clear so we should think 2025 for PNG twenty-six for ruble, but still.
Bob Brackett: Where are we are working towards the 2026 timeframe in the rovuma there.
Bob Brackett: P&G, we're continuing to work through.
Bob Brackett: A target hopefully we'll have something near the back end of this year for <unk>.
Okay. Thank you.
Bob Brackett: You bet. Thank you Bob.
Speaker Change: The next question is from Neal Dingmann of <unk> Securities.
Neal Dingmann: Hi, Good morning, Thanks for the time during my question is around your long term plan for leave you all had suggested about.
Neal Dingmann: The earnings are around $20 billion in cash flow by an additional 30 billion by 2030, and I think that goes along with the U S production, I think doubling or severely increase and I'm just wondering in order to achieve this I'm just wondering what type of levels are you all assuming for on broad strokes for annual capital spend in Opex during this.
Neal Dingmann: Period in order to achieve but I'm just wondering like Directionally, what what are you assuming.
Neal Dingmann: Sure. So I'll start with capital because we gave guidance at our corporate plan.
Neal Dingmann: Coming year in 2025, we said, we expect cash capex to be between 27% and 29 billion and then between 2026 and 2030 that number's 28 to 33 billion and then if you just think about expenses, obviously, we're growing and we're growing across our business that is going to.
Neal Dingmann: Half growth expense associated with it and some of the offset to that is driving significant structural cost reductions and so.
Neal Dingmann: To date since 2019, we're at a little over $12 billion in terms of structural cost reductions and we said.
Neal Dingmann: Between here and 2030, we expect to get that number up to 18 billion. So kind of an additional $6 billion in structural cost savings to help to offset just the cost of that growth overall, and obviously a little bit of inflation and the last thing I would say on that topic is.
Neal Dingmann: Our global procurement organization as we talked about the global projects organization working pretty hard to make sure that we're bringing kind of the full scale.
Neal Dingmann: And the manner in which we integrate our business to kind of to bear as we procure the different products and services that we pump carousel theyre doing quite a good job.
Neal Dingmann: They look to help us hold down expenses, yeah, maybe just to build on Cathy's point. If you look at where we were in 2019, we challenged the organization to pay for the growth to make sure that as we were growing and adding some of those additional expenses associated with new facilities, new production that we offset that through our structural cost reductions.
Neal Dingmann: If you look at where we were in 2019 and where we ended 2020 for not only have we offset all of the additional cost of the growth, we offset all of the inflation and had a further reduction of about 1 billion and a half dollar. So I think we've demonstrated the ability to.
Neal Dingmann: Both grow the business and grow the value, while reducing cost I think that is a very unique.
Neal Dingmann: Challenge and I think a great Testament to the work that this organization has been doing to create value out there. The only other point I would make is not only do we have really solid plans to 2030, and the new markets and new businesses that we're starting.
Neal Dingmann: Don't really start to move the needle until we're beyond that 2030 timeframe and so what I'm excited about is not only the fidelity that we have in terms of how we get to 2030 and that 2030 objective that we've talked about but also that we have established a foundation that gives us a platform for growing well into the future and.
Neal Dingmann: Markets that are decoupled from the commodity price cycle, that's pretty exciting for our company.
Neil Mehta: Well said, thanks, Darren Thanks, Kevin Thank you Neil.
The next question is from Roger read of Wells Fargo.
Speaker Change: Yes, good morning.
Maybe to take a slightly different tack here on some of the policy changes like you mentioned in the beginning of the call Darren some some favorable changes one of the other ones that's percolating a little bit in the executive order was.
Speaker Change: For the EPA to take a look at the endangerment finding on C. O two and I know Theres a lot of ways C. O. Two was approached in terms of what's in the IRA and stuff, but if we were to see that.
Speaker Change: Change in federal government regulations on Cotwo, how do you think about that affecting some of the decisions you're making on the.
Speaker Change: Renewable.
Speaker Change: Low carbon <unk>.
Speaker Change: Investment approaches here.
Speaker Change: Yeah. Good morning, Roger Thanks for the question. So let me just start with the fundamentals of how we think about this stuff because our work and the low carbon solutions business is reflective.
Speaker Change: Not any specific policy thats existing in fact, we put that business together and started working on it well in advance of the IRA and some of the policy that divided administration brought forward, we focused instead on what we recognize as a need to continue to supply the.
Speaker Change: The energy sources and products that the world desperately needs to grow into for peoples prosperity to improve.
Speaker Change: But at the same time reduce emissions and I would say as a company we recognize the need for society to reduce emissions and a thoughtful constructive way.
Speaker Change: And what we're trying to do is offer up a skill set and a capability set that can help accomplish that that's the long term objective here and putting in place the foundations.
Speaker Change: For an approach that makes sense that leverages, our key competitive advantages and affordably reduces emissions, while we continue to meet the needs for our products is part of the strategy and frankly, we're demonstrating the ability to do that and to pay for it and to generate returns at the same time and so this and equation.
Speaker Change: As we believe a real thing and that people should be focused on doing it all and that's what we're trying to do so I would say that's the foundation. That's how we think about it we recognize the demand for the reduction in the intensity of focus on that May vary as you move across.
Speaker Change: Political regimes and move around the world and we will move up and down with time, but the fundamentals. We believe are there and that's what we're focused on is the long term game here and making sure that what we bring forward in terms of our solution is cost.
Speaker Change: Efficient and very effective and that's how we're looking at it.
Speaker Change: Frankly from what we've seen so far I think.
Speaker Change: We've got an advantage with respect to where we're at and looking at those opportunities and we've got an advantage with our capabilities and with the facilities that we brought on so far and the ones that we're developing so we feel good about that and the only thing I would add is obviously the new administration is focused on.
Speaker Change: Trying to streamline regulation right and looking at how that can open things up for business you know when we look at just as an example.
Speaker Change: Looking to permanently sequester cotwo.
Speaker Change: Getting that permitting.
Speaker Change: <unk> has been has been a long process and so it's.
Speaker Change: Just one area of many that you can look at across the industry to say, hey, what things can be done to ease regulation. So that business can get done more quickly projects can get put in place more quickly and so we look forward to continuing to discuss those things with the new administration.
Good news our Rogers, we've got flexibility here. So we can adjust as we move forward and respond to some of the changes that we see.
Speaker Change: I appreciate that thank you.
Speaker Change: The next question is from Paul Cheng of Scotiabank.
Speaker Change: Alright, Thank you and good morning.
Speaker Change: Good morning, everyone.
Speaker Change: You guys can that have an expertise in the deep water Daniels upset with the C suite.
Speaker Change: That makes it go in Angola on recently.
Speaker Change: But one deepwater area that you are noticeably missing is Gulf of Mexico.
Speaker Change: Wed have to the size of the company and your small.
Speaker Change: Just wanted to understand that you said because when you guys looking at that you don't know what the cost structure at all like you don't know yet.
Speaker Change: The regulatory environment or you don't like about the geologist and that such that with the new administration the approach there.
Speaker Change: Is that going to change the way that how you look at that basin.
Speaker Change: Yes, good morning, Paul Thanks for the question.
Speaker Change: Youre right that in terms of as you look around the world our presence in the Gulf of Mexico is.
Speaker Change: A more limited and I would just tell you it's a function of evaluating the opportunities there and the cost of supply you touched on a couple of factors. One is the cost of supply and the cost to develop there in the Gulf of Mexico, you talked about the geology thats it.
Speaker Change: If the geology is tough as well, which obviously impacts the cost and so we look at all those factors.
Speaker Change: Factors, we are continue to evaluate opportunities and if the Trump administration opens up.
Speaker Change: New areas for exploration, we will be in there with the rest of the industry evaluating to see if we think there's an opportunity to cost effectively develop those resources, but.
Speaker Change: I'll come back to and so.
Speaker Change: That's the lens, we put across all of the opportunities in the Gulf of Mexico is no no better offer no worse off than anything else that we're looking at but it's really the criteria of cost effective.
Speaker Change: Supply being on the low end of the cost of supply curve, making sure that we can develop those are in an advantaged way that then brings an advantaged.
Speaker Change: Returns into the portfolio and that the criteria that we're using and if we find something in the Gulf of Mexico that we convince ourselves will allow us to do that we'll develop it.
Speaker Change: We don't we will continue to find and look for those opportunities in other parts of the world, We're pretty agnostic with respect to location much more focused on the characteristics and the ability to develop advantaged barrels.
Speaker Change: Thank you.
Speaker Change: Paul.
Speaker Change: The next question is from Ryan Todd of Piper Sandler.
Speaker Change: Okay. Thanks, maybe one on carbon capture you have for a decent sized projects set to start up over the next 24 months on your list I know in the past you've talked about.
Speaker Change: Some of the challenges of effectively creating a new industry that doesn't currently exist, particularly on the commercial side can you maybe give some color as to how the commercial side of that business has evolved what challenges remain including maybe on the regulatory support side.
Speaker Change: And maybe what contribution you expect to see over the next couple of years that are out of the Ccs business.
Speaker Change: Yeah. Thanks, Brian I think you know a lot has happened in this space over time, and I think probably the most important development is theres been a real shakeout.
Speaker Change: Between people, who are out there talking about carbon capture and storage business and people who are actually capable of doing it and that has.
Speaker Change: I think created a lot more clarity, particularly from a customer standpoint in terms of where they need to go to find companies that can deliver on this we are as you mentioned uniquely positioned here. We've got the only the world's only end to end capture transport and storage system and so that puts us in a unique position.
Speaker Change: To work with customers to help them Decarbonize and so I think those conversations continue to happen. There is a continued interest and we've got a fairly healthy sales pipeline that we're working with customers on.
Speaker Change:
Speaker Change: So I like I like how that's developed I like our position we continue to do a lot of work around that system that we've built and making sure that unlike a lot of.
Speaker Change: Companies in this space that are limited to a single site.
Speaker Change: We've got a system and we're developing that system. So that we've got a lot of optionality and take advantage of storage storage sites, all along that pipeline.
Speaker Change: So we feel good about having a very robust system that we can then ensure customers that when we commit to capture their C. O. Two in stores that we can effectively do that and manage any of the variables that kind of come along the pike and so that's how we're looking at it we've got pretty aggressive growth plans in this space again all day.
Speaker Change: Pending upon.
Speaker Change: Customer interest in customers' willingness to engage in long term contracts and so that's.
Speaker Change: But we're continuing to work on like I said, a lot of interest in this space given our unique abilities.
Speaker Change: What we said back at the corporate plan is when we look at our low carbon solutions business and its entirety right. So obviously the Ccs opportunities you just talked about the hydrogen.
Speaker Change: Everything all together.
Speaker Change: Would see $2 billion in earnings growth kind of between now and 2030, obviously that economy as we pick up momentum and start to implement the projects that we've been talking about.
Speaker Change: Thank you. Thank you.
Speaker Change: The next question is from <unk> <unk> of Royal Bank of Canada.
Speaker Change: Hi, Thanks for taking my question.
Speaker Change: I just wanted to get some perspective on the chemicals market you show a helpful. Slide every quarter on the margins related to our 10 year average obviously the chems our margin has been well below that very consistently.
Speaker Change: Do you see any signs of green shoots in that space, either regionally or product wise that you can talk about and as a quick follow on to that separately.
Speaker Change: Are you able to disclose Youll reserve replacement ratios.
Speaker Change: For the year, both total and organic thank you.
Speaker Change: Yeah. Good morning barrage I'll start with that so you have Kathy has anything she wants to add but.
Speaker Change: The margins that we show in the markers that we sure kind of an industry perspective with respect to kind of the distribution of the chemical business globally around the world.
Speaker Change: The average margin that you see there where are advantaged versus that with respect to our facilities and so as you look across the world I would say the most advantaged.
Speaker Change: Our region today is North America, where as you know we've got a fairly large footprint. So we've been despite I'd say very challenging conditions I think we've been well positioned there and very.
Speaker Change: Proud of the work that our folks in the chemical business have been doing to optimize and make sure that in this environment to continue to deliver earnings.
Speaker Change: The demand in chemicals is actually very strong a record levels of demand. It's the challenge is obviously been in the supply side of the equation I think in terms of a green shoot comment how do you balance supply and demand I mean, it's every every.
Speaker Change: The facility out there has to kind of figure out where they're out in the cost of supply and whether they whether they can survive or not I think youre seeing more and more companies that are disadvantaged with respect to their facilities evaluate their business and ability to be successful in the kind of market that we're in the way I look at this at a macro level. These cycles are.
Speaker Change: Necessary, we've gotta go through the the Lowe's to make sure that the industry continues to focus on efficiency and effectiveness and continuing the high grading of the broader overall industry portfolio. Our job obviously is to make sure that our facilities around the high end of that high grading and we feel really good about what we've been there and so I think that's going to.
Speaker Change: To happen I think from my perspective. This challenge here is not unlike the challenges we've seen in the past and frankly very much in line with our philosophy as you build this business to be successful in the down bottom of the cycle and then you take the gravy that comes with the top of the cycle and so we feel good about our ability to be successful even in these.
Speaker Change: Bottom of cycle conditions, Kathy anything to add the only thing I'd add is if you look at the projects, we're bringing online those all continue to help us to be advantaged, whether it's the China, one chemical complex, that's coming online, which is really focused on performance chemicals right.
Speaker Change: Grade were doing overall in our Singapore facility kind of reserve upgrade.
Speaker Change: On the margin helps us and then obviously, bringing on more circular.
Speaker Change: Plastics basically helps us in terms of advanced recycling. So all the projects. We have will continue to well position the company and we've been very focused on ensuring that we're a low cost supplier, which makes us resilient even in these difficult market conditions.
Speaker Change: Thanks Raj.
Speaker Change: Thanks.
Speaker Change: On the reserve replacement ratio.
Speaker Change: No, we don't really consider that to be.
Speaker Change: Particularly informative of where the company's going.
Speaker Change: Okay understood.
Speaker Change: We have time for one more question.
Speaker Change: Anil question will be from Jason Gere Goldman from TD Cowen.
Jason Gere: Hey, good morning, Thanks for squeezing me in here.
Speaker Change: I want to ask a question on slide six where you lay out all the projects and Doug alluded to it earlier it seems like Youre missing a couple of projects that are starting up your T. C O. The Permian pipeline project, we would've thought the overall potential earnings number from all the products combined are.
Jason Gere: Closer to $5 billion, including those two projects so.
Speaker Change: First is that correct and second is there any major difference you see between the earnings contribution of these projects and in the cash flow contribution. Thanks.
Speaker Change: So I'm happy to take that we tended to focus here on the projects, where we're the operator as opposed to.
Speaker Change: Tcl, where we're not the operator, obviously, we will get some benefit from that but we did not focus on projects that were not the operator. We also focused on projects that are newly starting up as opposed to <unk>.
Speaker Change: Projects like the Permian crude adventure that is already underway and so I would say, yes, we clearly continue to get incremental benefits from the projects that are already underway that the company started up our pre 2025, and obviously to the extent that we're participating in.
Speaker Change: And in an arrangement where somebody else is the operator and projects are starting up we will get the benefits from those things.
Speaker Change: And I would add in terms of those other projects that you referenced obviously, they're baked into our plans and the volumes that we shared as part of the.
Speaker Change: Corporate planning outlook includes all elements of the projects that are coming on.
Speaker Change: Great and any difference between earnings and cash flow contribution from these projects and the major difference.
Speaker Change: No all I would say is typically on projects generally theres, a little bit of a lag on earnings relative to cash flow.
Speaker Change: Okay, great. Thanks.
Speaker Change: Thank you alright, Jason Thanks, and thanks, everybody for joining this call and for your questions. We will post the transcript the transcript of this call to the investors section of our website early next week.
Speaker Change: And have a nice weekend and that concludes today's call.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Sure.
Speaker Change: [music].
Yes.
Speaker Change: Yes.
Yeah.
Speaker Change: Uh huh.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].