Exxon Mobil Corp (XOM) — Q4 2023 Earnings Call Transcript

Good morning, everyone. Welcome to ExxonMobil's fourth quarter 2023 earnings call. We appreciate you joining the call today. I'm Jennifer Driscoll, Vice President of Investor Relations. I'm joined today by Darren Woods, Chairman and CEO, and Kathy Mikells, Senior Vice President and CFO. This presentation and pre-recorded remarks are available on the Investors section of our website. They are meant to accompany the fourth quarter earnings news release, which is posted in the same location. Shortly, Darren will give you an overview of our 2023 performance. Then, we will take your questions. In conjunction with our recent announcement about acquiring Pioneer Natural Resources, we’ve included additional information about the transaction on Slide 2. Please be aware that this presentation is not intended to be a solicitation of any vote or approval. During today's call, we'll make forward-looking statements, which are subject to risks and uncertainties. Please refer to our cautionary statement on Slide 3. You can find more information on the risks and uncertainties that apply to any forward-looking statements in our SEC filings on our website. Note that we also provided supplemental information at the end of our earnings slides, including an overview of full-year results, which are posted on the website. And now, I'll turn it over to Darren.

Good morning, and thanks for joining us. I want to start with the theme of the quarter, which frankly, has been a theme of the year, excellence in execution. Whether it’s operating our facilities, building projects, deploying technologies, trading, marketing, sales, supply chain, or any of our other activities, the men and women of ExxonMobil are setting and holding themselves to very high standards as they execute their responsibilities. Their hard work and commitment drove the strong results we reported today and are the foundation of our success. At the end of the day, it’s all about our people. They make the difference and are delivering industry-leading results. And nothing is more important than the safety of our people. Keeping them safe requires intense focus and relentless discipline, 24 hours a day, every single day. For many years we’ve outperformed industry benchmarks for workplace safety. Over the last several years we’ve been implementing improved systems for managing both personnel and process safety, leveraging best practices from across our company and industry, our own and others. These efforts are paying off with continued improvements in the number and severity of incidents. The discipline needed to consistently deliver industry-leading safety performance manifests itself in all our work. We see it in our project teams, who are delivering large capital projects at top-quintile performance on cost and schedule. We see it in the reliability of our operations, where we achieved record performance in both the upstream and refining. We see it in our environmental performance, where we set several new records. And we see it in the successful management of the transformational reorganizations we’ve made over the last several years. Results are clear. By any measure, 2023 was an outstanding year. We delivered $36 billion of earnings, strong cash flows, and a 15% return on capital employed. Our strategy, introduced in 2018, coupled with consistently strong execution, is delivering results that lead the industry across a range of metrics, including earnings and cash flow growth, total shareholder distributions, and total shareholder returns since 2019, the baseline year of our plans. On a constant-price basis, we more than doubled earnings in 2023 versus 2019, demonstrating the improved earnings power of the company. The growth in profitability reflects significant progress in high-grading our portfolio of assets through advantaged projects, divestment of less strategic operations, and significant cost reductions. During the year, our divestments generated more than $4 billion of cash proceeds. And we also announced two value-accretive acquisitions. Denbury, which closed in November, provides opportunities to profitably accelerate our Low Carbon Solutions business with a compelling, end-to-end, customer decarbonization offer. Pioneer, which is expected to close in the second quarter, will further differentiate our advantaged Upstream portfolio. The synergies will create significant shareholder value and accelerate Pioneer’s net zero ambitions by 15 years, to 2035. In 2023, we made significant advances in a number of innovative solutions. We entered the lithium business, where we see an opportunity to supply approximately 1 million electric vehicles per year by 2030 with economically advantaged production that has a much smaller environmental impact than today’s supply. In the carbon capture and storage space, we recently completed the construction of a pilot plant to further develop a unique, proprietary technology, which has the potential to significantly lower the cost of direct air capture. We also launched Proxxima, a thermoset resin with a high value in use for coatings, infrastructure, automotive parts, and wind power, made from low value components used in gasoline. We also took a further step in reducing costs, leveraging scale and improving effectiveness with the formation of three new centralized organizations, Global Supply, Trading, and Global Business Solutions. This change provides additional opportunities to grow deep expertise across a broad portfolio of critical business capabilities. Today, we’re convinced that no other company can match the depth and breadth of development opportunities that ExxonMobil offers. It’s no surprise that for the 11th year in a row, we were recognized as the most attractive US employer in the industry for engineering students. This is another key competitive advantage. Our plan for 2024 remains anchored in our existing strategy, building on world-class execution and the performance we delivered last year. We set a high bar for ourselves across all aspects of the business, from safety to operational excellence to financial performance, and have confidence in our team's ability to consistently deliver. For 2024, we expect to invest $23 billion to $25 billion to grow our portfolio of advantaged, low-cost supply assets, further shift our product mix towards higher value, higher margin performance products, and reduce emissions, both our own and others. Our plan also continues to structurally reduce costs to achieve $15 billion in structural cost savings through 2027. We have opportunities to enhance supply chain efficiency, further improve maintenance and turnarounds, modernize data management, and simplify business processes. In Low Carbon Solutions, we’ll continue the integration of Denbury and look to add additional customers to our US Gulf Coast network. As we noted during the Corporate Plan update in December, we’re now pursuing more than $20 billion of lower emissions opportunities, evenly split between reducing our own emissions and reducing third-party emissions. Overall, our portfolio of low carbon investments is expected to generate returns of approximately 15%. Our Upstream portfolio will be further transformed when we close on the transaction with Pioneer. By combining the capabilities of our two companies and leveraging the advances we’ve made in technology, we expect to recover more resource, more efficiently, with lower emissions. We’ll provide more detail about this compelling combination at our Spotlight event following the close. Our results in 2023 once again demonstrated the strength of our strategy. As I reflect on the past year, I have tremendous pride in what our people accomplished and a strong level of confidence in our continued ability to lead in the years ahead. Finally, I want to thank our shareholders for their continued confidence and support. Now, I'll turn it back to Jennifer.

Thank you, Darren. Now let's move to our Q&A session. As a courtesy to others in the queue, we ask all of our analysts to limit themselves to one question. However, please remain on the line in case you need any clarification. With that, operator, let's open the line for our first question.

Yeah, good morning, Darren, team, and congrats on the strong results. My question was around the structural cost savings. So we're at $9.7 billion versus 2019 and targeting $15 billion by 2027. Can you talk about the progression over the next couple of years? What are the key buckets and milestones we should be watching out for as it relates to those cost savings?

Sure. Thanks, Neil. Good to hear from you again. Maybe just start with a little bit of perspective. If you think about where we have been driving efficiencies and what lies behind the improvements in structural cost. We've made tremendous changes in the organization and we've been doing that each successive year, sequenced with respect to what needs to come first, second, and third to make sure that we can effectively manage that. We're still in the early stages of taking advantage of all the changes that we've made going back in time with our global technology organization, with our product solutions organization that frankly brought refining together with our marketing and then together with chemical. So a lot of restructuring, a lot of opportunities, and all the organizations see a path to significantly improved effectiveness in executing the business and, to your point, a significant path to efficiencies. On top of that, we just launched our global supply chain organization. We just launched our global business solutions organization and our trading organization. So they're early in their process, and all of them see significant opportunities for efficiency. So I would say $9.7 billion is a reflection of the hard work coming from the reorganizations that we've done and we're early in that and then we've got additional reorganizations to take advantage of. That $15 billion that you referred to is not a target, it is in our plans and the plans reflect what the organizations are working on. So what are some of the areas? We've seen a lot of benefit today by a centralized approach to enhancing our maintenance and our turnaround processes. We've taken a lot of cost out with respect to that. We see an opportunity to bring further cost reductions there. The supply chain organization brings a huge opportunity. In the past, we had very fragmented supply chain organizations across all of our businesses. We've now consolidated all that. We see a lot of opportunities to bring together our data and our processes and harmonize those and do those consistently across all of the organization. And then a lot of continuing optimization within the base business, taking advantage of the new construct and learning from one another, that's a huge part of the go-forward reduction. So I would just tie all that to the ongoing change and the fact that we now have a good line of sight across all of our organizations around the best way to do things and the most efficient ways to do things. I'll hand it over to Kathy if there's anything to add to that.

The only other thing I would add is how we're looking to leverage technology to both drive incremental efficiency but as importantly to drive effectiveness. So things like how we use artificial intelligence and chatbots in our customer care centers, right, which gives our customers better service. And obviously, that drives efficiency for the company. How we use predictive analytics and things like driving maintenance turnarounds to top quintile type performance or similarly how we use those predictive analytics in our drilling and fracking centralized operation here in Houston. So bringing together our information technology organization with our engineering and research organization will just further enhance, I think, how overall we as a technology company fundamentally try to use technology to both drive efficiency but obviously to drive value in the business.

Thank you, Kathy. Thanks, Darren.

Thank you, Neil.

Thank you and good morning, everyone. Darren, it’s clear that a lot has changed since you proposed doubling cash flow from 2025 to 2027, particularly with the progress in Guyana. My question is, how do you assess our progress toward that cash flow target in 2024, and specifically, what do your CapEx comments indicate about the timing of Guyana in relation to that target?

Yeah, good morning, Doug. Thanks for the question. Maybe I'll start with the back end of your question around the CapEx. I mean, it should be clear, hopefully it's clear, we've provided guidance in a range in CapEx to give you a perspective of when we start the year based on the plans that we put together the previous year where we think we're going to end up and spend across the year. Obviously as we're going through the business, each of the businesses are clear on their objective to find value-creative opportunities and to capture those as quickly as possible. So we've got an ongoing process. If we see an opportunity that we weren't aware of at the time of putting together the plan, we're not constraining our activities based on some artificial number or the guidance that we've put out. We're very focused on making sure that it's going to be an effective use of capital, that we can efficiently execute what's required for that capital, and then that there's value behind it and there's an advantage in it. So that's how we're managing. What we talked about in the release with respect to our CapEx in 2023 reflects just that, incremental optimizations as we're going through the year. And my view is we'll continue to do that as we go forward into the plan years. Obviously, we've given you some guidance that we believe reflects where we'll end up. But as we work the opportunities, we're very focused on that. I think, the short term, what we've done with Guyana, you're seeing today in Payara, where we brought that online. And frankly, in January, well ahead of our plans, reached nameplate capacity. And part of that was around the optimization of the drilling and making sure that we had what we needed to bring that up quickly. In terms of the broader objective to get to 2027, I mean we're on that plan and we're actually delivering the value that we laid out in 2018. So I feel really good about the progress we've made. We noted in the release that if you look at just from 2019, the year before the pandemic, the advances that we've made in the business, on a flat price, take margin, take price out of it, we've doubled the earnings capacity of the corporation from 2019 to 2023. We've grown earnings at compounded annual basis by 40%, greater than 40%. We've grown cash flow from operations almost 20%, greater than 15%. So I think significant progress we've demonstrated at the work that we're doing, projects that we've put in place, the reorganizations that we've executed, the cost that we're cutting out of the business are all driving us towards this improved valuation and frankly the plans we have going forward are going to continue to do that. So the targets that we've laid out, what we communicated in our December company plan release, basically those are plans and we feel that we're right on track if not slightly ahead of delivering on those. Kathy, anything to add to that?

Yeah, I mean, Doug, I'll just try to grind kind of back to those numbers a little bit more just so you understand that on an earnings basis, we actually more than doubled earnings on again that constant price basis that we used in our corporate plan, which Darren is referring to in the numbers that he just mentioned. So I would absolutely say we are ahead of our plan in terms of what it is that we're achieving. And it's that earnings improvement that is flowing through to cash flow. And so as you think about cash flow, our earnings expectation in the corporate plan in terms of doubling it out to 2027, it's well ahead of doubling it. And then those earnings just flow through to the cash flow growth. So I would describe us as being ahead of plan in terms of where we stand today and feeling very good about the future.

I think we would concur. Thank you very much indeed.

Good morning. Thank you for my question. I received some inquiries this morning regarding the 2023 spending. Darren, you hinted at it in your earlier response. You managed to advance some capital expenditures for Guyana and Permian in the fourth quarter. Could you elaborate on the reasons for that, the types of efficiencies you’re observing, what specifically has been accelerated, and how that impacts your spending and production outlook for both assets in 2024?

Good morning, Devin. When considering the challenges organizations face, particularly in upstream operations, it's important to note the continuous cycle of drilling, data collection, and production. We have a real-time optimization process that incorporates our past experiences into our future plans, making this a highly dynamic operation. We're leveraging technology extensively to learn from the data we gather and adjust our strategies to enhance value. The organization recognizes its responsibility to drive value and identify opportunities, ensuring that any expenditures made are purposeful and efficient. If any constraints arise that are not reflected in our plans, we address those through discussions. Overall, it's a well-managed process. Regarding capital allocation in the fourth quarter, the decisions that resulted in exceeding our guidance were not made recently; rather, they were made throughout the year. We anticipated that certain actions taken earlier would potentially lead us to slightly exceed our projections by year-end. Looking forward, we will continue this dynamic approach. In the Permian, we are progressing with new technologies and evolving techniques to optimize production value based on our learnings. Similarly, in Guyana, we acknowledge the complexities of the reservoirs and the challenges involved. As we gather data through drilling, we will optimize our approach and advance development when opportunities arise to enhance net present value. Predicting outcomes based on new learnings can be difficult; if we had all the answers now, there wouldn’t be anything new to discover. Kathy, do you have anything to add?

I’d just say if you look at the specifics of what we delivered as a result of actually spending a little bit more on CapEx, I think you see that just goes hand in hand to how we drove value for shareholders. So in the Permian, we had guided to 600,000 kind of oil equivalent barrels, we came in at 620,000. In Guyana, we had said 380,000, we came in at 390,000 right? And you think about where we're at in Guyana today and we've got Prosperity, the third boat which is in the Payara development already up to nameplate capacity as we stand here today. And that's because we made the decision to drill more wells to ensure that we could get that boat up to capacity as quickly as possible and our organization absolutely delivered on that. So those were the right economic decisions that drove value for our shareholders.

Great. Yeah, I agree the strategy is certainly yielding great results. Thanks so much.

Hi, good morning. Thanks for taking my question. So my question is on Payara. You've expressed some confidence that you can ultimately get above the nameplate as you have on the first two platforms. Should we expect kind of a continuous ramp towards a higher number or does it run closer to nameplate for a period of time and then further unlock happens kind of more in a step change?

Good morning, John. Thank you for your question. Let me take a moment to explain the process. Our organization works hard to design projects for the capacities we aim to deliver. Once the projects are ready, they are handed over to the operating group, which begins testing to identify any constraints. One advantage we have is our commitment to consistent design across our projects, minimizing changes as much as possible from one boat to the next. Although we must adjust for varying complexities in subsurface development, we strive to maintain a level of consistency. This approach helps reduce capital costs and allows us to apply lessons learned from previous boats to new projects, thereby accelerating the process. A great example of this is how swiftly we brought the Prosperity unit online, achieving flaring reduction and reaching nameplate capacity at record speed. As we continue to bring new production units online, we learn and apply those insights to our next projects. I expect our pace will accelerate over time, although it is difficult to predict the exact nature of the ramp-up or specific improvements. It will depend on the next constraint we overcome while ensuring safe operations within all limits, and maximizing value. I would encourage you to look at previous ramp-ups as a reference, with the expectation that our organization will discover even better methods moving forward.

And then if you don't mind, I'm just going to add because I know everybody is now going to be modeling what Guyana is going to look like for the year. So this is just a reminder that at some point in the second half we're working on the gas to energy project, right, and laying the pipeline down to bring that gas from Liza 1 and Liza 2 onshore, to basically kind of plug it into the power plant that ultimately will drive down costs for consumers in Guyana. And we will be taking Liza 1 and Liza 2 offline for a period of time as we kind of hook them up to that pipeline. So that's just a reminder that we'll have a little bit of downtime at some point in the second half.

Thank you.

Good morning all. At the risk of oversimplifying, if I think about 2023, it was a very strategy-focused year, Denbury, Pioneer, Lithium. If I look at 2025, it's a major project delivery year. 2024, is this a year of execution or could there be some level of strategic interesting moves that we should think about?

Good morning, Bob. I believe you have oversimplified the situation. Every year is one of execution, and we have managed to execute at a high level, perhaps more smoothly compared to some of our peers. The challenges we face across all operations remain significant. However, the team at ExxonMobil has consistently performed excellently, as I mentioned in my prepared remarks. It's important not to underestimate this effort or take it for granted. Focus on execution is our top priority, especially as we bring projects online, which requires a great deal of discipline. Additionally, our strategy remains a focal point each year. The key factor is identifying the right opportunities that can add value for shareholders. In terms of mergers and acquisitions, we look for situations where the combined value exceeds the sum of the parts. For projects, they must have clear advantages and position us favorably on the cost supply curve. We have outlined our knowledge and what we foresee on the capital front. As we continue to execute our organization’s strategy and seek opportunities that align with our criteria, we will pursue them if they offer advantages and are within our execution capabilities. I wouldn't categorize 2024 as having a different focus compared to 2023. The development of projects and the required work has shaped 2024 as a year of execution, and it’s essential to see this as part of our project scheduling rather than anything more significant.

Very clear. Thanks.

You bet. Thank you, Bob.

Great, thank you. Maybe if I could ask one, with the Denbury deal now closed, can you talk about what we might see over the course of the next year or two, particularly on the carbon capture business? Should we start to see announcements or notable signs of acceleration or efforts on that side?

I appreciate the question. Regarding the Denbury acquisition, we have successfully closed the deal and are currently in the integration phase. We are quite optimistic about the potential for integrating this acquisition with our Low Carbon Solutions business in carbon capture. There are significant opportunities to reduce emissions, especially in high concentration areas along the US Gulf Coast and within that pipeline network. Our team is actively working on developing the business, engaging with potential customers to explore ways to capture their emissions, and enhancing the operations to expand the pipeline's capacity. This effort is ongoing, and I anticipate that as we engage with customers, we will secure more agreements to funnel emissions into the pipeline. Our primary focus is on building this business for the long term, addressing climate change risks and significantly reducing third-party emissions. This kind of business model is not present anywhere else globally, and we aim to establish a solid foundation as the first mover, fostering a venture that we expect to sustain for decades. While we want to expedite the reduction of emissions and attract customers, we are equally committed to not compromising the value this opportunity presents. We believe we can achieve growth in a manner that enhances value and generates the necessary returns for our capital investment in this business.

Okay, thank you.

Hi, thanks for taking my question. I had a question on gas realizations because they were just well ahead of, at least what I had modeled using the kind of rules of thumb and the portfolio mix you put out before. So is it just a case of the trading contribution coming into that number or is there something else driving that? And then just one quick clarification on the underlying cash flow from operations. Again, that was ahead of where the earnings beat would have suggested it would have been. So is there anything one-off in nature in the CFFO number that we should be aware of for 4Q? Thank you.

Yeah, I'll let Kathy address the cash flow thing. And I'll just say from a gas realization standpoint, I don't think there's anything unique in terms of what was realized as we went through the quarter. Obviously, we've been growing our trading business and that is going to manifest itself in our results, we're going to see that in our energy business, we're going to see that in our gas businesses. So that will continue to kind of, and as volatility changes and opportunities in the market change, we'll see that kind of ebb and flow. But we expect to see with time, a continued growth, structural improvement in earnings with the work that we're doing in the trading space. And then I think quarter-on-quarter we're going to see changes in mix as we move across the quarters. And so we'll see some variation there. But I wouldn't put anything structurally other than the trading work that we've been doing and to our realizations. And I'll hand it to Kathy for any other comments on that and the cash flow.

Yep. And so I'll just speak specifically to cash flow from operations and I think you're referencing the quarter but I'm happy to talk about the quarter and the year. Our cash flow from operations, if you look at the quarter was $13.7 billion. If you exclude working capital, we would have been at $16.9 billion. You're mentioning a beat relative to the street, and so was there anything unusual going on? As I look at people's models, I think sometimes they struggle to get depreciation and amortization right, so that's the only thing I'm going to speak to. And when we have a quarter where we're taking impairments, then we get an increase kind of in terms of a non-cash add back that flows through to cash flow from operations and we obviously took an impairment in the quarter. So that's my best guess as to anything that might be nuanced. Otherwise, no, nothing particularly unusual going on.

Okay, understood. Thank you.

Hello, good morning. Thanks for taking the question. I'd like to come back to CapEx if possible, just because, when the organization's performing so well as it is, it feels like there's always going to be opportunities to pull something forward or for people throughout the organization to kind of pursue their incentives and spend a bit more. And obviously this is something that's been a topic in the industry for a long time. And so particularly like, as we look at your Permian results, it looks like your ‘23 wells are still improving and everything's getting better. So I guess the question is, how do we think about this with respect to your planning when it feels like there's always going to constantly be opportunities for you to add kind of nickels and dimes to CapEx to do some quick and high return opportunities? Thank you.

Good morning, Sam. I would take issue with the characterization you've presented. It's not about the organization simply adding small amounts of money. We have specific work programs designed to drive value, and any discussions about spending extra money or making additional investments outside of our planned budget must go through the management committee. We maintain strict controls to ensure we understand the value proposition and how unique it is. We don’t allow the organization to freely decide to spend money whenever they identify opportunities. Thus, I believe it's challenging to uphold that characterization. I would highlight the success we’ve had so far, having delivered a very beneficial set of capital projects. Our track record shows that we’re not pursuing volume or marginal investment opportunities; they must be distinctive. The criteria to enter the capital plan are stringent. We maintain a clear understanding of the supply costs across the industry and know our position on the cost curve. When new projects or opportunities arise, we assess them competitively; they need to have a structural advantage and be robust enough to withstand cyclical downturns. When we apply all these conditions, there’s a limited pathway for expenditures. This has not changed. If we invest additional money, it will need to provide more value than what was outlined in the base plan because it comes as a marginal investment. Ultimately, we’re not evaluating ourselves based on any previous guidance or numbers. Instead, we focus on our ability to generate advantageous projects. The results we're achieving—growing earnings at twice the rate of the nearest competitor and cash flow from operations at double their growth—do not stem from investing in opportunities lacking the advantages I mentioned. Our track record and the results we’re producing confirm that our approach is effective, and we intend to maintain this strategy.

I would like to add one more comment about the number of projects we've managed to advance and successfully deliver, either on schedule or even earlier. Payara is an excellent example of this. It was initially planned to start in 2024, but we were able to accelerate its timeline. Additionally, we advanced incremental well drilling to bring that FPSO up to its operational capacity in a remarkably short period. This aspect truly sets ExxonMobil apart from other companies. Our exceptional performance in execution and bringing projects forward is always a sound economic choice because it allows us to benefit from the profits of those projects sooner. Therefore, this decision is closely aligned with our value-driven approach, which is fundamental to our decision-making process.

Thank you.

Yeah, hey, good morning. Thanks for taking my questions. I first wanted to get your take on the outlook for the chemicals market going forward. 2023 was a bit of a trough year. Some of the industry participants are saying maybe we're getting close to turning the corner. And that would be meaningful given all the underlying investments that Exxon has made in the chemicals business. So just wondering your view on potential for market improvement and seeing the full force of some of those investments come through.

Good morning, Jason. I agree with your assessment that 2023 was a low point. It was certainly a tough year, significantly below the lows of past cycles. However, we are proud that the investments we've made generated positive earnings and cash flow during this downturn. This aligns with our strategy, ensuring that our projects can withstand challenging market conditions. In the chemical sector, we've shown that the new projects we've implemented are still earning and generating cash, even during these difficult times. Like many in the industry, we are eager to emerge from this low point, and we anticipate that our projects will perform even better with improved margins when we do. Additionally, we noticed some slight improvements in the fourth quarter. While there's still considerable capacity in the market, ExxonMobil is experiencing solid growth in our performance product category. We have set ambitious targets for our high-performance, high-value chemical products, and we are making progress there. The key question is when the wider industry will recover and margins will start to rise. I believe 2024 may show slight improvements over 2023, but we don't anticipate a dramatic change, rather a gradual recovery as we work through the excess supply and some additional capacity expected in 2024 and 2025. Overall, we feel confident about our position in this market due to our capacity, footprint, and ability to optimize our feed and products. The results reflect this confidence, and we are prepared to navigate the evolving market landscape.

Got it. Thanks.

Thank you. Good morning.

Good morning.

Darren and Kathy, I want to ask about the trading operation. I think it seems like it's a very good trading year for you and a lot of your peers in Europe. Can you help us to maybe quantify that? What is the trading benefit for the year, whether in terms of millions of dollars or in terms of improvement in the return and whether that you think that is a repeatable? And after more than the last two or three years, what have you learned? Is there anything that you will do differently going forward in your trading operation? And whether you see the first quarter optimization opportunity set, is it similar to what you’ve seen in the fourth quarter, or is it getting worse or getting better? Thank you.

Thank you, Paul, and good morning. I'll share my insights, and then Kathy can elaborate. Looking back, we have discussed the trading potential within ExxonMobil for some time. There's a level of skepticism regarding our ability to establish that business. However, the success of our trading operations stems from our global presence, the variety of our businesses, and their integrated nature, which provide us with a physical footprint in markets worldwide to effectively trade and develop our business. The insights we gain from operating across this footprint and these diverse businesses have confirmed that our strategy of enhancing trading capabilities while optimizing our assets has been effective. We see ongoing opportunities for growth in this area. As we've mentioned, we are taking a cautious approach and are not rushing; we are committed to ensuring that our strategies are robust and that we are managing risks while reaping rewards, which we have accomplished. While 2023 saw a decrease from the heights of 2022 due to market conditions, it still demonstrated solid contributions from the capabilities we've been developing. There’s more work ahead. I expect to see stronger trading results as they should enhance the overall value of our businesses. Our aim is not for the trading organization to compete with core operations, but rather to collaborate in optimizing value for the company. I am satisfied with our 2023 performance, keeping in mind that market volatility will play a significant role year after year in what we achieve. However, the foundation we are building is solid, and I believe we will continue to see improvements going forward. Kathy, do you have anything to add?

Yeah, the only other thing that I'd add to that is if you looked at our trading results on a year-on-year basis, in upstream we were lapping kind of a big mark-to-market gain in 2022, right? So that impacted our results. And I've mentioned time and time again that quarterly results, especially as a result of that movement in mark-to-market, will kind of ebb and flow. And sometimes we get price timing nuances in the quarter. As we came to the end of this year, those price timing nuances that we saw in the third quarter had fully unwound by the fourth quarter. So I think we start the year overall in a pretty good place.

Kathy, is there a number you can share in terms of what's the contribution for trading for the year?

No, we don't disclose that. I believe all our peers are quite sensitive to competitive aspects regarding that figure. However, Darren provided good context by noting that last year was a record year for our earnings, particularly in trading. While we achieved strong trading results this year, they did decrease slightly compared to last year. I also highlighted that in upstream, we were facing comparisons with favorable mark-to-market gains from 2022.

Hi. Good morning, Darren and team. My question is on the Permian, specifically your continued record production to play. It appears, at least from what I'm seeing going forward, your Permian activity is likely to continue trending higher. And I'm just wondering, maybe, Darren, how you'd respond to maybe any critics who suggest all US companies should instead maintain flat production in order to, I guess, appease Saudi and the others maybe more so.

Thanks for the question. I want to clarify that we are not going to manage the business to satisfy any external parties. Our main focus is on whether the investments we make yield a return. We want to ensure we are spending our resources wisely and efficiently. This is the criteria guiding our plans. We anticipate increasing our volumes in 2024 to around 650,000 barrels per day and aim to continue that growth to reach approximately one million barrels per day by 2027. This is our strategy, and we are committed to it. As we've mentioned before, our growth won't be uniform year over year; it will be uneven, but over time, we expect it to average about 13%. So far, we haven't encountered anything that suggests this will change. With the acquisition of Pioneer, we will incorporate their production and look to optimize our combined portfolios. Once the deal is finalized, we plan to share more details about the impact of merging these two companies on our Permian production.

Yeah, makes a ton of sense. Thank you.

Yeah, thanks very much. And glad to have the opportunity to talk with you. Following on from the Permian question, actually, Darren, when you were asked about the pace of growth in 2024 in the Permian, I think the time of the capital budget release, one of the comments you made was a desire to build drilled uncompleted wells. I just wondered whether you could talk a little bit around the concept of building inventory, why the need, why put more wells into inventory? Is it very simply adding flexibility to the business in order to maintain the production profile going forward? So what's the thinking? Thank you.

Sure. Yeah, I'm happy to do that. And you remember correctly, we did say we were going to build some more DUCs. And I would think about that. And you used the right word, inventory, like any inventory that we have in the business, which is, if you're optimizing what is a pretty complex system of drilling and fracking and managing simultaneous ops and how you schedule all that and how it interfaces with each other and the planning piece of it, you want to have a little bit of inventory that allows you to continue at a pace and manage around some of the complexities and potential conflicts that you have in developing the acreage. And you'll recall that what we are doing in the Permian, in the Delaware in particular, is this manufacturing approach where we're laying out these spines and then executing like a manufacturing organization down that. So it is a very paced and continuum of work and production. So there are constraints that you hit as you're doing that consistently across all that acreage and having some DUCs available to us allows us to when we run into an issue with what we're doing in the immediate vicinity, we have some other opportunities to continue the production. So we use it like any other inventory. Now, obviously the trick is to get that inventory level right. You don't want a bunch of capital sitting there that isn't earning its return. This, we think we've got to an optimized level that allows us to keep a very efficient, I'd say, manufacturing process running versus a focus on production and production process.

Thank you. That's helpful.

Good morning, everyone. Appreciate the time. Going back to carbon capture, I was interested in the comment early on about the pilot plan and the potential to lower the costs of direct air capture. Now, imagine there are limitations on what you can share just given, as you mentioned, the proprietary nature of the tech here. But with other key players in the energy space, particularly on the service side, exploring new technologies for this, just thought it would be great to get any commentary you can speak to on key learnings so far from this pilot plan and the magnitude of potential savings. Where you see the most opportunity to improve the cost structure and what kind of capital investment that I guess the low carbon solutions business overall might involve over the near term?

I believe it's important to acknowledge the proprietary nature of what we're discussing, so I'll keep some details limited. However, from a broader perspective, we are confident that carbon capture will significantly contribute to society's goals of achieving net-zero emissions or making substantial reductions in carbon emissions. Instead of discarding our existing infrastructure and energy-intensive industries, we should focus on addressing the emissions problem. Carbon capture is a crucial part of this solution. Currently, the technology we have was not originally designed for this specific application. It works effectively for high concentration emissions but becomes increasingly expensive as we deal with lower concentrations of CO2. Therefore, the challenge is to utilize existing technology for these high concentration streams, where it is economically viable, while also developing a more affordable solution for the lower concentration streams. We recognize that new technology is required, and we are exploring advancements in material science, particularly in nanostructures. There have been significant technological improvements since the original technology was created, leading us to investigate how we can enhance CO2 capture with these advances. We have set up a pilot plant to test new capabilities and evaluate the cost-effectiveness of our capture methods. Our initial goal is to achieve around a 50% cost reduction, which is a good start but still not sufficient. If we can realize a significant improvement in costs or a pathway to lower those costs, it will provide us with optimism that we can make further advancements and establish more competitive and economical solutions for global deployment. As I've mentioned before, achieving effective direct air capture is crucial for addressing emissions. The industry faces the challenge of finding more cost-effective methods for this purpose. While we are still in the early stages of developing this technology, we believe it is a valuable area for exploration. Our technology teams have innovative ideas and the expertise to optimize materials and processes, and they are working towards significant advancements. Although it's too soon to determine how successful we will be, I believe we have the necessary capabilities and should dedicate ourselves to making progress in this field.

Great. Looking forward to your updates in the space there. Thank you.

You bet. Thank you.

Thanks, everybody, for joining our call today and for the questions you asked. We'll post a transcript of the Q&A session on our investor website later this week or early next week. Have a nice weekend, everybody. And with that, we'll turn it back to the operator to conclude our call.