Exxon Mobil Corp (XOM) — Q1 2023 Earnings Call Transcript

Good morning. Welcome to ExxonMobil's first quarter 2023 earnings call. Thanks for joining us today. I'm Jennifer Driscoll, Vice President, Investor Relations. Here with me are Darren Woods, Chairman and Chief Executive Officer; and Kathy Mikells, Senior Vice President and Chief Financial Officer. Our presentation and prerecorded remarks are available on the new Investor Relations section of our website. They're meant to accompany the first quarter earnings news release, which is posted in the same location. Shortly, Darren will provide opening comments and reference a few slides from this presentation. That will give analysts more time to ask questions before we conclude at 8:30 A.M. Central Time. During the presentation, we'll make forward-looking comments, which are subject to risks and uncertainties. We describe some of them in our cautionary statement here on slide 2. Additional information on the risks and uncertainties that apply to any forward-looking statements are listed in our most recent Form 10-Ks and 10-Qs available on our website for investors. Also, please note that we provided supplemental information at the end of our earnings slides, which are posted on the website. And now please turn to slide 3 for Darren's remarks.

Good morning. Thanks for joining us today. Following a record year, ExxonMobil delivered the highest first quarter earnings in our history even as energy prices and refining margins moderated from the fourth quarter. This ongoing success reflects the hard work of our people, executing our strategic priorities and fully leveraging our competitive advantages. Through investments in advantaged assets, mix improvements and cost and operating discipline, we are delivering the structural earnings improvements outlined in our corporate plan update last December and expanding the energy supplies needed to meet growing global demand. Compared to the first quarter of 2022, we added about 300,000 oil-equivalent barrels per day to global supply, primarily from a 40% increase in production from Guyana in the Permian Basin, increase more than offset our divestments in the expropriation of Sakhalin-1, which we no longer account for, but which importantly remains part of global supply. In addition, our Beaumont refinery expansion reached nameplate capacity in the quarter. This 250,000 barrel a day expansion is the largest US refinery addition in a decade, helping meet society's ongoing need for transportation fuels. Guyana, we're pleased to announce that we reached final investment decisions for Uaru, fifth offshore project, which will bring on even more production from this low-cost, low-carbon intensity resource. Uaru will provide an additional 250,000 barrels a day of gross capacity with start-up targeted for 2026. Earnings in our Product Solutions business benefited from the team's solid operational execution with top quartile turnaround cost and schedule performance during a particularly heavy planned maintenance period. Low Carbon Solutions, we're building momentum across several fronts. In early April, we announced a long-term agreement with Linde to capture, transport and permanently store up to 2.2 million metric tons CO2 annually. Hydrogen, we announced a front-end engineering and design contract for the world's largest low carbon hydrogen facility in Baytown, ahead of an agreement with SK Group of Korea for offtake of blue ammonia from that facility. As we said during our Low Carbon Solutions spotlight earlier this month, our low carbon projects must be advantaged and deliver competitive returns. The ability of our low-carbon projects to compete successfully for capital is important if the world is going to meet its emissions aspirations. Incentives included in the Inflation Reduction Act are a positive step forward, although permitting and other regulatory improvements are still needed. Europe, by contrast, policy approach remains far more prescriptive and punitive. This is true whether we're talking about the emissions reductions needed to put the world on a path to net-zero or the production needed to provide Europe with affordable and reliable energy. The progress we're making across the company is underpinned by the continuing evolution of our business model. Effective on May 1, two new enterprise-wide organizations will be up and running. Global Business Solutions will centralize the majority of our finance procurement operations, enabling us to deliver simplified corporate-wide processes. ExxonMobil Supply Chain will consolidate supply chain activities globally. The organizations will focus on leveraging our scale to drive efficiencies, improve operating and financial results and, importantly, deliver an improved experience for customers, vendors and our people. On June 1, we plan to launch our new enterprise-wide trading organization. Global Trading will bring together expertise from across the company in crude, products, natural gas, power and marine freight trading, and we plan to build on our record 2022 results, leveraging the unique insights we gain from participating across each of our value chains and all along their entire length, with a global operating footprint larger than any of our competitors. Now, let me cover the quarter's headlines. We're pleased to have delivered $11.4 billion of earnings, a record first quarter following a record year. A significant contributing factor was structural cost savings that now total approximately $7.2 billion, keeping us on track to meet our target of $9 billion by the end of this year. Cash flow from operations totaled $16.3 billion, and our net debt-to-capital ratio declined to 4%, further increasing the strength of our balance sheet, while supporting shareholder distributions of $8.1 billion in the quarter, including $3.7 billion in dividends. Biodynamic market, our underlying performance remains rock solid and well ahead of our competition, reflecting the many improvements we've made over the last six years and, of course, the hard work of our people. Our diverse portfolio of advantaged businesses, improvements in mix, structural cost savings, and excellence in execution are driving industry-leading earnings, cash flow and shareholder value. Combined with the strength of our balance sheet, we have the capability to win across a wide variety of market conditions to deliver strong returns, while meeting the evolving needs of society, including the need to reduce emissions. Leveraging the capabilities and advantages developed in our traditional businesses, we're building an advantaged new business, Low Carbon Solutions, which is positioning us as a leader in the energy transition, in our own and others' emissions and establishing long-term value-accretive growth opportunities that will underpin continued growth in shareholder returns. With that, let me turn the call over to Jennifer.

Thank you, Darren. Now let's move to Q&A. As a courtesy to other analysts, please limit yourself to a single question. That way we can accommodate more questions from more people. Also, please remain on the line in case we need to ask any clarifying questions. With that, operator, please open up the line for our first question.

Thank you very much. Darren, you've spent significant time in the refining industry, and you bring a unique perspective to these calls. We were expecting margins to begin normalizing, and we’re starting to see some signs of that. I'm interested in your thoughts on the current product demand and how you foresee it impacting the refining system’s margins in the next couple of years. Thank you.

Yes, good morning, Neil. Regarding refining margins, I want to highlight that we are not confident in our ability to accurately forecast them. This is largely due to the unpredictability of demand, especially when supply remains relatively constant. It’s often challenging to anticipate future movements. Currently, we are at a seasonal low, approaching the second and third quarters, which is typically a driving season when supply and demand tighten, leading to improved margins. Early in the year, many refineries undergo turnarounds, which temporarily reduce capacity during this low-demand phase. Once these turnarounds are complete and capacity increases, there tends to be an influx of supply, which usually causes refining margins to drop during this transitional period, before demand increases again into summer. In terms of gasoline demand, it appears to be holding up well. Jet fuel and transportation demands are also on an upward trend, and discussions with customers indicate expectations for robust airline travel this summer. I believe we will see the usual increase in margins during the summer months. It’s also essential to consider the situation in China, which significantly affects both demand and exports. Exports from China have been strong in the first quarter, and if they remain at similar levels to last year, I anticipate this could create upward pressure on margins. Regarding refining margins, there’s a structural aspect to consider: typically, the marginal refining capacity comes from Europe, which plays a significant role in determining global prices, excluding transportation. With high gas and carbon prices in Europe, the cost of marginal production is significantly higher than in the past, which will likely maintain upward pressure on global prices and improve margins for producers located outside of Europe.

Okay, Darren. Thanks so much.

You bet.

Thank you. Good morning, everyone.

Hi, Doug.

Darren, I wonder if I could kick off first on disposals, another reasonable contribution from non-core asset sales. Can you characterize where you are in that process and what you think you might have still in front of you in terms of non-core asset sales. And I've got a quick follow-up, please.

Sure, Doug. Good morning. If you look at the plans we set back in 2018, particularly regarding the Upstream sector, we emphasized increasing our divestments and adopting a measured approach. This strategy allowed us to prepare our assets for sale when market conditions were favorable and when we had buyers interested. We've successfully marketed our assets and realized their value. We expect to achieve the objectives we set for 2018 sometime this year. As we continue to refine our portfolio, we will keep identifying assets that are not strategic for us or where we see a higher potential value for others. Our goal is to maintain a steady presence in the market, trying to connect with buyers who can derive more value from the assets than we can, leading to better opportunities for us. Importantly, our approach to divestments focuses on maximizing value. We are satisfied with our current portfolio, and we're only considering sales when they present valuable opportunities.

I appreciate the answer. I think I couldn't remember if Jennifer said one question or one plus one follow-up. So I'll risk a follow-up very quickly. I'll delicately ask this question, if I may. Obviously, Kathy was on the wires this morning talking about how picky Exxon would be on M&A. I just want to ask you if you feel that you need to backfill your Permian position at any time in the future. And I'll leave you there. Thank you.

Certainly. We have been consistent in our approach to acquisitions, always seeking opportunities that enhance value. Our goal is to find acquisitions that are value-accretive and where what Exxon Mobil brings complements what each company could achieve independently. We are focused on finding value rather than just volume, and we prioritize bringing unique contributions that benefit our shareholders. We're putting significant effort into our technology in the Permian, aiming to improve resource recovery and reduce development costs. This focus on technology may create acquisition opportunities down the line, but we need to ensure we can demonstrate a distinct value proposition first. Our attention will remain on areas of our portfolio with substantial business and ongoing technological advancements.

Thank you.

And as a reminder, we would like you to limit yourself to a single question. Thanks.

Good morning. Thanks for taking my question.

Good morning.

So I want to stick with the Permian, but I'm not going to ask an M&A question, I wanted to ask about the results you're seeing there. And if you look at the production in the quarter, you guys reported 615,000 barrels a day. It's a strong sequential growth versus 4Q and also puts you already in line with that 10% growth target that you had laid out for 2023. So I was wondering if you could talk a little bit about the productivity trends and the driver of the strong results that you're seeing there, and then also how you're thinking about the evolution of production for the balance of this year?

Good morning. We have not adjusted our year-end targets, and the guidance we provided during last year’s corporate plan discussion remains unchanged. As we mentioned previously, production in the Permian may experience fluctuations, so it's important not to rely on any single data point or quarterly numbers for projections. We are generally pleased with the productivity we're observing in the Permian. A few years ago, we shifted our strategy to focus on maximizing oil recovery rather than just initial production rates, which led us to a different development approach. This involved working across the cube design and simultaneously across benches to maximize overall recovery. We have been refining, testing, and evolving this strategy, and we are satisfied with our progress. The results of this new approach are starting to show, and we believe we will be able to stand out in terms of production compared to many of our competitors who initially focused on high production rates from the best benches. Over time, they may adopt a similar strategy, but we feel we have a significant head start. We see positive early signs in our efforts and will continue to maintain our rig count and capital investment levels as we have consistently indicated. We will see how the year unfolds, but we are committed to the same year-end guidance we provided last year.

Great. Thanks, Darren.

Welcome.

Hi, guys. Good morning. Thanks for taking the question.

Good morning.

So on the Beaumont expansion, can you talk about how the capacity is being absorbed in the market? And given what's happened to cracks and the general concerns around demand today and granted, I think, Darren's commentary on the market was probably a bit more positive, but are there any concerns about adding capacity at a time where fundamentals appear to be weakening?

No, I don't think so. We all understand that these markets can be unpredictable and fluctuate. I want to emphasize our focus on the Beaumont expansion, which we have been planning and developing for many years. This initiative is based on Permian production and changing transportation differentials by bringing crude to the Beaumont refinery, allowing us to produce intermediate products that utilize our conversion capacity, reduce imports of intermediates, and save on the transportation costs typically associated with those imports. We justified this project based on transportation differentials, believing it would offer a reasonable return. Additionally, we anticipated increased value from the fuels and higher-value products we are now producing, which is exactly what we are observing today. The project is well positioned on the cost of supply curve, and it's important to consider this in our business strategy. Regardless of margin fluctuations, our stance is that all our facilities should be positioned on the far left of the curve to ensure a competitive edge, and I am confident that the capacity we brought online in Beaumont is indeed positioned on that side of the cost of supply curve, making us competitive.

Thank you.

You bet.

Good morning. Thanks for taking the question.

Good morning, Sam.

Looking at the numbers, the cash balance stands out. You have been quite open about this topic and the need to create a strong balance sheet. However, I'm curious if the current trajectory of cash, even after considering increasing shareholder returns that align with your targets, indicates we might be moving past a robust position into something even more substantial. Is there any consideration regarding the current cash level and what the optimal amount might be? Historically, Exxon maintained a very streamlined balance sheet in relation to both production and cash flow, which differs from the company's current approach. I would appreciate your insights on this. Thank you.

Sure. I'll go ahead and take that, Sam. I mean, our capital allocation approach, I think, has been very consistent and very clear. And we had talked about the fact that we would expect our cash balance post the end of the year to kind of ebb and flow depending on how market prices and margins evolve. So I'd say we're very comfortable with where we stand. It's important for us to have a really strong balance sheet in order to ensure that we stick to our capital allocation priorities through the cycle, right? That's investing in the business and competitively advantaged high-return projects. It's maintaining a very strong balance sheet. You know that balance sheet gives us all the firepower and confidence we need to succeed across a very wide variety of market conditions, which is obviously what this industry faces. And then clearly, we're looking to share our success with shareholders, and you see that through a more consistent share repurchase program and a growing dividend. So, we feel pretty good about our cash balance. I would just also mention that we're in a relatively unusual market environment compared to what we've seen in the past. ExxonMobil's average debt rate is about 3%. You can look up what people are earning on short-term cash. I think three-month treasuries are at 5% today. So, right now, we're not incurring a negative cost of carry on that cash balance, and that's certainly one of the things that we look at as well. So, we feel really good about where we're at today in our balance sheet.

Yes, I think it's been noted that historically we have operated with a lean cash position. However, looking back to previous high cycles, we maintained larger cash reserves, correlating with commodity cycles where we typically accumulated cash at the peak. This cash becomes a crucial asset as we enter the downturn, especially for sustaining consistent investment levels and pushing forward with projects in our portfolio. Therefore, as we are currently at the high end of the cycle, I anticipate that our cash reserves will be higher, positioning us well for the anticipated downturn, the timing of which remains uncertain.

Thank you so much.

Thank you.

Thank you. Good morning.

Good morning, Roger.

What I'd like to ask on the specific commentary about the $7.2 billion in savings on track for the $9 billion this year. Could you characterize a little bit where that's come from to-date, how kind of general inflation within not just the oil field but in general, how that's affecting that? And is $9 billion, like is that the end of the program, or is there something to happen beyond that? I know I'm kind of asking three questions in one, but they're all focused right around the $7 billion to $9 billion. So, if you allow me, I'll throw that out.

I'll address that suite of questions for you, Roger. First, I want to say we're very pleased with the progress we've made. We're on track to reach $9 billion by the end of this year compared to 2019. Our various programs are driving savings, notably through improved productivity across our workforce. In Upstream, we've significantly reduced above-field costs, which has been a major focus. Over the past couple of years, we have made several organizational changes aimed at centralizing key functions that were previously handled separately. A prime example is our global projects organization. Recently, we combined our Downstream and Chem organization into our Product Solutions business, simplifying operations by merging our engineering and research teams. We also announced the integration of our supply chain and the establishment of a global business services organization, consolidating our global trading capabilities. These efforts enhance the experience for employees, vendors, and customers while driving efficiencies and effectiveness. We saw some of these benefits in the recent quarter, particularly concerning maintenance activities, which exceeded our expectations with a much shorter duration and better throughput than planned. This represents a significant area of savings. Additionally, we've centralized this function within our global operations and sustainability group. This outlines where some of our savings stem from, and we anticipate that the recent organizational changes will foster further efficiencies going forward. Lastly, regarding the program's timeline, we have shared a specific timeframe externally to improve transparency, but internally, we view this as a continuous effort to achieve structural cost savings over time. These are part of the plans we presented last December, and we will provide an update at the end of the year, detailing our outlook moving forward.

And the final point I'd make to build on what Kathy said is we have seen with all these organizational changes, as our people have come together the new organizations and focused on the objectives of those organizations and what the corporation is trying to achieve, we find a lot more opportunities than we could envision even going in to the changes. So my expectation is as these new organizations come together, they'll begin to find things. The organizational changes we've already made are continuing to find things. So our expectation as we head into the future is we'll continue to drive efficiencies and deliver structural cost savings onto the bottom line.

And then I'll just circle back. You asked a little bit about inflation. We actually have put an additional disclosure in our press release, so I'd encourage you to look at that. If you look at the quarter, we more than offset inflationary cost pressure with the structural savings that we were able to generate. Overall, I'd say, the organization is doing a good job at looking to offset inflation in what's obviously been a higher inflation environment recently.

Thank you.

Welcome.

Hey, good morning. Thanks for taking my question. I wanted to ask a question on the Downstream business and given your global reach there, we're seeing reports that Asian refiners are contemplating run cuts while margins in the US are still really robust. And I'm wondering if you see that dynamic has kind of balanced where cracks in Asia are zero but margins in the US are still 20, and that's kind of representative of the market structure that we're in, or do you expect the weakness in Asia margins to force US refining margins lower in the near-term? Thanks.

I'll take that question. My first comment is that over a certain period, which is usually quite short, the market tends to balance itself. We often say the world is round, meaning it's difficult to remain disconnected because ultimately the margins will equilibrate based on transportation costs. This is the model I have in mind. There will always be short-term disruptions, as we experienced after the pandemic with various logistics challenges. However, these adjustments usually occur over time. In the U.S., margins will depend on which production source is influencing the marginal layer of production. Historically, this has come from Europe, where cost structures have risen, leading to higher marginal costs, which is influencing Gulf Coast refining. I don't expect this to change soon. If additional lower-cost capacity comes online and supply exceeds demand growth, we could see a shift in the marginal price setter. Eventually, balance is restored based on transportation costs. Looking back at last year's export levels from China and fairly stable balances in Asia, the question remains whether we'll see a similar situation this year. Time will reveal the answer.

All right. Thanks.

You bet.

Hi, thanks. I wanted to follow up on the earlier questions regarding our cost structure and balance sheet. Darren, could you share your thoughts on dividend growth? We see clear evidence of strong foundational earnings growth and the timely completion of significant projects like Guyana and the successful performance in the Permian. Additionally, you're increasing base capacity downstream. Can you remind us how the Board approaches dividend growth on a mid-cycle basis, especially considering the steps you've taken to reduce risks associated with foundational earnings?

I'll begin and then Kathy can elaborate, but generally speaking, when we consider the dividend, we aim for a long-term perspective and remain highly aware of commodity cycles along with the market's variability and volatility. Our goal is to establish a dividend level that is dependable and sustainable, and I would like to see it grow over time, as has been our history. You’ve seen us work hard during the pandemic to ensure we maintain that commitment. It's crucial for us to ensure our actions are sustainable for the long term. Additionally, we can balance shareholder returns with buybacks, but focusing on the long-term and ensuring our shareholders feel valued through our dividend policy is essential. Kathy, would you like to add anything?

Yeah, I'd say we look to take a very balanced approach as we think about shareholder distributions and getting that balance between a growing competitive dividend, right, as well as the efficiency through share repurchases. And I think we're striking a pretty even balance in that regard. And we definitely think about this over the long term as opposed to the near term, given we're in a business that's highly cyclical. And so, you've seen us in the last two years raise the dividend in the fourth quarter of the year. We're never going to get out in front of the Board of Directors. It's obviously something that we look at regularly, and we know it's important to ensure that dividend competitive and growing. And about 40% of our shareholders are retail shareholders, so more of the moms and pops across the globe that are investors. And so we know it's important. It's something we're really focused on.

Thank you very much.

Thank you.

Great. Thanks. Maybe a question on the chemicals business. You saw sequential margin improvement in your chemicals products business driven by advantaged ethane pricing. Have we turned the corner in the chemicals environment? And can you talk about how you see the trajectory of margins in that business over the course of 2023?

Sure. I'll start and then Kathy can add if she has anything. The key factors affecting chemical margins are the commodity chemicals influenced by supply and demand dynamics. We experienced a significant increase in capacity as various investments that were delayed during the pandemic have since been activated and are now entering the market. I anticipate that we will continue to see additional capacity in the short term. The effects of COVID-19 took some time to affect the global economy, which in turn influenced chemical demand. Demand for chemicals is closely linked to overall economic activity, so when economic activity is limited, chemical demand is also limited. This was notably evident during the lockdowns in China. Currently, there is significant capacity available, and the focus will be on the direction of demand. While there are some encouraging signs from China, we need to observe how their demand and economic activities develop. Additionally, optimizing feed and feedstock is a vital factor in our margin calculations. We have various assets that enable us to manage and switch feedstocks effectively. As gas prices decreased, we benefited from a favorable liquid to gas spread, allowing us to adjust our feed in our crackers. This feed optimization contributed positively in the first quarter, and I expect it will continue to play a role moving forward. The broader macroeconomic impacts will also unfold as time progresses. Kathy, do you have anything to add?

Yes. The only other thing I’d add is, we obviously brought on our Baton Rouge chemical expansion project late in the fourth quarter. That's spooled up in quarter. That's part of an overall strategy of growing Performance Chemicals along with growing high-value products across our Product Solutions business, be it performance chemicals or full emission fuels, high-value lubes. And so, even though the market has been tough, that project actually had a positive earnings and cash flow contribution for us in the quarter. So that's a big part of our overall strategy and mixing up in both the Chemical business and across our Product Solutions business. And we feel very good about the results that's bringing. And we obviously have a very heavy US Gulf Coast footprint kind of relative to the global footprint, and that helped us in the sequential improvement in margins.

Yes. It's a great example of where we're focused on, advantaged projects that bring on advantaged low-cost capacity. So, that polypropylene unit that we brought on in really what is a pretty low point in the polypropylene market to make earnings, positive earnings on a brand-new piece of kit that starts up in the lowest of the cycle is, I think, a testament to the strength of the projects that we are investing in and bringing online.

Thanks Darren and Kathy.

Thank you.

Thanks.

Hello. Darren and Kathy, thanks very much. I wonder if I could just ask about unit depreciation trends. There's quite a big change first quarter versus fourth quarter in depreciation. Is that some of the portfolio effect in the year that we should be picking up? How does that rate through the year then?

Sure. I'm happy to answer that. What you tend to see in depreciation is some ebbs and flows associated with our asset management activities. And so when we're selling assets, sometimes we're taking a small impairment that runs through depreciation. And so I'd say you kind of have to take a step back from that noise in depreciation. If I put that to the side, the company has run about, I'll call it, $19 billion, $20 billion annually in depreciation and amortization. So, that's how I think about it.

Okay. Thank you.

Hi, thanks for taking my question. I just wanted to follow-up on trading because there's been various press reports about Exxon wanting to build up its capabilities in asset optimization and trading. And I was just wondering where you are in that journey. Because, obviously, we've seen some exceptional volatility in 2022 and early this year across oil and gas. And if I look at some of the numbers from some of your peers, it looks like those businesses, the asset and optimization could add up to 5% on ROCE in exceptional environment. So, you obviously have a big advantage with your refining footprint and your asset base. I'm just wondering how sort of vigorously are you pursuing this opportunity? And how long do you expect it to take to get to where you want to be on the trading front? Thank you.

Sure. Good morning, Biraj, and thank you for your question. Putting aside the media reports, we've been discussing this since 2018. Our focus on China trade stems from the reorganization we undertook, shifting from a functional structure to a focus on value chains. This transition allows us to trade more effectively within those chains and leverage insights as well as value chain dynamics. We've established a streamlined perspective on the marketplace by integrating our Upstream into these value chains, alongside Refining and Downstream, now represented in our Product Solutions organization. This setup enables us to trade throughout the entire value chain and take advantage of our global footprint, allowing us to arbitrage between markets. We believe our current organizational structure significantly enhances our ability to optimize trading opportunities. We've been expanding this area since 2018 and are pleased with the progress made. We've brought in talented individuals who have successfully responded to our updated objectives, adding value to our bottom line. Recently, we've decided to consolidate our trading organizations, which are currently spread out across the company, into a single centralized trading entity. We feel this consolidation is logical and have done considerable work in the past couple of years to assess the potential of this opportunity and what is required to pursue it effectively. We're now in the process of executing this plan, which includes building the organization, establishing support systems, and developing and nurturing the necessary talent. I see this as a progression, continuing toward what we believe is a significant opportunity. We will approach this thoughtfully and steadily, focused on greatly enhancing our value proposition centered around our footprint. This is not about taking speculative risks but optimizing our existing asset base and value chains, capturing insights from our operations, and acting on those insights. We've already begun to see positive results and expect more to come. The value from this opportunity will be tied to trading based on the transformation of molecules, developing desirable products, and distributing those products globally. This framework equips our traders with a solid foundation to maximize value, which we anticipate will manifest in our business.

That's very helpful. I have a quick follow-up. Does this affect how you plan to manage your cash balances in the future? Considering previous cycles, if you have a greater exposure to trading, might you prefer to maintain a higher cash balance? Am I correct in thinking that way, or could you provide any additional insights?

So we obviously take the company's working capital needs into consideration as we think about our balance sheet and our cash balance, all else held equal, a bigger company means a bigger working capital needs. So that's how I would think about it. I'd also say, as it relates to trading generally, I mean, there's some near-term, I would say, working capital that has to be brought in mind in terms of the trading organization. The profits that come through trading are different quarter-to-quarter, but I'd say year-to-year, pretty steady.

Got it. Thank you.

Thank you.

Thank you. Good morning. Darren, can you give us an…

Good morning, Paul.

Thank you. Can you give us an update where you are on Mozambique and also in the Papua New Guinea LNG, in terms of the Papua New Guinea expansion talk?

I think it's important to discuss the LNG portfolio overall. We're making significant progress. Specifically, we're advancing through project concepts and designs to ensure that our developments are competitive and positioned effectively within the cost of supply curve. Our production is very competitive in the market, ensuring we have a strong supply foundation for the long term. We've seen positive developments in both Papua New Guinea and Mozambique. In Papua New Guinea, we've made good strides with the government to secure necessary agreements and move forward alongside our partner, Total. I'm pleased with the progress we're achieving there. Regarding Mozambique, we've faced some delays due to various challenges, but we are monitoring the situation closely. As conditions improve and we feel confident in our ability to develop the project successfully, we'll proceed in collaboration with Total and their initiatives.

Darren, can I ask about the situation in Mozambique? Total appears to be optimistic about the security situation there and is working on the cost structure with the contractor. Do you still have concerns regarding security, or are you going through a similar process to address the cost structure?

Yeah. We work very closely with Total, obviously, given the same exposures and the work that we're doing together. So I'd tell you it's kind of a hand-in-hand approach that we're taking there, sharing information. We've had our own security folks out there assessing the situation. I would say our assessment is very consistent with Total's assessment. We don't see a lot of difference between what the conclusions they're coming up with and our conclusion. So we do like the progress that we've seen there. Obviously, we need to be convinced that that will sustain that progress. And today, I feel pretty optimistic about that.

Thank you.

Welcome.

Okay. I think that, that completes our Q. So thank you, everybody, for your questions today. We will post a transcript of our Q&A session on our new investor website in a few days. Additionally, we look forward to connecting again on May 31st for our Annual Shareholders' Meeting. Have a nice weekend, everyone. And now let me turn it back to the operator to conclude our call.