Exxon Mobil Corp (XOM) — Q2 2025 Earnings Call Transcript

Good morning, everyone. Welcome to ExxonMobil's Second 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, and I'm joined by Darren Woods, Chairman and Chief Executive Officer. Kathy Mikells, our Senior Vice President and CFO, is not on the call today as she is recovering from a planned medical procedure. We wish her a speedy recovery. This quarter's presentation and prerecorded remarks are available on the Investors section of our website. They're meant to accompany the second quarter earnings press release, which is posted in the same location. During today's presentation, we'll make forward-looking comments, including discussions of 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. Note that we also provided supplemental information at the end of our earnings slides which are also posted on the website. And now I'll turn it over to Darren for opening remarks.

Good morning, and thank you for joining us. This quarter once again proved the value of our strategy and our competitive advantages. They continue to deliver for our shareholders, no matter the market conditions or geopolitical developments. We built our strategy to take maximum advantage of ExxonMobil's uniquely diversified business across multiple markets and products, products that exist today and new products that our groundbreaking technology will enable for the future. In our Upstream business, we achieved the highest second quarter production since the merger of Exxon and Mobil more than 25 years ago. But it's not just about the volume. We're growing production from assets that deliver the most value. More than half of our oil and natural gas production comes from high-return, advantaged assets. We expect that number to climb to more than 60% by the end of the decade. One of our most important advantaged assets is Guyana where we recently marked the 10-year anniversary of our first oil discovery. With nearly 11 billion barrels of resource, it's the industry's biggest oil discovery in the past 15 years. We have three major developments online producing roughly 650,000 gross barrels per day in total, considerably above our investment basis. Our fourth development, and the largest to date, Yellowtail, is next in line and anticipated to achieve first oil next week, delivered four months ahead of schedule and under budget. By 2030, we expect to have total production capacity of 1.7 million oil equivalent barrels per day from eight developments. The success of these projects has established Guyana as the world's fastest-growing economy. It's also one of the reasons I believe the Guyana development will prove to be one of the most successful deepwater developments of all time. Regarding the recent arbitration decision, I admit the ruling was a surprise. We were highly confident in our position and so was CNOOC. This dispute was about protecting our contractual rights. The sanctity of contracts among governments, investors and co-venturers is critical for the upstream industry. Without it, confidence in large capital investments is undermined. Having co-written the contract with Shell, we understood its intent and believe the contractual language conveyed it. Unfortunately, the tribunal interpreted it differently. While disappointed, we respect the process and the ruling. As we move forward, I hope our investors take comfort in the lengths we will go to in protecting the value our employees create for the company and our shareholders. With respect to the continuing development of Guyana, the arbitrators' decision changes nothing for us, and we welcome Chevron to the Stabroek Block. Moving to the Permian Basin. During the quarter, we produced roughly 1.6 million oil equivalent barrels per day, which was another record for us. Nowhere is our emphasis on technology and innovation paying off more clearly and immediately than in the Permian, where we have the largest inventory of Tier 1 acreage. Last year, we increased the total resource from 16 billion to 18 billion oil equivalent barrels with the successful development of new technologies. Our team is making great progress on my challenge to double recovery from the industry average of roughly 7%. We continue to make progress on the deployment of lightweight proppant, a patented material made at a very low cost with petroleum coke from our refineries. It is proving to be more effective at keeping fractures open, allowing us to extract more oil and gas from each well. On a 10,000 lateral foot equivalent basis, we've deployed this in over 100 Permian wells and are seeing improved recoveries up to 20%. That's up five percentage points from what we announced last December. By year-end, we expect deployments to reach roughly 150 more wells. And we're also leveraging our advantage of contiguous acreage to drill four-mile laterals without losing any productivity. Others are drilling wells half that length at far greater cost, resulting in much lower capital efficiency. So while some operators in the Permian are talking about peak production, our current plan is to grow Permian production from about 1.6 million oil equivalent barrels to 2.3 million by 2030. And with a deep portfolio of technologies we're developing, we have the industry-unique opportunity to drive capital-efficient, high-return growth well beyond that. Turning to our Product Solutions project start-ups. We're continuing to ramp up operations at the China Chemical Complex. This facility supplies China's growing domestic market, the largest in the world, with high-value consumer-oriented chemical products used in household appliances, hygiene products and safe food packaging. We're also starting up our Singapore Resid Upgrade project, deploying new-to-the-world technology that converts the lowest value molecules at the bottom of the barrel into some of the highest value products we offer. With this new technology, we've introduced a new lubricant base stock, which we've sold out, and have essentially sold out the incremental 20,000 barrels per day of production. We've started up our Fawley Hydrofiner project in the U.K. converting high sulfur gas oil exports to domestic ultra-low sulfur diesel sales. We're now producing renewable diesel at Strathcona in Canada for the first time. This is a key part of our lower emissions fuel strategy, growing production where policy and economics are supportive of cost-effectively reducing the carbon intensity of essential products. Lastly, we expanded operations at our new Proxxima systems blending facility in Texas, a critical step to more than tripling production capacity this year. We also signed an MOU with a leading building materials and construction company based in the Middle East to manufacture and distribute rebar made with Proxxima. These are important steps in establishing this new business. In total, our 2025 project start-ups are expected to drive more than $3 billion of earnings in 2026 at constant prices and margin. This goes a long way towards derisking our plans to achieve $20 billion by 2030. That's $20 billion of additional earnings and $30 billion of cash flow versus 2024 on a constant price and margin basis. In our Low Carbon Solutions business, our first third-party carbon capture and storage project is now in operation. The project uses our CO2 transport and storage network, the world's only large-scale system, to store up to 2 million metric tons of CO2 per year that otherwise would have been emitted to the atmosphere. We also recently announced our seventh CCS customer contract. This brings total third-party CO2 offtake to nearly 10 million metric tons per year. In addition, the U.S. Environmental Protection Agency issued the draft Class VI permit for our Rose CO2 storage facility in Texas. We expect Rose to be the first of many storage sites linked to our CO2 transport pipeline. Turning to the status of our Baytown hydrogen plant, the world's largest low carbon hydrogen project, we've seen mixed progress. As we've said, this is a complicated project that requires simultaneous development of supply, demand and policy. We were disappointed that under the recently approved 45V tax credit, timing for startup of construction was shortened from 2033 to the beginning of 2028. While our project can meet this timeline, we're concerned about the development of a broader market, which is critical to transition from government incentives. If we can't see an eventual path to a market-driven business, we won't move forward with the project. We're now working to determine if the combination of 45Q and a shortened 45V will provide the support needed to catalyze a broader low-carbon hydrogen market. Beyond that, we're working to translate heads of agreements into firm sales contracts, including exports of ammonia to Asia and Europe and domestic hydrogen sales. We knew that helping to establish a brand-new product and a brand-new market initially driven by government policy would not be easy or advance in a straight line. It's why we focused on low carbon opportunities aligned with our existing capabilities and advantages. Our strategy provides optionality and flexibility, which is critically important in this dynamic and often uncertain world. I'm pleased to see that it's working. We're strengthening and extending advantages our competitors can't match with a focused portfolio of advantaged assets operated to the highest standards, world-class execution of large-scale high-return projects, captured cost savings that exceed all other IOCs combined since 2019 and driving superior earnings and cash flow growth potential irrespective of the market environment or geopolitical uncertainty. It's why we believe, and more importantly, are demonstrating that we are in a league of our own. Thank you, and we're happy to answer your questions.

Thank you, Darren. Before we proceed to the Q&A, I want to emphasize that we will be releasing our annual global outlook later this month, which typically includes our most recent insights on global energy demand and supply through 2050, serving as the foundation for our business planning. Now, we can move to the Q&A. Please open the line for the first question.

A lot of good stuff to dive into in the release, but I actually wanted to ask, Darren, about some comments you recently made in an interview around M&A. I'm paraphrasing a bit but just talking about seeing opportunities and working to bring some of that to fruition, want to just unpack that a bit. If you think about your portfolio, you have a really strong organic opportunity ahead. And I imagine that creates a very high bar. And then at the same time, you've also talked a lot about the technology you bring to bear, like the uplift highlighting in the release on the Permian. And that may be able to create value in assets that others can't. So when you put these factors together, high bar, differentiated technology, differentiated scale, how does that influence your thoughts on further acquisitions and M&A for Exxon? Are there asset types or regions where you see the biggest opportunity?

Thank you for the question, Devin. You've highlighted a crucial aspect of our strategy, which involves developing a distinctive set of capabilities and competitive advantages that we can leverage to enhance organic value. We are committed to this focus while also applying these advantages to pursue inorganic growth and generate more value than a typical merger would provide. Essentially, we aim for a scenario where one plus one results in three or more, a concept we've discussed for a while. This was evident in the Pioneer acquisition, where we've made significant progress on synergy development. Initially, we anticipated $2 billion, but we've since raised that to an average of $3 billion annually over the next decade. I expect to update that figure further during our corporate planning discussions at the year’s end. We are very pleased with these results, which also open up opportunities for us to seek additional value-driven deals. Our priority is not on acquiring volumes but on building value and volumes—something we've been doing with Pioneer and will continue to seek in other opportunities. The advantages we brought to Pioneer included leading technology and scope, along with strategic talent and leadership acquisition. We're not just focused on cutting costs; instead, we want to bring in talented individuals from acquired companies, fostering a mutual learning environment. This is key to our acquisition strategy. For instance, the former CEO of Pioneer now oversees our entire Permian business, contributing significantly. Additionally, it's essential that new team members fit well with our company culture, which emphasizes safety, environmental stewardship, efficiency, and high performance. We value committed employees, often with 10 to 30 years of experience, who take pride in their work. We maintain high standards for potential opportunities, which we believe are necessary for truly enhancing the volume and value proposition instead of merely consolidating. As I mentioned earlier, we see opportunities across all sectors of our business, not limited to Upstream. We have an active pipeline where we assess potential prospects, aiming to understand unique value creation possibilities and identifying opportunities that we can pursue in the future. This is an ongoing and long-term endeavor, and we feel optimistic about our progress.

Yes. Thanks, Darren, for the comments. I wanted to drill down on Slide 7, where you provided some new disclosure about the Permian production potential, and there's been a lot that's been said about peak Permian production across the basin. Do you have a different view given your technology upside? Certainly, it seems like you do for your portfolio. And in that context, on the back of Devin's question about M&A, is it logical to think that this is the right space for you to be the consolidator in?

Yes, thank you, Neil. To address your question about our perspective and differences, I can confidently say yes. From the very beginning, when we entered the unconventional sector, I likened our approach to that of a long-ball hitter, while others focused on short-term strategies. This long-ball perspective led us to discussions about cube development, which were initially overlooked but have now set the industry standard. Given our early position in the technical development of unconventional resources, we have been pushing the technological limits hard. I set an ambitious goal to double recovery rates from a starting point that is relatively low compared to other resource types. Our technology team has made significant changes resulting in a promising portfolio of technologies that are currently in early deployment stages, showing potential for substantial results. For instance, the lightweight proppant we discussed in December is yielding a 20% improvement in recoveries, surpassing our earlier expectations. This is just one example from a broader portfolio we are actively working on. We are vigorously advancing our technology development and quickly deploying it to empirically assess the outcomes, while continuing to refine our capabilities. Although the evidence of our progress might be difficult to discern externally due to the scale of our operations and the nascent stage of the deployments, we are becoming increasingly confident that our projections beyond 2030 show upward momentum and continued growth. Our technology team remains dedicated to achieving our goal of doubling recovery rates, and I believe we will reach that point in the future, even if we are not there yet. I am impressed with the strides the team is making and their ownership of this challenge. To your point about our unique capabilities creating opportunities, I agree completely. It revolves around identifying the right resource base and acreage for technology application, alongside the other criteria I discussed with Devin. This represents a significant opportunity for us. Additionally, we are implementing unique technologies in our lubricants and chemical businesses, and across our entire portfolio, our technology team is driving advancements. This will enhance the performance of our base assets and potentially unlock new avenues for inorganic growth through acquisitions.

I don’t want to dwell on the Permian, but I’ll ask my question again in a different way. Slide 7 indicates you have a 20-year inventory. I'm uncertain about how that's defined. Is it based on today's production or the 2.3 per day, which you need to sustain by 2030? I see that the trend is positive. My concern is that you are heavily dependent on the Permian, which will account for 40% of your production, and you essentially operate as a dividend company. It appears that you might be steering the company towards higher decline rates, increased sustaining capital, and likely a shorter inventory life as you ramp up production. This is significant since it presumably contributes to your free cash flow for dividends. How do you assess the risk of relying so much on a high decline asset as a long-term pillar for dividend sustainability?

I believe that this is just one aspect of a larger portfolio. In the upstream sector, we have consistently faced the challenge of depletion and the need to find new barrels to compensate for the depletion rate and production. This is not a new issue for us. We don't believe that the best way to tackle this challenge is by accumulating value. Instead, we need to find the right balance between the pace of development and the advancements we are making in technology, while ensuring we give ourselves enough time to enhance our capital efficiency and reduce costs for future production. I anticipate ongoing improvements in our capital expenses associated with resource access and the returns we generate from that capital. Our perspective is that the current situation may not represent the future paradigm, which we believe will be different. Furthermore, we are excited about the potential of new technologies that will create opportunities for other resources globally, which can benefit from the innovations we are pursuing. Ultimately, our focus will be on enhancing our core capabilities, expanding them, and applying what we have to the opportunities that drive business growth. We expect all our business units to deliver steady cash flow and earnings growth. It’s important for us that cash flow growth is accompanied by earnings growth; otherwise, it suggests we’re spending too much relative to cash earned. Our plans, which we will share with you in December and those we are developing for beyond 2030, are aimed at sustaining earnings and cash flow growth for the foreseeable future, keeping in mind our development strategies in the Permian. We see our 20-year inventory as the number of wells we bring online each year, equivalent to wells sold. That is our approach to this.

Darren, could you discuss some of the downstream projects? You've seen significant success with several major projects this year. Could you share any lessons learned from Strathcona and Singapore? Also, I would like to hear about your future growth ambitions in refining. How do you view the upcoming opportunities? Are they as promising as the last five years have shown in the downstream sector?

I appreciate the question. We've experienced significant success in launching these large product solution projects. Historically, prior to establishing a centralized project organization, our results with large projects were inconsistent due to our distributed capabilities and the inability to deploy the best skill sets for our toughest challenges. With the new project organization and the restructuring of our business and venture teams, we've achieved remarkable success in developing these projects with leading capital efficiency. We've managed to bring them online faster and with fewer challenges than ever before. I'm particularly proud of the rapid completion of the China Chemical Complex, one of the most intricate grassroots startups we have undertaken in decades, which went into production in record time. Additionally, I just learned that the Singapore Resid Upgrade project has successfully produced on-spec base stock, which involves converting low-value resid material into lubricant base stocks—a groundbreaking technology implemented at a large scale. This complex process has been successfully completed by our organization. What we are witnessing is the chance to transform low-value molecules into high-value ones using existing facilities, allowing for low incremental capital costs. We plan to continue focusing our refining and manufacturing operations on these integrated capabilities to create a wider array of high-value products. We intend to shift our production toward higher-value outputs and dispose of lower-value products, which will guide our investments in refining. The organization has strong plans for the next steps, and while we aim to ensure our current projects run smoothly and effectively over time, we are also considering future opportunities in biofuels, driven by demand or regulatory changes, as well as recycling plastics. We have redefined our facilities, viewing them not just as suppliers of transportation fuel or chemical products but as versatile manufacturing sites capable of leveraging advanced technology to produce a variety of goods. Going forward, we will continue to innovate with high-value products. The establishment of the project organization has proven to be a successful strategy, allowing our teams to concentrate on bringing facilities online efficiently. Overall, we are doing well, and there are currently no significant issues to address in this area.

Maybe pivoting a bit to the low carbon businesses. It's interesting to see the contrast from the recent legislation between the rollback in the hydrogen incentive, but arguably enhancement in the carbon capture incentive. Just curious on your thoughts on how you see the low carbon business opportunity set and CapEx evolving versus what was laid out in the December Analyst Day? And specifically on CCS, that 10 million-ton per annum is no small feat. So as the credit now is cutting carbon utilization and sequestration at parity, does that further open up the opportunity set for projects?

Yes, Betty. When we discussed our capital expenditure, we identified a foundational level of CapEx, which included some early-stage major projects that we were still conceptualizing. We separated these projects, along with the new policy initiatives, because we aimed to highlight the difficulties in predicting technological advancements and the varying speeds at which demand and policy are developing. This created a lot of uncertainty around our CapEx projections, so we categorized it separately to make it clear that while we have plans, they are subject to more variables than our traditional businesses. However, we have made significant progress in carbon capture, and our team has found numerous additional opportunities. The addition of incentives or the parity aspect hasn't substantially altered our initial plans, as we intended to sequester the carbon. The emergence of enhanced oil recovery as a consideration doesn't materially affect those plans. We are progressing well and are seeing increased interest in this area, benefitting from our extensive transportation and storage system. On a positive note, the administration is facilitating the permitting process, and we are eager to finalize the Rose permit and expand to more sites as states assume control. Overall, the carbon capture business seems to be positioned well for a growing demand in carbon reduction technologies, which are among the most cost-effective in the country. We anticipate maintaining our aggressive spending pace in this area without significant shifts. On the blue hydrogen front, which requires considerable investment, we face more challenges. The timeframe for industry development has been compressed, and there are alternative products already available in the market. Consequently, production costs and product pricing are crucial factors for buyers, many of whom are still evaluating those numbers. We have not reached a final investment decision and will wait until we secure off-takers to ensure confidence in our anticipated returns. Thus, it seems likely that the timeline for this initiative may be delayed. Regarding low-carbon data centers, there's a substantial demand, and we are in a unique position to offer low-carbon power quickly, making us the only option currently available to hyperscalers. We'll observe how this scenario unfolds, especially with discussions around using unabated gas first, followed by decarbonization later, which could also cause some delays. Nonetheless, we have a strong proposition for the market and are collaborating with serious players looking to establish data centers. Lastly, on the lithium front, we are focused on advancing lithium technology and are prioritizing cost reduction to ensure that when we launch, we can compete effectively on supply costs, including against Chinese competitors. This progress might take longer than we initially expected. Overall, the portfolio is taking shape, and while we recognize the uncertainties we've highlighted in our capital plans, we still see considerable value in the opportunities. As I mentioned earlier, these developments won't occur in a linear fashion, so we may see some fluctuations. It's too early to predict the specifics, but we will provide more updates during our plan update in December.

Exxon has always been a great technology company. And in your prepared remarks, you're talking about how the $18 billion of the cost-saving target by 2030 and new technology may be able to bring in more opportunity and beyond that. So from that standpoint, I mean, two of the biggest rapidly advanced technologies are AI and robotics. And so can you help us understand where are the biggest opportunities for Exxon in those two areas and how it will change your workflow or processes or your ability? I mean you'll be able to do things that you previously would not be able to do. And that how much is the potential incremental benefit cost synergy or the efficiency gains beyond what you already built into your current target that you could see potentially that is out there? And why do you think Exxon is better than others in the oil industry in being able to really take advantage of that?

Thank you, Paul. You've brought up a very relevant topic regarding technology. The way we've reorganized has positioned us well to leverage new technology through a centralized technology organization that integrates information technology with traditional technology forms. There is strong collaboration within this group, allowing us to maintain a consistent approach to technology across the entire company. One aspect that sets us apart and will give us an edge is our corporate-wide ERP solution. Historically, our company had fragmented systems across different businesses. We are currently transitioning to a unified ERP system with a consistent data architecture, making all our data, including historical data, accessible for AI applications. We believe our system will align well with AI requirements, enabling us to leverage a data set that surpasses what other companies in the industry can access. This will provide us with substantial advantages, allowing us to explore new and improved ways of operating. It's important to note that we are still in the early stages of this technological curve. We have been discussing how to prioritize our AI initiatives given the current limited resources. While we acknowledge the importance of cost efficiency, we believe that maximizing effectiveness will yield greater value. We are focusing on how we can utilize AI to reduce production costs and improve performance. By doing so, we see significant opportunities to enhance our operations. Initially, our goal is to free our teams from lower-value tasks so they can concentrate on higher-value work, ultimately boosting our bottom line. We understand this is an evolving process and are approaching it thoughtfully on a corporate level, ensuring we allocate resources to the highest value opportunities. Thank you for your question.

Just a quick one on the corporate cost guidance. Just noticed over the last few quarters, it's been creeping up with the 2025 run rate looking like it's about double 2024 levels. Just if you could help me understand what is driving that increase and how we should think about it into 2026, that would be really helpful.

Yes, Biraj, it's Jim. Thanks for the question. The expense line you're referring to is largely influenced in 2025 by our extensive slate of new projects coming online, which is currently on track, on schedule, and within budget. Additionally, we expect a higher level of noncash depreciation, depletion, and amortization this year compared to last, due to a full year of Pioneer being included in our numbers and the growth in our production volumes alongside these new projects. Looking ahead to 2026, we will revisit this as part of our corporate plan in the fourth quarter. However, any new projects next year will be more marginal compared to this year, along with increased production that will affect our depreciation, so we anticipate continued growth in line with our activity and production levels. On the other hand, we are also focused on achieving structural cost savings, having added $1.4 billion to that total this year. We aim to reach our $18 billion target by 2030 based on 2019 figures, which we believe will help offset some of the increased expenses driven by our activity.

Yes, I would add to that. If you look at our cash operating expenses in 2019 and compare them to where we are today, excluding energy costs and production taxes, we are actually still lower than we were in 2019. Our operating expenses have been offset by the savings we've achieved since then. I'm sure others could provide a similar track record in that area.

Since Liberation Day, there has been a massive influx of interest in U.S. LNG contracting. And it looks like many more U.S. projects may move forward versus initially anticipated. Do you view this as a structural shift in the market? And does it affect, I guess, either your interest in getting into more U.S. LNG or the time line for your pre-FID international LNG projects?

The short answer is no. I believe that the countries participating will choose energy that aligns with their economic needs. Unless the tariff agreements lead to a significant change in economic activity, global demand will continue to be influenced by the fundamental economy. My focus is on how that demand will be satisfied and the sources from which it will originate. I’m not convinced that we have all the details yet to accurately assess this, but my initial reaction is that while we may see shifts in trade flows, the overall demand remains consistent and can still be met by available supply sources. Thus, I don't see this altering the rate or speed at which new supply enters the market, considering the existing demand. Specifically for us, we typically secure contracts for the capacity we are bringing on. As we develop our projects in Papua or Mozambique, our LNG organization is also securing sales channels. This ensures that when we make final investment decisions, we will have locked in sales that are tied to crude, giving us a clear understanding of the expected economics and operational expenditures. Therefore, these short-term factors do not significantly influence our perspective on the long-term fundamentals of the investments we are making.

I wanted to ask on Guyana production. And at the corporate update in December, you talked about lower production and capacity due to production falling off plateau levels. Can you remind us when we should start to see that production plateau start to come off? And then also remind us activities that you're pursuing to arrest those declines that we should be on the lookout for?

Yes, I understand this has been a topic we've discussed repeatedly. The organization has indicated that we expect to reach 1.7 million barrels per day of gross capacity by 2030, with an anticipated production of around 1.3 million barrels. This estimate reflects our understanding of the decline rates and the measures we are implementing. From our experience, that serves as a reasonable foundation for our projections. However, I want to emphasize that no one on the Guyana team will be satisfied without fully utilizing our resources. We are focusing on infill drilling and optimization efforts. While these will not entirely negate the natural depletion, we are investing significant effort into them. I mention this to explain that I cannot provide a definitive answer to your inquiry. We have a plan regarding our production levels compared to capacity, and the organization is searching for every possibility to exceed those expectations. Honestly, I'm placing my confidence in them.

I actually have a follow-up and a little bit of a detailed question on Guyana as well. Looking at the data, both Liza 2 and Payara have recently been running around 270 kbd per day versus nameplates at 220 and 250. So I was wondering if you could talk about some of the debottlenecking efforts you've been doing there and if you view that as a sustainable run rate? And maybe just a follow-up is we have seen output at the Liza 1 ship kind of come down more recently in that 130 to 140 range versus, call it, 160 kbd in 2024, and thoughts on an infill program to maybe sustain the rate back at full capacity there?

Yes. I believe the organization puts in a significant effort to ensure we maximize the capital investments we make. We start with a design basis, evaluate its potential, and once operational, our technology and operations teams focus on optimizing the value of our investments while maintaining integrity and safety standards. They have been effective in this regard across all our facilities globally. With our concentrated technology organization, we have a substantial advantage in achieving these goals. As we progress with each new project, we identify debottlenecking opportunities applicable to upcoming initiatives and incorporate them into our planning, ensuring we understand the capital needed to reach our production goals. We continuously refine our investment and design based on insights gained from debottlenecking. As new equipment is introduced, the team re-evaluates and addresses any bottlenecks. Ideally, this process should reduce capacity creep over time as we integrate our findings. However, the drive for innovation within the organization presents a counterbalance, as there is a continuous effort to maximize capital efficiency. I have confidence in our team's ability to excel in this area and to identify ongoing debottlenecking prospects. We provide you with our design basis as our best estimate and hope to exceed expectations based on the skills of our dedicated team working tirelessly every day.

Maybe a question on the chemical side. Your earnings have been fairly resilient to the bottom here, even with lower margins sequentially this quarter. Can you talk about what has worked well, including the contribution that you're seeing from the China Chemical Complex? And then maybe your thoughts on where the chemical outlook goes from here?

Yes, I'll begin by addressing the current situation from the back end. There is strong demand for chemical products globally, but there's also a significant supply trying to meet that demand, which has resulted in challenging margins throughout the industry. I expect these conditions to persist longer than preferable. We need to either reduce capacity, which is occurring but tends to be a slow process, or increase demand. If demand grows more rapidly, we could recover from our current position more quickly, although we don’t rely on that happening. Our strategy has always focused on building our business and investing in projects that ensure our success, especially during these less favorable market conditions. While our current results may not meet our expectations, they are relatively positive given the existing margin environment and in comparison to our competitors. Several factors have contributed to this performance, including our emphasis on the design of our operations, our feed flexibility, and our capability to optimize feedstock for profit on any given day. Our chosen locations provide structural advantages regarding feed availability, and we have strategically concentrated on producing high-value products and improving production levels to enhance our offerings, which has been a major factor in our success. We've also significantly reduced structural costs, focusing on spending only what's necessary to maintain value and ensure product movement. We've pursued efficiency even during periods of high margins, aware that the market would eventually recover. Our commitment to these principles is paying off, and I credit our team for their effective management of feedstock and product upgrades at lower costs—a challenging feat for many organizations. Regarding our operations in China, we are still in the initial stages of ramping up. We are pleased with the production progress and are actively selling into that market. However, we have yet to reach full operational capacity. Given the significant capital investment, achieving full utilization is essential. We anticipate that by the year's end and into next year, we will be fully operational, contributing at our maximum potential.

I wonder if I could return to the very first question on M&A because it's quite an important comment, I think you made. I mean, I take your point that volume is not a criteria. Do you feel limited by scale? I'm trying to ascertain whether you're sort of talking about bolt-on transactions or something larger in your perspective.

Yes, scale is important, but it needs to be the right kind. My main point is that chasing volume for scale and paying for that volume doesn't benefit shareholders and doesn't create any real advantage or value for them. Scale may be beneficial if you can integrate that organization into yours and find significant efficiencies. However, it should always be secondary to the opportunity to create unique value, which is our main focus. I don't want to dismiss the importance of scale, but often, you pay a price for it in terms of value creation. We're looking to identify where we can uniquely contribute so that the combined outcome benefits both sets of shareholders more than they could achieve separately. That's the essence of successful acquisitions and what we aim for.

Alastair, just to add to that, a lot of interest in this topic this morning. We set out, as you know, in December a plan through 2030 to grow earnings $20 billion and cash flow of $30 billion at flat price constant margin. Just for the avoidance of doubt, that plan doesn't reflect and it certainly doesn't rely on any M&A. So this is certainly an opportunistic additional category.

Yes, good point, Jim.

Darren, I was wondering if you can just run through kind of how you're thinking about North American gas today? I mean, you have a lot of vertical integration already. And maybe it goes back to an initial question, but would power ever fit into that? And then maybe just any comment on Golden Pass taking first commissioning gas would be great.

Thank you, Lloyd. Regarding your question about Golden Pass, I am very pleased with how the organization has bounced back from the bankruptcy and the progress made on construction. We still anticipate first gas delivery by the end of this year or early next year. I'm optimistic about the recovery and how the team has come together after facing the bankruptcy challenge. As for our outlook, it remains unchanged from what we've previously communicated. On the broader topic of power generation, I believe that creating a demand sink for gas is not a significant value driver for us. While we are certainly capable of power generation and have implemented it in various settings globally, it is not a core focus for us. Our interest in low carbon data centers is about enabling carbon capture and storage rather than power generation itself. We recognize the growing commitment from hyperscalers to reduce emissions while expanding data centers, which is why we introduced our solution aimed at helping them decarbonize efficiently and cost-effectively. If there is no potential for decarbonization, I do not foresee us entering the power generation business.

All right. Thanks, everybody, for joining the call and thanks for your questions. We'll post a transcript of this call to the Investors section of our website by early next week. That concludes today's call. I hope everyone has a good weekend.