Exxon Mobil Corporation

Good day, everyone, and welcome to this ExxonMobil Corporation fourth quarter 2020 earnings call. Today's call is being recorded. At this time, I'd like to turn the call over to the Vice President of Investor Relations and Secretary, Mr. Stephen Littleton. Please go ahead, sir.

Thank you, and good morning, everyone. Welcome to our fourth quarter earnings call. We appreciate your participation and continued interest in ExxonMobil. I am Steven Littleton, Vice President of Investor Relations. Before getting started, I hope all of you on the call, your families and your colleagues, are safe in light of the continuing challenges we face as a result of the coronavirus pandemic. I am pleased to welcome Darren Woods, Chairman of the Board and Chief Executive Officer of ExxonMobil, who will be joining me for the call today. After I cover the quarterly financial and operating results, Darren will provide his perspectives on 2020 and updates on our priorities and plans for 2021 and beyond. Following those remarks, Darren and I will be happy to address questions. Our comments this morning will reference the slides available on the investor section of our website. I would also like to draw your attention to the cautionary statement on slide two and the supplemental information at the end of this presentation. I'll now highlight developments since the third quarter of this year on the next slide. In the upstream, gas realizations increased by approximately 40%, with demand and prices recovering from lows earlier in 2020, reflecting the impact of supply disruptions, colder weather, and crude length LNG pricing. Liquids realizations were essentially flat with the third quarter, with low October prices improving as the quarter progressed. While there were no economic curtailments in the quarter, government mandated curtailments increased to approximately 190,000 all equivalent barrels per day. Despite considerable challenges associated with the pandemic, the upstream business matched its best ever reliability performance for the year. We continue to progress active exploration programs in Guyana and Brazil. and in the fourth quarter announced a hydrocarbon discovery in Suriname, which extends ExxonMobil's resource position in South America. In the downstream, we achieved the best-ever personnel and process safety, as well as record reliability performance for the year. Industry refining margins remained at historic lows, driving industry rationalization four times the 10-year average level of capacity reductions announced in 2020. With continuing weak margins, we expect further industry closures. The chemical business matched the strong operational performance of the upstream and downstream, also achieving best-ever annual safety and reliability performance. This excellent performance enabled us to fully capture the improving margins driven by sustained strength in packaging and continued recovery in automotive and durable product markets. Across the corporation, we exceeded the operating cost and capex reduction targets that we laid out in April. We decisively responded to the unprecedented market conditions in 2020. Leveraging our global projects organization, we were able to defer spend and optimize projects to preserve the long-term value of our industry-leading investment portfolio. Let's move to slide four for an overview of fourth quarter results. The table on the left provides a view of fourth quarter results relative to the third quarter. Starting with third quarter 2020, the reported loss of $700 million included favorable identified items of $100 million, driven by the non-cash inventory adjustments we noted in the third quarter. Excluding these items, the third quarter loss was $800 million. Fourth quarter results were a loss of $20.1 billion, including $20.2 billion of identified items related to impairments. Earnings excluding identified items were $100 million, a $900 million improvement from the third quarter. Fourth quarter results were $200 million lower than the third quarter, due to mark-to-market impacts on unsettled derivatives. This reflects the impact of marking-to-market open financial derivatives for which the physical trading strategy has not closed at the end of the quarter. We expect to realize the full earnings of these trading strategies when they close in the future. Improvements in upstream natural gas and LNG prices as well as increased liquids production in Guyana also benefited earnings. Continued strong demand for high-value chemical performance products, coupled with the strong reliability, supported chemical earnings improvement of $200 million. Finally, as a result of the growing strength of our portfolio, we removed less strategic assets from our development plans, including certain dry gas resources, notably in North America. This resulted in a non-cash after-tax impairment charge of about $19 billion. On the next slides, I will cover a brief summary of quarterly results. I will focus my comments on the underlying business performance, excluding identified items. Moving to slide five, improved prices and margins in the upstream and chemical increased earnings by $530 million. The benefit of higher upstream liquids production in Guyana, Canada, and the U.S. also improved earnings. This was offset by higher expenses due to the timing of planned turnaround, maintenance, and expiration activity. In the downstream and chemical, our integrated manufacturing sites allowed us to rapidly respond to dynamic market conditions and capture significant feedstock benefits. For example, we optimized units that typically produce gasoline to increase production of high-value chemical feedstocks, critical to the manufacturing of gowns, masks, and hand sanitizer. Manufacturing results in the downstream were improved with strong reliability and investments that high grade product yields contributing $160 million to the fourth quarter earnings. On the next slides, I will cover a brief summary of the full year results. Slide six is a comparison of full year 2020 results relative to 2019. Results reflected the unprecedented loss in demand driven by the economic impact of COVID. which in turn significantly depress upstream and downstream margins. In responding to pandemic-related challenges, the organization rapidly reduced costs, achieving $3 billion in structural savings out of a total reduction of $8 billion. Our manufacturing facilities contributed an additional $1 billion with better reliability and improved product yields. Moving to upstream volumes on slide seven. Upstream volumes decreased by an average of approximately 190,000 all-equivalent barrels per day compared to 2019. Volumes were impacted by economic and government-mandated curtailments as well as Groningen production limits, which in total reduced volumes by approximately 210,000 all-equivalent barrels per day. Excluding the impact of economic and government-mandated curtailments, entitlements, Groningen production limits, and divestments, volumes increased by about 110,000 oil equivalent barrels per day. This was in line with our original production plans with optimization of maintenance activity, reducing the impact of economic curtailments. Moving to slide eight. In April, we set a target to reduce 2020 cash operating expenses by 15% and CapEx by 30%. We exceeded these reduction targets. Looking at capital spending, we established reductions of 30%. The reorganization of our upstream and downstream businesses a couple of years ago enabled us to accelerate the efficiency capture that we expected from these changes. Cash operating expenses were down $8 billion versus 2019, including structural reductions of about $3 billion that were delivered through optimization of supply chains and logistics, work process simplification, and workforce reductions. We leveraged our new global projects organization and strong relationships with EPCs to adjust our capital plan, deferring spend, and further optimizing projects. This allowed us to reduce quarterly spend by $2 billion in the second quarter versus the first quarter, a 25% reduction. As we continued this work through the year, we reduced capital expenditures by $10 billion, or greater than 30% versus 2019 in the original plan. Importantly, we did this while improving safety, reliability, and the environmental performance of our operation. Let's turn to the next page where you can see the impact of these reductions on our cash profile. Excluding the impact of working capital effects, fourth quarter cash flow from operating activities was up $600 million from the third quarter. Gross debt decreased by about $1.2 billion to $67.6 billion. We ended the quarter with $4.4 billion of cash, a little above our minimum operating levels. Turning to slide 10, I'll cover a few key considerations for the first quarter. In the upstream, government mandated criteria are expected to average 150,000 oil equivalent barrels in the quarter. a decrease of approximately 40,000 oil coolant barrels from the fourth quarter. Production is expected to be higher in the first quarter due to seasonal gas demand. In the downstream, we anticipate higher scheduled maintenance and turnarounds to be offset by additional efficiencies. In chemical, we anticipate continued demand resilience across packaging, hygiene, and medical segments with continuing recovery in automotive and construction markets Scheduled maintenance is expected to be in line with third quarter. Corporate and finance expenses are anticipated to be about $700 million. Lastly, at current crude prices and downstream chemical margins, we expect cash flow from operating activities to cover the dividend and our planned CapEx, which has flexibility to adjust depending on the business environment. With that, I'll now turn the call over to Darren.

Thank you, Steven. Good morning. It's good to be on the call. I hope you and your families are safe and healthy. I'm sure I'm like many of you, happy to close the book on 2020 and optimistic for the year ahead. As you know, the pandemic has had devastating impacts on people and businesses around the world. These effects were especially severe in our industry. Energy consumption collapsed as economies shut down. Oil prices hit their lowest point in history. And refining margins fell well below their 10 year lows. It was the first time in memory that we saw simultaneous lows in each of our businesses. As I discussed a year ago, our response throughout these challenging times was primarily focused on three areas. Protecting the health and safety of our employees and communities. Keeping operations running to support COVID response efforts, providing critical energy and products. and aggressively reducing spend while preserving value to ensure we remained in the best possible position for the eventual recovery. We're pleased with how we performed on each of these. Our employees stepped up and made contributions to those in need of our products, from hand sanitizer to specialty products for protective equipment to fuel for first responders. Through extraordinary efforts, we kept operations running 24-7 while achieving strong safety results and exceptional reliability performance. At the same time, we leveraged on the ongoing work in reorganizing our upstream and downstream businesses to significantly reduce cost and preserve value in an extremely challenging and uncertain market environment. We delivered on our cost reduction objectives and outperformed our revised plan, which we shared with you in April. Going forward, we're continuing to work to reduce cost by leveraging synergies from aligned organizations and work processes across the upstream, downstream, and chemical. Further opportunities are being identified to reduce costs to drive cash flow and maintain our capital allocation priorities, including paying a strong dividend and maintaining a fortified balance sheet that we do leverage over time. I'll provide more detail momentarily on the successful efforts to drive greater efficiency across our businesses and further improve our cost structure. I'll also spend time discussing the significant steps we're taking to reduce emissions intensity and absolute emissions, and our work to advance lower-emission technologies, like our newly announced low-carbon solutions business. Collectively, this will help position us as an industry leader in greenhouse gas performance while helping society move to a lower-carbon future. Let me start, though, by highlighting a few notable achievements from 2020 in what was a very difficult business environment. During a year of unprecedented challenges, our people successfully managed our global operations, ensuring the uninterrupted supply of essential energy and products while achieving best-ever safety and reliability performance. We reduced cash operating expenses by more than 15%, including $3 billion of structural improvements. and reduced capital investments by more than 30% to $21 billion without compromising the advantages or value of our projects. We achieved our 2020 emission reduction goals for both methane and flaring and established new plans for 2025 that are projected to be consistent with the goals of the Paris Agreement. These plans are expected to reduce absolute upstream greenhouse gas emissions by 30%. Permian Basin volumes exceeded our plan at 370,000 oil equivalent barrels per day, despite curtailments and reduced investment. This performance was driven by significant ongoing improvements in operating efficiencies and technology development. We progressed LISA Phase II and PIARA developments in Guyana and continued our exploration success with three new discoveries, increasing the recoverable resource estimate on the Staybrook Block to nearly $9 billion, oil equipment barrels. Our chemical business set a new record for polyethylene cells, reflecting the growth and demand for performance packaging and strong operating performance of our expanding asset fleet. We maintained our position as a global leader in carbon capture, one we've held for more than 30 years, by increasing sequestered CO2 to more than 120 million tons. This is well over twice the next closest competitor and larger than the next five competitors combined. To put this in perspective, 120 million tons is equivalent to taking more than 25 million passenger vehicles off the road in a year. In 2020, we focused on managing through the impacts of an unprecedented industry environment, leveraging the strengths of our corporation to progress an industry-leading portfolio of advantaged investment opportunities critical to the long-term success of the company. At the same time, we drove deep structural efficiencies to improve competitiveness and position ourselves amongst the industry's lowest cost of supply. Let me start with our efficiencies. You may recall that in 2019, we completed our corporate reorganizations, moving from functional companies to businesses organized along their value chains. This allowed us to reduce overhead and provided end-to-end oversight for each business, which was a critical first step and streamlining the businesses to structurally reduce cost. It also allowed us to more effectively prioritize work and focus on the highest value activities. Consistent organizations across each sector are allowing us to consolidate like activities to fully leverage the corporation scale, further reducing costs and improving effectiveness. Our global products organization was established in 2019 as a result of this approach. This organization has played a critical role in reoptimizing our global investment portfolio, improving the capital efficiency of each project, and when necessary, cost-effectively deferring work. As we came into 2020 and the pandemic, the organization changes provided the foundation for significantly reducing spend across the businesses. Expense results are shown in this chart, which is consistent with the chart Steven showed, excluding production taxes and energy expenses that are a function of commodity price. As you can see, 60% of the $5 billion reduction from 2019 to 2020 was structural, driven by reduced overheads and operational efficiencies. The remaining reductions were temporary, driven by lower production and activity deferrals. During last year's planning process, Each organization identified opportunities to convert the short-term or temporary expense reductions into permanent structural efficiencies. This year, we expect to achieve a further $1 billion of structural efficiencies. By 2023, we will achieve a total of $6 billion in structural expense reductions versus 2019. I expect even further reductions as we take advantage of additional synergies unlocked by consistently organized businesses. One final point to make on this slide. structural reductions we've shown are independent of the price environment we find ourselves in on the other hand returning activity and increased expenses between 2020 and 2023 are in large part a function of the price environment in lower price environments much of that increase would be further deferred i may now turn to another critical area our capital investments Over the past several years, we have been progressing a strategy to high grade our asset base and improve the earnings and cash generation potential of our businesses. We announced work to invest less strategic assets and have been progressing a portfolio of industry leading investments. With pandemic driven losses, we responded quickly to bring capital spending in line with market conditions and an uncertain outlook. And preserve our strong dividend. As we enter 2021, our capital plan is at a historic low, significantly reduced from 2020 levels. Our capital plans through 2025 reflect three key themes, value, flexibility, and discipline. Value derived from advancing our highest return, cash flow accretive projects to deliver increased earnings in cash, both near and long term. Flexibility to respond to a dynamic market. We demonstrated this in 2020 and have developed our plans with this in mind. And discipline to make adjustments to our capital program depending on market conditions to support a strong dividend and begin to deliver. Our plans are built on a price basis consistent with third party outlooks and advance our highest return investments. They maintain a healthy balance sheet and our strong dividend. They're robust to a wide range of price scenarios and using last year's experience and flexibility to respond to lower-priced environments. In each planned year, we have a level of short-cycle unconventional spend which can be reduced in line with market conditions. We also expect to restart projects that have been suspended across this time horizon, but if necessary, can be delayed longer, further deferring spend. We also have a level of early investments that fund long-term growth opportunities. These too can be deferred or suspended. While each of these reductions impact the value of our plan, they are available if circumstances warrant. Less flexible spend can also be reduced, but at a higher cost. This capital is generally longer cycle, more firmly committed, or very near completion. The next slide helps quantify our capital flexibility. On the left of this graphic, we show available cash from operations for our 2021 plan at different rent prices, assuming the lowest refining and chemical margins experienced from 2010 to 2019. This is our source, with higher crew prices generating more available cash. As you move right, you see our uses, the current dividend, and our 2021 capex from the previous page. As you can see, the breakeven Brent price needed to pay our dividend and invest in the low end of our flexible capital is roughly $45 a barrel. The Brent price required for $16 billion, which is the low end of our guidance, and closer to where I expect our actual spend to be in 2021, is $50 a barrel. With downstream and chemical margins at the bottom of the 10-year historical range, we can fund our highest return investments in Guyana, the Permian, and the chemical business and begin paying down debt at Brent prices just above $50 a barrel. If downstream and chemical margins were at their 10-year averages, Brent breakeven prices would be roughly $5 a barrel lower, which would allow us to fund investments, pay the dividend, and pay down debt at Brent prices above $45 a barrel. As we look at the market year to date, actual prices and margins in total are above our plan. allowing us to progress our investments, pay the dividend, and begin paying down debt in the first quarter. Obviously, we are very early into the year, and we know the market will change. We are keeping a close eye on developments and will adjust our capital spend accordingly, protecting the strong dividend and preserving the balance sheet. Let's shift to a later year in our plan, 2025. By 2025, we expect downstream and chemical margins to be off their lows and closer to a long-term average. In this case, we used the average margins from 2010 to 2019. In addition, we will see the full benefits of the structural OPEX improvements and additional cash from the projects that come online by 2025. As you can see, there is substantially more flexibility in our capital spend. As a result, our plans continue to cover the dividend and capital investments at Brent prices as low as $35 a barrel. At Brent prices above $50 a barrel, our capital allocation framework supports our planned investments, further debt reduction, and or shareholder distributions. So as you can see, our plans are robust to a wide range of price environments. And while we are optimistic that the recent improvements in the macro environment will continue, we recognize that much could change over the next four to five years. If we face a year where Brent prices remain below $50 a barrel on a sustained basis, we would reduce investments to levels more consistent with this year's plan. Recognizing the market uncertainty, we've attempted to strike the right balance between maintaining a strong dividend, fortifying the balance sheet to deliver, and continuing to invest in high return cash accretive projects. This last point is critical, particularly in a depletion business. The next chart gives a good perspective of this. Our investment strategy is focused on growing earnings and cash flow across a wide range of market environments. We are investing in advanced projects with some of the industry's lowest cost of supply. They grow earnings and cash flow in a variety of market environments. This graphic helps to illustrate this. Using IHS crude price and third-party margins, we expect the cash flow from project startups over our investment horizon to represent roughly 40% of our operating cash flow in 2025. This makes a critical point. You pay a significant long-term cost for excessive short-term investment reductions. When industry does it collectively, the market pays with much higher commodity prices. Striking the right balance, responding to short-term constraints with an eye on the mid- to long-term generates the greatest value. Of course, an investment portfolio of industry-advantaged projects is critical. The next slide provides a perspective of the investments we are making in developing upstream resources, which represents the majority of our upstream capital spend. This chart graphs cumulative upstream capital spend to develop resources from 2021 through 2025 against the Brent price required for the investment to generate a 10% return, which we've deemed our cost of supply. As you can see, our focus on high return, lowest cost of supply investments generate a portfolio with a cost of supply well below $3 a barrel. In fact, Almost 90% of our investments in developing upstream resources have a cost of supply of $35 per barrel or less. These investments generate an average return using third-party price outlooks in excess of 30%. So as you can see, striking the right balance, progressing a very attractive portfolio of investments while maintaining our strong dividend and fortifying the balance sheet to deliver is essential to maximizing value. both near term and long term. When executed in a period where others are pulling back in construction markets or slack, these investments become even more attractive. When you factor in the flexibility of our short cycle investments in the Permian, where the value proposition continues to grow, we are well positioned. We have an attractive investment portfolio that we can flex with market conditions to strike the right balance across our capital allocation priorities. We now take a few minutes to highlight the progress we've been making in the Permian. Despite challenging conditions and a rapid change in activity, our progress in the Permian exceeded our plan and expectations. These improvements reflect the hard work of our people, the organizational changes made in 2019, and the continued evolution of our technology and techniques. In 2019, we better integrated the experience of our global drilling, technology, and project organizations with the unconventional operating organization. Working together, they made a step change in performance that continues to improve. 2020 drilling rates were 50% better than our plan and more than 20% better than full-year 2019 results. Drilling and completion costs were 15% below our plan and more than 25% lower than 2019 results. We estimate that roughly two-thirds of the savings were due to improved performance. As an example, the number of frac stages achieved in a day increased by 30% versus 2019. As we enter 2021, we continue to see progress in our key performance metrics, further growing the value of this resource and improving upon our plans. In 2020, capital expenditures in the premium were 35% below plan. Despite significant economic curtailments in the second quarter, 2020 volumes of 370,000 oil equivalent barrels per day exceeded our plan. or about 100,000 oil equivalent barrels per day above 2019. Going forward with the pandemic related impacts on our balance sheet and market outlook, we are pacing permanent investments to maintain positive free cash flow, deliver industry leading capital efficiency, and achieve double digit returns at less than $35 a barrel. Based on the current market price projections, Our plans result in Permian volumes of approximately 700,000 oil equivalent barrels per day by 2025. If demand and prices are lower than current third-party outlooks, we'll adjust our plans. At a nominal Brent price of $50 a barrel through 2025, we would expect to deliver an additional 100,000 oil equivalent barrels per day in 2025 versus 2020 production levels. Key point here is that we have flexibility in options, which I expect to improve with time. We've been making significant progress on our technology programs, which are contributing to current performance. With the advances we are making, I expect continued improvements in productivity, growing volumes at even lower cost. Hopefully, the Permian discussion and broader overview of our investment plans provided a useful perspective on the opportunities we have and the balance we are attempting to strike across our capital allocation priorities amid an uncertain market outlook. I'd like to move on to the results we've achieved in lowering our emissions and the plans we have for further reductions. But before I do, I'd like to recap some key points. Our portfolio offers the best collection of investment opportunities we've had in over 20 years. We have some of industry's lowest cost of supply projects with strong returns that are robust to low prices. Coupled with our expense efficiencies, our capital program through 2025 improves our earnings power and cash generation potential of our asset base in both the near and long term. Leveraging our experience from 2020, we've built flexible plans that will allow us to adjust to market developments and potentially lower prices. If prices move higher than our plan basis, this will allow us to more quickly replenish our balance sheet. Our plans strike the right balance, growing value, maintaining a strong dividend, and a fortified balance sheet that is delevered over time. Let's turn to our work in positioning the company for a lower carbon energy future. Addressing the risk of climate change is one of society's biggest challenges, requiring the combined effort and collaboration of governments, academia, businesses, and consumers. ExxonMobil has spent decades researching new technologies and deploying existing ones to lower our emissions and the emissions of our customers. Today, we remain committed to this, with plans to position ExxonMobil as a leader in our industry. Since its inception, we have supported the goals of the Paris Agreement, engaging in climate-related policies and supporting a tax on carbon. Since 2016, the year of the Paris Agreement, we've reduced our operating greenhouse gas emissions by 6%. Last year, we met the reduction objectives we set in 2018, and in the fourth quarter, announced new emission reduction plans for 2025 that are consistent with the goals of Paris. Our plans reduce emissions from operated assets and align the company with the World Bank's initiative to eliminate routine flaring. They reduce the intensity of our operated upstream greenhouse gas emissions. They drive a decrease in methane intensity and a decrease in flaring intensity. This is expected to reduce absolute upstream greenhouse gas emissions by an estimated 30% and absolute methane and flaring emissions by 40 to 50% versus 2016 levels. Our plans continue to invest in lower emissions initiatives with an expected spend of more than $500 million a year. This includes energy efficiency, TCS investments, cogeneration, research and development, and renewable purchases, an area where we already make a significant contribution. Today, we are the second largest buyer of wind and solar power in the oil and gas industry and among the top 5% across all corporations. purchasing roughly 600 megawatts, but we don't bring a significant competitive advantage to many wind and solar projects, we can leverage our size to support world-scale developments with purchase contracts, helping to ensure they are built. We are also the world's leader in carbon capture, responsible for over 40% of the CO2 captured. To put this into context, the Nature Conservatory announced a campaign in 2008 to plant a billion trees. Our cumulative CO2 capture is more than double that goal. We are also one of the world's largest producers of hydrogen. As the potential for this and the energy transition develops, we are well positioned to leverage our experience, scale, and technology to contribute. In fact, to ensure that we effectively leverage all of our technologies, experiences, and expertise, yesterday we announced the formation of a new business, ExxonMobil Low Carbon Solutions. This business will focus on advancing commercial CCS opportunities and deploying emerging technologies as they mature. I'll come back to our plans for this in a moment, as we expect it to underpin our long-term strategy in driving emission reductions. I want to first focus on the progress we've already made. As you can see in this chart, since the inception of the Paris Agreement, ExxonMobil has made significant progress in reducing our greenhouse gas emissions, down 6%. significantly outpacing the progress made by society as a whole. Over the past 20 years, we have invested more than $10 billion to research, develop, and deploy lower emissions energy solutions, resulting in highly efficient operations. During that time, we eliminated or avoided about 480 million tons of CO2 emissions, which is equivalent to the annual emissions of 100 million cars. The plans we announced in December further reduced the intensity of our businesses. delivering an expected reduction in emissions of roughly 12% by 2025. I want to pause here for a minute and emphasize that these are not targets. These reductions are built into our base plans. In conjunction with the reorganizations completed in 2019, we established a more rigorous process to capture emission reduction efforts at operating units around the world. Plans developed in 2020 leveraged this process and built in additional efficiency steps and accretive investments to deliver these reductions. Like other plan objectives, the performance of our businesses and our senior management will be evaluated based on achieving these commitments. I think it's important to point out that our plans are in line with the stated ambitions of the Paris Agreement, which you can see on the next chart. This slide overlays both global and ExxonMobil emissions since 2016 with the goals of the Paris Agreement. hypothetical 1.5-degree and 2-degree Celsius pathways. As you can see, our plans are consistent with the stated ambitions. Of course, the challenge will be maintaining our progress into the future for both ExxonMobil and society at large. Today, the set of solutions available in overcoming this challenge is incomplete. There's a gap between what is needed and what is available. This is illustrated by the 2016 PEARS submissions shown by the green diamond, which is an estimate of the signatory's nationally determined contributions. We are working to close this gap and help provide solutions for society. Our investment in R&D is focused on the world's highest emitting sectors, manufacturing, commercial transportation, and power generation, which together account for 80% of global energy-related carbon emissions, and where today's alternatives are insufficient. As I said earlier, through 2025, we expect to invest more than $3 billion in lower emissions initiatives, which include energy efficient process technology, advanced biofuels, hydrogen, and carbon capture and storage, which is a crucial technology for achieving the goals outlined in the Paris Agreement. Carbon capture and storage is expected to play an important role in addressing emissions from difficult to decarbonize sectors. is also generally recognized as one of the only technologies that can enable negative emissions. In the two degree scenarios presented by the Intergovernmental Panel on Climate Change, it is estimated that in 2040, 10% of total energy will require CCS. It is also estimated that 15% of global emissions will be mitigated by CCS. If carbon capture and storage does not progress and play a significant role in decarbonizing the economy, The Intergovernmental Panel on Climate Change estimates that society's cost of achieving a two-degree outcome would more than double, increasing the cost by 138%. In short, the world is unlikely to achieve the goals of the Paris Agreement without focused action and innovation in carbon capture and storage. Unfortunately, according to the IEA, its development and deployment are not on track. This is an area where we can potentially leverage unique capabilities to make a difference. ExxonMobil has been the global leader in carbon capture for more than 30 years. We believe there's an opportunity to leverage our deep operating experience, history of process innovation, project execution skills, subsurface expertise, and ability to scale technology to uniquely contribute in this area. In 2018, we formed a carbon capture venture to identify and develop potential CCS opportunities using both established and emerging technologies. This group has been working with governments, industry, academia, and tech companies to advance projects. Today, we have more than 20 opportunities under evaluation. With increasing government focus, growing market demand, and additional investor interest, we are increasing our emphasis in this area through the establishment of ExxonMobil low-carbon solutions. This new business will continue to progress the ongoing venture work while looking to expand other commercial opportunities from our extensive low-carbon technology portfolio. The business will focus its efforts on solutions critical to achieving the ambitions of the Paris Agreement, work with governments around the world to promote the necessary policies and regulatory frameworks, and partner with interested parties to achieve improvements at scale. While new, this business will hit the ground running. incorporating the existing venture organization and a healthy pipeline of potential opportunities. We look forward to sharing more information as this effort advances. Before we open the lines for your questions, let me close by reiterating our areas of focus. Delivering world-class safety and reliability, driving structural cost reductions, advancing a flexible portfolio of high-return, cost-advantaged investments, maintaining the strong dividend and fortified balance sheet, and reducing emissions while developing needed technologies to support the ambitions of the Paris Agreement. Our people delivered in these areas last year, despite the unprecedented challenges of the pandemic. I am absolutely confident they will deliver even more this year and into the future. I hope I've given you a deeper understanding of our strategy and plans for 2021 and beyond. I look forward to providing you with more detail during our March Investor Day and as the year progresses.