ExxonMobil Stock

Good morning. I'm going to kick off a minute or 2 early. I'm delighted to welcome you to day 2 of the 40th Barclays Energy and Power Conference.

We have a jammed pack day of conversations fireside. So really looking forward to the conversations ahead.

I wanted to kick it off because first, delighted to bring Neil Hansen, the CFO of ExxonMobil to kick us off on this day 2. And we also have some audience polling questions that we wanted to ask you to participate in with the clickers that's right in front of you.

So Neil, why don't you join me on stage?

And let's start with the audience polling questions. You can just correspond to the numbers that you think you believe corresponds to your views.

First question, when do you expect the Straight of Hormuz crisis normalize? So either before midterm, by year-end, first half of next year or now might be the new normal? It won't be interesting to see.

You might be surprised, but this is very similar to how we develop our company plan, just through polling.

Well, it's consensus [indiscernible]. Yes, that's the longer this drag down, it's not surprising.

The next one, please. So given that view, how do you think about where Brent price is going to average next year, the strip this is as of last Friday 79. So 70, 70 to 80, 80 to 90 above 90?

All right. We're still pretty close to strip with a bullish tilt. The last one, please. So over the next [ 12 months ], which subsector of energy do you think has the most upside? Integrated E&P services, refining, midstream and utilities?

All right. It's actually pretty similar to what we were seeing yesterday as well. Well, thank you so much for participating and Neil, thank you for being here and kicking us off. So I know you have some prepared remarks, why don't we kick that off to start.

Excellent. Thank you, Betty. And it's great to be back at the Barclays Energy and Power Conference. Last time I was here was in 2019 when I was the Vice President of Investor Relations. So it's great to be back. And before we get to the Q&A, I just had a couple of slides that I wanted to share with the audience around a few things that we think.

At ExxonMobil, we do really well and that are fundamental to how we create long-term shareholder value. This is our cautionary statement, brief cautionary statement. I won't go through it, but I will be making some forward statements, and we have more information on our Investor Relations website.

So these are three foundational pillars at ExxonMobil that underpin a lot of what we do and underpin our ability to create long-term shareholder value. We also think these are three things that transcend markets. They transcend commodity price cycles. They will enable transition to different energy systems. They allow us to identify new products, and they differentiate us from competition. And importantly, they help us to create long-term shareholder value.

So if you look at each of these three, technology, again, we think this is fundamental to the ability to continue to improve, to continue to identify products that society demands and I'm sure we'll talk about it today. But one of the things we've referenced often is the focus on technology in the Permian.

We've got 40 complementary technologies that we're progressing with the focus on improving recovery and capital efficiency.

Project execution this is a capital-intensive business. And the ability to execute projects well is core. It's a core capability and it is one we think that differentiates ExxonMobil. We are, on average, executing double the number of major projects relative to competition, and we're doing it at 20% lower cost and 20% faster than everybody else.

And then, of course, operations, the ability to maximize the assets that we have and to do that safely and reliably. And we recently centralized a lot of these organizations across the enterprise to capture best practices. And more importantly, really to redefine what we consider to be industry defining performance.

Operations is a good example. When we look at turnarounds compared to the last cycle that we went through turnarounds at our sites. We're at 30% lower cost and we're doing those turnarounds at 50%, shorter duration than we did previously.

And again, those three pillars underpin what we're trying to do, which is to grow long-term shareholder value. And that starts with investing in advantaged low-cost, high-return opportunities. And we feel we're advantaged in that area in terms of the portfolio that we have, and we're capitalizing on that.

And then, of course, once you invest in those projects or as you invest in those projects, the importance of having financial strength, we talk about our strong balance sheet, [ AA minus ] rated. Our net debt to capital, I think, is 11%. This last quarter, we reduced that by another $7 billion. That balance sheet allows us to continue to invest through cycles, through different markets when others have to pull back or they have to cut distributions, we're able to lean in as opportunities arise.

And then, of course, we want to share our success with our shareholders. When you look at the dividend, the dividend for us needs to be sustainable, growing and competitive. And all three of those elements are important. We've been able to grow the dividend for 43 consecutive years now, and that is, I think, 95% better than most of the S&P 500. And then, of course, share repurchases, we view as flexible tax efficient ways to return cash to our shareholders.

So I just want to end with that. Again, I think we're well positioned given the capabilities that we have in technology and project execution and operations. And as a company, we want to be defined by what we do well. not necessarily by the products that we produce. So with that, I'll turn it over to you to Betty.

Thank you. And these three foundational pillars are really differentiated Exxon long term. But I want to start the conversation on the macro front as we are still sitting through the largest supply disruption ever in modern energy market.

As you have -- Exxon has a front load seat to seeing what's going on across the board. So could you tell us in your view on where you're seeing the most resilience in the system? Where do you see the most distressed? What has the price to the moat so far?

Yes. I think a couple of high-level things that we've seen given what's happening in the Middle East. One is it's a stark reminder of the importance of providing affordable and reliable energy and products to the world. And you can see how central that is to economic progress, how central that is to living standards, our day-to-day lives. And I think this has been a stark reminder of that.

The other thing we'd tell you is the market fundamentals for the most part are working. And when you see a supply shock like we've seen in the oil markets, one of the things you're going to witness is a rush to try to increase supply. And we've seen unprecedented levels of release of inventory, both strategic commercial reserves but also strategic petroleum reserves.

You've seen the supply side. You've seen countries like the U.S. and Brazil increased their supply and at the same time, to help offset that, you've seen price play the role of demand destruction. You've seen demand destruction in chemical and refining. And so for the most part, the oil markets have settled into a fairly range-bound price scenario.

We were a little surprised, I think, by the amount of inventory that was available to be released.

On the refining side, we would tell you that's where the pinch point is today. And that is somewhat driven by what's happening in the Middle East, products not coming out, but also the crude that's needed in Asia to run refineries there. But it's also what's happening between Ukraine and Russia. And then we're also seeing the Chinese are not exporting products. And so you're seeing a significantly higher margin in refining.

So when we look at the entire energy system, today, we would tell you that the supply shock and the pinch point really is around refining.

And so what lessons that we learned? I -- again, back to the fact that what we do is really important to society. And then I think you're also seeing the market behave relative to long-term fundamentals terms of supply and demand and how they respond to these types of situations.

I think the market -- everything is just showing really the value of the integrated model because the stress can move from one part of the value chain to another. And you guys talked about the value of supply chains, trading optimization and commercial optimization. Can you speak to how you find maybe the competitive advantage assessed within the integrated model that you've been able to deploy?

Yes. I think what we believe in and have seen is there are benefits to physical integration. And one of the things that we've done over the last few years is to organize ExxonMobil along the value chain. And the reason we do that, one is when you see the end to end of a value chain from feed to manufacturing to logistics to the end consumer, you can see how value is created, which is really important.

And then the other thing we know is that value will shift along that value chain. When I ran the fuels business in Europe during COVID, the value in the fuels value chain was mainly outside the gate on the commercial side and the retail side.

As you sit here today and during the Ukraine -- the start of the Ukraine and Russia war, the value and the fuels value chain was in manufacturing, right? And so just being in a position along that value chain allows you to capture the value as it shifts.

And then to your point, supplementing that with the capability. And we've reorganized at ExxonMobil the last few years to centralize a lot of these capabilities across the enterprise. I mentioned projects and technology and operations. But the other key is leveraging supply chain and trading to optimize the assets that we have, to optimize placement of products into the highest value outlets.

I mean one great example recently with what's happened with the Strait of Hormuz is in refining and chemicals in Asia, not having the crude that we typically use to run those facilities, the ability for us to respond to that quickly, using our technology company and our operations to qualify other crudes that we can run and respond in that manner. Again, leveraging and trading and supply chain to continue to run those assets and provide finished products.

So it's a combination of having those end-to-end value chains and being placed there and seeing where the value is created and then having those capabilities overlaying those value chains across the entire enterprise allows us to capture the full value of integration.

Yes. And I think another differentiation that really shines through this disruption is Exxon's strategy of just investing in growth through the cycle doesn't really matter where oil prices are up and down, you are sticking to your own strategy.

How do you think about that investing through the cycle has benefited Exxon relative to the broader industry? And how does that influence your -- you think about growth or investing in growth for the next 5 to 10 years?

Yes. I think that view -- and the importance of being able to invest through cycles and through different markets starts with the objective we have to grow shareholder value, to continue to grow earnings and cash. And it really starts with being grounded in the long-term fundamentals of the energy system and just a shameful plug, our 2026 version of our outlook of supply and demand for [ Energy and Power ] will come out later this month.

It is the basis on which we develop our plans and our strategies. We're not going to deviate based on trends that are happening in society. We're going to focus on the fundamentals. So it starts with the fundamentals. And then you need you have to have the opportunity set to continue looking at building out the portfolio, you have to have the financial capacity, and we talked about the importance of the balance sheet so that as you go through cycles, you can continue to progress those opportunities.

And maybe more importantly and where I think we are seeing differentiation relative to competition is you have to have the capability. You have to be able to execute projects, you need the technology and you need to be able to operate the facilities. And what we've seen and what we are seeing is starting and stopping in some ways doesn't allow you to continue to learn to continue to improve, to continue to develop the technology you need to successfully invest.

There are other benefits to this. I mean if you're leaning in, in a down cycle, you're obviously going to probably capture lower costs and improve the economics. But it comes back to long-term fundamentals, you have to have the balance sheet. You have to have the opportunities and then you need the capability. And if you pull back at different times in the cycle, it's hard to develop and maintain that capability. And I think we're seeing a lot of space between us and competition at this point in some of those areas around project execution and operations.

And those capability and the technology that you talk about really shine through in the Permian being able to deliver much better higher synergies post that Pioneer acquisition through technology and innovation.. How has that learning change your view on that asset? And how much you think Permian is continuing to grow from here?

The Pioneer acquisition has gone extremely well, probably better than we expected. And when we did that acquisition, we anticipated achieving about $2 billion a year of synergies, and we've been able to double that. And that is a combination of bringing what we do well to the Permian, but it's also learning from Pioneer. I mean there are a lot of things that we did -- they did really well that we've learned from. And so it's really been a best of both approach.

And what we see in the Permian, I mean, is an opportunity to significantly grow earnings and cash at attractive returns. And as many of you know, one of the challenges in the Permian is you're still recovering a fairly small amount of the resource that's in the ground.

And so that's why our organization is focused on developing the technologies to improve primary and secondary recovery and do it more efficiently. And so we've talked about stackable or complementary technologies that were progressing. They're in different elements of that cycle. But the aim is how do we improve that recovery? How do we get more out of the ground at that initial start and then going back in and doing secondary recovery.

Some of those technologies will produce the same amount of volume, but with fewer wells. So we'll see capital efficiency. But the aim is how do we increase the value to our shareholders in the Permian. And our view is the unlock will be technology. And we have, I think, a stated objective of doubling recovery in the Permian. That is the focus and the aim of the technology organization and operations in the Permian. That's the challenge. So how do we find out through technology to improve that recovery.

So our ambitions and our view on the Permian is very optimistic, and our progression to some of these technologies are very optimistic to achieve that objective.

So given the value creation that you're able to extract from Pioneer and then technology and capability, as you mentioned, how does that change or influence your view on M&A opportunities going forward?

Yes. Obviously, Pioneer and the success with Pioneer gives us confidence in the ability to leverage what we do really well with integration and technology and operations and apply that to the Permian or other locations.

We can be a very picky acquirer. And for us, when we look at potential M&A, we have to see an opportunity where we can bring something, one of the capabilities that we do really well and create more value than the current owner.

So it's not about just acquiring volume or acquiring assets. It's doing that in a way where we can leverage our capabilities and again, hopefully, the capabilities of the other company to create more value for our shareholders and their shareholders.

So it has to be -- it really has to be one plus one is three or more. I mean it can't just be a view on getting the assets or getting the volume.

So again, I think it gives us -- I think Pioneer is a really good example of what we can bring. I don't think it changes our approach in terms of looking at things, but being very selective and looking for opportunities where we can substantially increase the value of what currently is there.

Right. That makes sense. Talking about LNG, I think LNG with it is a growth driver within the portfolio. And given what we are seeing in the market today, there's more emphasis than ever on the value of diversification or [ advantaged ] projects. So longer term, how do you balance getting access to the most [ advantaged ] projects, but also having that diversification the portfolio?

Yes. For us, the long-term fundamentals of LNG remains sound. I would tell you, coming into this year, we thought there was going to be near-term length and obviously, with what's happened in the Middle East that's been pushed out for some time. So we're -- again, we see the fundamentals are there. We think we bring a lot to LNG. So we're still very interested.

The geographic diversity isn't a primary driver for us. The primary driver for us is can we invest in a way that we can bring on low cost of supply? Is it advantaged in some way? And or in many ways? And then do we bring high returns to our shareholders. That's the primary driver for us. We would not sacrifice the ability to create value in that way to ensure that we have geographic diverse. It's not a primary driver.

Now it happens to be when you look at our portfolio, we obviously have existing operations in the Middle East, but we're also progressing in opportunities in Papua New Guinea, in Mozambique and then, of course, Golden Pass in the U.S. Gulf Coast. So the portfolio is pretty diversified, but it wasn't with that intent.

And you may have seen in the news here in the last few days, with Total in Papua, in PNG, where we're going to take over operatorship and increase our equity. So our appetite, our interest in progressing these opportunities is pretty high, but it's always going to be focused on and we bring on supply that's advantaged, low cost, high returns.

We feel pretty confident, given our history and our experience to operate in a lot of different complex environments and to navigate complexity like we're seeing today. It's not unusual for us, and so we're less driven by avoiding that, I would say.

No, that makes sense. On Guyana, I think you had -- the company had a milestone with the resetting of the entitlement contractor share this quarter. But it also just shows the amount of value that you guys have created in the country and how quickly you were able to recover that cost.

Can you just talk us through what this milestone means for the project? What does it mean for free cash flow inflection? And if you can going forward, able to recover CapEx faster than that even be actually a good thing for the company?

Yes, it's a good news story, right? I mean the desaturation of the cost bank was not a surprise. It did happen a lot faster than we expected, I think, 2 years earlier, even when you adjust for the price impact. So that is a reflection of, I think, the execution of the projects. It's a reflection of operations and being able to run the existing FPSOs really well. And so all of that accelerated the recovery of those costs which is $55 million. From a company perspective, recovering that capital in a shorter period of time is great news. .

What that means going forward, obviously, is slightly lower in titled volumes. I think we said 100,000 barrels a day starting in the third quarter. But more importantly, what it means is double the amount of free cash flow between 2025 and 2030. So it's really -- this is about value. It's not about volume. And so -- that's always been the focus. We obviously continue to invest.

We've got the fifth FPSOs in the water today in the waters of Guyana. So that's progressing well, and we're looking at advancing the ninth FPSO. So Again, it's progressing well.

This is also -- if you think about it very good news for the government and the people of Guyana in terms of the amount of receipts now that they'll have. And I think it highlights that ExxonMobil is the partner of choice. If you're a resource owner and you want someone to come in and execute a project like this in a way where the costs are recovered quickly and the investments recovered and the resource owner benefits from that more timely ExxonMobil really is the partner of choice.

And we're seeing that play out. Historically, gaining access to resources is more of an open bid type of approach, and we're seeing more one-on-one dialogues with three source owners. Again, using Guyana as the example of what we can achieve. So yes, it's a great new story, not a surprise, maybe a little bit faster, but from a capital return from going forward, this is something that we'll continue to bring a lot of value to ExxonMobil and to the Guyanese.

And given the success in Guyana, like does that change how you -- how Exxon evaluates resource opportunities that you see around the world?

I think we've not I think we -- again, back to the focus on the long-term fundamentals, we've not really deviated at any point in time from a recognition that you need to have continued investment in supply. And that has a lot of ranges to it, right? There's a lot of resources that are discovered but undeveloped and so we will pursue those with the resource owners. That is also the need to continue with frontier exploration.

We invest in the last 5 years, we've invested $1 billion every year in exploration. So we've never deviated from that perspective of you really need to continue to invest, given that, especially in the upstream, the resources declined pretty rapidly, you're constantly in this need to find additional opportunities.

I think what's changed over the last 5 to 10 years is this recognition of resource owners about who operates and who develops matters. And you can destroy a lot of value if you have the wrong operator. I think that dynamic has changed quite a bit. Again, it's opened more one-on-one type of discussions with the resource owners.

Right. No, that makes sense. Shifting gear to the emerging businesses. last year at the conference and Jack talked about the -- really the growth potential that we could see from Proxxima and carbon materials. And that's really going to drive the growth into the 2030s. So how do you think about the scale and the advancing these emerging businesses for Exxon? And anything that has changed over the last year?

Yes. I think Proxxima and graphite are two really good examples of what I talked about at the beginning around the company wants to be defined or views themselves as being defined by the capabilities and what we do well, not necessarily by the products we produce.

And this is a great example of the ability to leverage technology and take the molecules that we convert today into products like motor gasoline and instead convert them into resins. In the example of Proxxima.

And I would tell you right now that it's progressing well. The value and use is being demonstrated, whether that is rebar, where it's lighter, stronger, easier to install or it's coatings, where instead of three coatings, you need only one. I mean there's -- so what we're seeing is the technology is proving out. We recently FID-ed a blend plant to produce more resins. I think up to 120,000 KTA. And so that's progressing well.

Now what you're focused on predominantly is market development and customer adoption, and that is the cycle of building a new business.

Graphite similar. We've -- we're working with OEMs and others to prove out the technology we're seeing faster charging times with batteries. We're seeing more capacity and longer duration and the OEMs are recognizing that.

So in both cases, progressing well, technology is proving out, the value and use is being demonstrated. And now the aim of the organization is how do we get market development and customer adoption. So that's kind of where we are.

But I would tell you, those two are just two examples. We have the organization in a lot of different ways are looking for opportunities where we can leverage our capabilities to create new value chains and new products.

Again, we think because of those capabilities that we have, we're better positioned than anybody to be able to do that.

Yes. And how do you guys like to say, Exxon is an energy technology company. and that's a demonstration of that.

So I want to end with a look out to the 2030s, because know that Exxon is delivering really differentiated earnings and cash flow growth out to 2030, and we have the target. We know that's coming from Permian and Guyana. But you're also working and investing on the next layer generation of projects for as we sit here today, what part of that medium- to longer-term outlook do you think might be underappreciated or that's the most exciting for you?

Yes. I think, first of all, the plans to 2030, the I think, $25 billion growth in earnings and $35 million in cash flow, we're getting closer to '30%, and I would tell you that is only increasing in confidence in our ability to deliver that, which is great.

What's great about it is I think the organization is entirely focused on how do we continue to grow earnings and cash. The world does not end in 2030. And there are a lot of opportunities that we're excited about. You mentioned Proxxima and graphite. Those we talked about the LNG projects that are coming. I mentioned this persistent approach to frontier exploration, for looking for opportunities with resource owners, especially on the discovered undeveloped side.

The other thing that I think we're just now touching on, and we talked a lot about structural savings that we've achieved, a lot of that up to this point has come from divestments.

Going forward, that is going to come more and more from the organization we've designed. And this setting up of these central organizations, operations, project technology, we think, in addition to the new enterprise-wide system that we're putting in place will be a step change in terms of the savings that we can achieve going out past 2030.

So it's -- when we did this 2030 plan that we discussed and disclosed to the market at only 20 months ago. And so it's amazing how quickly the organization has responded to that, and they're responding to the objective of continuing that growth post 2030. And there's a lot of opportunities in the portfolio.

And it will come back to maintaining those capabilities of project execution and technology and operations, having the financial strength and capacity. But the objective is shareholder value and continue to grow shareholder value.

Great. And that's what Exxon is best doing. So with that, thank you so much. Thank you. Thank you for joining us for this fireside Great.

Thank you. Appreciate it. Thank you, everybody.

Good morning, everyone. Welcome to ExxonMobil's earnings call. Today's call is being recorded. We appreciate you joining us. I'm Jim Chapman, and I'm joined by Darren Woods, Chairman and Chief Executive Officer; and Neil Hansen, Senior Vice President and Chief Financial Officer.

This quarter's presentation and prerecorded remarks are available on the Investors section of our website. They're meant to accompany this quarter's earnings release, which is posted in the same location.

During today's presentation, we'll make forward-looking remarks, including comments on our long-term plans, which are subject to risks and uncertainties. Please read our cautionary statement on Slide 2. You can find more information on the risks and uncertainties that apply to any forward-looking statements in our SEC filings on our website.

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

And now I'll turn it over to Darren for opening remarks.

Good morning, and thank you for joining us. Unfortunately, as all of you are aware, the conflict in the Middle East continued through the second quarter, impacting our employees, partners and operations in the region. I want to begin this morning by recognizing the service of the men and women engaged in the conflict and the hardships being endured and losses suffered by those in the region. They remain at the forefront of our thoughts, and we continue to pray for a quick resolution.

As a company, we remain committed to mitigating the global impact by maximizing production and providing the energy and products essential to modern life. While we didn't anticipate the current situation, we were prepared for it. In our markets, disruption is inevitable. Establishing globally diverse production at scale across value chains built on a foundation of durable advantages provides a robust platform for creating value through price cycles and market disruptions.

The second quarter demonstrates the strength of our approach. Despite the temporary loss of approximately 10% of our upstream production, we delivered exceptional financial results, including industry-leading earnings of $14.5 billion and cash flow from operations of $23.6 billion. Performance was strong across the company.

In the upstream, excluding the Middle East, we delivered our highest production volumes in more than two decades. In Energy Products, our integrated U.S. Gulf Coast refining operations ran reliably as global diesel supply tightened. The business delivered record second quarter diesel production, helping meet market needs.

In Chemical products, our North American facilities with advantaged feed and record first half reliability helped meet the shortfall in supply caused by disruptions in the Middle East, driving a roughly 180% increase in chemical product margins versus the first quarter. In Specialty Products, our integrated approach down the value chain, reformulation capabilities, global footprint and strong execution helped meet customer needs despite significant supply challenges, delivering best ever basestock margins and record quarterly and first half adjusted earnings.

Guyana remains one of the clearest examples of our advantaged growth. In the quarter, Guyana delivered gross production volumes of approximately 900,000 barrels per day. Errea Wittu, our fifth FPSO, set sail toward Guyana in June and remains on track for start-up by the end of the year. The next major step in Guyana's continued development. Longtail is on the path toward final investment decision, and we are evaluating the potential for a ninth FPSO. The success of this development has set a new standard for the industry and frankly, has exceeded our own expectations.

Delivering on tight schedules at industry-leading cost with strong reliability and optimized production has resulted in recovering our capital and cost nearly two years earlier than anticipated, increasing NPV and desaturating the cost bank. This is great news. But as a result, our volume entitlements will change as reflected in our 2030 plan. As always, our focus remains on value, not volume. Turning to the Permian. This quarter, we set another production record of more than 1.8 million oil equivalent barrels per day. More importantly, we continue to improve recovery and lower capital cost through new technologies deployed at scale.

Our industry-leading acreage position supports extended reach development, including 4-mile laterals that drive superior capital efficiency. In the first half of the year, we drilled more than 80 4-mile wells, supported by our Houston-based remote operations center and real-time data that helps ensure safe, efficient and effective execution.

During the quarter, we had to work through some complex conditions. Logistics were tight, supply chains were constrained and customers were short of critical products. Our global trading and supply chain organization put our new operating model to work, optimizing feedstock and product placement, balancing supply across regions and responding to localized disruptions. Those actions kept our operations running and customers supplied and helped avoid roughly $750 million in annual disruption cost through advanced modeling, fleet reallocations, product reformulations and alternate supply sources. At the same time, we continue to make progress on our transformation.

On July 1, we integrated upstream operations into our global operations organization, bringing together approximately 31,000 employees across more than 150 sites in 48 countries. This is an industry-first operating model. The objective is clear: make the most of what we have while raising the standard for safe, reliable and efficient performance across all our assets. With this new organization, we expect to deliver improved margins and industry-leading operations excellence, improving safety, reliability, maintenance cost and turnarounds across the portfolio. We are also advancing our enterprise-wide process and data platform transformation.

As I've said before, this is redesigning end-to-end processes and connecting data, transactions and decision-making across every business, geography and function. Early deployments have gone well, building a strong foundation for larger rollouts in 2027. The work is already simplifying processes, improving line of sight and replacing fragmented reporting with more consistent enterprise data. As it progresses, it will help us learn and act faster, better leverage our scale and accelerate the adoption and value of AI. The value of this transformation is showing up in our results.

Cumulative structural cost savings have increased to $16.3 billion since 2019, with centralized organizations contributing nearly half of the year-to-date savings. Financially, this was a strong quarter with more than $14 billion of earnings, more than $17 billion of free cash flow and a more than $7 billion reduction in net debt. That strength allows us to keep investing in advantaged opportunities, return surplus cash to shareholders and maintain one of the strongest balance sheets in the industry.

Cash capital expenditures were roughly $7 billion, and we returned more than $9 billion to shareholders through dividends and share repurchases. Finally, in the quarter, shareholders overwhelmingly supported redomiciling ExxonMobil from New Jersey to Texas, which we completed on July 1. The move aligns our legal home with our headquarters and where we have operated for more than 3 decades, while providing a stable, predictable and efficient governance framework that supports sound decision-making, long-term value creation and shareholder rights.

I want to thank our shareholders for their support and the quality dialogue we had across the year's engagements. Stepping back, the second quarter was shaped by disruption, but defined by execution. The market benefit was real, and so was the value created by the choices we have made over many years to strengthen the portfolio, lower our cost structure and improve how we operate through deeper integration and technology-enabled execution. That is the point of our transformation. We are building a company that can perform through disruption and deliver superior long-term shareholder value across cycles. Thank you.

Thank you, Darren. Before we move to Q&A, two things to note. First, as a reminder, the Investors section of our website provides further data on our results and operations, and we encourage investors to take a look. And second, I want to highlight that we plan to publish our annual global outlook in September, a comprehensive report detailing our latest views on global energy demand and supply through 2050, which forms the basis of our long-term business planning.

So with that, we can move to Q&A. As a reminder, we ask each participant to keep it to one question and operator, we'll ask you to please open the line for the first question.

[Operator Instructions] The first question comes from Steve Richardson of Evercore.

Darren, I was wondering if we could start on Guyana. Obviously, what we've all known is these are really high-quality projects. Can you just talk about this desaturation point, obviously, in light of cost performance and higher commodity prices and maybe just how the timing compares to maybe what your previous expectations were. Also curious if we could talk a little bit about exploration.

There's a mention in the disclosure about using AI tools and generating prospects. I think people are also curious about what the exploration outlook in Guyana is, particularly as you think about parts of the block that maybe are underexplored close to maritime boundary.

Sure. Steve, thanks for your question. I think as you point out, it's a real success story in what we've achieved in Guyana, delivering, frankly, the production units faster than we had originally anticipated at a lower cost, running those assets above the investment basis. And then obviously, the market prices have been higher than our base assumption. So all that means more cash sooner, which is good for the project, good for NPV, good for Guyana and the people of Guyana.

Obviously, we recover our costs back faster and therefore, desaturate quicker, which is a good story. And I would say we -- that was a moving target as prices manifest themselves as we delivered those units and continue to grow production, we kept updating it. And then based on price forecast, our assessment would be happening later this year, early into next year, and that's obviously come forward now with where prices have been. So I think a really good news story. With respect to exploration, I think, too, another good news story.

We obviously have a large chunk of acreage, which is in force majeure waiting for the ultimate ruling from the International Court of Justice on the Venezuela dispute and we'll see what happens there. We feel there's an opportunity then to start shooting seismic and understand what that acreage potentially holds. And we've got more work to do in the acreage that we've already shot and the work that we've been doing.

I think Neil Chapman had mentioned at a prior conference this year that we really put a lot of effort into artificial intelligence and training models based on what we found already, all the drilling that we've done, the characterization of that subsurface and unleashed that in the rest of the block and have four new discovery opportunities above and beyond what we thought were opportunities. So we're optimistic there.

Obviously, a lot more work to do to confirm those. But I think our view is we're not done yet in Guyana, and we see -- continue to see a really bright future there.

Maybe, Darren, just to add to the comments on Guyana. I think this reinforces why we are the partner of choice, especially for developments of this scale. And if you look at the desaturation, and Darren mentioned the price impact. But even if you took out that price impact, we saw a 2-year acceleration of our investment recovery.

And let's go back to the things that we mentioned. The ability to execute these projects at industry-leading cost and schedule, running the FPSOs at above 98% reliability, optimizing, being able to produce at 100,000 barrels a day above the investment basis. So even without the price impact, we're seeing accelerated recovery of our investment. And as Darren mentioned in his opening remarks, this is about value, not volume.

And going forward, we're going to see 2x the level of free cash flow in 2030 than we saw in 2025. So again, just speaks to the tremendous success that we're seeing in Guyana.

The next question comes from Neil Mehta of Goldman Sachs.

Darren, just love your perspective on the business that you spent a lot of time growing up on the refining system. It's obviously the bottleneck in the petroleum system right now and margins are exceptionally high. So two perspectives on that. One is, how do you see the situation evolving as you think about the products?

And then Neil Hansen, there's probably a question for you on the quarter itself. It did feel like relative to some of the independents, the refining earnings were a little softer than I would have thought. And so maybe there was some -- it was more of a timing or operational things, but how do you see that progressing as we move into the third quarter?

Yes. Neil, I'll start and then hand it over to the other Neil. I mean, as I mentioned this morning, we are a very large refinery, much larger than any of the other IOCs. In fact, we're the #2 in size in the world behind China and outside of China, we are the largest refinery. So we've got a good footprint. And as you know, we have been -- we spent the last 10 years really focused on optimizing that portfolio, divesting refineries that we didn't feel like we could move to the left of the cost of supply curve and then investing in those refineries that we felt like had long-term strategic value and high-grading the yield on those refineries.

So today, we have a portfolio that will be very successful in low-margin environments and then obviously, in higher-margin environments, even more successful. And the organization is now very focused on in the short term, with these significant constraints in product flow, maximizing production and getting the most needed products to the market and meeting customer demands where it's such a critical need today that's not being met. I see that, frankly, the challenge here is, obviously, with the Strait closure, we've got about roughly 3 million barrels a day of capacity that's not available to the marketplace.

China has stopped exporting. There's another couple of million barrels a day of refining capacity that is not available to the market. And then, of course, Ukraine has been pretty effective at taking Russia refining capacity out. And so another 1 million barrels a day or so of Russian refining capacity that in the past was providing product to the broader market. So with all those -- that supply out, we're well below available capacity, frankly, that I've ever seen. If you exclude COVID, where there was no demand, I've never seen the available capacity relative to demand as low as it is today. It's going to take a while for the industry to kind of climb its way out of that hole.

And so from our perspective, we think we're going to continue to see a very robust refining market with very high margins. And of course, our job will be to continue to push as hard as we can to maximize production and try to meet that need because we do recognize that these high margins lead to high product prices, which we also know has a significant impact on consumers and people's pocketbook. So we're doing our best to put as much product out there as we can. And I think you see that in the results.

I'll just touch on the mix issue and what you're seeing at other refiners versus ExxonMobil. Nobody has the portfolio that we have. Nobody has the mix that we have. Nobody has the geographic footprint. So there's a lot more mix and variability that kind of happens around the market than maybe a stand-alone U.S. refiner or some of these more narrowed refinery companies. But with that, I'll see if Neil has got anything else to add.

Yes. Let me -- maybe before I get to your question on the quarter, talk a little bit about the energy products business. And you look at what we've done over time in terms of investments in our refining capacity, improving the complexity and taking advantage of the scale of our footprint. The portfolio high-grading that we've done and then the day-to-day efforts that we put into place to optimize throughput and capacity and all those things, combined with the growing capability in trading really has resulted in a step change in earnings in that business in Energy Products.

In fact, if you look at the contribution from Energy Products to our overall business line earnings, it's gone from about 9% to about 23% in the last 5 years. So that increase just speaks to the investments we made. It speaks to how well we're running and speaks to the trading capability that we've built. And operationally, we ran really well in the quarter. You look at the U.S. Gulf Coast refineries, the reliability exceeded 95% in the quarter. So again, we feel really good about what we've done to strengthen that business over time and how we operated in the second quarter.

I think when you look at the quarter relative to consensus, I think some of that is, as Darren talked about, I mean, there are a lot of moving parts, especially with the volatility and the disruption that we saw. So I think that has an impact on projecting some of those refining margins, but no underlying concerns with how that business has performed, and we're benefiting from the investments and how we're operating in Energy Products.

The next question comes from Arun Jayaram with JPMorgan.

Darren, I was wondering if you could help us understand what you're seeing on the ground in terms of the Strait of Hormuz. Perhaps you could highlight what you saw in July, just given the disruption impacts. And I guess my overall question as well, I wanted to see how you're thinking about with your partner, Exxon's intention to invest in the repair of the two Qatar LNG trains, if you come up with your partner on the plans to repair those facilities.

Yes, sure. Arun, thanks for your question. I don't think I have a lot of additional perspective on the ground with respect to what's happening in the Strait. I think it's fairly well covered in the media. And frankly, any discussions I tend to have with the administration is more focused on our perspective of the market and the implications of the constrained supply and how that will manifest itself. I will say, as a big supplier in the marketplace, it is ultimately down to the shipping companies and the crews on those ships to make those transits.

And I think the more volatility there is, the more back and forth with respect to disruptions and attacks, you create more uncertainty, more concern and therefore, less willingness to transit. So I think there's going to be a continued inhibition for movement, which will -- even once we get things cleared up, I think it will take some time for folks to gain some confidence there to continue to ramp things back up to a very high level. And frankly, we're prepared for that with respect to what we're trying to do.

With respect to the broader question, our presence there and the work that we're doing with Qatar, I just come back to the medium- to long-term fundamentals, which the world needs the resources in that region, and it needs to have the Strait open and transiting back at levels it was prior to this conflict. And so we're convinced that, that will come to be at some point in the future. I can't really predict when it will happen or exactly what it will look like. I just know that it's too critical to the overall health of the world economy and for people's -- to meet people's standards of living to have that disrupted for perpetuity. So it will come back. It will be needed.

We've got a long relationship there. We value the partnerships we have. We're in dialogue with Qatar Energy. I think we have a significant role that we can play to bring our expertise to help expedite the repairs. We're in discussions with QE about that. And frankly, looking for the best approach there where, obviously, Qatar Energy and the people of Qatar benefit and ExxonMobil benefits as well. And so I think the one thing I would say about our long, long-standing relationship with Qatar Energy is they recognize the importance of win-win solutions and certainly very focused on how we figure out the path forward here to get production back on and flowing as soon as we're able to.

The next question comes from Devin McDermott of Morgan Stanley.

Darren, you highlighted really strong non-Middle East upstream production in the quarter, the highest in over two decades. You talked a little bit before about Guyana. One of the other drivers of growth is the Permian. You had volumes hit 1.8 million BOE a day in the quarter, in line with your full year guide. I know that this year marked a big step-up in some of the use of advanced proppant and other new technology. And I was wondering if you could just give us an update on how that's progressing versus expectations, specifically as it relates to capital efficiency and recoveries that you're seeing there across the basin.

Yes, sure. Thanks for the question, Devin. And you touched on, I think, one of the really important variables there, which is all the progress we're making with respect to the technology portfolio. We've been talking for some time now that we've got 40-plus technology developments that we're working and have been going out and trialing in the field. And the value of those technologies are -- most of them are stackable so that you keep building on the success and drive more and more recovery, fewer wells, so less capital. And I'd tell you that, that portfolio continues to exceed expectations for the technologies that are successful.

So I put out a challenge back in 2018 for doubling recovery. We have an opportunity set that will do more than that. And when you risk it for all the uncertainties associated with that portfolio, we're getting really close to that objective. And it's just a function of continuing to deploy those technologies and getting it to a critical mass to where it's transparent to the rest of the market as we continue to bring into new production, new wells. So I feel really good about that. I'm really confident in what the team is doing, a lot of energy and motivation by the technology organization and our Permian organization to deploy the technology and to see the benefits of that. So we're more than on track.

Yes. I think Darren, maybe just to add to that. I mean, there is a lot of excitement around the technology that's being developed and will be deployed. But I think you can easily look past the expertise and the technology that's already being used in the Permian. You look at things like extended reach laterals. I mean we're leading the Permian and long lateral development. I think in the opening remarks, we mentioned 83 4-mile wells that we've drilled year-to-date. But if you look back and you look at all the Permian producing wells since 2020, anything above 3 miles or longer, we have 1,200 wells.

I think our nearest competitor is around 400. And you would have to go to the next 6 competitors to get to that same level of 1,200. So you look at the extended reach laterals, surfactants, AI, machine learning, all of that is contributing to very strong performance even before we start to deploy some of these other technologies.

The next question comes from Doug Leggate of Wolfe Research.

Darren, I hate to beat on Guyana. I wonder if I could come back to Guyana and a couple of clarification points or maybe more than that perhaps. So I think there's some confusion between production entitlement and free cash flow. Maybe it's for Neil. But I wonder if you could just opine on although your production entitlement goes down, what happens to your free cash flow? That's my first kind of part of that. And I guess I can't help but notice Phase 9 is now part of the story. What is your latest thinking on gross production sustainability through the end of the decade, maybe a little beyond that?

Yes. Thank you, Doug. I'll let Neil talk a little bit about the free cash flow portion of the question. I would just say we're going through our plan process currently, which we will finalize as we get to the end of the year and then come out and talk about it as part of our corporate plan update. And as part of that, every year, we revisit what are the opportunities, what progress have we made, how is our thinking developed. And indeed, one of the things that we now see an opportunity for is this ninth FPSO and really take advantage of what we've done with Longtail to replicate that and get some significant capital advantages to apply.

So our view is that's looking promising. We haven't finalized that, obviously, but we're progressing and it looks pretty attractive at this stage. I think longer term, we've got more work to do. As I mentioned one of the earlier -- responding to one of the earlier questions, there's a lot of acreage yet to fully take advantage of. And so we're continuing exploration, continue to look for opportunities. I mentioned that with some of the AI tools that we've trained with what we've already found in the drilling we've done. We've seen some new opportunities to explore that we hadn't previously identified.

So I would tell you this thing, the tape hasn't run out on this play yet, and we're going to continue to evaluate that and see what we can get from it. But I mean, you can rest assured the organization is very focused on maximizing the value of that acreage for the benefit, obviously, of ExxonMobil, but more importantly, for Guyana, government of Guyana, people of Guyana. But I'll let Neil talk a little bit about the free cash flow question.

Yes. Let me try to answer your question, Doug. So again, as we mentioned, at this point, we fully recovered the $55 billion of investment along with all the operating costs. And the way the contractor agreement works is we can recover that investment up to 75%. After that, the remaining production is shared 50-50 between us and the government of Guyana. And so if you think about -- if you just stop today and there's no additional investment, then more of your production and revenue is going to flow towards cash flow, again, shared between us and the government of Guyana.

The reality is we have more investment. To the extent we have the investment come in and operating costs, it will still go into the cost bank. We'll still recover that at that 75% cap, but there's much less investment to recover. And given the level of production that we're at, you're unlikely to see that cost bank obviously be full again. And so you'll just have more cash flow above your investment and above the operating cost. Now that obviously is a question of what you think price is going to do going forward in addition to the investment and cost that we'll be putting into the cost bank.

So hopefully, that helps. But we would anticipate, and I think we showed that in the slides that now that we've reached full recovery of that significant investment, more of our revenues will go towards cash flow -- free cash flow versus recovering cost and investment. Hopefully, that helps, Doug.

Neil, just to be clear, so is it fair to characterize this as an inflection in free cash flow then as opposed to a decline in production entitlement? That's a reasonable way to frame it.

That's very much an inflection into free cash flow. Absolutely. And this -- for us, Doug, and I'm sure for you as well, this is about value. It's not about volume, right? Even though there's a slight decline in the entitled volume, the focus we have is on the value that we've created for ourselves and for the government of Guyana. And at this point, there's an inflection to where you're going to see a much larger amount of free cash flow come in. It is -- it's a very positive, exciting story.

The next question comes from Betty Jiang of Barclays.

We're seeing an increasing number of resource-rich governments looking for partners to accelerate the development of their resources. And as Neil said earlier, Exxon's track record is really positioning you guys as a partner of choice. I imagine these are large-scale, long-duration resources but can also come with different set of risk. How do you evaluate these opportunities for Exxon and their competitiveness relative to what you already have in the portfolio?

Sure. Betty, I'll take that and then see if Neil wants to add anything to it. So I'd come back to the fundamental investment thesis that we have across all of our businesses is the projects that we pursue and ultimately advanced have to have an advantage versus what others in the industry can do. It has to -- we have to be able to drive the cost of supply to the far left of the cost curve so that the supply cost curve so that we know irrespective of where the market goes and the ups and downs in prices and margins that we'll have investments that generate above-industry returns. And that's been the philosophy across every business that we have and all the projects that we evaluate.

And results of that are manifesting themselves today and all the investments we made over the last 10 years, that's not going to change going forward. And so I'd say, first and foremost, as we look at new opportunities, you got to clear that hurdle. Do we bring an advantage? Do we end up with a project that's advantaged versus the rest of the industry? And is it at a very low cost of supply and therefore, generate above industry returns. And I think that's the criteria that all of our businesses are driving towards. And then, of course, when it comes to specific areas and risk -- country risk associated with those areas, the market tends to decide that.

And so our view is we will generate projects that realize the risk premium associated with any projects in some of those areas consistent with the rest of the market, and then we'll add to that with our advantages. And then the final step is making sure that we manage that risk in the portfolio. One of the advantages of being large and having a very diversified portfolio is we can diversify out of specific risk. So we don't have to bet the farm on any one location or any one place. And we keep a very close eye on the overall exposure of the portfolio and look at how that's developing. And as we make investments, is that portfolio risk changing significantly or not.

So that's how we do it. What we've seen to date, you see it today with some of the disruption in the Middle East, you saw it several years back with the Russia disruptions that the portfolio is robust to some of these unexpected events, and that's how we'll manage it.

And Betty, I think you're absolutely right. I think our track record and a recognition of our capabilities certainly is leading us to being the clear partner of choice. And when we talk about that, you look at being in a capital-intensive business like we are, it's the ability to execute large-scale projects, leverage technology and then operate at a very high standard and a very high level. And if you look at just the ability to execute projects, we're doing about twice the number of mega projects in our nearest IOC, and we're doing it up to 20% lower project costs and our project delivery schedules are 20% faster than industry average.

So I think it's -- when you look at resource owners, I think there's absolute recognition of that capability, that track record of being able to do those 3 things really well. And then as Darren mentioned, I mean, when we look at any opportunity, obviously, we look at the terms, but more importantly is, can we bring something unique and different? Can we leverage those competitive advantages to provide an outsized returns for our shareholders. So that's kind of how we think about it. But we are in a, I think, in a nice position with resource owners given what we've been able to accomplish in places like Guyana.

The next question comes from Bob Brackett of Bernstein Research.

I'm struck by the combination of lower base volumes on the Energy Products side amidst record diesel production. That diesel production could be cyclical, you're planning set points or whatnot or it could be structural. And I suspect it's structural. You all will continue to break that diesel production record over time. And sort of a quick follow-up. How did you decide around scheduled maintenance and choices around deferring scheduled maintenance and maybe grabbing opportunistically some better product prices?

Yes. Bob, I think one of the things you hit on is this drive we've had across our portfolio to continue to high-grade the bottom of the barrel, the low-value molecules into higher-value molecules and distillate, obviously, is one of the higher-value, in-demand molecules that come out of our refineries. So if you look at what we've been doing over the last 10 years with investments in Antwerp, investments in Rotterdam, the investments that we've made in Singapore to upgrade these low-value molecules and as a result, get more distillate out, that is a continuing focus.

And in fact, we have a number of projects in development and slated for what we're doing in the Gulf Coast to continue that trend and to continue to grow distillate, jet, and basestock production. So that is a clear theme, and it makes our refineries, frankly, lower-cost suppliers and higher-margin facilities, which is a clear focus. If you look at just what we've accomplished here in the last 3 years, our global throughput is up 11% and the production of jet and diesel is up by 15%. So it is reflective of the work that we've been doing.

Anything to add to that?

And Bob, I'm not sure what time frame you're looking at. But certainly, there's an impact from planned maintenance and turnarounds in the quarter. And there's a number of scheduled maintenance activities that we have completed this year, and that's had an impact, obviously, on volumes. And we've done everything we can certainly to consider the current refining margin environment if we can safely defer some of that, that's certainly been part of the consideration. And I think why you're seeing such strong performance on utilization. I would just say, though, and I think it's back to the benefits of the centralized organization with global operations.

The turnarounds we have completed this year, what we've seen relative to the last time we did a similar turnaround or in the previous cycle, we've seen a 30% improvement in cost and a 60% improvement in duration. So harder to see, but that certainly helps us to ensure we're not leaving anything on the table in this type of environment is when we do execute those turnarounds, we're executing them at leading edge, certainly in the first quartile.

The next question comes from Biraj Borkhataria with RBC.

It's on the downstream. And Darren, you've been -- spoken about EU policy in the past and some comments today as well. I don't want to get into the debate on that. I think we share the same view. But as of yesterday, one European country approved windfall taxes effectively on the downstream. And given what's happened to oil product prices and refining margins, it seems like this will be a growing theme. You've got 850,000 barrels a day of refining between U.K. and Europe. So I was wondering, I assume you've been in contact with the policymakers. So have you had any discussions on this topic? And how likely do you think that this will be put in place?

Yes. Thank you, Biraj. I think there's a huge temptation all around the world to deflect attention to the bad policies that governments have been implementing over time and scapegoat the industry. And the reality is we saw a long time ago with the emphasis that Europe has been putting on, frankly, deindustrializing their economy and shutting down refineries that there would come a point in time when they would be short product, and we see that today.

And so any time you get into an environment where demand spikes and there is a shortage of supply versus demand and it's trying to be met, that refinery margins will rise and those who stayed in that business and tried to improve that business to be successful across the cycle will make money. Penalizing the businesses who've stood by those countries and provided that product going forward is very shortsighted. And leads us from the past windfall profit tax to invest even less. So we canceled investments that we had planned for Europe based on the last time they passed the windfall profit tax. And in fact, pursuing the -- because we don't think that's a legal taking for the industry. I think the discussions I've been having with many of the leaders there recognize the problem with that approach and the consequences -- the unintended consequences of that approach.

So they're sensitive to it. I'm not sure that's going to keep them from trying to address concerns of their base, but we'll have to see if any of that actually manifests itself in real policy and regulation. If it is, it's just another great example of misguided policy that ultimately is going to inflict more -- higher cost and lower standards of living on their population. I hope at some point in time that the European population wakes up to the very poor policy decisions being made there.

The next question comes from Jean Ann Salisbury with Bank of America.

There are many gas pipelines coming on in the Permian starting now. A lot of investors, including us, think that it could lead to a shift to materially more gas and NGL growth out of the Permian as operators are no longer making decisions around constraining their gas-to-oil ratio. As the largest operator in the Permian, do you anticipate your gas volumes or gas-to-oil ratio in the Permian will inflect as a result of the new pipe?

And we have a very similar assessment as you do with respect to the balances on piping and that market will now clear, and we won't see the disconnects that we've historically seen. I don't -- my sense of things is, and I can't speak for the entire industry, but as we're developing wells, we're looking at the economics, and there's a clear incentive to have higher oil production. I think that's been, I'd say, a general trend within the industry as you look at economically maximizing the value of every well, you want more oil and less gas given the constraints in the gas market.

And I think that's not going to change. My sense would be you get more into -- if you've got the takeaway capacity, it just opens up your ability to produce more oil and the gas then comes with it. And so we may see some additional gas come on to the marketplace associated with that. But the real driver will be unconstrained takeaway capacity and maximizing oil production.

The next question comes from Jason Gabelman of TD Cowen.

I wanted to go back to the Middle East footprint and specifically on the LNG side. I think you have over 2/3 of your LNG portfolio primarily in Qatar. And as you assess the changing risk profile in that region, are you looking to either accelerate LNG projects into your queue to help diversify away from the Middle East? Are you evaluating more closely external opportunities? Or do you feel pretty comfortable with your LNG risk exposure?

Yes. Thank you, Jason. I guess I'd start by just saying we're not extrapolating current events to kind of a long-term change in the stability of the region. As I said earlier in the call, ultimately, the world has to resolve the conflict there and get to a stable situation where those critical resources in the region find a way to the market in a reliable way. And so I think ultimately, there's a solution that the world will arrive at. I couldn't tell you exactly when or what it's going to look like, but that -- those resources are just too critical to the overall economic health of the world for them to stay offline or for them to be unstable.

So I would say that's generally how we think about it. If you look at our portfolio of opportunities in LNG, it has, through the opportunity set that we have, diversifying our production away from the Middle East just based on where the opportunity set is. And so Mozambique, we hope to FID that project later this year. We've got Papua and Papua New Guinea that we look to FID later this year. We've got Golden Pass coming on. So I think continue to see opportunities and very large opportunities that are on the left-hand side of the cost of supply curve coming online. So that's going to achieve some diversification. But I would also tell you that as we continue to look for future opportunities, given the important role that natural gas is going to play, we won't shy away from the region.

The next question comes from Manav Gupta of UBS.

I wanted to go a little bit into Specialty Products. What's the margin environment looking like? Because lubes are extremely tight right now. Lubes margins are uniquely high, and you do have a strong base stocks business. And then also wanted to understand how Mobil 1 is tracking? And any further updates you can give us on Proxxima, how the traction with new clients is going on Proxxima?

Sure. Thank you, Manav. Well, I'd say the specialty business is no different than any other sector business that we have, which is significant supply disruptions, significant challenges with meeting the base demand and basestock is clearly where it starts, particularly given the importance of Middle Eastern crude with respect to basestock production. And so one of the advantages that we've had is with the investments that we've made both in Singapore and in Rotterdam, synthetic base stocks that we can make open up the crude slate and give us opportunities to make base stocks with less dependence on Middle East crudes versus some of the more traditional extraction methods.

So I think we're more robust to that disruption, but clearly, the market is tight. We're leaning in as hard as we can with respect to basestock production, and we're seeing the benefits of that with the high earnings that we made in Specialty Products. We're also quite advantaged with respect to the value chain that we participate in and being part of base stocks. Obviously, running the refineries, running the basestock production, running that base stock marketing business down to finished lubes, coupled with the technology organization that we have, a lot of work the organization has been doing around reformulating to kind of find ways with the available molecules that are out there to meet customer demand, and we've been very successful with that.

So that ability to respond to the constraints and the challenges and find better ways to continue to meet customer demand is paying off as well. And so I think we see the business that we've established there and our participation along that entire value chain really paying off this quarter. And our expectation is as that Strait remains constrained, we'll continue to see a big benefit in our specialty businesses for having that integrated approach to running that business. With respect to Proxxima, I would just say we're progressing the investments to expand capacity like what we're seeing there. The size of that market is huge and all the applications that we've been testing, the work we've been doing continues to demonstrate a very high value and use for our customer base.

So we've got the [ 35,000 kT expansion -- 35 kT expansion ] that's come online. And then we've FID-ed the next large step in our Proxxima blending plant earlier this year. And so we see a big opportunity. It will take time to kind of realize that opportunity because you're obviously starting a brand-new market, a brand-new product for some very attractive markets. But we see -- again, the customer feedback says there's high demand for that. It will just take time to penetrate, but we see a long-term attractive potential here.

And maybe just go back to Specialty Products. I think for the reasons side of the investments that we've made, including the Resid Upgrade project in Singapore last year, which allows us to continue to grow high-value products. For that business, Specialty Products, it was a record earnings for the quarter, and it's also record earnings for the first half of this year. So again, that just demonstrates prices certainly were supportive, but it's all about those advantaged investments we're making. The focus on growing high-value products is clearly yielding very strong results for Specialty.

The next question comes from Sam Margolin of Wells Fargo.

This is on the structural cost savings, you've made tremendous progress, but you have been fighting inflation. And it looks like there's some environmental drivers that are potentially adding some more friction. Is there -- can you talk a little bit about the way that the mix shift in your portfolio and the development of major projects in the life cycle that you're at today might influence this cost-out progress? It feels like as you enter like these new phases of free cash flow sort of oriented phase in Guyana and you bring on fewer developments at a time simultaneously, there may be some levers to offset the inflation impact. But in any case, I would just love your thoughts on that whole trend.

Yes, sure. Thanks, Sam. Thanks for the question. I would just say maybe just step back and talk a little bit about the philosophy that we started back in 2018, which was we knew we wanted to grow the business. We wanted to make these investments and recognize that as we did that, that as you start new facilities, bring new projects online that you incur more operating expense. And as you develop new products to go into new markets, you're spending money on R&D and basically incurring more operating expense. So we recognize the path to growth meant additional operating expenses.

And the challenge that we gave ourselves in the organization was to recognizing we needed to do that to grow earnings and cash flow that we had to find a way to offset that cost, and we weren't going to let our expenses rise. And the only way to do that is start figuring out structural cost savings and driving structural cost out of the business to make room for the additional spend that we knew would come for doing high-value accretive projects and product development. And that's exactly what we've been doing. And so -- the cost savings have come, I'd say, primarily through the transformation we've been driving into the business and creating the value chain, giving organizations a clearer line of sight and more direct accountability for end-to-end profitability. That puts a very high focus on operating expenses.

The synergies that we're capturing through the consolidations that we're making in the centralized organizations are driving huge value and cost reductions. And I would tell you, we just announced on July 1, the formation or the completion of our global operations organization, where for the first time in the company's history, we have all of our operations in one organization, which, again, will open up opportunities to identify efficiencies that have been implemented in some parts of our portfolio, but haven't been spread across the whole. So we've got a long ways to go on, I think, structural efficiencies. And that's not even bringing into account the ERP system that we're developing, which I think, again, will unlock a lot of opportunities.

So our job is to keep driving down these structural costs to make room for the additional expense that comes from the -- from growth. We don't limit, frankly, our growth or the projects that we pursue based on trying to meet an artificial overall cost target. We have a very clear and separate objective on growth and a focus on cost and cost efficiency, and that continues, I think, to play out very well. I think if you look at our cash cost from last year versus this year and ignore production taxes and energy prices, we're basically holding cash costs flat. So we're basically offsetting the inflation that's out there and that's the objective here.

Maybe just additional point on that, Darren, just to demonstrate the progress that we've made. Darren mentioned the year-over-year comparison. But if you took our cash expenses this year and you just annualized it, our cash OpEx would look even with 2019. And again, that's with all the growth that we've had. You mentioned the inflationary impacts. I think it just demonstrates the hard work and the focus that we have on removing costs across the enterprise. And that's regardless of the market conditions, that's regardless of how much we make in a specific quarter.

And it also, as Darren mentioned, demonstrates the power of the model that we have. And again, we're at $16.3 billion cumulative year-to-date, and we plan to get to $20 billion by 2030. So again, really good progress, and it's pretty impressive to see how we've been able to offset some of the impacts that you mentioned, Sam.

We have time for one more question. Our final question will be from John Royall of Piper Sandler.

So we've seen some news flow over the past couple of months about talks of an expansion of the Kashagan project in Kazakhstan. I was hoping maybe for some thoughts on where you are in those discussions and what a project could ultimately look like there.

Yes. John, thanks for the question. I would say, obviously, a huge opportunity, we think, in Kazakhstan to optimize what's been going on there and to help the government achieve its objectives of growing production, growing the benefit of their natural resources for the benefit of the Kazakh government and the people of Kazakhstan. But we're very early in those conversations. I think many of the companies involved in the business there are engaged in discussions.

We've got some hurdles to clear and some short-term issues with the government and then continuing to look longer term around the different options available to the industry broadly and more specifically to ExxonMobil in terms of what we can bring to bear to help achieve ultimately the government's ambition of growing production there and growing their revenues. But I would say it's -- we're too early in that process to give you much detail on that.

Thank you, John. And thanks, everyone, for joining this call. Thanks for your questions. We're going to post a transcript of the call to the Investors section of our website by early next week, and have a good weekend.

Good morning, and welcome to the second day of the 42nd Annual Bernstein Strategic Decisions Conference. I am Bob Brackett, co-Head of America's Energy and transition and global metals and mining.

We are not expecting a fire drill or any sort of test. If the alarm rings, please take it seriously. Your primary exit is out the back door down to the right where I am pointing to the escalator area where you likely came up this morning down to the first floor, exit to the street and wait further instructions. If for any reason that path is blocked, there's a series of internal stairwells that you can choose. They'll take you down one floor to the ground floor and follow the lights there.

Ultimately, this is your conversation. We call it a fireside chat. The way you can contribute and engage in the conversation is through the various blue pieces of paper that are scattered around the room. It has a QR code that gets you to the Pigeonhole app that allows you to put your questions into the queue.

While we wait for your questions to come in, Neil and I will have a conversation that's very much like a pyramid. We will start at a high level with macro questions, move down to how that macro informs strategy, talk to operations and then we have time to get into technology and exploration and all sorts of good things.

With that, I welcome Neil Chapman, Senior Vice President of Exxon Mobil. And I believe he has a few slides to share before we kick things off.

Yes, Bob very, very briefly, and I'll just be maybe 3 minutes, if that's okay, and then we'll get into the questions. In the last 6 years, we've rewired, reengineered, reorganized this corporation. We believe we've set ourselves up in the right place to address what we regard as a dual challenge.

The world needs more energy, it needs more affordable energy, it needs more reliable energy to meet the growing needs in the developing economies and, of course, in this country for data centers, for example. We've done that by leveraging the core competitive advantages of this corporation.

So very, very simple. The scale, we're the largest. Execution excellence. We have the strongest, most reliable operations. We have the safest operation. And critically in a capital-intensive business, we execute major projects better than anyone else in the industry, on time, on budget and first quartile. We're a fully integrated company. We're balanced between fuels, refinery, chemicals and the upstream. That gives us tremendous flexibility, and it's unique in our industry.

And then the third advantage is technology. Every strategy of every business in ExxonMobil, the foundation is our proprietary technology. Those are the advantages. And over the last 6 years, why we did that restructuring and organizing. We've taken $15 billion of structural costs out of the business. Let me just put that in perspective, that's more than all the other IOCs combined. We've divested $25 billion of less economic end-of-life assets.

And through doing all of that, we've replaced these less economic, less growth potential assets with the strongest growth potential, well recognized, in the industry, development potential. We've grown cash flow and earnings at double-digit levels each year through the last 6 years. 18 months ago, we laid out our plan to 2030. And what we said was we will continue to grow cash flow and earnings, double-digit levels, annual growth rate through the next 6 years to the end of the decade, all of this at constant prices and constant margins.

And just to illustrate the point, in the upstream by 2030, ExxonMobil will be producing 5.5 million oil equivalent barrels per day. We don't have records that go back far enough to be at that level. Historically, our company, as most people in the room will probably know, we've been 3.7 million, 3.8 million oil equivalent barrels a day. We're already close to 5 million today, will be 5.5 million at the end of the decade.

Critically, it's not just about growing volume. On constant prices, our earnings per barrel in 2030 will be 3x on average what they were in 2019. So we've done a lot to restructure this business. A lot of people say to me, okay, I've seen your plan to 2030, what goes beyond there?

Well, we haven't issued a plan for 2030, but our Chairman has indicated on multiple occasions. We would expect, we anticipate we have the potential to continue on this growth trajectory well into 2030s. So that's what we've been doing as a company. In terms of shareholders, our dividend, we've grown dividend each year for 43 years. Our total dividend, I think it's the second largest in the S&P 500. It's not second, it's right up there.

We've bought back $20 billion of shares last year. We're on plan to buy back $20 billion of shares this year. And you can see the earnings potential 13% per year between now and 2030. It's unmatched in our industry. There isn't any other company in this oil and gas and petrochemical industry that has anything like that kind of potential in the next 6 years.

That differentiates us, Bob, than the others. Clearly differentiated versus the other IOCs. And I think importantly, if you benchmark that kind of data versus the large cap industrial companies, we're right up there with the very best, if not better, than all of those. I've gone over 3 minutes, but hopefully not too much over...

Fantastic. And it is funny. The oil and gas industry plans on a period of time, 2030 is fairly well baked for you all. You know what you'll be doing. 2035, you sort of know what you're doing, and you'll let us know in 2030, I think every semiconductor in the market today will be obsolete in 2030.

Absolutely.

Every AI tool in the market today will be obsolete in 2030, you know what you'll be doing. Today, in terms of the macro, I don't know what we're doing. Well, let's start with people, which is roughly 20% of your volumes come or produced with west of the Strait of Hormuz and perhaps 15% or so move through historically the Strait of Hormuz. That means you have operations, you have people, you have friends on the ground. What's the situation there?

Well, let's put the volumes in perspective. Obviously, Strait of Hormuz closed. We have a big position in Qatar in LNG. We have a big position in the Emirates, in Upper Zakum with our partner, ADNOC. Total, it's about 15% of our upstream production from those 2 assets flows through the Strait of Hormuz.

We still have people on the ground there today. We are part of an operator. We're a joint venture operator in both assets. We did take a lot of families out safely. Actually, if you go into Doha, it's pretty much business as normal. I myself was there during the middle of this. And so in Doha itself, the malls are full, the streets are full. Hotels are empty. Airport is empty. But it's pretty much business as normal.

And then if economics is the allocation of scarce resources, we have a scarce -- we have 2 scarce resources. We actually have more, 2 that are relevant for us. And normally, economics is fixed with free market prices or with the hand of the state policies, what is happening -- why is petroleum economic seemingly broken? Why do we see $90 on our screen in a world where we've disrupted this level?

Well, I think most people don't really appreciate what's happened. You take arguably 11 million or 12 million barrels a day of crude oil out of the global market. The market is about 100 million, 103 million, 104 million barrels a day. Normally, you'd see prices go through the roof. So what's happened to mitigate that?

Well, first of all, the Saudis maxed out on their East West pipeline. So they're running 5 million barrels a day of crude from the east to the Red Sea and that obviously, you can get into the global market. I think what people appreciate less, there was a lot of sanctioned crude oil on the water. In other words, unsold. Iranian, Venezuelan -- Venezuelan, Russian crude was -- and that has now gone to the market, and that's mitigated some of the loss of oil through the Strait of Hormuz.

Most importantly, though, is what's happened to inventories and this really is a telltale for what could well happen in the coming weeks. Commercial inventories of crude oil, of liquids-linked petroleum, gasoline, diesel, jet fuel, they've all run down and running down those inventories as mitigated or offset supplemented by the release of strategic petroleum reserves, which most of the Western countries have done.

All of that has mitigated the impact. You can model this. We've modeled it. I think a lot of people in the industry have modeled it. We're approaching unheard of inventory levels. I mean, really, really low levels. You can debate whether that's going to hit those really low levels in 2 weeks or 3 weeks. But once you get to that point, then you'll see price shoot up. And I think dated Brent, most people will have modeled, would say dated Brent will shoot up.

Once you get to that really low inventory level up to $150, $160, the models would tell you that. And then what happens is when the price gets to a certain level, demand destruction brings it back into balance. Prices go so high, it becomes unaffordable and that's what happens. And so we're at that level right now, and I think crude being in the sort of $90 to $110 for the last whatever it is, 6 weeks has really been mitigated by running down inventories. Can't last forever. So we'll see what happens. Predicting this and the exact timing, it's always a challenge, but that's the way we see the picture.

Yes. To be clear, you're talking about price signals, very high-priced signals coming in 2 to 3 weeks...

The order of magnitude.

Order of magnitude, and that is informed by a global crude oil and refined products trading organization, right. So you talk to that organization, basically talk to the knowledge base, which informs what you just said.

Historically, Exxon has not been in the trading business, but we built a trading organization over the last 5 years. So what you really see is we have the most -- the largest footprint in the oil and gas business around the world. We were pretty much in every country. We have assets, we have logistics, and it gives us tremendous insight. It doesn't just give us arbitrage opportunity. It gives us insight on where vessels, where opportunities are.

We've built that trading organization largely by bringing in experienced traders at the same time as training our own organization. So we have an extensive trading organization in Houston, in London and in Singapore. But those insights come from having the largest footprint in this industry around the world. I don't know, Bob, whether it's 2 to 3 weeks or 3 to 4 weeks. What I'm really saying is it's -- once you get to the minimum inventory levels and all-time low inventory levels, there's only one way to go. That's the situation.

Very clear. It's vaguely apocalyptic.

We know I'm a terrible predictor of price. So I'm not going to do that.

Move to LNG then right? So it's a similar scale of disruption coming into summer power demand, where it's generally the most needed. And again, Global LNG whether it's TTF or JKM, they haven't really adjusted to similar. Are we going to see similar things there?

Well, I think it's probably more advanced going into this, I mean, there was an oversupply of crude oil coming into this disruption. There was arguably a larger overhang of LNG. A lot of new LNG production that's come on the Gulf Coast of North America, that's mitigated a lot of it. In many of the markets, you can deconvert from gas and electricity generation to coal. And we've seen a lot of that happen, particularly in China, particularly in Asia.

So I think those are the mitigating situations. Of course, what you see today is the U.S. retains its $3 domestic gas price at Henry Hub, whereas Europe and Asia are in the $18, $20 type of range.

And that brings me to the final least loved commodity. I'm looking for someone else that loves to talk about U.S. Henry Hub. Is there any hope for U.S. Henry Hub?

Think about domestic gas in North America, primarily in the Lower 48 in the U.S. It's a lot of it. Not only is there a lot of gas in this country, it's a very flat supply curve which means there's not a lot of differentiation between the lowest-cost barrel and the highest cost barrel. So there's a lot of it. And even if you produce more and the demand goes up, that supply curve doesn't change that much for long time.

The prices really get set in the different regional prices by logistics. So we can't lay pipe. And obviously, it's very difficult in the Northeast to lay a lot of pipe. Price is higher. California, it's higher. But if you're in the Midwest, I mean at Henry Hub, Waha Hub price is pretty very typical. Now how do you evacuate gas out of this country? Well, okay, you can convert it to LNG. And a lot of facilities have been built on the Gulf Coast to export LNG around the world, but it takes time.

We, with our partner, QatarEnergy, have built an export terminal. We've just started up. Our first train is online. We shipped our first cargo recently. The reason we did it, it goes back 20 years. We actually invested in an import terminal for gas long before the opening up of the unconventional business. And that gave us economics, which were highly attractive because a lot of the capital has been already spent 15, 20 years ago, and it gave us the most advantaged export facility.

The irony is that, that location was going to be a place for Qatari LNG to ultimately land in the...

That's exactly right.

Now it is the current sole source of Qatari LNG exports from Qatar and it's large...

It's 18 million tonne 3-train asset. First train is online. The second train will be mechanically complete at the end of this year and a third train will be finished in the first half of next year. So that's a big capacity. A lot of capacity to come on in LNG around the world. I've been in this job for 8 years. I've been with the company for 42 years, I've always heard about this glut of LNG supply that's coming on the market in 2 or 3 years' time. And what's happened historically is the market suit up pretty quickly, so you don't actually see it.

Sometimes for reasons you never predicted.

Exactly.

A question coming back a bit to the oil. A general question on the sector. How long does it take for oil to move from the wellhead to the final consumed product? And what are the current inventory levels along that value chain?

Well, it's a wide, wide range. Of course, it depends where you are. If you're an importer of crude oil, take Europe, take Northeast Asia, obviously, from the wellhead, it's going to take you 2 or 3 weeks to ship, never mind, producing what's in inventory and let's just say, the Middle East to get up to Japan, then there's a whole supply chain.

People think of crude oil, the source of gasoline. Well, of course, it is. And people say, well, in crude oil goes to $150, gasoline price will be $9 in California, and that will be a serious issue. It's much, much more than that. Crude oil goes into virtually everything around us. Fertilizers, it comes from crude oil and gas, food prices, they would reflect the absence or the lack, plastics, everything you see in the world is plastics. Delivery, Amazon, still a lot of trucks around the country are running on diesel.

So the crude oil price impacts so many parts of society. In terms of inventory levels down that supply chain, of course, for every single component, every market that those barrels go into, I don't know the answer to that. What I do know is that the gasoline levels of -- sorry, the inventory levels of gasoline, the inventory levels of crude oil is pretty much in the public domain. You can plot it, you can see it and you can see that we're down, pretty much down at 5-year lows.

We also have a comparable question. China data is difficult to find. What have you seen in that country and how are they dealing with an energy crisis?

While the Chinese have been building steadily a strategic petroleum reserve for years, consistently building it, our data would suggest they haven't touched it very much during this crisis. They've managed to secure crude oil. They've managed to use commercial inventories within the country. That doesn't appear that they've touched that. And so sort of position to the rest of the world, you would argue, based on that data, they're in a very strong position. They have a very large petroleum, strategic petroleum reserve, which they've obviously planned and built for a long, long time.

And then seesawing quickly back to Henry Hub. What impact would the increase in export capacity, LNG export capacity have on Henry Hub price? I think I know your answer.

Yes. Not a lot. I don't believe it will. I mean, because there's so much, there's so much gas in this country, and it's easy to go and drill a well and put more gas in the market. So even though you got this big suction sound of all its new export capacity, there's plenty in the gas in this country to supply it. And again, we go back to the supply curve because the supply curve is flat, they just mean the price is unlikely to change. I think most predictions that you see from third parties suggest that price is going to gradually rise over the next 10 years. I think it's more likely to be driven again by regional differentials, regional differences based on logistics or lack of logistics.

So if we take that macro backdrop and start to think about strategy, I always like to ask the question as a former strategist, what won't ExxonMobil do? To me, strategy is what you won't do.

Well, here's what we will not do. We're not going to deviate from the core capabilities of this corporation. We're a hydrogen carbon manipulator company. That's our business. I talked about our strength. Our strengths are understanding the subsurface. Our strengths are in executing major capital projects for lower costs than anyone else. Our strengths are in catalyst conversion.

So leveraging those capabilities, the core capabilities I talked about are core to every part of this company. This is why we resisted getting into wind and solar for so many years. We don't have any capability in that space. We know about hydrocarbons. So we will not deviate from that. We will not deviate to chase volumes. I'm absolutely adamant about that.

You can grow a business, but if you don't grow the value in a commodity business, every investment you make wants to be left inside the supply curve, the lowest in the industry. So we're not going to chase volumes, even though prices are very, very high. Now it takes a long time to bring new capacity online. We're absolutely focused on the lowest cost barrels.

So as an example, in the upstream business, we have not made an investment since 2018, 2019 above $35 cost of supply. And what does that mean? That means for the life of that asset, 30 or 40 years typical for an upstream asset, if the price was $35 Brent for the entire life of that project, we would still make a 10% return. That's what we put that ceiling on investments in the corporation. What it does is it forces our corporation to identify the most profitable barrels.

Our Permian cost of supply is $30 or less now. And so we won't chase volume. We will absolutely leverage our capabilities. So maybe just one other because it comes to my mind. I mentioned that we've taken $15 billion of structural operating costs out of the business in the last 6 years. We have plans to take another $5 billion out by the end of the decade. People said to me, "Well, that's it. You must have taken all the fat out then."

It's not correct. It's a commodity business. You have to drive costs out year after year after year. Structurally, it's not cut structurally engineered costs out. None of us know what the impact of AI is going to be. I don't anticipate it's going to raise costs. It's going to find ways to take more costs out of the business. So I think those are the 3 areas I'd say, Bob.

We're going to continue to leverage what we're good at. Our capabilities are our competitive advantages. We're not going to chase volume for volume's sake. We're going to continue to focus on the lowest cost barrels, the lowest cost performance in the industry, and that will continue.

So that segues into the upstream. 5-ish million barrels today. 5.5-ish million barrels by 2030 and you split those upstream barrels into 2 categories: advantage assets and maybe traditional. I don't know what -- I don't want to say disadvantaged non-advantaged. I don't know what you call the other.

Today, those legacy assets might be are worth of 2 million barrels a day. By 2030, there'll be less than 2 million. So all of your growth is coming from advantaged assets. And that's Permian, Guyana and LNG. So let's start with the Permian. What is the -- and I really want to talk about your conviction in that growth rate, what you need to do to get there, you have focused on R&D and technology as a way to unlock those barrels. So start with the easy stuff starting with how are you going to get there? And then let's go down the technology path.

Yes. If you look at the industry and you certainly look at ExxonMobil in the Permian, the efficiency improvements over the last 6 years have been extraordinary. I mean you can see that as an industry when you look at the number of rigs that are running in the Permian, they come down dramatically and yet the production has continued to go up. So we know exactly where we're going to drill. We have the resource in place. We have the plans in place.

It's all about execution in terms of delivering, we'll be 2.5 million barrels a day by 2030 in the Permian. We have the largest contiguous Tier 1. Tier 1 means the highest concentration of hydrocarbons, the highest quality resource in both basins. And that's really, really important.

So we have the resource. The question is how do you deliver that resource? How do you get the resource to the surface in the most profitable manner? And I've said many, many times, Bob, this is a balance between resource recovery, capital efficiency and production.

You can improve resource recovery with technology. We've talked about that a lot. You only recover, I don't know, 6% to 8% of the hydrocarbons in the unconventional space. In other words, you leave 90-plus percent in the ground. So the key is how do you get more out. And we spent 8, 10 years in research in terms of how we get more resource recovery, how do we improve that?

We're well on the way to improving that by 50%. And we committed to do that by the end of the decade. We've said that we will double the resource recovery early in the 2030s. We're on track to do that. How are we doing it? Well, we are fracking. We're smashing that rock under the ground more effectively and cheaper than anyone else. In other words, the fracking, the more you smash the rock, the more space you have to recover crude oil.

But it's not just about smashing it. This is 1 to 2 miles below the surface of the ground. So you smash the rock, you've got 2 miles of rock trying to push back down to close those gaps. That's why you inject proppant and the industry injects sand to keep those minute channels open.

The problem with sand is it's heavy. So if you put a frac and the frac goes 1,000 feet, the channel goes 1,000 feet under land, under the ground. The sand will only go part way up that frac because it's too heavy, it stops. So we're using lighter proppant. We're using lightweight coke, coke from our own refinery. It has the same strength, but is much lighter. And it allows that proppant to go much further down the frac, keeping the frac open, giving us more recovery, 20% improvement in recovery through the technology that I talked about.

So I think we have -- we've talked about 40 unique stackable technologies. And those technologies that we're pursuing and deploying in the field, the lightweight proppant I've just talked about is one of them. That's to recover more crude oil and to get an improvement in capital efficiency because you can recover a lot of crude oil, maybe you overcapitalize it, how it doesn't work.

You can reduce, you can do the opposite, reduce your resource recovery, spread out the wells, get lower capital spend, improve the capital efficiency. It's getting that balance right. The key for Exxon is the differentiated performance. We have a performance. We have a set of technologies, which is giving us lower cost drilling and fracking than anyone else. The higher recovery than anybody else.

And Bob, as you know, we've taken a unique position in the upstream industry by all these technologies we're deploying with patenting. Historically, in the upstream business, people don't patent their technology. We are patenting it, and we fully anticipate defending that proprietary technology.

That's nice. That means at least external people will see those patent filings and so we'll start to get an idea of what you're doing. We've known about the coke proppant. Longer laterals is another thing you've talked about. Care to tease us with any other technologies? Or should we wait for the filings?

Well, let's just -- let's talk about what you try and do. So in the Permian, there are multiple benches, layers of rock with different concentrations of hydrocarbons with different density of rock. And that changes, that changes by each bench. It also changes by geography. And what's important here is you get the spacing between the wells correct. Because if you have the wells too far apart, you leave too much oil in the ground. If you have them too close, you spend too much capital.

So how do you get that balance right? This is a good example of where AI is helping the industry, helping us. Because today, we have an army of engineers and geoscientists who are doing that mapping to lay out the next cube development plan, to get that balance right between capital efficiency and resource recovery. AI can do that. We're using AI to do that. We are using AI to -- you can put different frac strengths into the rock. You can frac harder, you can frac softer, you frac more, it's more expensive. You frac softer, the fracs aren't as large.

But to get that balance right is really very important. So how you frac and the intensity of the frac, that's a lot of the technologies that we're putting in. You need to get that oil and gas to move. You've got these micro pores. The diameter of these channel is only a grain of sand. And so you're trying to get this thick globby oil through all of that. You want to mobilize it. So surfactant, you heard people talk surfactants targeted at each bench and at each geography to help the oil move is a critical part of what we're talking about.

One final one. To get oil out of a reservoir, you need pressure. If you're in the Middle East and you drill a hole, there's a lot of pressure underground -- 2 miles underground, which forces the oil up. As you extract more oil, the pressure goes down in the reservoir and you can't get as much. It's under pressure to push the oil out. So in the unconventional space, secondary and tertiary recovery is going to be really, really important.

How do you repressurize the reservoir to extract more oil for the long term? It will never be economic unless you have large contiguous acreage. You just have a 2-mile block, I can assure you, it will never be economic as we have the largest contiguous acreage, we're putting a lot of technology into secondary and tertiary recovery. So there's your teasers.

I will take those. Excellent. Two more advantaged assets. It's funny. In past years, Guyana was about the most exciting thing out there. We'll move it behind the Permian. And we'll talk about it just briefly. It's almost been dull, it's repeatedly dull success, right? Despite...

I like that. I mean I like the description.

Talk to Guyana.

Well, Guyana has been extraordinary. I think everybody understands that. I mean it's not just about finding the crude oil, it's about the execution capability. I mean, we're building the lowest-cost facilities in the deepwater, the industry has ever seen at the fastest pace that industry has ever seen. We've got 4 facilities online, 4 FPSOs.

They're all running above their design capacity. We're producing them. In the first quarter, I think 900,000 barrels a day versus a capacity of 800,000 or something like that. So they're extremely well. We have 4 more in the pipeline. We'll bring 250,000 barrel a day bolt-on in the second half of this year. We will bring another one on in the second half of 2027. And our seventh and eighth boats will come online in '29 and '30. So we'll have a capacity of 1.7 million barrels a day by the end of 2030.

Stabroek is a massive block and I think not only has it been successful, there remains a lot of potential. I think a lot of people are aware that 30% of the block is under force majeure because there's a border dispute between Venezuela and Guyana. We anticipate, and I think the world anticipates that will get resolved here in the next 12 months. And we'll go on the lead of the Guyanese government, what we want to do with that.

But obviously, there is potential there. We have signed up this year to take a sole position offshore South of Trinidad. I think this is pretty telling. And I think most people can understand what we're doing here. We see this geological play going up through Guyana and potentially going into Trinidad and we've secured all of that, which offers us exploration, potential exploration you never know until you drill but its potential.

We have 8 FPSOs in the southeast of the Stabroek block. That's really, really critical for the next decade and beyond because it gives you this opportunity for really low-cost tiebacks. In other words, you got no more capital in the ground or limited capital and you can drill small pockets of oil that are relatively close and run them back to those vessels.

And the key here has been the execution. We use this principle of design one and build many. And that's what we're doing. And the execution of that from our projects organization has been exceptional.

Maybe I'll just -- if you don't mind, just extend because I mentioned AI a moment ago. And I think AI is going to be pivotal in this industry. I mean, the Holy Grail in our industry is, can you find more oil and gas? If you find it, it's the most economic. You have to buy it from somebody, you find it.

And how do you use AI to find more oil and gas? We have the largest subsurface data set globally of any institution in the world. The key for AI is do you have the data set? And what you're looking for is to analyze all of that data to see if you can find similarities to find new opportunities.

And the reason I raise it now, in Guyana, we have built an agent, a model, let's think of it that way, which if we give it the seismic data that we've run, I'm oversimplifying to make a point and we say, go find the crude oil, it can find all the crude oil that we've already found with a 90% success rate. That is pretty extraordinary.

So you can feed it to all the information and all the discoveries that we've made improved, it can identify them just by feeding that seismic data. You've got to have the data set to be able to do that, but it offers obviously potential for the future.

One more on that point, Bob. We have analyzed the well data from 50,000 wells that have been drilled in the industry all over the world, 50,000. It would have taken us 15 years to do that analysis. We've done it in a matter of weeks. And again, you're looking for similarities that humans may have missed. It's identified 150 exploration opportunities worldwide. We don't know if they're going to be successful or not until you drill a hole, you can never be sure. But the potential of applying this technology, AI, not just to Guyana, but globally is something that I think it will be really, really important for this industry in the future.

Last question on this topic, it's fascinating. If you think about where the FPSOs sit today in Stabroek block, they sit at the mouth of the Essequibo River [indiscernible]. You drilled a well in the middle of the block, Ranger, that was a carbonate discovery, right, carbonates, coral reefs loves to stay away from sand systems.

When you get to the western part.

This is a geologist talking.

Western part of the block, you're getting into the [ Orinoco], which is actually a higher discharge system than the one you found in the East, and you've taken exploration across the mouth of that. Did you do all that after AI? Or has AI helped that as you're starting to look at...

No. We've done all that analysis before the use of AI. And I think, again, I don't want to say we've -- we've reached the holy grail in AI and exploration, we certainly have not. But what I'm saying is we're making progress. And it's really important that we're making progress. And the key to progress in this is to have the data set. That's what's really, really important.

Ranger is a carbonate structure. This is one of the discoveries in Guyana. It's very, very different from all the developments so far. We've got work to do there to see if we can develop that or not.

Third advantaged asset is LNG. We talked about the Strait of Hormuz. And we have a number of questions on macro that will hopefully get back to the very tail end with LNG disruptions, you have 2 unsanctioned LNG projects, one in Mozambique, one in Papua New Guinea, some Japanese trade house talks about diversity of supply, security of supply. Talk to those projects, talk to the potential of FID this year? And then maybe talk about the overall LNG portfolio.

Yes. Mozambique, enormous resource, very low-cost resource, challenging location. It's right on the border of Tanzania. We have Block 4 and Area 4, and we're the operator of that. We plan to FID to sanction 18 million tonne development this year, and we're on track to do that this year.

Very low cost because the reservoir is very large, close to the shore. Importantly, it's on the East Coast of Africa. So in terms of distribution and shipping, it allows you access to the Asian markets at a much lower cost. Papua, of course, Papua New Guinea is already in the Southeast of Asia. And this is a -- it's a new reservoir and new development with our partner, Total, but we will be leveraging the existing liquefaction facilities that we already have there.

Again, our plan and we believe we will sanction that project this year. These are, I would argue, the most economic opportunities in LNG around the world. We are in Qatar, with Qatari, they're big NFE. We have a relatively small position there. We have 25% of 1 train. There are 4 trains. So we're 25% of 25% with 2 million tonnes. And obviously, they're getting close to completing that, and that will depend on how they can start up their activities. So that's what we have on the target.

Both those projects, Mozambique and Papua, which are both very large for ExxonMobil will not be online toward 2030. When I talk about growth beyond 2030, obviously, there are components in there. We also have the Golden Pass facility on the Gulf Coast of America. We're a 30% position again of 16 million to 18 million tonnes, which is coming online.

What I like about our LNG portfolio we've established is we have positions all around the world. We're in Australia. We're in Papua New Guinea. We're in the Middle East, we're in the Gulf Coast, we'll be in Africa. And that allows you to optimize trade flows. It allows you to trade that really allows you to optimize flows around the world. So we like our position in LNG and those are big projects to be able to execute in the next few years.

The 3 advantaged assets. Is there anything in the portfolio that can move up to the big leagues. They can move from a legacy...

You can the try 2 million tonnes of what you said was less strategic. I don't regard them as less strategic. It's just that the reason we talked about Guyana, Permian and LNG like that, those are the growth engines. Extremely low cost of supply, left-hand side of the supply curve with lots of potential.

Just to give an illustration in the 2 million tonnes you talk about, it's not growing, but there's 15% depletion in our business every year. So to keep it flat, it means you've got to be growing something. We're in Upper Zakum with our partner, ADNOC, very, very attractive asset. We are growing that with our partner there. That's a key part of our growth portfolio. We've been highly successful in mining. And we regard our coal operation as the lowest cost mining operation in Canada. If you go up there oil sands...

Oil sands mining...

I apologize, oil sands. This is -- you mine sand, it's 10% crude oil, you've got to extract the crude oil from the sand, and that's the way of -- it's a hard way to make oil is the way I look at it. But it's really interesting if you go up there. These are massive trucks and massive scoops that are taking these oil sands and take it to the processing facility, 100% autonomous.

Well, it's not a single person driving those vehicles now all controlled again by AI. So we're growing that. We're growing our in situ, which is a heavy oil business, a little different than mining in Canada. We see good growth potential there. So across the portfolio, we have other unconventional assets like the back end that we plan to continue growing. We have growth in Angola. We have growth opportunities in Nigeria. So within that 2 million tonnes, there's a lot of opportunity.

2 million barrels.

2 million barrels. Sorry.

And then that would suggest that things like inorganic opportunities growth would be unnecessary, but still part of your strategy. Talk about M&A and what role it plays in the portfolio.

I think the key to M&A is, can you acquire somebody and get 1 and 1 to equal 3. There's no point in just buying somebody for the sake of buying somebody to get volume. You've got to have a deal space. You've got to have value. We bought Pioneer, as you're well aware, and the key to that was the technology I talked about, the ability to recover more crude oil out of the rock and do it at a lower cost.

Meant that, that resource that Pioneer had was worth this much to them, it's worth a lot more to us. And that creates deal space. We can obviously add a premium to Pioneer, and it creates tremendous value for us. That's the key with M&A. Can 1 and 1 equal 3? What I like about our position is because we have this growth portfolio, we don't have to do M&A. We don't have to.

We have a growth portfolio already. And we like to describe ourselves as picky acquirers. We're not going to do it if the deal is right, but the key to the deal is to create deal space. What can we do, which adds more value to anyone that we acquire? That's the basis of Pioneer. So I would tell you, if you're in my job, you're looking at every company and every asset in the world on an ongoing basis. Of course, you are. The key is does the time -- is the time right, can we create that deal space? Is that an opportunity set?

So what I'd say, Bob, is, of course, if you're in our business, you look for those opportunities, you're constantly assessing them. You're constantly reviewing them. Timing has to be right, and we'll see that plays out. So I've told you nothing about are we going to acquire anybody...

You gave me some boundary conditions. If we think about this year, mathematically, global crude prices this year are almost going to have to average $90 barrel or more, perhaps more. We know what your dividend payment is and how it grows historically. We know your plans for share buybacks. We know your CapEx plan. You haven't changed them this year, amidst this run up in price. And therefore, we or consensus would have something like $30 billion more cash flow coming to you at this part of the cycle. A good question would be, how do you reallocate that $30 billion of pro-cyclical cash flow?

Well, first of all, let's go back to your price assumption. I don't know if the Strait of Hormuz opens tomorrow, price doesn't get up to this $150, but it is going to take time to rebalance the global markets for sure. The ships are all in the wrong locations. So it's going to take -- and you can estimate 4 to 6 weeks before we get into a normal supply chain. And it all depends on whether the Strait opens and at what time it opens.

And then the question for the world and every country and every commercial organization is how quickly do you rebuild those inventories? And if you're nervous about this thing starting up again, you're going to rush. And so that's going to have more demand than we had going into this crisis. So that could keep the prices high. But I think there's a bunch of unknowns.

I think logically, you would say there is going to be some pull on demand and there's going to be a lack of supply over a period of prices are going to be elevated which for a company like us could end up with the situation you're in. And first of all, I mean, we have optionality. We're going to build cash, of course, on the balance sheet. We're going to address debt, of course, we are. And then it will be a question for the Board around distributions.

I like the fact that we have this continuous stable share buyback scheme. We've never had that historically as a company. I like the fact that we continuously raise the dividends year-on-year. Whether we feel there is an opportunity to do more than that, Bob, I think the key for us is generate the cash, lower debt, put it on the balance sheet, let the Board of Directors decide.

And that's a process...

Yes.

So wait for an opportunity set. Two, on the opportunity side, I'll try to combine a couple of the questions as well. I had a question around Australian unconventionals and a question around Venezuela. What role will those 2 assets play in the portfolio?

We had a lot of publicity about ExxonMobil in Venezuela in recent weeks, because I always say be careful what you read in the media. We're assessing Venezuela with the support of the U.S. government. We have teams in Venezuela now. We've had teams in Venezuela. You have to assess technically what the state of the assets are. We're in discussions with the government of Venezuela, we're in discussion with PDVSA. Yes, it's going to take time.

We haven't been in Venezuela for gosh, 20 years. We've been expropriated twice. So but we're in there. It's a tremendous size resource. It will take time to understand whether that's going to compete for capital in our portfolio, whether we can get agreement with the [indiscernible] and with the government of Venezuela. It's an opportunity set -- as large as we are, Bob, you have to look at every opportunity around the world, and we're certainly doing that. I've forgotten your first question...

Australia unconventional...

Australia unconventional, yes key is unconventional. The rocks have got to be right. The fiscals are going to be right. You get the right rocks and the right fiscals. In unconventional, you need a lot of open space because the key...

Australia has open space.

A lot of open space. Drill, frac, drill, frac, drill, frac, but then you've got to get that product to the market.

So Argentina has a lot of unconventional rock. Azerbaijan, Algeria, Australia, the key is what competes. Early days in Australia, there is certainly potential there, but it's quite a ways in land. So you've got to build a lot of pipe to get it to the open market and can that be economic? Can it compete in the global market?

I would tell you, there isn't an opportunity around the world that we're not involved with, we're not addressing, we're not assessing, I would say, including Australia because if you're the size we are, it's a 15% depletion every single year, you have to be looking at everything. We're looking at Venezuela, we're looking at Australia, but really new yet.

It sounds like Algeria and Azerbaijan would be higher on your unconventional list in Australia?

Well, we've looked at them more, but again, very early days on all of them.

We've got less than 2 minutes left. Could you close out telling us what's the value proposition ultimately for owning ExxonMobil shares?

Yes. Well, I'll repeat a little bit of what I talked about at the start. The runway for this corporation is unmatched of anything that we've had in the last 40 years. We have the strongest, highest earnings and cash flow growth potential that in decades. It's taken a lot of effort to reengineer, rewire the corporation to get that space.

We laid out this plan to 2030, 18 months ago. Six months ago, we updated it. We added $5 billion cash flow growth and $5 billion earnings growth between now and the end of the decade. So at constant price, we will increase earnings by $25 billion between 2025 and 2030. And cash flow will increase by $35 billion. We added 5 million included in that 6 months ago without any increase capital expenditure, and that is due to technology.

The key in this industry is can you differentiate performance versus everyone else. And I think the data suggests and it shows to you not only do we have a growth runway to grow cash flow and earnings through 2030. We're putting those foundational and blocks in place to make sure we extend beyond that.

Perfect timing. With that, I want to thank Neil. I want to thank you in the audience. I encourage you to stay for Diamondback, followed by Chevron. And with that, let's thank Neil.

Good morning, everyone. Welcome to ExxonMobil's earnings call. Today's call is being recorded. We appreciate you joining us. I'm Jim Chapman. I'm joined by Darren Woods, Chairman and Chief Executive Officer; and Neil Hansen, Senior Vice President and Chief Financial Officer.

This quarter's presentation and prerecorded remarks are available on the Investors section of our website. They're meant to accompany this quarter's earnings release, which is posted in the same location.

During today's presentation, we'll make forward-looking remarks, including comments on our long-term plans, which are subject to risks and uncertainties. Please read our cautionary statement on Slide 2. You can find more information on the risks and uncertainties that apply to any forward-looking statements in our SEC filings on our website. We also provide supplemental information at the end of our earnings slides, which are also posted on our website.

And now I'll turn it over to Darren for opening remarks.

Good morning, and thank you for joining us. Let me begin by recognizing the impact of the conflict in the Middle East and our colleagues and partners in the region. We've been in close contact with our regional partners as well as with companies and countries we have worked with for many years. We are proud to stand beside them during these very difficult times.

While the financial impact in the region is real, it is even more real is a daily threat our colleagues and partners have been living under. We remain committed to supporting them as we work to restore operations and repair assets with a clear focus on safety, and disciplined risk management. The Middle East is and will continue to be an advantaged and meaningful component of our global portfolio. The disruption to the broader economy, we are seeing underscores the critical role our company plays in providing the affordable, reliable energy and products the world depends on. What we produce remains essential to development and progress sustaining and improving living standards around the world.

In this environment, scale, integration and execution excellence matters. Those advantages, combined with the deep experience and capability of our employees, give us the ability to respond quickly and manage effectively through disruptions. Our competitive advantages are on display in this quarter's results. We delivered strong operational performance in a challenging environment, maintain rigorous safety and reliability standards and continued advancing key priorities across the portfolio, supporting long-term value creation for our shareholders. We saw those advantages in our response to supply disruptions, leveraging our global portfolio to support customers.

We delivered on our plans to increase Permian production year-over-year, achieved record levels of production in Guyana, achieved first LNG at Golden Pass, optimized logistics and crude product flows and safely maximize refinery throughput where possible. In fact, in March, refinery throughput increased by approximately 200,000 barrels a day versus February or the equivalent of a midsized refinery. As we brought back refineries from turnaround and deferred maintenance activities where we could without impacting safety or long-term reliability.

Our global supply chain organization rapidly executed alternate routings from the U.S. Gulf Coast to Asia to sustain critical supplies for our customers. Despite the unprecedented impacts in the global energy system, we maintain deliveries to our customers globally through coordinated planning and real-time vessel visibility.

Financially, excluding identified items and estimated timing effects, our first quarter earnings per share were up versus the fourth quarter of 2025, reflecting the strength and resiliency of the underlying business. Stronger portfolio mix, structural cost reductions and execution excellence continue to drive improving performance. Those same factors leave us better positioned to manage uncertainty versus several years ago.

The strength of that advantaged portfolio is clear in the work we're doing today. We are expanding our LNG footprint, our newest facility, Golden Pass LNG, a joint venture with Qatar Energy is increasing U.S. export capacity and an important moment for global supply. Train 1 of the facility achieved first LNG in March and will deliver an increase of about 5% relative to 2025 U.S. exports. By the time the third train is online, we will increase the country's current LNG exports by roughly 15%. At the same time, we continue to progress towards final investment decisions on LNG projects in Papua New Guinea and Mozambique, both expected later this year.

Elsewhere in the upstream, Guyana continues to set the standard for execution, development pace and value creation. We delivered record production, continued strong reliability and have [indiscernible], Whiptel and Hammerhead projects under construction with [indiscernible] expected first oil late this year. Consistent with our broader approach to support long-term economic development in countries where we operate, we've committed $100 million investment over 10 years to support national STEM education in Guyana, strengthening our bond with the people of Guyana and establishing a foundation for long-term prosperity.

In the Permian, we continue to show how scale and proprietary technologies improve efficiency, recovery and long-term value creation. We remain on track to grow full year Permian production to 1.8 million oil equivalent barrels in 2026, with that growth grounded in value, not volume. We're also progressing our Permian Net Zero ambition with continuous methane monitoring implemented across all key assets in New Mexico.

In Product Solutions, performance remained strong, driven by higher value products and technology-led differentiation. The Beaumont refinery expansion completed in 2023, fully recovered its initial investment ahead of expectation and is contributing to stronger margins and cash flow. This underscores how disciplined investments grounded in long-term market fundamentals, rigorously executed, generate durable returns independent of price cycles.

In parallel, we continue to progress our journey to build a reliable domestic supply of advanced synthetic graphite. We recently held a ribbon-cutting ceremony at the pilot production plant in Kentucky, which represents a critical milestone between lab scale development and full commercial deployment. In Low Carbon Solutions, we began transporting and storing captured CO2 from the new generation gas gathering project, our second startup in less than a year. Through this year and next, we plan to start facilities with the capacity to capture an additional 4 million tons per year of CO2.

Importantly, with our advantages, these projects deliver attractive returns that compete with the investments in our base business. Technology as a core competitive advantage remains central to our strategy is one of the ways we improve structural competitiveness, strengthen returns and create new earnings opportunity.

In Guyana, we achieved the first deepwater fully autonomous well section using rig automation and automated downhole steering tools, improving both safety and efficiency. Additionally, we're on track to leverage our proximate technology in subsea applications with Hammerhead and future FPSOs, further demonstrating the materials performance and demanding offshore environments.

Across the company, we're making further progress to simplify how we run the business through effective application of technology. Our enterprise-wide process and data platform transformation, the largest ever undertaken in the industry reached an important milestone with the successful launch of a new modern workforce enablement system. This significantly simplifies the work processes that underpin our talent management approach and streamlines our payroll processes in more than 50 countries. It provides a single, consistent data foundation on which future system deployments will be built. We delivered this with no business disruption demonstrating the strength of our centralized core capabilities, fully leveraging our scale advantage. This is the first step of many to make our processes more efficient and effective, ultimately enhancing the experience of our global workforce. This will allow our people to focus their efforts on high-value work, further reinforcing our competitive advantages.

Without the changes we made over the last decade and the focus we've put on leveraging our core advantages, this game-changing enterprise system would not be possible. This is establishing a truly differentiating foundation for long-term competitive advantage. With recent events, the world has been reminded of the critical role and long-term need for reliable, affordable energy products.

Today, more people recognize that demand for oil and natural gas remains substantial and will continue to play an important role in global economic growth far into the future. This fundamental and the competitive advantages we bring underpin our strategy, our capital allocation decisions and the long-term success of our company. We are confident in our advantages, the importance of scale and integration, the critical role of technology and execution excellence and the power of talented people. We are confident in our continuing transformation and the critical role our company will play in any future scenario. And we're confident in our plan to build long-term sustainable earnings and cash flow growth, the basis for long-term growth and shareholder value. Thank you.

Thank you, Darren. Before we move to Q&A, I want to highlight that we plan to publish our 2026 Advancing Climate Solutions report this month, detailing all of our progress on solving the And equation, meeting demand and reducing emissions as well as our latest sustainability report. All these documents can be found on the Investors section of our website. We really encourage you to take a look. And with that, let's move to Q&A. Please note that we ask each analyst to limit themselves to 1 question as a courtesy to others. And operator, we'll ask you to please open the line for our first question.

[Operator Instructions] The first question comes from Devin McDermott of Morgan Stanley.

So Darren, I wanted to try to unpack some of your views on the near and longer-term impacts from the situation in the Middle East. And on the near-term side, I was hoping you could talk through your view on the time line for operations in the region, including your own to return to normal once the straight reopens? And then shifting to the medium and longer term, I would just love to hear your perspective on how lasting you expect the market impacts to be across upstream, refining and chemicals and whether you're seeing anything that structurally changes your view of normalized or mid-cycle price at the margins?

Sure. Thank you, Devin, and thanks for the question. Maybe to start, let me just provide some context around how we're looking at what's been playing out here in the market, which will form the foundation for then how we see it continuing to play out. So I think it's obvious to most that if you look at the unprecedented disruption in the world supply of oil and natural gas, the market hasn't seen the full impact of that yet. And you only have to look at the ranges that oil prices have moved at, which are very consistent with the last 10 years in the history there versus this unprecedented and historically unprecedented disruption. So there's more to come if the Strait remains closed.

Why haven't we seen those impacts manifest themselves pulling in the market yet? Well, I think we all know there was a lot of -- a lot of oil in transit on the water, a lot of inventory on the water that has been deployed in the first month of the conflict, strategic petroleum reserves have been released. Commercial inventories have been drawn down. And so we've seen that play itself off and mitigate the impact as we move through March and then here through April. As you get to the kind of the men working levels of inventory on the commercial side, you're going to lose one of these sources of supply.

And so, we anticipate as that happens in the Strait remains closed, that we will continue to see increased prices in the marketplace. Once the Strait opens back up again, it will take some time for frankly, to get back to a stable flow rate that was consistent with what we've historically seen, ships got to reposition themselves. We've got to work through the backlog. Then there's obviously the transit time to get product to market. And so we're thinking there's going to be a 1- to 2-month time lag between the Strait opening up and the market seeing normal flow.

And then depending on how long this goes and how far strategic petroleum reserves are drawn, how low commercial inventories go, there will be a period of time where players, markets, governments, countries try to refill and replenish those inventories. And so that's going to bring an additional level of demand into the marketplace, which we think is going to put upward pressure on prices. I would also anticipate that many countries around the world will look at -- if they don't have strategic petroleum reserves, start thinking about whether they need those, that may bring some additional demand into the marketplace. And then obviously, people are going to reassess their energy security and how they ensure that going forward that they don't have the same exposure that many of them have been -- have realized here in the short term.

So I think all those things, difficult to predict exactly how it plays itself out. But I do think that will have an impact on prices with basically manifesting itself as maybe higher demand than we anticipated at the beginning of this year.

And then the final point I would make with respect to longer-term implications. It kind of depends on where Iran ends up. And if the world -- how comfortable the world is, what assurances they have that the flows will remain uninterrupted. And so whether or not a risk premium gets put into the market, I think, is a question that has yet to be answered.

With respect to our own facilities there, and we were obviously, first and foremost, as this conflict erupted, very focused on protecting our people and making sure that we kept them safe, which I'm very pleased with how our organization responded to that. As the conflict has gone on, and we've done our risk assessments, we have allowed more folks to return to help with our partners and assess the damage. I think once the Strait opens back up again, a large part of the capacity that isn't in the market today will come back on in a relatively short period of time. We'll have to cool down the LNG trains to get that movement again. That will take a few weeks. But I think we'll see that demand or that supply ramp up fairly quickly.

And then ultimately, we'll have to work with Qatar Energy on the 2 trains that were damaged. That will be obviously a much longer time horizon with respect to repair. That will be about 3% of our global production and Qatar Energy came out early on and said, the repair time will be anywhere between 3 and 5 years. Obviously, we're working to be on the low end of that range. But we've got more work to do to fully assess the damage and understand what options we have for repair. Neil, anything to add to that?

Devin, maybe another just perspective on the near term. And obviously, we've been focused on the external impacts to our upstream production. Certainly, what we've seen in the Middle East, but we also had some other external impacts in the quarter, some impacts in Kazakhstan from drone attacks. And it seems like it's been a while, but there is also a fairly significant impact from the winter storm in the Permian back in January. But if you exclude all those external impacts, it really highlights the benefit and the value of having a global diverse portfolio. If we take those impacts out, year-over-year, our upstream production was up 8%. And that 8%, again, comes from advantaged assets in the Permian and in Guyana, organic advantaged assets.

So again, it just highlights -- yes, there is a lot of disruption, but having those advantaged assets that global diverse portfolio allows us to continue to deliver long-term shareholder value.

The next question is from Bob Brackett of Bernstein Research.

I'm drawn to your Exhibit 5 where you show March 2026 refining margins. Obviously, it's not a full quarter. It's a single month. Can you talk to that opportunity maybe inform us how April turned out and then talk about how you can sort of help balance that market? And what are the opportunities for you in the downstream this year?

Yes. Thank you, Bob. I would just start by saying one of the advantages we find here in this market and with the pressure on supply and the resulting then increase in refining margins is we're very satisfied that we've never lost focus on making sure that we were building a very robust and advantaged refining network. You'll recall, we started up a very large expansion at our Beaumont refinery in 2023. I think when we first announced that investment in refining, there was a lot of, I guess, questions about whether or not that was going to play itself out and be a profitable investment. We've now paid that investment off completely.

And so I think that is just an example of how we never doubted that having an advantaged footprint in refinery, one that has a diversified product slate is going to be critical as we move forward to meet the world demand. And so we feel really good about where we're at. We've had several investments in high grading the production of the refining. And so today, we've got a very strong circuit to meet this challenge in the marketplace today. If you look at our Gulf Coast refineries, which is the largest footprint we have, it ran out in the first quarter at record utilization rates.

And so, we've been very focused on reliability and making sure that the facilities that we have are running at peak production. And we emphasize that really as we moved into March and saw this disruption coming. We worked through the refining circuit for units that were in turnarounds and down the organization expedited that maintenance work to get it back online sooner for units that we were planning to take down for additional maintenance. We did the assessments to see if we could safely defer those. And so really worked hard to try to respond to the demand that was out there. And from February to March, we increased refining production by 200,000 barrels a day.

And so just an example of how we were leaning on the organization to try to meet the moment. On top of that, our supply organization has done a tremendous job at moving barrels all around the world to rebalance the supply that we have with the demand shortage that we see developing across the world. So all that continues. And I think that's going to play out very well for us as we move through April and into the second quarter.

I'm extremely pleased that the work that we've historically done over the last 10 years to reshape the organization. This was a real test of that, the changes that we've made. And frankly, it has proven itself to be extremely impactful with respect to our ability to bring the most critical resources, our best talent on some of the hardest problems. And thankfully, we had built our trading organization up to help facilitate these movements. And so all that in combination, I think, has led to what was a very successful month of March, not just from an earnings standpoint, but obviously from the ability to meet the moment and meet the demand, and that's going to play itself out going forward.

Yes. And Bob, just to give some context, I know we had some temporary transient impacts in our financial results this quarter with the timing impacts that we disclosed in the identified event. But if you take those things aside and you look at that Energy Products segment, we made $2.8 billion in the quarter, up $2 billion compared to last year and a few hundred million compared to the fourth quarter. So again, for all the reasons that Darren talked about, leveraging those world-class assets that we brought online last year, leveraging our trading capability, we've been able to deliver to the bottom line, the market environment that we saw in March.

The next question is from Arun Jayaram of JPMorgan.

I wanted to see if you could elaborate on how you view some of the resource expansion opportunities in Guyana as well as your initial assessment of the situation in Venezuela?

Yes, sure. Thanks for the question. I'll start maybe with the latter. If you look at Venezuela, obviously, Venezuela is a huge resource that's now opened up more freely to the world. There are continuing work going on with the industry, with the Trump administration with the government of Venezuela to get a context of that opportunity shape so that it represents attractive investment opportunities for the industry and generate the necessary returns to make the investments in Venezuela.

The oil in Venezuela is very heavy and therefore, requires a lot of effort to get the production up and get it onto the market. Doing that in a way that is low cost is going to be absolutely critical for Venezuela oil to be a fully contribute to the world balances and to meet the demand that's out there. And I would tell you the work that we've been doing really anchored in our resource up in Canada in that resource base there and the work on heavy oil, the technology developments we've been making, I think, positions us uniquely in terms of low-cost production of the Venezuela resources, when that opportunity -- when the context is right and the investment and the returns look promising.

And so I feel positive about what's happening, the opportunity there, more work to do, but I think we'll be uniquely positioned and play an important role in bringing those barrels to market.

More broadly, as you look at the resource opportunity, Guyana continues, we continue to demonstrate outstanding progress with Guyana, we're again at record production and well in excess of the investment basis that we had as we brought those projects online. I would just say that it's a testament to, I'd say, the innovation and ingenuity of the team working that resource and their motivation to continue to find ways to improve and get better. And I think that mentality applies itself broadly across the opportunity set. So the team is very engaged in working with developing the resources across the [indiscernible] focused on developing projects that generate the returns to -- across the entire resource base. And I think we're going to continue to see projects come online and opportunities present themselves as we continue to develop that resource.

There's still a lot of acreage that left to be assessed. And so I think the opportunity there is significant. And then I think as we look in the area as a whole beyond Venezuela, you've got the work that we're doing with Trinidad and Tobago, and I think we're going to see some opportunities there as well with time.

The next question is from Neil Mehta of Goldman Sachs.

I just love your perspective on the Permian. You guys have been very clear about this being a growth engine guiding to 1.8 million barrels a day and eventually getting to 2.5 million barrels a day. And so just your perspective in light of the higher commodity price and the need for U.S. barrels, do you expect the Permian to have an activity response from an industry perspective? Does this change the way that you're prosecuting the basin in any way? And then I know you've had a lot of conversations with the administration. We're getting a lot of questions about the crude export ban and any risks around that. Do you guys feel comfortable around that policy?

Yes. Thank you, Neil. I think first, just with respect to what we've been doing in the Permian, I think you all know we've had the pedal to the metal here from the very beginning, we recognize the importance of that resource in meeting world demand and in particular, in establishing the U.S. as the preeminent player and supplier in this market. And so we've been very focused on that from the very beginning. You can see that in the growth rate that we have achieved -- in that resource. And obviously, very focused on doing it in a very capital-efficient way and ensuring that we have a very low cost of supply.

And the work that we've been doing on the technology portfolio is showing a lot of promise. It's hard to see in the data today because we're early stages of deployment. But I would say we remain very, very optimistic that we're going to continue to see capital efficiency opportunities manifest themselves and recovery opportunities manifest themselves through the deployment of technology. And so, we're going to continue on the pace that we've been at. I would say we are running pretty full speed, unlike many of our competitors who, I think, have predicted the plateauing of the resource and the opportunities out there. We have never seen that, don't see it today. Whether the views of that change in the industry, I can't really comment on whether they can make a decision to maybe run through their inventory more quickly. I can't comment on that. I don't know how they'll be thinking about it. But ultimately, the record here or the opportunity here is to do things in a more effective way to maximize the recovery of the barrels. And obviously, that's what we're very focused on.

With respect to crude export bands, I think you bring up a really good point. I've been very encouraged by the comments made by Secretary Wright and the recognition that something like that would be hugely detrimental to the industry and the supply. And I think it's important for politicians to understand that countries and companies export product when they don't have that demand domestically. I mean the most -- your most profitable barrels are the barrels that you supply to your local market because the transportation cost is the lowest. And so I would tell you, I think everyone that's out there looks to that tier first. And it's only when you satisfy the demand of your local markets that you start sending your product and barrels farther afield and incurring the transportation cost.

So once you -- so that's what's driving the exports. The world is in price parity. And so the markets and the prices around the world all reflect a consistent price basis. So it really comes down to what are your local opportunities versus, and when you run through those, you export. If you shut in exports, you shut in production. And it's particularly impactful in the U.S. that if you shut that production in, you shut in the associated gas that comes with it. And a huge benefit to the U.S. economy to date has been low-cost, low-price natural gas, which feeds our industrial complex, our manufacturing complex. It leads to the economic growth that we've been enjoying in the company, leads to job creation expansions. And so a lot of negative implications if we see that happen.

And I'm extremely pleased that the administration recognizes that and isn't looking to that as a lever table. Unlike other countries as you move around the world that have started talking and looking at things like that. They are going to cause a bigger problem for themselves in pursuing what feels like populist action in the short term that has very negative long-term consequences.

The next question is from Betty Jiang of Barclays.

I want to ask about LNG and maybe starting with whether today's disruptions have changed your long-term view on LNG macro. And given the tightening supply today, is there any flexibility to lean in on the Golden Pass with the first train that's currently on, whether there's ability to increase that utilization and maybe accelerate the timing of future trains? And maybe just an update on the timing on the next 2 LNG projects as well?

Sure. Good. Thank you for the question, Betty, and good morning. I think if we reflect on the discussions I've had with all of you over the last year or so, there's been this prediction out there that the LNG market is going long. And of course, a lot of our LNG is tied to crude contracts. And so the supply-demand balances and the impact on pricing in the LNG market is a little different than what we have in the crude markets. But we -- so we are always constructive on LNG going forward.

And what we see now is with the off-line, the impacts with what's come offline and some of the damaged facilities that length that people were, I think talking about over the last year has gone away, and I think we're going to see a tighter market here, certainly, in the short to medium term. That's helpful in the short term. But as you know, we don't make investment decisions based on calling specific supply-demand balance and price environment, we tend to instead to focus on making sure that the capacity we bring on is advantaged, it's low cost and will be successful irrespective of the price environment.

So Golden Pass is obviously one of those assets. Mozambique, Papua New Guinea, all those are projects that we're developing with a long-term view. And frankly, have been progressing those as on an expeditious manner as quickly as we can, consistent with capital discipline and efficient project development. So we will look for opportunities in the short term, and we'll look for opportunities with our production to see if there's more that we can bring on. But I don't see needle-moving opportunities simply because in the base case, we were pushing hard to do it in an efficient and as an expeditious manner as possible.

With respect to Golden Pass, as you know, we've got Train 1 on and getting product to market. Train 2, we expect to be mechanically complete by the end of this year, and then Train 3 should be mechanically complete as we head into the second quarter or the second quarter of next year.

The next question is from Doug Leggate of Wolfe Research.

Darren, I wonder if I could come back and maybe it's for Neil, I come back to Qatar. So you've quantified the volumetric impact, the LNG impact. But my question is, your participation in the repairs comes up against, I believe, limited remaining contract length in the 2 Trains you're involved in. How does force majeure impact that decision? Do you get -- does the contract get extended? Or maybe you could walk us through the implications of that?

Yes. Thanks, Doug. I would just say -- start by saying that the long history that we have in Qatar and the partnership that we have with Qatar Energy is extremely strong and as strong as it's ever been. And so we are extremely committed to working with Qatar Energy and helping restore the supply to the marketplace. Having said that, what I would tell you is we'll do that in a construct that ensures that we generate a return on the capital and the money that we put back into that business. And so I'm not going to get into the specifics of how that will play out. But I would just say, I think Qatar Energy has always recognized that successful partnerships require win-win solutions and opportunities.

And I think that's actually been a real strength of Qatar Energy and the work that they've done in the industry. Certainly, it underpins the work that we do with them and the partnership we have as they understand and respect the value and the contribution that we can bring in our partnership, and they recognize the importance of being rewarded for those contributions. And I know the discussions I'll have with Saad and the rest of the leadership of Qatar Energy is that, that will continue to be respected, and we'll find a way to do that in a way that's good for Qatar Energy, good for ExxonMobil, and frankly, good for the world in terms of bringing that low-cost supply back into the marketplace.

The next question is from Biraj Borkhataria of RBC Capital.

As a follow-up on your LNG portfolio, you talked at the start of the call about countries thinking about their level of exposure to the region and when I look at the rest of your business, it's fairly diversified. But I look at your LNG portfolio relative to peers, and it's obviously much more concentrated with Qatar being such a big part of that. So, do recent events make you think about wanting to diversify much more rapidly? I know you're doing a few things outside of that now. But how are you thinking about over the longer term?

Yes. Thank you, Biraj. I would just tell you that we've always believed, and I think you all will recognize that we have consistently viewed LNG as a business that is going to be critical for meeting the long-term energy demands of the world far into the future. And so we've always been bullish on natural gas and LNG markets. And what really has dictated what we pursue in the investments that we're going after is the quality of the opportunities and the returns that we can generate. It hasn't been constrained by anything other than that.

And so this disruption doesn't change the opportunity set that we've been working on or the emphasis that we've had in that particular area. And so if you look at the things that are in the pipeline and that we're pursuing, Mozambique and Papua New Guinea continuing to bring on the rest of Golden Pass. Those are all growing our LNG portfolio, which has been a strategic objective that we had. And it's also diversified with respect to sources of supply, which we think was important with respect to establishing a global network of supply points. And so that is playing itself out as we speak today.

If additional opportunities develop here in the short term that we feel like we can bring advantage to and generate an advantaged project with advantaged returns with low cost of supply competitively positioned in the world supply portfolio, we'll pursue those. But my going-in assumption is that those opportunities are already out there, and we've been actively pursuing those. I don't think it's going to change with respect to what we've seen certainly in the short term, and we'll see what happens longer term. But our emphasis remains constant here.

The next question is from Jason Gabelman of TD Cowen.

Yes. I just wanted -- I just wanted to first clarify one point going back to Doug's question. If you're self-insured in Qatar like you are on most of your assets or if you have insurance on that. And then I was hoping you could talk about the opportunity that is potentially available in the UAE if they were to ramp up production towards that 5 million barrels per day once the Strait of Hormuz reopens, you obviously have a very large footprint in that country and wondering if there's spare capacity on your assets?

Sure. Thanks for the question. I won't get into the specifics of our insurance. What I would say is you're right that we have a position where we use a large portion of self-insurance. We also look at third-party assurance where we think it makes economic sense. And so we take a portfolio approach there. We feel pretty good about the coverage across that portfolio. And frankly, don't see any material impacts with respect to [indiscernible] what we -- the insurance portfolio and the damage that we've seen there.

With respect to UAE, I mean UAE is a strategic partner for us as well. We have a very long relationship there. I think we have worked very productively with ADNOC and establishing an opportunity set to take some of our capability sets and advantages and bringing to bear in terms of unlocking additional capacity in the UAE, and we are working towards that ambition. And so I think we've got a very good relationship with them. We've got very good commercial arrangements with them, and we're actively working to help the UAE grow -- meet its ambition of growing production and will be a part of that, I'm sure of it. We already are and obviously looking for opportunities to do more.

The next question is from Manav Gupta of UBS.

You guys are an expert in developing heavy oil. And obviously, you talked about Venezuela, one area where you kind of [ stop growing ] is Canada. And given everything that's going on in the world and the short supplies, is there a way you and your partner can move that proprietary technology at a faster pace and bring back Aspen or future phases of Canada. When you delayed those projects, there was an egress issue and other issues, those issues are resolved. So I'm wondering if you can restart growth in Canada also?

Yes. Thank you, Manav. I think you touched on a really important part of the portfolio and the advantages that we have in heavy oil. I would say the emphasis that we've had over the last several years working with IOL is to really drive performance improvement in our Kearl assets and making sure that as you look at the global supply curve and the cost of supply in the portfolio around the world that meets that supply that, our Kearl resource is attractively positioned in that supply curve. And the team through IOL and the work in that venture, I think, have driven improvement to the point where we see that as being a very competitive source of supply in the world market. And that's a function of, I'd say, a lot of things we've been working on.

Technology is certainly a huge piece of that, but also the practices that we bring through our operations organization and the work that we've done to bring things that we've learned through our manufacturing assets into that upstream dominated environment. I think we've seen huge benefits, a lot lower cost. And so today, it is a very productive resource, and we continue to make investments, and we see that being a long-term profitable part of our portfolio.

Likewise, the in-situ Cold Lake, we've got technical opportunities there, and we're frankly progressing those. And so that was also recognized with the technology work that we've done that we've lowered that cost of supply to the point that we do think it represents a very attractive opportunity in a low-cost supply. And so we're continuing to progress that. And that's really what anchored my comments with respect to Venezuela. I think we are uniquely positioned in terms of the global footprint that we have and the ability to go into Venezuela with the right set of circumstances to apply that technology and produce those barrels at a much lower cost of supply than many of our competitors would be capable of doing. And so we look forward to exploring that opportunity and seeing if we can flesh that out to a point where it develops a -- becomes a win-win-win opportunity, a win for ExxonMobil with respect to the returns for the capital, the assurances that we'd have with those returns, a win for the government of Venezuela and then a win for the Venezuelan people with the economic activity that would obviously come with that.

The next question is from Alastair Syme of Citi.

I wonder if I can come back to that Slide 5, and you obviously chemical margins squeezed in March, but I wonder if there's been any recovery in April back to those 10-year averages. And how you see sort of your own feedstock available [indiscernible] I think you referenced potential for the Product Solutions business to have 3% lower utilization this quarter, but I am just wondering how specifically that shakes out for the chemical products piece?

Yes, sure. Thank you. The first point I would make on that Slide 5 is we're representing industry margins there to kind of help you understand what the macro environment is with respect to the quarter and the circumstances that we are operating in. It doesn't reflect our footprint specifically. And so I would say that we are advantaged versus where the general market is primarily because of all the work that we've been doing to grow performance products and to improve the efficiency, lower the cost of our manufacturing facilities. But on top of that, we have a very large base here in the U.S. And as crude prices have risen, and we -- our U.S. footprint is primarily gas crackers, what you see is the world price being said on liquid crackers and we have a big feed advantage there.

And so my expectation, if -- as -- well if world crude prices remain elevated, is that chemical margins for a large part of our footprint will be advantaged simply because we have a feed advantage coming out of the U.

And I would just highlight, Darren, that, that North American advantage extends to our refining footprint as well. Again, this is a view of a global footprint, but more and more heavily weighted to North America. And again, we benefit from those -- from that low-cost energy supply that we have here in North America as well.

The next question is from Jean Ann Salisbury of Bank of America.

For the damaged trains in Qatar, can you give any more color about what drives the 3 versus 5-year timing to get those back online? I've read it that there's a 2- to 3-year lead time for new cold boxes. Is that right that, that's the primary factor? And are there options to speed that up?

Yes. Thank you, Jean Ann. I think the range obviously is a function of where we're at in the process of assessing, working with Qatar Energy and assessing the damage and then working out a plan to address the damage recognizing the conflict is ongoing, and we've -- and we've been very aligned, and I'd say Qatar Energy has been a real leader in this space of making sure that we are very judicious in the steps that we're taking and the deployment of people to make sure that we maintain level of protection and maintain the safety of our people working there.

And so part of the challenge is in the early numbers has just been a lot of the unknown variables that we're working through with Qatar Energy around what exactly are our options and what can we do there. And so I would tell you, it's a function of where we're at and the maturity of the work that we've done to date in terms of assessing what we can do.

I -- and I think in the point that you made around cold box, the cold box being a critical path in the work there, that is, I think, accurate to think of it in those terms. But I would just say we don't have -- I haven't accepted kind of any schedule where we're at because frankly, we haven't been able to do all the work that we need to do to kind of challenge ourselves to see what's possible here. What I would say is I have a lot of confidence the partnership and the work that we do with Qatar Energy that the capability we bring to this repair is -- will be unmatched. I don't -- whatever we end up doing here and whatever time line we said, I don't think there would be anybody else who could beat it.

So I feel very confident in the capability set that we're bringing to bear here, and we've got to work through the details to see what the ultimate answer is, but whatever it is, I think it will be the best that could be done by anybody in the industry.

The next question is from Sam Margolin of Wells Fargo.

This question might be for Neil. It's related to the timing effects. And I know it's sort of a short-term issue, but your long-term targets have been very consistent. So maybe that's where the focus is right now. They encompass a lot of different aspects of the business. And when they reverse, it also involves a lot of different moving parts. And so the question is insofar as some of the reversal of the timing effect is related to execution wins within the business, and there's prospects for volatility events to continue throughout this period of uncertainty. Were there any learnings or any changes in kind of your operating practices that were made as an adjustment to this event, and that would help you sort of reverse the timing effects faster? Or is it -- do you expect it to just kind of pass as they have done in the past?

Let me -- I'll start with that and then hand it over to Neil. I just want to make sure that kind of -- the basis of the timing or the underlying activity of the timing is understood because, I mean what this basically is, you'll all remember that we've set up this trading organization and have been growing it over the years with the primary objective to take advantage of our large footprint. The fact that we're an integrated business and involved in many parts of the value chain and to make sure that we see trading as a channel to optimize that footprint and that we think is a real advantage versus anybody else that's out there trading, and we've done that in a very methodical way in a way that we feel like manages the exposure and the risk.

And I'm extremely proud of what that group has accomplished. And obviously, very happy that we had established that capability and it was in place in March when all this broke out. But I would also tell you, just going back before that, that organization continues to optimize the footprint and bring value to the underlying businesses that it's supporting our production and our facilities.

The timing impact here is primarily driven by the fact that the trading organization is taking advantage of the opportunities in the marketplace and locking in profit. And so we're hedging the flat price risk. And so this volatility that you referred to, Sam, that's why we put the hedges in is to protect ourselves against those price movements and to really take advantage of the spread that we see -- that underlies the transaction that we put in place in locking that in. And that's why we're so confident that this is just timing and that will work itself out because this is all driven by the requirements to book the paper without booking the corresponding physical barrels that are moving. And so there's a disconnect between what we book, we book 1/2 of the deal, not the other half. When that the physicals get delivered and you actually bring those into your earnings, it will offset the paper and therefore, you'll get to realize margin.

So that's how we think about it. And I would tell you that's exactly how we want to do it. We want to mitigate the price exposure for these opportunities and lock in this value. And so that's what's driving it. And I would tell you that hasn't -- that's not changing. In fact, we've really encouraged the organization to keep on keeping on in that space.

The identified item that we mentioned is different. That is you buy crude delivered in March and January. And so we've long had a practice of trying to match up the pricing of the crude when we take delivery of the crude to run it. And in this particular case, and the reason we had as an identified item is that with the disruption, the paper that we put in place for the physicals that we bought, the physicals weren't delivered and so we ended up with a naked hedge, and that was basically a unique circumstance given the disruptions here, and that's what the identified item is. Neil, anything to add to that?

Yes, absolutely. Maybe to build on that a little bit, Darren. Again, this mismatch that occurs is the difference between the accounting standards that require us to value the financial derivatives based on the price that we see at the end of the period. As Darren mentioned, the physical transaction, the value of that remains on the balance sheet until the transaction is complete. So it creates this mismatch in earnings that unwinds over subsequent periods.

So if you think about for us, generally, we're long physical and short paper. And so what you see is in periods of rising prices, like we saw in the first quarter, these timing effects typically are negative. And then in times when we see decreasing prices, we see the opposite of that. And the timing effects become positive. But I think importantly, as Darren mentioned, when you take aside these timing effects, the trading activity that we do, the optimization has consistently delivered positive earnings for the corporation. And it's obviously something that we track and in fact, in the first quarter, when you look at the transactions that closed out where the paper and the physical closed out, we had a strong quarter from those optimization activities.

So this is truly timing, again, driven by the accounting standards and now we have to value these transactions. But the most important thing is that underlying activity of optimizing our global portfolio is consistently delivering value for the company.

Yes, I might just add on that. That's one of the reasons why you saw a slight difference in our press release and what we revealed is to help understand what the underlying activity and the value generated in the quarter was beyond what was booked with respect to GAAP, and that was the reason for that additional disclosure.

We have time for one more question. Our final question will be from Nitin Kumar from Mizuho.

Darren, you spent a lot of time on the hydrocarbon side of your business and global disruptions. Could you give us a little bit of an update on the power opportunities in the Gulf Coast. There's been a lot of debate around the pace of development and capital spending by the data centers. So just wanted to get an update on where things lie with that?

Sure. Thanks for the question. I would tell you, so I want to make sure that kind of our objective in this space is clear. And I've said this when we first started talking about the data centers and this the recognition of the growing demand here is we're not interested in the utility business of providing power. We're interested because we don't think, ultimately, that we bring a unique set of capabilities there that would manifest itself in above-average industry returns.

What we're interested in is bringing the unique capability and capacity to generate power with virtually carbon-free or emissions-free by using decarbonized natural gas that we're producing and the unconventional business and our carbon capture and storage business and leveraging the unique and frankly, only globally end-to-end supply chain or value chain for capturing, transporting, sequestering CO2. And so that, for us, is the play here. And as you know, we've been growing our carbon capture and storage business with third parties, establishing contracts to capture the CO2 and to transport and store it. And the power side of the data centers is an opportunity to do that.

So to the extent these hyperscalers and the data centers want to have very low emissions power, we have the option to provide that. And so we're in discussion with a number of hyperscalers. We're working through the specifics of the opportunity and the fiscals. And I would say that those are continuing dialogues. And frankly, it's a function of what the demand there is.

And I think what we've seen in this whole low-carbon space above and beyond carbon capture and storage, which is manifesting itself in real deals that it's challenged when people are forced to put -- pay for the emissions reductions when, in many cases, the market is not recognizing or rewarding in. So that has been the challenge in the space. And we'll see in this particular area, whether we overcome that challenge with customers and their desire to have low carbon power.

All right. Thanks, everyone, for joining this call, and thanks for your questions. We're going to post a transcript of this call to the Investors section of our website by early next week, and we look forward to connecting again later this month during our Annual Shareholder Meeting, which is on May 27. And that concludes today's call. Have a good weekend.

Okay. We are going to go ahead and kick off our first lunch keynote section here today. For those of you that don't know me, my name is Devin McDermott, and I head our North American Energy Research team here at Morgan Stanley, and I am very happy to be joined by Jack Williams, Senior Vice President at ExxonMobil and one of the members of the management committee at the corporation as well. We are going to kick off with a few prepared remarks from Jack and then dive right into Q&A from there. So without any further pause, Jack, I'll turn it over to you.

Great. Thank you. Thank you, Devin. Appreciate it. A cautionary statement. I'll be making some forward-looking statements. Our strategy at ExxonMobil kind of starts out with this, the and equation that we've -- you've probably heard us talk about before, which is as the world's population grows and people are going into rising into the middle class, improving standards of life, there's more of a need for energy and essential products, and we feel like we need to be increasing our production to meet those needs. And at the same time, we need to be reducing emissions. So that's kind of core to our strategy as a corporation.

And a key way we execute that strategy is through leveraging these competitive advantages that we have, that we built up over decades. I'm talking about their scale, the integration of our businesses, technology and then some deep functional capabilities around like project management, operations management, personnel and process safety, emissions reduction, those kind of key competencies, key capabilities that we have as a corporation and all underpinned by our people and the significant time and effort we put into developing our workforce. And these capabilities have kind of -- the way -- what we've been working on the last 6, 7, 8 years is making sure that our organization is structured to where we can really leverage these capabilities.

We made some great strides in being able to do that. And these competitive advantages, these capabilities have kind of unleashed lots of opportunities. So we have this unmatched pipeline of opportunities that has been enabled by and sometimes initiated by these competitive advantages. Like, for instance, the big project we just executed in Singapore, the Singapore Resid upgrade project, where it was leveraging 2 big proprietary ExxonMobil technology. So it's never been done before project. Like the acquisition of Pioneer Natural Resources, where we brought a technology toolkit that enabled us to get more out of those resources and therefore, enable deal space to allow that deal to happen. Like in Guyana, where we are leveraging our project management expertise to deliver more value from those resources for the Guyanese government people and for the -- our shareholders.

And then like new product lines like a new graphite material that's going to be put in battery anodes, lithium-ion battery anodes is going to be able to deliver faster charging and longer life for the batteries. So those capabilities are core to being able to open up opportunities. And then that's manifested in a plan that we've talked about going out to 2030 that generates a 13% CAGR earnings growth over that time period, $25 billion of earnings improvement, $35 billion of operating cash flow improvement. And it's a plan. It's not an aspiration, it's not a target, it's a plan. And that's on the back of continued growth in the Permian, continued growth in Guyana in the upstream, in Product Solutions, it's continued growth in high-value products as we high grade the yield of our product slates.

It's structural cost reductions continuing on and gives us a really nice runway up to 2030. And then we're looking beyond that as well. So we see further runway beyond 2030. Think about some LNG projects we're working on, progressing that have not been FID'd yet, but are progressing along. Mozambique, Papua New Guinea. Think about these products, the graphite I just mentioned, Proxxima coming into the fold. So continuing to look at the things that will be providing that same level of earnings growth beyond 2030 as well. But if you think about just between now and 2030, just real quick simple math here in terms of shareholder returns, the 13% earnings CAGR is that big bar that I just talked about, but that's in addition to a pretty competitive annual dividend yield and then also the accretion via share buybacks. So when you combine earnings growth, assuming we have a similar multiple and the dividend and share buybacks, you get with a pretty competitive overall total shareholder return over the coming years. So that's the simple quick ExxonMobil story. And with that, we can turn on over to some Q&A.

Well, a lot that I want to dive into there. And before we go into some of the specifics on the plan and the differentiating attributes of Exxon's portfolio, I just wanted to address upfront given the situation in the Middle East at the moment, which I know is extremely fluid. Could you just talk briefly about how Exxon is positioned to manage through these periods of volatility? And any operational or financial call-outs you want to make, please feel free to add that in as well.

Sure. Well, it's -- as you said, very dynamic, very uncertain situation, certainly mourning those lost in this operation so far. We are a top priority concern for us is our people in the region. And we have folks in Saudi Arabia, in UAE and in Qatar, and we're focused on their safety as our top priority. Coming into this, the market was -- the crude markets were -- and I'd say LNG markets as well, were very well supplied. So there's a pretty large good foundation to build off of. And clearly, this is a big disruption. And like others have, I'm sure, already said and everybody has already heard, it really comes down to how long the Strait of Hormuz is going to be closed, closed for tanker traffic.

For ExxonMobil, I mean, we have some implications for operations in the region. But by and large, when you step back and look at our global footprint, we have assets all over the world. We have upstream, downstream. We have a big trading operation that we operate a large long-term charter fleet, so we can move feed and we can move products around the world to optimize and optimize around this situation. So as you said, very fluid, very dynamic, and we're optimizing around it like others are. I just think we have a few more tools to be able to optimize that. One observation I would make in terms of how things sit in the U.S. is clearly, when you think about crude, it's a global market, and we priced accordingly, and we'll bear the brunt of that as well. But you think about physical supply of crude and supply of products and supply of natural gas in the U.S., I mean we are obviously very, very well positioned because of the shale revolution that took place over the last decade, where we have a lot of natural gas production here in the U.S., a lot of crude production, and it's positioned our refining and chemical industries very healthily, too, in terms of feed and energy costs. So we have good physical access to what we need here, but the prices obviously are subject to the global market.

Great. Thanks. [indiscernible] monitor how it all unfolds. And let's dive in then to some of the differentiating attributes of Exxon portfolio strategy, growth profile. It's notable that over the entirety of these last 5 years, this post-COVID recovery for the sector, Exxon has been an outperformer versus the broader industry and versus peers. And even this year with what's been kind of a beta rally in crude. Exxon has been one of the leaders in the sector, outperforming some of the higher oil torque small cap E&Ps that I think is noteworthy and probably speaks to some of the differentiating attributes of your strategy that appeals to a broader investor universe. So from your perspective, talk a little bit about some of the strengths of the Exxon portfolio, the strategy, what's delivered such good results? What's different than the peer group?

Yes. Thanks, Devin. I mean it really gets back to these competitive advantages that we talked about that we're leveraging. And I do think I've certainly been pleasantly surprised with the impact the organization changes we've made have really brought those advantages and allowed us to leverage those advantages more than we were able to before. The advantages are enduring and decades long to build up when you think about building up technology expertise, project management expertise, so forth. But being able to fully leverage them was really unlocked by this organization structure where we have our businesses, Upstream, Product Solutions and Low Carbon Solutions. And then we pulled out all these capabilities into these central organizations, technology, projects, operations, trading, supply chain, these big organizations that support all our businesses and allow us to really fully leverage that scale.

And so I really think that's really unlocked -- I threw out a few examples in my opening remarks and allowed us to have what I think is the bottom line of why we've outperformed because we've been growing earnings and cash flow. And we've been growing earnings and cash flow by continuing to invest in advantaged opportunities. We haven't pulled back on investment. We've continued to lean in because we have really, really good opportunities. And I'd like to think those opportunities are largely because of what we bring, the advantages we bring, and we can extract more value from those discrete opportunities than our competitors can.

So I think the other thing I would point to, and again, it's related to this organization is the structural cost reductions that we've had $15 billion so far, and we've announced going up to $20 billion. And the 2030 overall earnings growth that I mentioned earlier, I think there's some market credibility with that because we're doing a lot of the same things that we did over the last 5 years that have generated even higher than 13% CAGR on earnings growth. So it's a lot of the same structural cost reductions and same projects, same areas where we think there's a lot more room to run. And as I said, I'd like to think that the stuff we're talking about and that people see visibility to beyond 2030 is starting to impact some of how people think about terminal value for the corporation and that we can continue that growth rate longer term. And of course, that's going to have an impact on market value.

Great. So let's dive into what continues that growth rate and some of the pillars of this earnings uplift through 2030. And it's notable that you increased earnings and increased the volume outlook for one of your key assets, the Permian and the U.S. without picking up capital spending, which speaks to efficiencies and technology. Can you just talk to some of the drivers of that increase in the Permian? You highlighted these stackable technologies, including advanced proppant alongside your corporate plan late last year. Give us some of those building blocks. What's changing? What's the technology evolution of the asset?

Yes. Well, I mean that is a part of the story. We're going from 1.2 million barrels a day to 2.5 million barrels a day in 2030. And that's a lot of growth. And we're not trying to just grow more volumes. We're trying to grow earnings and cash flow and focus on the quality of the earnings. And that's where the technology has really helped us out to really -- we're starting with an advantaged position. When you take contiguous acreage position we had in the Delaware Basin and we added in the Midland Basin with the Pioneer acquisition. In both basins, we have a nice big core contiguous acreage position, which helps to set the foundation upon which to deploy these technologies. It helps you drill -- have the ability to drill these longer laterals to set up these cube developments that have and are continuing to add a lot of value in terms of our ultimate recovery and unit earnings.

So that we start with that and then you leverage in these technologies on top of that, that we're kind of in the midst of on the fly deploying. So some have been deployed, some are yet to be deployed. And so it's difficult to get good apples-to-apples, but we think we're getting 20% uplift on the lightweight proppant, which was an interesting technology because it really did -- it points to this central technology organization and having upstream and downstream researchers sitting side by side and seeing the downstream folks understanding the proppant characteristics and how that could help in terms of a lightweight proppant that's going to allow a bigger fracture and a larger effective wellbore to increase recovery. And so we're -- we've only -- we deployed that only like about 1/4 of the wells last year, about half the wells this year, and we're going to continue to ramp that up.

So that's still kind of in deployment. But really, I would say -- and we've talked about the synergies with Pioneer, and we had some reverse synergies as well, but $4 billion a year of synergy capture, that certainly helps, good acreage positions to start with certainly helps and then the technology is the big 800-pound gorilla that helps us to really drive that going forward. And we talked about the growth to 2030, but we continue to see that growth beyond that as well. So that is a big engine. The Permian is a big part of that story.

Great. So let's stick with efficiencies, but a different bucket, cost reductions. Another big pillar in growth for you all through 2030 is the cost reduction initiatives that you have in place. You've achieved $15 billion so far since 2019, $20 billion total target by 2030. Talk about where you see room from here for further cost reductions? What are some of the opportunities you all are focused on delivering?

They are important. I mean when you think about growing the business. And if you can grow the business, grow top line revenue and without cost increases because you're offsetting the growth cost with efficiency reductions, that's a powerful formula for growing the business profitably. And that's kind of what we've been doing the last several years. We've had these great growth opportunities, and we set ourselves up with tailwinds from these structural cost reductions that have helped essentially fund, if you will, the growth. And that's, again, largely come from this structure I talked about before, where you have these large organizations that are taking more of a focus on some of these areas than we were able to before.

So the one I'll mention because it reports into me, and I know it a little better than some of the other ones is supply chain. So we had supply chain set up in all our businesses before, but they're relatively siloed and we weren't able to fully leverage the scale of the corporation. So I think we had capable supply chain organizations before that were enabling us to get what we needed to manufacture our products and to get our products to market and so forth. When you pull all that together and looked at the full corporation scope of supply chain, it allowed us to make investments in that to really step change, enhance our supply chain operations.

So for instance, setting up twins, digital twins for all our marine fleet. And therefore, we're getting like a 10% reduction in fuel usage or being able to do a much better job of demand management, which is not something we've done as well a job in the upstream as we had done in, say, like chemicals or lubricants, and setting up modeling for a lot of the logistics routes that we have and the warehouses we have to reduce the capital employed, working capital. So a lot of things like that just kind of that when you're looking at across a large segment of the entire corporation add up to some significant impact. So that in and of itself is looking to be $5 billion of reduction just in supply chain over the time period. So lots and lots of opportunity. And we saw that same thing. We're seeing that same thing in operations. We just set the global operations organization. It's kind of the newest that we set up. But when you think about maintenance operations across our entire fleet, turnaround across our entire fleet, there's more to come on that.

Great. And then what about the potential impacts of new technologies and AI specifically? Can you talk about how Exxon is focused on deploying that across your business, cost reductions or otherwise and how that might flow through is going to be upside to the plan as you look out long term?

Yes, I think there is. I mean I would say, as we think about that 2030 plan, there's no material AI improvements built in. So to the extent that we can leverage AI and get benefits in a reasonably short-term time frame, that's clearly upside to our outlook. We're focused right now on -- we know ultimately, it's going to help impact productivity, and we're playing with that a bit, but I think there's more to go on that. But the real focus we're making is on the step changes. Can we look at opportunities like seismic? Can you apply AI? We have the largest data set of anybody out there in terms of seismic data. Can we deploy AI to see things that we missed before to have more of an objective lens in terms of what we're looking for in terms of seismic. Can we enhance our discovery rate?

The other thing we're doing in terms of data because I think -- I mean, I'm not telling anybody any surprise. I think data is going to be really, really key, obviously, in the whole AI space. We are going from -- we're in the process and pretty far along, over halfway through this process of going from 10 ERPs that are highly customized, a lot of customized code and not all consistent across the corporation to one instance, one SAP instance that is very -- does not have much customization at all, kind of a clean core, if you will, and so doing that, we're looking at all our processes across the corporation, making sure we're standard and structured and where we can be kind of -- we can take an SAP customer right out of the box. And then looking at all the data that goes along with that and having clean data sets across the corporation and bringing all that into one place. So we're really setting ourselves up to have a really, really good clean data structure and processes -- enterprise-wide processes going forward to really leverage that opportunity.

A lot unfolding there for sure. Let's shift over to one of your key growth assets or one of those points that you mentioned might be relevant, which is seismic and new technology there. So Guyana is where I want to go next. You've had this very substantial 11 billion barrel of oil equivalent recoverable resource estimate out there for several years now. If you think about emerging technology, the development opportunities from here and also the fact that a large portion of the block has been in force majeure and that might no longer be the case 12 months from now. How do you think about the opportunity set? And what opportunities are you focused on capitalizing on as you monetize the asset going forward?

Well, look, that's a real pride point for us, the Guyana operation. And as a matter of fact, I was just down there last week. And boy, it's just -- that's one of the really fun things about this role is I get to go visit and see what our teams, our Upstream project operations teams can do on the ground when you have a resource like that. And it's incredibly impressive what we've been able to -- with 4 FPSOs out there over 900,000 barrels a day, building an organization there, a lot of developing the Guyanese, interfacing with those folks, it was -- it's truly, truly impressive. 11 billion barrels -- 11 billion oil equivalent barrels is a tremendous resource. It is a huge resource.

Back in 2018, that number was a little bit over 3 billion. And so -- and a lot of that was just success after success. And as I mentioned earlier, our project management team have been able to extract even more value by getting these new FPSOs on under budget and faster than scheduled. So it's just been a tremendous effort. Guyana will benefit from 4D seismic from day 1, if you will. We have base seismic over the whole thing. We're already shooting 4D. So that will be a huge uplift in terms of the ability to optimize recovery across that asset. And then as you said, Devin, I mean, this -- the block we have in Guyana is the size of Massachusetts. So it's a large block. And a bit over 1/3 of it has been inaccessible because of border disputes.

And hopefully, that will be cleared up within the next year or so and allow us to go in and it's prospective and allow us to go in and start gathering data and hopefully drilling some wells in that area of the block. So I do think there is upside going forward. I do think what we have is incredibly impressive and only half of the boats are out there right now. We have 4 FPSOs producing. We have 3 more under construction right now and one more that's going through approval processes. So a lot more growth in terms of actual earnings and cash flow to come. And we'll continue to work on -- if there's more than 11 billion barrels out there, we're going to find it.

All right. Good stuff. So the border dispute in the force majeure is tied to Venezuela. And maybe we'll just address that quickly since it's been topical so far this year. Just talk about where Exxon stands on sending a team in to evaluate, as you all talked about in the past. And what would need to happen for Exxon to make investments in a country like that? How do you contrast return versus the other deep set of opportunities you have broadly across your portfolio?

We have -- so we have an evaluation team that we've kind of put together. We have -- there's an OFAC license that would allow us to go in the country. We're working logistical and security arrangements right now. So within a few weeks, I'd say we're probably going to have a team in country starting to look at get boots on the ground. Obviously, we've been in Venezuela before. We've been expropriated twice. We know the asset. We know the resource pretty well. We had a very successful operation there. I recall it fondly, really good operation before. So no doubt, we can go in there and replicate that. And I would say, even enhance that because the heavy oil technologies, we've continued to -- through our Canadian affiliate through what we've been doing up there at Kearl and Cold Lake, we've continued to refine some of the heavy oil technology, and that would be applicable there as well in Venezuela.

So I think we can do even better than we were before in terms of technology toolkit that we can bring. Obviously, we would need to see some changes in terms of the physical regime there and security arrangements to make sure that we would have something we can take comfort in, in terms of being able to have a long-term operation without getting kicked out. So I think we'll continue to look at that and work with the Venezuelan government to try to get the right terms in place. And if we can get those terms in place, and we will be interested in going back.

Okay. Makes a lot of sense. Let's stick on this theme of emerging opportunities and how that might translate to longer-term growth. You mentioned one of the goals of Exxon and the Exxon management team is to make sure you extend that growth runway beyond 2030. What are some of the opportunities that you all are focused on when you look at the next decade and what might facilitate or extend the attractive growth rate you all delivered on in the past in the future?

Yes. Good question. And I think, like I said, I think a lot of the contours are coming into place. The first thing I'll mention is we're working right now on some prospective LNG projects in Mozambique and then an expansion of our PNG LNG. And neither one of those would be ringing the cash register before 2030. So those would all be kind of 2030s projects. We're -- as I mentioned before, Permian, we continue to see growth in the 2030s. Guyana, hopefully, we'll continue to have 2030, 2031 FPSOs out there. So that will provide some growth. In Product Solutions, we have a large chemical franchise, large chemical business and a lot of growth and demand for our high-value products, and that would be something we'd be growing in the 2030s for sure.

Continuing to work on high-grading the yield at our integrated manufacturing facilities. And 2 areas where technology has really played a big role, these new products that we have. I mentioned the graphite that is basically a synthetic petroleum coke product that we have found a way to manipulate the molecules to generate those improved -- improved performance that I mentioned earlier. So that looks really, really strong, and that will be largely be a 2030s type story, may get a little bit in 2029, but mostly a 2030 story. And then you may have heard us talk about Proxxima, which is a new material that we'll be working on, and that's probably, again, a little bit before 2030, but most of the runway there is in the 2030s. And that is a very versatile new material.

Think about taking that into infrastructure, it's 75% lighter than steel and twice as strong. Think about taking that into coatings where it's corrosion-resistant and some applications right now that would take 3 coats, we can do in 1 coat. And so we think about marine vessels and recoating those and how you could reduce a shipyard visit, think about tanks and so forth getting us back in service, a lot, a lot of upside in that. It's going to take a while to kind of get these into formulations and get that moving, but we're very excited about that product. And it basically is both the graphite and Proxxima. Proxxima ultimately coming from a gasoline stream, a blending component in gasoline would be the feed into our Proxxima. So we're taking basically converting gasoline into different high-value products. And then as I mentioned, graphite is a resid stream coming out of our refineries as well. So really optimistic on that as well. And I think it just plays again to this technology theme, this central technology organization that has always been there. We've always had tremendous technology capability, but focusing that, harnessing that, we've been able to really leverage and take it to the bottom line impact. So pretty excited about all that. And all that's 2030 plus.

Great. I'm glad you mentioned Product Solutions and these new business opportunities. I personally think they are some of the more interesting and also underappreciated drivers of long-term growth for the Exxon portfolio and really differentiate you and your strategy versus the peer group. For Product Solutions specifically, it's also been a big year over the last 12 months of project starts for you all. I was wondering if you could just talk a little bit about the expected earnings contribution as everything ramps and specifically on some of the chemicals expansions you have come online, how that all fits in with the current macro picture for the [indiscernible] market and asset base, right now?

Yes, that's good. So -- and if you look at Product Solutions, our Product Solutions business, which is think about fuels, lubricants and chemicals altogether. And we've talked about between now and 2030, that would be a $9 billion earnings improvement and over that time period, which is essentially kind of doubling earnings on this kind of mid-cycle basis. So we're trying not to call the market on what we think the market is going to do, but just take the average mid-cycle margins on those 3. And as you mentioned, chemicals has been below that for the last year or 2. And there's various projections on it staying low for several more years. But as you think about that margin across our Energy Products, our Chemical Products and Specialty Products, the fourth quarter '25 total margin environment is about what we're expecting.

So by 2030, that 2030 number would be a -- based on margins that are consistent with what we had in aggregate in fourth quarter of '25. So Energy Products was above the average. Chemical Products was below. Specialty Products were somewhere about on par. So combined, it's kind of that same margin environment that we're depending on. So we're not -- this is not -- our earnings projection is not counting on some big run-up in terms of margins. It's counting on, number one, the structural cost reduction we already talked about. Number two, the contribution from central organization. So I talked about supply chain earlier. A lot of the benefit from the supply chain is going to manifest in Product Solutions and some of that in operating expenses, but some of that in cost of goods sold.

So it will accrue to margin and higher margin. We have the projects we brought on. So you mentioned our chemical project we brought on in China. I mentioned the Singapore project that we had online. We had another big project in the U.K. at our Fawley refinery. We had a renewable diesel project online in Strathcona in Canada. So all of those, we have not seen a full year of operation for those and the full year production. So there's more coming with those. And then in the China asset, we still have not gotten that fully on to the Performance Products or making some commodity products. And so we're in the process of getting the product slate that we want out of that facility. And so we're pretty optimistic once we get that up and running and on the right product slate that we'll be doing well there. So a lot on the projects, and that's a big part of it, but we've got a lot of other kind of ores in the water too, solutions.

Excellent. Maybe we could spend a moment just on capital allocation priorities. You all have indicated a plan to buy back $20 billion of shares in 2026, assuming reasonable market conditions. I mean 2 months ago, the debate would have been around lower oil prices. Now things are trending higher, at least for the time being. Just talk about your approach to shareholder distributions, especially buybacks? And how do you think about buying back shares with Exxon stock close to all-time highs at the moment.

Yes. So we have -- it's a pretty easy question for us. I think we're pretty clear on our capital allocation. First and foremost, we're going to invest in the business. And it gets back to -- we have great opportunities. We have a deep pipeline of opportunities, and we're going to invest in those opportunities. And that has served us well. And again, it's those competitive advantages that it's a virtuous cycle. They're going to generate more opportunities. When you invest in those opportunities, it's going to continue to grow cash flow. Second thing is we want to make sure we maintain a strong balance sheet because we want to continue to invest in the business throughout the cycle. So when you have throughout the run-ups in prices or down in prices, we all know it's a pretty cyclical business.

We want to steadily continue to invest in the business. And to do that, we need that good strong balance sheet. So we want to maintain that. We've done a really good job of that. We're 11% net debt to capital right now. So we feel like we're in really good shape there. And then we want to reward our shareholders. And the first way we reward our shareholders is with the dividend, and we've grown our dividend for 43 consecutive years. We are very sensitive to the retail shareholder base that really relies on that dividend and that dividend growth. And we continue to have conversations on the amount of dividend growth with the Board and so forth. But we -- with a 43-year track record, you can assume that we're trying to maintain that strong record of growing dividends.

And then the way we're thinking about buybacks is a couple of things is, one is staying to the extent we can, and it's the last leg on the stool, if you will, but as best we can, staying relatively ratable. So we talked about -- we were at $15 billion, we talked about $20 billion last year and this year. And if you stay relatively ratable there, then we're not trying to estimate where our stock price is going to be, whether it's low or high. And the other thing about that is it really does help with -- if you're increasing your dividend, then you're increasing the absolute dollars out the door and having fewer shares outstanding does help with that increasing dividend. And we are the second largest dividend payer in the S&P 500 right now. So that is quite a bit of cash going out the door. So that's kind of how we think about it. It all starts with investing in the business, maintaining the balance sheet and then rewarding our shareholders.

Makes a lot of sense. And our last minute here, I'm going to squeeze one more in for you. Having strong stock price and some of the technology advantages that you talked about before also could create opportunities for further consolidation. So I was wondering, given the success of the Pioneer deal, how is Exxon looking at further M&A in the landscape more broadly? And please answer that not just upstream, but broadly across your portfolio.

Yes. Thanks for the opportunity to squeeze that in, I may go a few seconds over. Look, we recognize that we're going to be continuing to grow earnings and cash flow in the business. We have really good organic opportunities, but we want to make sure we're looking at inorganic opportunities as well. And to make that work, to make M&A work, you have to bring something to the party. You have to bring something that opens up deal space beyond just G&A synergies. And so for the Pioneer deal, like I mentioned, the technology to have improved recovery in the Permian and some of that being already deployed, some of that being us basically betting on ourselves, betting on our technology organization, opened up that opportunity.

And I do think that is having technology, having something that others don't have in terms of not only just a set of opportunities we have today that we point to the 40 stackable technologies, but also an organization behind that, that you know is continuing to innovate coming other way gives you the confidence to kind of step out on some of those things. So I do think we're going to continue to look. Obviously, you need a buyer and a seller, and that's a space for us, not just in the upstream and the unconventional, but also across our portfolio.

I mentioned a couple of these technologies that we came out with. the Proxxima technology and also the graphite, there was 3 acquisitions in there that really kind of made those things work. We had a good bit of the technology equation. We needed a little bit more and that full equation with the acquisitions kind of made up -- got all the puzzle pieces together. So I would say it's across all our businesses, including Low Carbon and Product Solutions, but also across our technology. So it's an important tool in the toolbox and one that we're more and more making sure we can leverage.

Okay. Great. Well, we covered a lot of ground there. Really helpful update, great dialogue. I appreciate the time, Jack, and thank you all for joining us here in the room and tuning in on the webcast. We will wrap it there.

Thank you.

Good morning, everyone. Welcome to ExxonMobil's Fourth Quarter 2025 Earnings Call. Today's call is being recorded. We appreciate you joining us. I'm Jim Chapman, Vice President, Treasurer and Investor Relations. This quarter's presentation and prerecorded remarks are available on the Investors section of our website. They are meant to accompany the fourth quarter earnings press release, which is posted in the same location.

During today's presentation, we'll make forward-looking remarks, including comments on our long-term plans, which are subject to risks and