Exxon Mobil Q1 2022 Earnings Call Transcript

Quartr
Provided by Quartr
April 29, 2022

There are 18 speakers on the call.

Operator

Day, everyone, and welcome to the ExxonMobil Corporation First Quarter 2022 Earnings Call. Today's call is being recorded. At this time, I'd like to turn the call over to the Vice President of Investor Relations, Mrs. Jennifer Driscoll. Please go ahead, ma'am.

Speaker 1

Good morning, everyone. Welcome to our Q1 earnings call. To the operator. We appreciate your interest in ExxonMobil. Joining me today are Darren Woods, our Chairman and Chief Executive Officer to Kathy Michaels, our Senior Vice President and Chief Financial Officer.

Speaker 1

The slides and our pre recorded remarks were made available on our Investors section of to our website earlier this morning, along with our news release. In a minute, Darren will provide opening comments and reference a few slides from that presentation, to the operator, then we'll conduct a question and answer session. We expect to conclude the call by about 9:30 am Central Time. Over to the operator. Let me encourage you to read our cautionary statement, which is on Slide 2.

Speaker 1

Please note, we also provided supplemental information at the end of our earnings slides,

Speaker 2

to Darrin Woods, which are posted on the website. Now, I'll turn the call over to

Speaker 1

Darren Woods.

Speaker 3

Good morning and thanks for joining us today. To you. As we laid out at our most recent Investor Day, our goal is to sustainably grow shareholder value through the execution of our strategic priorities to Gene on this slide. As we think about recent events, our job has never been clearer or more important. To the operator.

Speaker 3

The need to meet society's evolving needs reliably and affordably is what consumers and businesses across the globe to our demanding and what we delivered this quarter. First, we continue to build our competitively advantaged production portfolio, to bringing new barrels to market today, driven in part by the high value investments we continue to progress through the pandemic driven downturn in prices. To a prime example of the benefits of our continued investments is Guyana. This quarter saw the successful start of Alisa Phase 2. To our operator.

Speaker 3

Production is ramping up ahead of schedule and is expected to reach capacity of 220,000 barrels of oil per day by the Q3 of this year. Over to the operator. Combined with Liza Phase 1, we'll bring our total production capacity in Guyana to more than 340,000 barrels per day. Over to our 3rd project Payara is running ahead of schedule with a start up now likely by year end 2023.

Speaker 2

Over to the operator.

Speaker 3

The Yellowtail, the 4th and largest project to date on the Stabroek Block received government approval of our development plan

Speaker 2

to our operator who is

Speaker 3

on schedule to start up in 2025. Further adding to our portfolio, we have made 5 new discoveries this year that have to increase the estimated recoverable resources to nearly 11,000,000,000 oil equivalent barrels. To the U. S, we continue to grow production in the Permian Basin. In March, we produced about 560,000 oil equivalent barrels per day on pace to deliver a 25% increase versus 2021.

Speaker 3

Looking forward, we're also growing our globally diverse portfolio of low cost to Capital Efficient LNG Developments. In Mozambique, the 3,400,000 ton per year Coral South floating LNG production vessel to the operator to discuss our financial results. CorelSouth is on budget with the first LNG cargo expected in the Q4. Over to you. In addition to investing in high value opportunities in our existing businesses, we're also advancing opportunities in our low carbon solutions business.

Speaker 3

Over to you. During the quarter, we announced plans to build a large scale hydrogen plant in Baytown, Texas. We anticipate the facility will have the to capacity to produce up to 1,000,000,000 cubic feet of hydrogen per day. Combined with carbon capture, transport and storage of approximately 10,000,000 to tons of CO2 per year. This facility will be a foundational investment in the development of the Houston CCS hub, to the operator, which will have the potential to eliminate 100,000,000 metric tons of CO2 per year and represents a meaningful step forward in advancing accretive to Low Carbon Solutions.

Speaker 3

We also reached a final investment decision to expand another important carbon capture and storage project to our Helium plant in Wyoming. In addition, we received the top certification of our management of methane emissions at our Poker Lake development in the Permian. Over to Scott. We are the 1st company to achieve this certification for natural gas production associated with oil. At the end of the Q1, to the operator.

Speaker 3

We implemented a series of organizational changes to further leverage the scale and integration of the corporation, improve the effectiveness of our operations to our customers. We combined our Downstream and Chemical operations into a single product solutions business. To you. This new integrated business will be focused on developing high value products, improving portfolio value and leading in sustainability. Over to you.

Speaker 3

As a result of these changes, our company is now organized along 3 primary businesses: Upstream, Product Solutions and Low Carbon Solutions. To Mr. Chairman. These three businesses are supported by corporate wide organizations including projects, technology, engineering, operations, to safety and sustainability. Before I cover our financial results, I want to provide our perspective on the market environment.

Speaker 3

To the operator. In the Q1, a tight supply demand environment, primarily due to the low investment levels during the pandemic, to the operator for questions. Thank you, Steve. Thank you, Steve. Good morning, everyone.

Speaker 3

To the events in Ukraine have added uncertainty to what was already a tight supply outlook. Brent rose by about $22 per barrel to the operator for 27% versus the 4th quarter. Today, natural gas prices remain well above the 10 year historical ranges,

Speaker 2

to the operator for questions.

Speaker 3

The same tight supply to the Q1 of 2019.

Speaker 4

The impact of the impact of the

Speaker 2

impact of the impact of the impact of the impact of the impact

Speaker 4

of the impact of the impact of the impact of the impact

Speaker 2

of the impact of the impact of the impact of the impact of the impact of the impact of the impact of the impact of the impact of the impact of the impact of the impact of the impact of the impact of the impact of the impact of the impact of the impact of the impact of the impact of the impact of the impact of the impact of the impact of the impact of the impact of the

Speaker 3

impact of the to the operator to discuss the financial

Speaker 2

results with product prices lagging the

Speaker 3

steep increases in feed and energy cost. In our case, the U. S. Ethane feed advantage provided a significant positive offset to the operator to discuss this global view. With that market environment as the backdrop, let me turn to our Q1 financials.

Speaker 3

To our financial results. Earnings totaled $8,800,000,000 excluding an identified item, the after tax charge associated with Sakhalin 1. Over to you. As you know, we are discontinuing our Sakhalin operations in Russia, which represented less than 2% of our total production last year, to about 65,000 oil equivalent barrels per day and about 1% of our corporate operating earnings. As the operator, to our priority continues to be the health and safety of our people and the protection of the environment.

Speaker 3

Of course, we remain in full compliance with all U. S. Sanctions to the operator and are closely coordinating with the U. S. Administration.

Speaker 3

Turning to structural savings, we continue to drive further efficiencies, to now delivering more than $5,000,000,000 of annual savings versus 2019. CapEx totaled $4,900,000,000 for the quarter, to maintaining our strong balance sheet. Our debt to capital ratio remains in the low end of our 20% to 25% target range, to our net debt to capital ratio dropped to about 17%. We returned $5,800,000,000 to shareholders, of which about 2 thirds to the financial

Speaker 2

results in the form of dividends

Speaker 3

and remainder share repurchases consistent with our previous program.

Speaker 4

Over to Mr. President.

Speaker 3

We said during our corporate plan update in December that we expect to repurchase $10,000,000,000 of our shares. This morning, we announced an increase to the program, to the operator to provide you with a reconciliation of $30,000,000,000 in total through 2023. This move reflects the confidence we have in our strategy, to the performance we are seeing across our businesses and the strength of our balance sheet. Before I leave you with a few key takeaways, to the operator. Let me share one other decision we made this month with respect to our workforce.

Speaker 3

Continuing investing in our people and maintaining a strong culture, to our core strategic priorities and essential to achieving our long term objectives. As part of that effort, to Mr. President. We are tripling the number of employees eligible for stock grants by bringing in high performing employees at earlier stages of their careers. Over to our operator.

Speaker 3

Our goal is to increase our people's ownership in the company and importantly in our financial and operating results. To the operator. Secondly, in June, we will implement a 3% off cycle compensation adjustment in the U. S. To maintain competitiveness.

Speaker 3

Over to our compensation and benefits programs are a key element of our total value proposition that enables us to continue to attract and retain the best talent in the industry. Let me leave you with a few key takeaways. We had a strong Q1 and I'm proud of the organization's progress. Over to the operator to

Speaker 2

discuss the impact of

Speaker 3

weather on the upstream volumes and derivatives and timing impacts in the downstream have secured a strong underlying performance. To Mr. President. We anticipate an absence of these impacts and strong refining margins to position us very well in the Q2. To Mr.

Speaker 3

President. We are making outstanding progress on our high value growth developments in Guyana, the Permian and LNG. To our new Corpus Christi Chemical Complex is up and running ahead of schedule and generated positive earnings and cash flow in its Q1 of operations. Over to you. We have strengthened the balance sheet and are creating value for shareholders through an attractive dividend and increased share repurchases.

Speaker 3

To our operator. We are advancing hydrogen, biofuels and other low carbon solutions consistent with our intention to lead in the energy transition, to leveraging our competitive advantages of scale, integration and technology. Finally, we are evolving our organization from a holding company to an operating company to better serve our customers' evolving needs and grow long term shareholder value. Before we take your questions, I want to acknowledge the very real impact the to the high prices we're having on families all around the world. You may recall that we anticipated this in 2020 to the industry investment levels well below those required to offset depletion.

Speaker 3

That is why we worked so hard to preserve our capital expenditures during the depths of the pandemic, to ensure that additional production is available to meet the eventual recovery in demand. Today, that long term focus is paying off to the growing production of Industry Advantage Supply. We are continuing to focus on the fundamentals through our ongoing investment in advantage projects to the low emission initiatives to ensure that we can continue to meet the critical needs of people all around the world reliably and affordably well into the future.

Speaker 1

Thank you, Darren. One last piece of housekeeping I wanted to mention is that ahead of the segment reporting change next to the operator. We plan to provide you annual and quarterly information for the past 5 years using the new reporting segments to assist you with your modeling. To our next question. We plan to post the new data on our website around mid June.

Speaker 1

Also, please note that starting with this call, we ask our analysts to limit themselves to a single question, so that we can fit in questions for more people. However, you may remain on the line in case clarification is needed. Over. And with that operator, please provide the instructions and then open the phone lines for the first question.

Operator

Over to Mr. Driscoll. The question and answer session will be conducted electronically. We'll take our first question from the line of Phil Gresh with JPMorgan.

Speaker 5

Yes. Hi, good morning, Darren and Cathy. Over. So I guess my question is a little bit of a 2 part question then. The buyback $30,000,000,000 over 2 years.

Speaker 5

To the operator. Previously you talked about I think $10,000,000,000 mostly in 2022. So should we assume the $30,000,000,000 essentially ratable $15,000,000,000 this year? And then to you. If that's the case, it still seems like there's a lot of excess cash potentially building up at strip prices.

Speaker 5

So how do you think about to any excess cash, debt reduction, etcetera, given where the leverage is versus targets now? Thank you.

Speaker 1

To you. Great. Thanks very much. So look, we don't know exactly how long the strong market conditions that we're seeing today are going to persist. To you.

Speaker 1

And we've learned some pretty tough liquidity lessons during the pandemic. So our cash balance has been building a bit. You would see that it was 11,000,000,000 over to you as we ended the quarter. So you should expect with the backdrop of these strong market conditions that even with the higher buyback to the program that we announced this morning. We would be building our cash in the near term potentially between $20,000,000,000 to $30,000,000,000 over time.

Speaker 1

To you. And so that really addresses our need for flexibility in what's an incredibly uncertain environment and ensuring that we'll continue to to appropriately invest in the business and sustain the share repurchase program that we talked about through 2023. To you. In terms of just how to think about the pace of the program, it's up to $30,000,000,000 through the end of 2023. To the operator.

Speaker 1

We obviously got $2,100,000,000 done in this quarter. You should think about us looking to get up to a ratable pace And that roughly we'd be looking to get $15,000,000,000 done a year, again looking to sustain the program to more consistently over this 2 year period. So that's how I would think about kind of roughly where we see our cash balance and just looking to maintain to a lot of flexibility in what's a pretty uncertain environment. And we did learn some real lessons during the pandemic. We used to try and hold our cash balance, call it, between $3,000,000,000 $5,000,000,000 and run a lot of commercial paper.

Speaker 1

And when the pandemic hit, to the company. So we're going to be a little bit more conservative here in the near term.

Speaker 2

To the operator. Your next question comes

Operator

from the line of Jeanine Wai with Barclays.

Speaker 6

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

Speaker 3

To you.

Speaker 2

Good

Speaker 6

morning. Good morning. Our question is related broadly to your global gas opportunities. To you. Can you talk about how you see the evolution of the U.

Speaker 6

S. Market and how do you see certified gas playing a role in U. S. Supply? And to the operator.

Speaker 6

I guess, do you intend to really look for a global outlet for a portion of your U. S. Gas? And we understand that Golden Pass that provides a great opportunity to capture the spread, but maybe are you thinking about some other opportunities besides Golden Pass? Thank you.

Speaker 3

You're welcome, Jeanine, and good to hear from you again. Just maybe a broad comment on the LNG business. Obviously, as we're seeing across each of our sectors, over. The pandemic had a pretty profound effect with respect to deferring, delaying capital spend and therefore additional over to the next question. And as the pandemic has subsided and demand has recovered, we're seeing very tight markets and seeing that play out really around to the world, obviously, the significant impact on Europe.

Speaker 3

And then with the Ukraine and the situation there that has added a to significant additional level of uncertainty around supply. And so I think a very dynamic market and a very high price market. Over. And what we've seen in response to that is basically very full capacity utilization all around the world, maximizing over to the amount of LNG moving. Obviously, we've got our coral LNG starting up later this year, which will help to contribute and ease some of that tightness.

Speaker 3

And then you mentioned Golden Pass, which is an important leg of our strategy of making sure that we have to the next question and answer session. Thank you. Thank you. Thank you. Thank you.

Speaker 3

Thank you. Thank you. Thank you. Thank you. Thank

Speaker 4

you. Thank you.

Speaker 2

Thank you. Our next question comes from the line of Chris Worthington. Thank you. Thank you. Thank you.

Speaker 2

Thank you. Thank you.

Speaker 4

Thank you. Thank you. Thank you. Our next question comes from the line

Speaker 3

of over to our strategy and analogy going forward is making sure that we've got barrels that we can then move and trade in the marketplace over to the operator and move across the different regional demand centers. And so I think we're going to continue to look for opportunities in LNG. It's an important part of to the portfolio. We've got opportunities in PNG that we're progressing. Obviously, additional investments in Mozambique over in the future as well.

Speaker 3

And so I think it'll be a very important foundational layer of over to supply and a really important part of our overall business offering.

Speaker 1

And I would just add you asked a little bit about that top rating that we got on methane management in to the next question and answer session. And we would say we really see a market over time building for lower emission to the to the consumer and consumer products, right. And we'd say that's consistent across our business, but we definitely are looking to play into that going forward.

Speaker 3

To Yes. I would just add to that. Obviously, that would be a benefit, but it's certainly not the main driver with respect to making sure that our operations to the operator. We have very low emissions and very low ethane emissions. And so that's a core part of our to commitment in running these facilities and to the extent the market pays a premium for that.

Speaker 3

That's an advantage that we'll look to take advantage of.

Speaker 2

To the operator.

Operator

Your next question comes from the line of Devin McDermott with Morgan Stanley.

Speaker 3

Hey, good morning. Thanks for taking my question. Over to you. I wanted to ask about some of the structural cost reduction goals. You continue to make good progress there.

Speaker 3

To the operator. But the question is, can you add a little bit of color around what you're seeing on just broad cost inflation, labor and otherwise and how, if at all, that impacts some of those goals and targets over time? Over

Speaker 2

to you.

Speaker 1

Sure. So I'll start out with just saying, we feel good about the progress that we're continuing to make. At the end of the to the Q4, we had said we had gotten to about $5,000,000,000 in structural cost savings relative to 2019. We're now at $5,400,000,000 So I'd say over to the operator. Overall, we feel really good about that progress.

Speaker 1

Obviously, we have now put in place the new organizational structure, which should to drive incremental efficiencies on top of just driving better operations, faster speed to market, better to a fair amount of both energy and feedstock inflation coming through the business in certain areas that put a little bit of pressure on margins. Over to the operator. Overall, in terms of how we're managing that, it flows through 2 parts of the operation. So one is on CapEx. To you.

Speaker 1

We feel really good about where we're at there because during the pandemic, we really took the opportunity to extend contracts on work that was coming forward. So I'd say while the shorter cycle work programs obviously have some inflationary pressure, the teams are working really hard to offset that. To you. Overall, I'd say we really try and lever master service agreements, self managed kind of procurement. To you.

Speaker 1

We utilize a diverse set of global contractors across the globe in trying to really manage inflation. So over. Through the quarter right now, I'd say we're doing a pretty good job of offsetting it, but it's obviously something that we're watching really closely.

Speaker 2

Over to you.

Speaker 3

I would just emphasize the point that Kathy made, but I think one worth remembering that this longer term view that we took during the pandemic to the operator to continue to maintain a level of investment. We also recognize that as economies recovered and demand over to the operator. Picked up that we would potentially see inflation. And so we were very focused on in anticipation of that trying to lock in to the pricing and savings during the low points that we could then take advantage of early on in the recovery, which is

Speaker 2

over to the operator and the final point I would

Speaker 3

make is within the organization, it's working hard and our leadership team is working hard to offset inflation and

Speaker 2

we're doing a good job

Speaker 3

of that. We think to Jim and we think we've got a pretty good handle here certainly in the short term. Obviously, we'll see how the market develops. To

Speaker 2

the operator. All right. Next question will come from

Operator

the line of Neil Mehta with Goldman Sachs.

Speaker 7

To you. Yes. Good morning, team. I have a question we want to focus on was around Downstream. And Darren, you know to the refining business really well given your leadership role there over the years.

Speaker 7

And so I'd love for you to kind of characterize how you're seeing to the crack and refining market environment, which is obviously extraordinarily strong. And then put that in the context of the quarter, which was softer in Downstream. But to to your point, I think a lot of that was timing effects. And it feels like things should sequentially move in the right direction as you move into 2Q. To the big picture question around the refining macro and then tie it into how you're thinking about the sequential move in your earnings power from here?

Speaker 2

Over.

Speaker 3

Sure. And good morning, Neil. Yes, I may again start and I feel like we're going to be a little bit of a broken record with respect to the anchoring a lot of what we're seeing in the market today across our sectors to the pandemic. And you'll recall as we are going through that very deep down cycle where demand for fuels products to drop significantly. There was a lot of refinery rationalization.

Speaker 3

In fact, refineries were shutting down at a much, to a much higher rate than historical averages, 4 times if not higher. And so you had a lot of to capacity coming out of the marketplace. There were new facilities that were planned or in progress primarily in the Middle East and out in Asia. Those got over to deferred and delayed because of the crunch. And so you've got, I think, this period of time where you've taken a lot of capacity out and new capacity that was planned or in progress has to the operator.

Speaker 3

It's been deferred and delayed. And so we've got a period with lower supply. And then of course, as demand has picked up, that has led to this very tight market and the higher margins that we're to seeing what's compounded that then is the important role that Russia plays in supplying markets around the world. And with the uncertainty associated with that supply and potential impacts of additional sanctions that's put,

Speaker 4

to the operator.

Speaker 3

I think additional concern and anxiety in the marketplace, which is leading to a very high margin environment. 1, frankly, that I don't think is over to a sustainable one and 2 good for economies around the world. So I think we're in a bit of a very tight to the timeframe. And as you've talked about the Q1, obviously, we saw that evolve over the Q1 with kind of rising to margins in January, February, March and now into April, very high margins. And so I think that's something that we're going to see for quite some time, certainly here this year and into next depending on obviously how demand plays out.

Speaker 3

Final point I'll make, which you touched on is you're right, this quarter over to the operator. It reflects that ramp up of margins, so you're not really seeing the healthy market that we're experiencing right now in the Q1 results that will, to the Q2 and then some of the timing impacts we expect to see unwind. Maybe I'll let Kathy just touch on those.

Speaker 1

To you. Sure. I'm happy to do that. And just to add a stat, our March refining margin was about $4 higher than the average in to the next quarter. So that's kind of reflecting that ramp up that Darren just mentioned.

Speaker 1

And then obviously, in our prepared script, you would have seen us talk a to a fair amount to timing impacts that impacted profitability in Downstream for the quarter. I think everybody understands the mark to market on open derivatives, to the operator for questions. So I won't talk about that, but we had another $590,000,000 of other timing differences. About 400,000,000 to the operator. That was also tied to derivatives.

Speaker 1

We had $200,000,000 that associated with cargoes where the derivatives actually closed in March And then they reversed when the physical deliveries occurred in April. So I'd say the way you should think about that is we took a $200,000,000 bad guy over in March and we will see a $200,000,000 Good Guy in April. We also had $200,000,000 associated with settled to derivatives that we just use to ensure pricing of our refinery, crude runs is ratable, right? The way you should think about that is it's

Speaker 2

to the question and answer session. It's kind of a wash over time.

Speaker 1

Sometimes that pricing mechanism gives us a positive in a quarter, sometimes it gives us a negative in a quarter. Over time, it's just a wash. To And then the last impact that we talked about was just commercial pricing lag, right? And the way I would think about that is we were in a steep rising to the price environment over the quarter. And so we had pricing that was a little bit lagging.

Speaker 1

If we're in a stable environment, that pricing will catch up. To the operator. If pricing kind of turns to a downward curve, then we'd actually get a little bit of a benefit. So that's how I think about it as you're trying to the next question. This model, the evolution into the Q2 here.

Speaker 1

The bottom line is, obviously, we're carrying a lot of positive momentum as we stand here today.

Speaker 7

Over. Thanks, guys.

Operator

Next, we'll go to Doug Leggate with Bank of America.

Speaker 8

Over. Thanks. Good morning, everyone. Let me first of all thank the Investor Relations team for the better presentation of results. So thanks for that, to Jennifer, but I'm also we're losing a question here, so I'll temper the enthusiasm, but I'm kidding.

Speaker 8

Thank you. To So guys, my question, Darren and Kathy, is on your balance sheet. Darren, going back some years, I guess, a couple of years ago, you talked about don't expect to Exxon to go back to the days of 0 net debt. We're going to have a more efficient balance sheet. I just wonder if you can to frame out for us today then what we should expect that to look like, because obviously that speaks to go forward cash distributions, buybacks, to cash on hand, the whole thing and obviously dividend policy.

Speaker 8

So that's my question for

Speaker 2

today, please.

Speaker 3

Yes. Thank you, Doug, and Good morning to you and appreciate your compliments to the IR team. I know they've been working hard to make sure that they're improving the transparency and to giving you the information that you need to help understand what we're doing here and the business results that we're achieving. I think to your point on the balance sheet, and you'll remember to what we started back in 2018 was this countercyclical approach where we leaned on the balance sheet to the DEPS, made those investments with an eye on the fundamentals and the expected recoveries and to take advantage over to the next question. With investments and facilities in the ground and then reinvest and lean into the down cycles.

Speaker 3

And I would tell you over. Generally speaking, that continues to be an ambition of ours and part of our strategy is to try to drive the countercyclical investment approach, which is over to the operator for questions. Okay. So that's I would say one philosophy. To the operator.

Speaker 3

Obviously, it is tempered by just the availability of cash and how deep and high the swings in this commodity cycle to our end. So I think part of that balance sheet and I'm going to toss it to Kathy here in a minute to let her make some comments on it, but part of that It's going to be a function of where you're at in the cycle and how severe that cycle is. And so there will be periods, I think, where you see some movement over to the operator for questions. And then, how the balance sheet is structured and based on where we're at and where the revenues are. To the operator.

Speaker 3

And I would also tell you though that it's not what's not going to change is being very focused on making sure that any investment that we make is advantaged across the cycle. To you. You'll recall my definition of disciplined investing is not an absolute level, but more of making sure that anywhere you spend money that you're convinced to you. You'll be the low cost supplier with an advantage versus the rest of the industry. That will be successful as you move through the cycle.

Speaker 3

Kathy?

Speaker 1

Yes. And then the only thing that I would add to that, Doug, is to Occasionally, I get the question of why don't I just go and kind of pay off all of the debt you have as a priority. And I'd say we're really comfortable with the level of debt to the operator and the operator to discuss the financial results that

Speaker 6

we have and obviously our gross

Speaker 1

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

Speaker 8

Okay. Thanks folks.

Operator

To Steven Richardson with Evercore ISI.

Speaker 9

Good morning. Thank you. Another question on the downstream if I could, Darren. I wonder if I could ask on the circular polymer efforts to some of the things you're talking about in terms of recycling in the plastics business. There's I guess the question is the overall approach between over to mechanical and molecular recycling and how are you seeing that market evolve?

Speaker 9

And is this conversion of existing facilities or over to new reactors and then also what are your expectations for the returns in that business kind of through cycle?

Speaker 3

Sure. Yes. Thank you, Stephen. I think You touched on, I think, a really important part of our strategy as we look at going forward, not only in the plastics and to plastics recycling, but also in biofuels. And I think what people have thought about with respect to our refining footprint and the size of that over to Perrin that as fuels traditional fuels demand declines that those assets become disadvantaged.

Speaker 3

To Frankly, given the integration that we have with those facilities, if you think about our chemicals and refining facilities integrated, which are now reflected in our product solutions business, the to the fact that we've got base stocks in lubricant facilities integrated with those. They are fairly robust platforms with large scale and low cost. And what we see is the opportunity that as demand shifts to convert those facilities to produce more lower emissions fuels through biofuels to you to utilize existing equipment for advanced recycling plastics. And that's what you've seen us do in Baytown with conversion of some of our over to heavy cracking facilities on the refining side used to recycle waste plastic. To the operator and we've got pretty ambitious plans in that space.

Speaker 3

We like what we see there. It gives products that have all the same attributes over to the

Speaker 2

next question. Thank you.

Speaker 3

Thank you. Thank you. Thank you. Thank you. Thank you.

Speaker 3

Thank you. Thank you. Thank you. Thank you.

Speaker 2

Thank you. Thank you. Thank you. Thank you. Thank you.

Speaker 2

Thank you. Thank you. Thank you.

Speaker 3

Thank you. Thank you. To bring an advantage there, with 1, our facilities, but 2, our technology and then 3, with our marketing over to the organization with respect to the marketing of those products. So feel generally good about that. We've got plans to drive that advanced recycling to 500,000 metric tons by to 2026 should have 30,000 metric tons in place by the end of this year.

Speaker 3

So I think in total, we like what we see there. The market today over to the operator to answer your questions. And there is a premium out there. So right now, I think that looks pretty attractive. I suspect with time

Speaker 2

over to the operator.

Speaker 3

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

Operator

To Jason Gabelman with Cowen.

Speaker 10

Over. Hey, morning. Thanks for taking my question. I wanted to ask a question about your international gas footprint and the maintenance cadence, over. Because it seems like you've mentioned in the slides that gas production over to the operator.

Speaker 3

It's going to

Speaker 10

be higher than it typically is in 2Q and 3Q, but you do have higher scheduled maintenance. To So I'm wondering if any of that maintenance is in the European gas footprint. And then more broadly, If you're seeing in the industry in Europe, more tempered declines from to European Gas into the summer, just given where prices are and if you expect that to be a feature of the market moving forward? Thanks.

Speaker 3

Over. Yes. Good morning, Jason. Yes, I think you've touched on the point that we made in our Q2 outlook with respect to seasonality, which has historically we've seen going into the Q2 a significant drop in demand for gas.

Speaker 2

To the operator.

Speaker 3

And given where the markets are at today and the level of inventories around the world, our expectation is we're not going to see the same level of to the demand change quarter on quarter. We try to indicate that in our outlook

Speaker 2

to suggest that we won't see the

Speaker 3

same level of to seasonality going forward. I think and as I said earlier with response to Janine's question, we do see this market being fairly tight over to you in the short term. Obviously, the industry is working hard to supply that, but it will the time cycle on investments and bringing additional supply on is fairly long, particularly in the context of where demand is at today and the tightness in the marketplace. So I think that's going to continue to

Speaker 7

over to you for

Speaker 3

a while. And as you move as demand declines, I think we'll see supply start to move into inventory. And so that to the purchases will move from meeting current demand out in the marketplace to meeting the demand to fill inventory to make sure that inventories are to the well positioned as we move through the summer and then back into the fall and into the winter season that the markets are well supplied. And then the final point I'd make there is obviously with what's happening in to Ukraine. There is a wild card there that I think most economies and governments around the world are going to make sure that they're trying to mitigate the potential implications over to the operator for questions.

Operator

To Sam Migelin with Wolfe Research.

Speaker 11

Good morning. How are you?

Speaker 2

Over to you. Good morning, Alex.

Speaker 11

Question on actually just a longer term sort of capital allocation over to the question in the context of what's become kind of conventional wisdom that NOCs around the world are very interested in to accelerating activity here and bringing new resource to market. But the majority of NOCs with the exception of a few rely on to foreign investment and partners like ExxonMobil and the industry on the independent operator side has framed over to a stable spending view over the long term, which has been something that's been very helpful for investors to have that multiyear to CapEx range. So I'm just wondering your perspective on how that squares. If the industry is going to get pulled into over to the imperative of NOCs to spend more and do more or if you think these steady ranges of CapEx are over to Achievable even within that context. Thank you.

Speaker 1

Sure. I'm happy to take that, Sam. So first of all, I would just remind you that we do have CapEx guidance that's out to the operator. Obviously, for this year, it's 21 to 24 and we've talked about kind of through 2027, a range of 20 to 25. Now within that, to the operator.

Speaker 1

We always try to leave ourselves a little bit of room understanding that there's these opportunities that can come up in the future. And obviously, we've made to some investments in the type of opportunities that you're talking about in the past. And by the way, Golden Pass is a JV that we have over with foreign investment that sits behind it as well. So I'd say we don't feel any particular to the operator. I just referenced back to what Darren said earlier, which is we spend capital when we have confidence behind the projects and to the returns that those projects are going to offer, right?

Speaker 1

And we're, I'd say, very, very disciplined at pressure testing those projects to make sure they're resilient across, I'd say, wide set of market environment given the cyclicality to the operator to discuss

Speaker 2

the financial results that we have in the business. So we feel

Speaker 1

great about the opportunities that stand in front of us right now. Obviously, we've got to our low cost of supply barrels that we're investing in, be it Guyana or the Permian, Brazil. Darren mentioned the LNG to the projects that we're moving forward, which we feel really good about. Obviously, we've got in the product solution over to our space investments that we continue to make to support growth in high value products, right, and over to Keith, I'd say optimizing our downstream circuit. So we feel good about that.

Speaker 1

If there's opportunities where we feel like there's good returns to be earned. We'll certainly look at potentially participating in those opportunities. But we're going to be very disciplined in our approach as you should expect from us.

Speaker 3

Yes. And I would just add to that, Sam. If you look at the work we've been doing with our organization, the changes that we've made over

Speaker 2

to the operator and the

Speaker 3

structure consolidation of capabilities across the corporation. One of the changes we announced on April 1 was a to the technology organization that combines technical skills and capabilities and the engineering capabilities across the corporation. To you. We've seen really good results doing that in the projects area. We think we've got a real opportunity in the technology area to realize similar benefits in terms of to effectiveness on top of whatever efficiencies that might come from that work.

Speaker 3

And I would say that effectiveness and that to the concentration of the technology and really getting the organization to focus on where we can add unique value and grow competitive advantage to the operator. It's going to be a really important part of continuing to be a valued partner with NOCs and others all around the world. To our strategy here is to make sure that we're an essential partner that when NOCs and other resource holders are want somebody who can to effectively and efficiently develop the resource and do it in a sustainable manner that the first name to come to mind is ExxonMobil and to the operator. We bring those unique capabilities and I would tell you I have enormous confidence that that's what's going to happen, that to the things that we can see in the pipeline, the opportunities that we have in front of us to become more effective at what we do, I think are huge. And I'm looking forward to then leveraging that to the operator

Speaker 2

for questions.

Operator

All right. Next question will come from the line to Raj Borkhataria with RBC.

Speaker 2

Hi, thanks for

Speaker 12

taking my questions. I had a question on Guyana. The 4th to FPSO, which you just sanctioned was large around 250,000 barrels a day. I was just wondering, in your base case plans, to you. Are you assuming a similar size for the later APSOs at that rate?

Speaker 12

And if I could over. Atak, cheeky's second question. A few days ago, there was an announcement from the DOE around additional over to Expert Pastry from Golden Pass. I was wondering if you could just help me understand whether that was just an administrative thing, whether that was you sort of relooking at the project or is it some kind of future proofing ahead of debottlenecking there? Thank you.

Speaker 3

To you. Yes, sure. On Guyana, Raj, I would tell you that as you know, we are having tremendous success with respect to to the discovery is there and the characterization of that resource. And I would just say that our teams have been very focused to the operator to make sure we have a good characterization of that resource, which will then be a really important part of how we to you to develop that resource in a cost effective way to make sure that the cost of supply and obviously the returns for those projects lead industry. And so over to Bob.

Speaker 3

As we look at that, these bigger production facilities to make a lot of sense when you have the resources to support and because it brings your unit cost down, brings down your cost of supply. To you. As we look at extending those developments in other areas of the resource base, it will be a function of what we find, but I would say we would lean towards these larger developments. And we'll obviously lean towards extending some of the current developments that we have and taking advantage of over to whatever synergies we might have with those facilities. And so I wouldn't say there's a single recipe here.

Speaker 3

It's really tailoring the recipe to make to the operator that is optimized for the development opportunities that we've got in front of us and that's going to evolve as we better characterize to the resource base. And I will just say with respect to Golden Pass, that project and the work that we're doing there, we feel good about the progress that we're making and we're on schedule.

Speaker 2

To the operator.

Speaker 12

Okay. Thank you.

Operator

To Roger Read with Wells Fargo.

Speaker 13

Yes. Thank you. Good morning. Over to the Guyana question. And I was to you.

Speaker 13

I wanted to clarify one thing there and then maybe just sort of a contrast to your Permian operations given Permian production is higher today, but Guyana Resources It's probably larger. As we think about the 11,000,000,000 barrels of resource, is that to you. Should we assume that's exclusively oil at this point? I mean, that's been kind of our baseline given the type of production coming out. And then how should we think about the long term over to the gas situation there, the opportunity.

Speaker 13

And when I said versus the Permian, kind of thinking about those 2 as we look to the middle and latter part of the decade.

Speaker 3

Yes. Good morning, Roger. I would say over to the resource is a mix and depending on where you're at within the Stabroek Block, that mix over to the changes. Our development priorities is weighted towards liquid. So I think what you'll see in our plans and the way we talk about over.

Speaker 3

There is a bias towards liquid today. And then with time, we'll see how those developments evolve. To the operator. We're doing some things with the government of Guyana to bring gas onshore to help deliver more cost over to the efficient and environmentally better power to the people of Guyana, give them a much lower cost energy source to a much cleaner energy source. And so there is some development gas in that space.

Speaker 3

So but I would say generally liquids weighted. And to the operator. Obviously, as we move through the field and run the economics, we'll develop the resources that optimize to capital and grow returns.

Speaker 2

Over. Thank you. All right.

Operator

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

Speaker 2

Over. Good. Thanks.

Speaker 14

Maybe one on capital allocation. As we think about your to capital budget. So it's not just for this year, but over the next few years and the range that you have within those budgets. Is that should we think about that range as primarily driven by timing or should we is there a possibility that higher commodity prices to you. Should we think of that maybe pushing towards the higher end of the range through some combination of inflation?

Speaker 14

Or to the operator. Are there opportunities in the portfolio to deploy a little additional organic capital, whether it's over to short to mid cycle infill drilling tieback opportunities. Does the higher commodity price open up the door over to a little extra capital deployment opportunity there.

Speaker 3

Yes. I'll just to Kathy for any additional comments. But I would I think the short answer is no. And I think we have tried to emphasize looking through the cycles, looking at the long term and making sure that the investments that we make are robust to the whole of the cycle. To the operator.

Speaker 3

You'll remember we were investing pretty heavily when prices were down in anticipation of longer term fundamentals. I would say while we're in a very tight market today, we're not going to to let that distract us from our focus of making sure that we have low cost of supply over to industry leading advantage projects. And so that remains the focus on the to short cycle stuff. I think to the extent that we stay within our, admittedly advantaged approach in the manufacturing process that we've set in and over to the boundaries that we set with respect to the facilities that we've built and pre invested in, we'll continue to optimize to the operator to discuss the long ball game that we're playing in the Permian and the unconventional space.

Speaker 1

To you. Yes. And I would say, certainly timing over what's a relatively long term period is something that we're trying to give a little flexibility for. I'd actually point to to what we talked about on the Payara Guyana project. Originally, we said that was going to start up in 2024 and now we're saying to the operator.

Speaker 1

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

Speaker 2

Over. Great. Thank you. Welcome.

Operator

Next, we'll go to Paul Cheng with Scotiabank.

Speaker 15

Over. Thank you. Hi, good morning.

Speaker 2

Good morning.

Speaker 15

First, hopefully, that also won't use my quota. Yes, I want to compliment IR over to the new format on the call as well as the increased disclosure, we really appreciate. Over. I have to apologize first because I want to go back into the inflation question. Kathy, to you.

Speaker 15

If we're looking out for your next several years, do you have a number you can share what percent of your CapEx to Yes. Pretty much that have some pretty fixed pricing and what percent is going to be subject to the inflation factor. To And also in your presentation, you talked about the 3% off cycle compensation adjustment. Could you quantify that? To you.

Speaker 15

How big is that number for us? Thank you.

Speaker 1

Sure. So overall, I think we talked a little bit about inflation on to CapEx and the fact that certainly in the near term, we're feeling pretty good because we did a lot of work during the pandemic. So we had caused some projects to you. During the pandemic, we did a lot of work to actually put the contracts in place, like finish the engineering and put the contracts in place at a point where, I'd say there was to some deflationary pressures in the market. So as it relates to our overall capital projects, we feel pretty good over the next couple of years.

Speaker 1

And obviously, to you. Strategically, the timing of when we do the engineering, when we go out to procurement is something that we're always looking at and taking into to consideration. And then I mentioned the fact that doing our own procurement globally to make sure that we're getting globally competitive bids It's something else we do. We do spend a lot of money over the years as we're looking forward on the boats associated with to and again, we approach that in a really strategic manner, so that we're managing those projects to the lowest cost, getting the to the specific design that we need. So that's how I would really discuss what's happening with regard to inflation.

Speaker 3

Over. And I would just add that the salary action that we announced this morning we're taking won't be to the material and the analysis that you're doing, Paul. Our intention would be to continue to deliver on the efficiencies coming at the

Speaker 2

over to the operator to discuss

Speaker 3

the question that we had projected in our plan.

Speaker 15

All right. Thank you.

Operator

To Manav Gupta with Credit Suisse.

Speaker 16

My very quick question here is, at the start of the call, you indicated that to the Asian Chemical margins are kind of below mid cycle. And I just want to understand, generally, when crude moves up, to the operator. There is support for commodity prices. So there's 2 equations going on here, some capacity coming on, but crude is also moving up. So do you expect the margins to to remain below mid cycle for some time?

Speaker 16

Or do you think that higher crude could actually push up the ethylene margins and stuff in the over to non U. S. Region on a go forward basis. Thank you.

Speaker 3

Sure. Yes, I think it's over to an unusual time we've got in the chemical market just because we see a level of dislocation between what's happening in Asia and what we see happening in the Atlantic Basin. I think we made reference in the comments that over to our North America footprint in chemical and the ethane advantage that we have is actually helped to mitigate this broader downturn that we're seeing with the global chemical markets, which are heavily weighted to or weighted towards the downturn that we're seeing in Asia. And I think as you look at crude prices coming up and the marginal supply in olefins being liquid cracker over to NASHSA feed that as that crude price goes up, your feed goes up, your NASHSA feed goes up. And so you've got cost to the operator to discuss the market

Speaker 12

demand and because of some

Speaker 3

of the logistics constraints and ability to kind of connect the markets demand somewhat dislocated and so to you've got oversupply in a market like China where you see some of the demand coming off with the lockdowns and logistics constraints. To Strain. So I think you've got we're in a unique period right now where you're seeing some regional imbalances and inability to close those to the balance sheet and transportation. Difficult to say how long it's going to last, but I think ultimately as markets open up, we'll see those over to Equilibrate with again, I think if crude remains high, my suspicion is that ethane to the operator. And I think cracking will continue to be advantaged, and then that will obviously move as crude prices move with respect to gas prices.

Speaker 16

Over. Thank you.

Speaker 3

You're welcome.

Operator

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

Speaker 17

Over. Darren, thanks very much for the opportunity. I just wanted to return to Golden Pass, if I might, and a couple of aspects of the question. To the first is just can you expand on the marketing approach and how you intend placing volume? It's a very large project, but it's a project which to the best of my knowledge.

Speaker 17

It has very little by way of contract at this time. So to what extent yourself and your partner QP will over to how you'll be looking to market product. And just can you give us some indication on the phasing of the start up of the 3 trains? I presume when you talk about 2024 startup, to Russ, the first train, I guess, I'd expect 4 to 6 months or so between the start up of each subsequent train, but any guidance you can give there would be helpful. Thank you.

Speaker 3

Over. Sure. Good morning, Lucas. Yes, just to start on the back end of your question, you're right, Train 1 is we expect to start up in 2024 and then over to the remaining trains in 2025. And what the strategic drive behind that investment and that supply to the point was really getting a global a balanced global footprint with respect to LNG supply.

Speaker 3

And so that Golden Pass to the operator. Our facility gives us an anchor point within the Americas to take advantage of the U. S. Gas market and the developments that we've seen there to the supply potential that we see in U. S.

Speaker 3

Gas. And so that forms a really important anchor supply point and we intend to use that with the trading business that we're growing in LNG and use it as an ability to over to trade and oftentimes bridge as some of our other LNG projects are being developed to bridge and supply to between those projects that allow us to optimize and make commitments for projects with flexibility in terms of using over to Golden Pass as a supply point and then to also just trade in the spot market. So I think it's going to give us a lot of flexibility to supplement our longer term contracts for our bigger projects, but to also participate in the spot market.

Speaker 17

Over. So there's no intent to contract some of the volume in what could be a very constructive market for pricing over the next 2, 3 years for those who have supply coming on this near term.

Speaker 3

I would tell you that the LNG organization is going to basically over to develop that portfolio in the way that they think maximizes the value of it. So I wouldn't take anything off the table. I'm just I'm suggesting that it's we've got a lot of optionality and flexibility and the expectation is the LNG business and the individual running that take advantage to the operator to maximize the value, how I would characterize it.

Speaker 17

Darren, thanks very much.

Speaker 2

Over. Welcome.

Operator

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

Speaker 3

Over. Thank you, Allison, for squeezing me in. My question is on the Permian. Just wondering, I'm currently seeing you all running somewhere around 16 rigs to 5 Spreads. I'm just wondering, will this continue to be around the level of activity needed in order to achieve that, I think your goal around that 25 to your Permian growth plans.

Speaker 3

And I was just also wondering if you could talk about maybe just broadly the degree of inflation you're currently seeing there? Over. Yes. I would tell you that the plan that we had and we've talked about with respect to the Permian specifically is somewhere between 10 12 rigs and then 6 to 8 frac crews, something like that. And we're basically, over to Mike.

Speaker 3

In line with that plan right now and part of that is making sure that we're the developments that we're pursuing are consistent with to the base infrastructure, the technology and the capital efficiency approaches that we've built into that development over to the operator for questions. That tends to drive what we're doing there. I think with and Kathy has touched on, we again had anticipated the market recovery and some of the tightness and so had developed some contracting strategies and partnering with suppliers to try to mitigate that impact that's paying off. To

Speaker 2

the operator. We're seeing that advantage here

Speaker 3

in the Permian. Permian, eventually that obviously will roll off. Some of the consumables and to some of the labor tightness that we're seeing in the Permian. Obviously, that's starting to impact us as well. So we are seeing inflationary to the expectations that will continue to grow as the work activity opens up and as some of the logistics constraints get resolved.

Speaker 3

And over to you. We're basically we've challenged the team to try to manage that and to make sure that as we look at progressing development and grow that production that we're doing it in a constructive way and not undermining the cost of supply or the advantaged position those barrels over to where they sit in the supply cost to supply curve for the industry. So I think we're going to this disciplined approach that we to talk about is not so much a spend, but in terms of efficiency and making sure that everything every dollar we spend there is productive. And over to

Speaker 2

the next

Speaker 3

question. Well said. Thanks, Darren.

Speaker 2

Over to Beth.

Speaker 1

Thanks, Darren, and thanks everybody for your time and for your questions this morning. We appreciate that. We will post to the transcript of the call on our investor website early next week. Have a great weekend. Thanks.

Operator

Over to you. Thank you. Thank you.

Powered by Quartr
Earnings Conference Call
Exxon Mobil Q1 2022
00:00 / 00:00