Exxon Mobil Corporation

At this time, I would like to turn the call over to the Vice President of Investor Relations, Mrs. Jennifer Driscoll. Please go ahead, ma'am.

Good morning, everyone.

Welcome to ExxonMobil's second quarter 2024 earnings call. We appreciate you joining us. I'm Jim Chapman, Vice President, Treasurer, and Investor Relations. I'm joined by Darren Woods, Chairman and CEO, and Kathy Michaels, Senior Vice President and CFO. This presentation and pre-recorded remarks are available on the investor section of our website. They are meant to accompany the second quarter earnings news 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 and integration efforts, which are still being developed and which are subject to risks and uncertainties. Please read our cautionary statement on slide two. 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 thanks for joining us. ExxonMobil's performance remains strong. In the second quarter, we delivered earnings of $9.2 billion, our second best second quarter results in the last 10 years. Just as important, we continue to improve the fundamental earnings power of the company, as Kathy covers in her prepared remarks available on our website. While overall market conditions were softer in the second quarter, oil prices remained firm. As a reminder, had rent between $60 and $80 a barrel real and 10-year average refinery and chemical margins. We expect to generate between $80 and $140 billion in cumulative surplus cash from 2024 to 2027. The Pioneer acquisition increases that even further. In the quarter, we once again set production records from our advantage assets in Guyana and the Permian. Including Pioneer, our Permian production surged to 1.2 million barrels per day. In product solutions, our sales of high-return performance products rose 5% sequentially to a new record. Our strong performance in the quarter continues to support our capital allocation priorities, including the distribution of $9.5 billion to shareholders, of which $4.3 billion was in dividends. With the close of the Pioneer transaction, our shareholders now include the former owners of Pioneer stock, who have begun to benefit from the strength of our combined companies. We welcome them to ExxonMobil, just as we do the talented people of Pioneer, who bring a strong entrepreneurial mindset and deep expertise in unconventional resource development. I also want to recognize the combined transaction team for their excellence in execution. The average time to complete this type of merger over the last several years has been more than 11 months. We closed Pioneer in six, once again demonstrating the strength of our organization and effectively executing large, complicated projects, including large acquisitions. It is challenging work, requiring deep thinking, a highly structured approach, and disciplined action, areas where we excel. Although it's still early days, the integration is exceeding our expectations, and I'm confident we'll deliver even more synergies than we've announced. The team looks forward to sharing these details and all the other work we're doing to significantly grow value at our corporate plan update and upstream spotlight in December. As we look ahead, we see opportunities to grow value not only through our corporate plan period, but long into the future. Later this month, we'll publish our Global Outlook, which projects global energy demand 15% higher in 2050 than it is today. We see oil demand holding steady at around 100 million barrels per day in 2050, while demand for renewables and natural gas grows considerably. An energy-abundant future driven by economic growth and rising levels of prosperity creates opportunity for ExxonMobil. no matter the speed or direction of the energy transition. Over time, as it becomes more and more obvious that heavy industry and commercial transportation will not be meaningfully powered by renewables, the world will come to rely more on technologies where we have an advantage, including hydrogen, biofuels, and carbon capture and storage. A serious approach to the transition should focus on moving the world from high carbon to low carbon energy, not simply from oil and gas to wind and solar. The data, science, and economics all support this as fundamentally necessary. Our strategy reflects this reality, and since it relies on the same corporate capabilities and advantages under any scenario, it is extremely flexible. delivering strong profitability irrespective of the path society takes. As a technology company that transforms molecules to meet society's needs, we're not defined by our existing product suite. We began as a maker of kerosene for lamps. Today, no one thinks of ExxonMobil as a kerosene company serving the lamp industry. In the future, ExxonMobil will be defined by the technologies and products it is producing to meet the world's future needs, as always, by drawing on our unique combination of competitive advantages. We shared with you a variety of technologies and products we're developing to more effectively meet existing needs while helping the world achieve a lower carbon future. Two examples where I see significant new market potential are Proxima and carbon materials. With Proxima, we transform lower-value gasoline molecules into a high-performance, high-value thermoset resin that can be used in coatings, lightweight construction materials, and advanced composites for cars and trucks, including battery boxes for electric vehicles. Materials made with Proxima are lighter, stronger, more durable, and produced with significantly fewer GHG emissions than traditional alternatives. In March, we showcased the automotive uses of Proxima at the world's leading international composite exhibition in Paris. We're progressing projects in Texas with startups planned in 2025 that will significantly expand our production of Proxima. We see the total addressable market for Proxima at 5 million tons and $30 billion by 2030, with demand growing faster than GDP and returns above 15%. That's an exciting new business opportunity with significant profit potential, but we have unique and hard-to-replicate advantages consistent with our strategy and core capabilities. We also see a sizable opportunity in carbon materials, transforming the molecular structure of low-value, carbon-rich feeds from our refining processes into high-value products for a range of applications. We're targeting market segments with margins of several thousand dollars per ton and growth rates outpacing GDP. These include carbon fiber, polymer additives, and battery materials. Our competitive advantages of scale, technology, and integration, combined with our North American manufacturing footprint, provides a foundation for building these compelling, new, high margin businesses. I've challenged the product solutions team to lean into those opportunities and develop plans to accelerate the growth of both of these profitable new businesses. I hope we can ramp up investments to make them a meaningful part of our overall portfolio sooner, which will help further diversify earnings and significantly grow shareholder value for decades to come. ExxonMobil has a long history of successfully establishing new, high-value and used products for established and growing markets. Consider Vistamax, which we launched to enhance the performance of everything from auto parts and construction materials to personal care products and packaging. We've grown our Vistamax performance polymer from five grades to 20, and total annual production capacity is 700,000 metric tons per annum. With highly attractive returns, and significantly more growth potential. Of course, consistent with the track record we've established over the last seven years, the hurdle for investing will be high. Any investment will have to generate competitive returns, possess clear competitive advantages, and be resilient to the bottom of any commodity cycle. As we've demonstrated, our capital allocation decisions have generated robust earnings, cash flow, and shareholder returns. I look forward to sharing more about our growth opportunities in December. In closing, we have a lot to feel good about. Our performance is strong. Our merger with Pioneer is already creating tremendous value with more to come. And we continue to develop products and build businesses that will enable us to grow profitably far into the future across a wide range of scenarios. including a rapid energy transition.

With that, we'd be happy to take your questions. Thank you, Darren.

Now let's move to our Q&A session. As a reminder, we ask each participant to keep it to just one question. And with that, operator, we'll ask you to please open the line for our first question.

Thank you. The question and answer session will be conducted electronically. If you would like to ask a question, please do so by pressing the star key followed by the digit one on your telephone. The first question comes from Neil Mehta of Goldman Sachs. Your line is open. Please go ahead.

Good morning, Darren and team, and thanks for the update. I want to build on your comments on Pioneer. Now that it's under your umbrella, can you build on some of your comments around One, how is the asset performing from a volume and type curve perspective relative to expectations? And two, you alluded to synergies tracking ahead of expectations. Can you help delineate what those buckets of outperformance are?

Yeah. Good morning, Neil. I'll start with a few comments and then let Kathy finish. Kind of add on top of that, I would say early days yet, two months in, but the work of the team prior to the change in control and then what we've seen since then is extremely encouraging. As we've stated, the Pioneer assets basically delivered a record performance in the second quarter. And if you think about the context of doing that with all the change that was going on, with respect to the merger, I think a real testament to the quality of the people there and the work that they've been doing. So I'd say vectors are all pointing up. I think probably better than what we had anticipated, but I would also say it's early in the process. The teams today are working very well together, which has led to, frankly, identifying a lot more value opportunities than, frankly, I think either of us could imagine. see when we were on opposite sides of the fence and now that we're together working we see essentially a lot of opportunities to transfer the best practices of ExxonMobil into Pioneer and likewise to transfer a number of best practices from Pioneer into the ExxonMobil base which when you think about our size has some tremendous leverage associated with it and so That's all being worked through in detail. As you know, when we commit to some of our objectives, they're based by some very detailed plans that sit behind them. The organization today is working those plans, but we already see significant upside potential, not only in the magnitude but in the pace at which we'll be able to deliver them. So I think a really positive story there. I'll let Kathy maybe add some additional details. Kathy?

Sure. I think one of the things we've been really pleased by is, the number of learnings that we've already had from Pioneer. And so not only will we bring, you know, our technology and cube development to them, but they're bringing a bunch of learnings to us. So we're already utilizing their remote logistics operations center in our own drilling and completions operations in order to improve supply chain. They've done some things on the procurement side, I'd say, you know, that we think can help us to kind of leverage up expertise they've been really good over the years of blocking up their acreage you know so we think that's another thing that ultimately we can benefit from and then you know as I think everyone knows they've got a you know quite large water structure you know in the Midland Basin and we'll be looking to also leverage that so we've been really pleased with what they bring to the table and we're off to a really good start you know, as we look at building an integration development plan with them that fully utilizes the technology that we bring to the table. And so we're going to have a corporate plan update in December. We're going to do a spotlight on the upstream, and we'll update where we're at with the synergies and how we're looking forward at that time.

Yeah, I just, I guess, cap it off, Neil, with, you know, we said at the time we announced the acquisition that we were going to produce more barrels at a lower cost and in a more environmentally friendly way. That continues to be the case. That's obviously good for our company. But more importantly, as we said at the time, and we continue to emphasize, it's good for the U.S. It's good for the U.S. economy. It's good for the people living in the U.S. It's good for U.S. businesses. And critically, it's good for U.S. energy security. So I think this is, as I said at the time, going to be a win-win proposition for all.

All right. Thank you, Darren. Thank you, Kathy. The next question is from Betty Jang with Barclays.

Darren, Kathy, good morning. Since we just talked about Permio hit on the other region, that's also hitting record production. So Guyana volumes continue to exceed expectations and the FPSOs just continue to produce well above capacity. We'd love to just get an understanding of do you think this type of performance is likely to continue, and is that translatable for what you would expect for the future projects that's yet to come?

Sure. I'll take that, Betty. Thank you, and good morning. Good to hear from you again. I would say what you're seeing is the collective effort of our organization focusing on what is a very high-value development and making sure that we are taking advantage of all the opportunities we can find to safely grow production. And as you commented, we're seeing some significant growth. improvements with production rates well above what we had based the investment decision on, and that's continuing across all three of them. We try to take that into account as we develop the next, and so in theory, you would think we build that into the base and don't continue to see that, but frankly, our experience is telling us otherwise, which is disorganization complemented by the work that we're doing with our technology organization, our global operations and sustainability organization, every element of the organization that we have now created and functionalized is very focused on maximizing value. And so with these new organizations and that focus, they continue to find additional opportunities. So I would bet that we'll continue to see how performance versus the basis on which We FID, but I would also tell you that every development is unique unto itself, and obviously we've got to get it up and running and then let the teams get after it and find the opportunities to safely increase its capacity. But I would tell you, I would bet on our people to find that. We've got a long history of doing it, and it's clearly demonstrating itself with this unique and valuable opportunity here.

Thank you. You bet. Thank you, Betty. The next question comes from Doug Leggett with Wolf Research.

Hey, good morning. Thanks for taking my questions. Good morning, Darren and Cathy. Good morning. I'm still getting used to the new moniker, Darren, but thanks for having me on. So I wonder if I could ask a question about portfolio now that you've got Pioneer in the door. You've got a lot of things that perhaps you could characterize as maybe non-core, a lot of tails in the portfolio. And I'm just curious, we haven't really heard much on the asset disposal front in a while. And I'm curious if now that you've got two very significant concentrated assets, to a certain extent, the Permian and Guyana, what it means for the portfolio in terms of high grading opportunities going forward?

Yeah, I'll start with that, and then I'll let Kathy add anything that she wants to. But I would say, actually, we've been fairly aggressively going after the tail. Remember, I think back in 2019, we had announced that we were going to divest about $15 billion over time. Of course, we got into the pandemic, and we said, this is not a forced march. We're going to basically divest when the market conditions ensure that we can realize the value that we think the assets that we are marketing can be realized. And frankly, that's what we've been doing. So as you look at where we're at to date, second quarter this year, I think we've basically gotten to the $15 billion in the upstream. And then if you look at what we've been doing in the downstream, there's another few billion dollars that we've added on top of that. So Frankly, from a cleaning up the tail standpoint, we've made significant progress. Obviously, there's a few more things that we're working on, and we'll continue to assess every one of the assets in the portfolio and make sure that they are competitively advantaged. And, you know, frankly, as we look at new investments, we force – those investments to compete on an industry-wide basis and make sure that they're advantaged versus the industry and therefore can be a supply product at low cost of supply. We also do that with all of our existing assets. And if they're not competitively positioned on an industry supply curve, then the organization has two options. Either we come up with an advantaged investment that makes them more competitive and moves them to the left on the cost of supply curve, or we look to divest. And that process has been ongoing across all of our businesses. And then, obviously, the timing of when we then take action is a function of realizing the value that we think those divestments should bring. And we're patient. We're not going to rush that process and But I would just say staying after it, being very steady, waiting for the market to be where it needs to be in order for us to reevaluate has paid off significantly. And basically we're delivering on what we said we were going to do, and we'll continue to look at it. But I don't see any big step changes here in the medium term.

And the only other thing I'd note, Neil, is, you know, you can see in our cash flow bridges every quarter.

Doug.

I'm sorry. I'm sorry, Doug. I'm sorry. But you can see in our cash flow bridges, you know, we're pretty consistently every quarter bringing in more proceeds from the divestments that are occurring. You know, in the first half of the year, that was $1.6 billion. And then I would just note we had a lot of activity in upstreams. And so that generated some positive earnings for us in the quarter. And so if you look at my prepared remarks, you know, that we published earlier this morning, I talk about sort of $380 million in the upstream being kind of these other one-off items. And that was a lot of earnings coming in from divestments only partially offset by the one-off costs associated with Pioneer.

Terrific. It would have been worse if you'd called me Jennifer, Kathy, but thanks so much.

I appreciate it. Yeah, good. Appreciate that.

Sorry about that, Doug. Doug, congratulations on the new shop, the new platform.

And to you, Jim. Thanks so much.

The next question is from Devin McDermott with Morgan Stanley.

Hey, good morning. It's taking my question. So, Darren, you had a lot of good updates in your prepared remarks on some of the low-carbon initiatives. There's been a lot of progress there, it seems, over the past few months and quarters, which is great to see. Now, I think back to the corporate plan you laid out late last year. This is a growing wedge of your overall capital spending in each of the next few years. So I was wondering if there were some of the investment opportunities bit more about what miles you're focused on to actually allocate more capital to these areas. So what's needed to make a final investment decision on carbon or move forward with carbon materials or build the scale you talked about in lithium production? Is it more commercialization and offtake, technology development, regulatory clarity, something else?

Sure. Yeah, you broke up just a little bit on that, Devin, but I think I got the gist of your question. If I don't hit the mark, then please... steer me in a slightly different direction. I think your question around what's required to continue to move along in our investments in the low-carbon solution across the portfolio of products that we've been talking about. I would just say, fundamentally, we expect in the low-carbon businesses, and in fact, some of these new products that, while they contribute to a lower-carbon future, they also bring significant value in use in today's application. They have to compete in the portfolio. They have to be advantaged versus what's out there today, and they have to basically generate good returns across the commodity cycles. And so, The fundamental philosophy that we've been applying in the base business also is required in the new businesses that we're trying to generate. So that's foundational, what each of – and, you know, Dan Ammon in particular, but then the stuff that's coming out of the product solutions organization has also got to meet that initial hurdle. And then as you look across each of them, the hurdles to clear – to deliver on that expectation – Very little bit. I would say in Dan's business with the carbon capture and storage, he and his team are building a brand new business. And so there are very few, I think, examples of where the company is not only developing the technology and the infrastructure and logistics system, but also developing the capacity to supply while developing the demand and developing the market in general. and advocating on what I would say are the initial policies needed to get things kick-started. So there are a lot of moving parts. I would say the broader industry and business community, I frankly haven't gotten far enough along in this to truly appreciate just how complicated it is. But I would say leveraging the capacity and capability that we've built over the decades doing this in other parts of our company, particularly in the upstream, that we're leveraging those capabilities and making really good progress there. On the Blue Hydrogen project, as we've worked through the engineering and we've got a really good line of sight to what that project can deliver, obviously a critical element of that is getting the IRA legislation translated into final regulations, and that's a process that's been ongoing. We're optimistic that the regulations will reflect the intent of the legislation. And if it does, I think we'll have a very attractive project that we can then FID here once those regulations are finalized. So I'm optimistic in that space. And as you may have seen, we've just added another 500,000 tons of carbon capture and storage into Dan's portfolio. And there's a pipeline that the team continues to work. So we see continued opportunity and growth with good returns in the carbon capture side of the equation. On the lithium, same thing. While lithium is an established market, it's fairly small with respect to what its ultimate potential is. And of course, we're bringing on a new production method with some new technology. And so again, doing the work to understand what the investments required there are, and to establish and ensure that we've got a real advantage versus what else is out there and what else needs to come on to meet the growing demand in lithium. But again, I feel good about that. We've told the team, we're not looking to rush this through and get something, get money spent. We're looking to make sure that we build a very strong long-term foundation. So none of the work that we're doing in these new businesses is schedule-driven. It's all about establishing successful long-term foundations. And then maybe just briefly touch on Proxima and the carbon ventures, which, you know, that's a broader effort that we've been on for quite some time, which is to say leverage our technical capabilities to transform molecules and apply that – to markets that exist with unmet needs. And I think we're making really good progress with Proxima. We've got some, I think, very high barriers to entry and competitive advantages there. And so I'm anxious to kind of prosecute that business and establish it as quickly as we can, because we see real potential there. And same with Carbon Ventures, again, leveraging our ability to transform the molecules, shape the molecules, and get some structures that improve performance, I think there's a big opportunity there. But that's, you know, I would say Carbon Ventures is still early in the technology cycle, but I think we've gone far enough along to see some real opportunity there. And as I said in my prepared remarks, the challenge I've given the Product Solutions Organization is, you know, what's a realistic but aggressive business plan look like and what would be the investment required to establish? That's good because it grows value today, but it also positions us well as those molecules become less demanded in their traditional applications. It becomes a much lower feedstock to these new applications. There's a lot of opportunity to diversify the slate, protect the business or diversify the business as we move through the transition. Long answer, but a lot of variables at play here, but frankly, all variables that we feel very comfortable managing, and I think the progress we're making there demonstrates our capability to manage those things.

Great. Thanks, Darren. Appreciate all the detail. Thank you.

The next question is from John Royal with J.P. Morgan.

Hi. Good morning. Thanks for taking my question. So my question is on the CapEx guidance update. We see that you moved the legacy CapEx up to the top end of the prior range, and then obviously you layered in Pioneer as well. But can you talk about the drivers of the legacy CapEx bumping up to $25 billion for the year?

Yeah, good morning, John. I'll start with that and then let Kathy finish up. So the reason we put a range out on the CapEx is as we build these plans, and the previous year starting around this time in the summertime and then kind of lock and load them in October. And obviously there's a lot of things that develop and evolve from, you know, the middle of the previous year to as we go into this year, that range is not meant to have you guys slice it down the middle and fix on a number. The range is to say, We've got optionality here, and as things evolve, we may reduce some of the spending, or if we find that the opportunities are panning out the way we expect, we may be on the other end. So that range is truly where we expect to be somewhere in, depending on how things evolve and what the opportunity set looks like. I mean, the key focus here is to make sure that we are investing in highly advantaged, highly profitable investments. projects and basically as we worked our way from October of last year into this year we see a lot of attractive opportunities that we continue to invest in which puts us at the top end of that consistent with what we understood the opportunity set could look like as we went in to the plan process last year that's why we're coming in at 25 and of course we're using the pioneer number to add on top of that, but Kathy, anything to add to that?

No, I would just say, obviously, we have a lot of projects coming online in 2025, and the exact pace of all of those, and therefore, you know, making sure that we provided sort of enough room, I would say, in the initial guidance supporting of all of those projects that are coming online in 2025. You know, we can't pinpoint, pinpoint, predict all of that as we put our plans together for the year. And so, you know, just as an example, China One's a huge project. It's going to be coming online early next year as an example. So there's always a little bit of give and take, which is why we give the range to start with.

Thank you, Ann. The next question is from Jason Gabelman with TD Cowen.

Hey, good morning. Thanks for taking my questions. I actually wanted to follow up on the 2025 project startup that you just mentioned, and thanks for a little bit more detail on the China chemicals complex. But as I look to the other projects coming online, I think the largest earnings contributors include the Permian crude pipeline, and then in the upstream, Golden Pass, and then the next Guyana boat. So I was just wondering if you could provide a little more color on those projects in terms of how they're progressing and kind of phasing through the year. Thanks.

So I would say consistent with the plans that we put out, the projects are all, with obviously the exception of Golden Pass, moving consistent with the plan. development and the announced dates that we talked about. All of them I think we feel really good about in terms of the work that we're doing and the case for the contributions, the returns, the earnings that we expect to get out of those projects I think we continue to feel good about. You know, underpinning all the projects is we never try to take a position on where we're going to be in the market cycle, but instead make sure that these projects, when they come on, can compete in any of the areas of the cycle. And we've actually found that if you look at the investments we've made since 2018, brought online, if you look at the aggregate return of that portfolio, it's exceeding the basis in which we FID those projects, even as we've been, say, in the chemical business at the bottom of cycle conditions. So I think we continue to demonstrate to ourselves the time we spend to make sure these projects are advantaged in the best case is paying off. And then, of course, our global project organization is really continuing to drive very effective execution of projects the portfolio with keeping our cost well within the FID basis and generally delivering it faster and therefore bringing more value sooner.

Yeah, and I would just note it's an especially big year for our EMPS business. So, you know, I already noted China One. You noted a couple of projects. I mean, the Singapore Resid upgrade project is a pretty big project. You know, we have a upgrade. project at Foley in order to bring on, you know, ultra low sulfur diesel. We've got the Strathcona project for renewable diesel coming online in 2025. So, you know, really big year for the NPS business in terms of the number of projects we have coming online. And then we're going to continue to expand our advanced recycling. So we'll be adding more capacity. as well next year. So, you know, we noted, you know, again, if you look at our IR slides, we talk about projects being a big driver of underlying earnings growth in the EMPS business. And you see that supported by everything coming on in 2025.

Thanks.

The next question is from Viraj Borkataria with RBC. Your line is open. Please go ahead.

Hi there. Thanks for taking my question. Just wanted to follow up on Jason's question and more specifically on GoldenPath. So I guess at this point, are you able to confirm updated scheduled guidance for the startup? And then the second question is just going to some of your prepared remarks. If I think about your upstream portfolio, a lot of your growth is liquids or liquids price linked through LNG. I think you say 80% of your upstream is now linked to liquids. So I was thinking as you're building out your LNG portfolio and your trading function, is there any desire to diversify that sales mix a bit more or is this intentional and where you want to be? Thank you.

Yeah, sure. I'll start with the last part of the question, which is, It is a conscious decision to get weighted on liquid prices. And frankly, if you look at the LNG market, and when you're building large LNG projects, you tend to sell those out and sign contracts in advance of the investments, which the market today is linked to oil. And so we continue to have a desire to... lock in a significant portion of those developments so that we've got surety on the sales side of the equation as we bring those projects up. So my expectation is we'll continue to be weighted on that, and we're very comfortable with that. In fact, there's been a huge drive since I've been in this job and brought Neil into the upstream to basically shift the portfolio and get a little heavier weighting in the oil side. As I mentioned earlier, this morning on CNBC, if you look at the oil that we're producing today, we're producing more oil than at any time since the merger of Exxon and Mobil. So that strategy is beginning to manifest itself. On your golden path, the project, so we've just gotten through, the venture just reached a settlement with Zachary. And so that venture is in the process of kind of restaffing and getting started back up again. Obviously, we're in the very early days of that. So there's still more work to be done. And, of course, the teams are very focused on getting back to work, effectively executing and bringing that project in as quickly as they can and as close to the original schedule as they can. Right now, our estimate is we're going to see about a six-month slippage. So we had anticipated – kind of first LNG the middle of next year. We now are looking at probably the back end of 2025 for first LNG. And that's kind of where the current schedule is. But I would just condition that with the teams are just getting back up and running. And they have a clear mandate to try to bring that in as effectively as they can. And again, my expectation is they'll do better than we currently think. but we've got work to do.

Understood. Thank you very much. Thank you, Rosh.

The next question is from Steven Richardson with Evercore.

Hi. Thank you. I was wondering if we could circle back. I appreciate all the conversation about projects and project execution and how you've got a number of really important and interesting projects coming on in the downstream in short order. Just wondering, you've added seemingly quite a bit of length to your upstream portfolio over the last number of years. And as you think out beyond 26, 27, Darren, are the teams continuing to bring you new and interesting projects in EMPS? And do you think continuing that kind of pace of integration out in the plan horizon is still interesting? Maybe you could just talk about that in terms of the investment mix and the opportunities and maybe address... EMPS and chemicals as well.

Sure. No, I appreciate the question, Steve, because I think you touched on a really important point. I think one of the advantages of the restructuring that we've done is we no longer identify our business with the products that we're making. So if you go back in time, the functional organizations that we established, you know, we had a refining organization that was producing refining products, and we had a fuels marketing organization that was marketing fuels. and we had a chemical company that was marketing chemicals. We've now combined all that into a product solutions organization, which is supported by a technology organization, which, again, is not organized around any of our heritage businesses or heritage products, but instead is organized around core capabilities, core technical capabilities to deliver products value to the businesses that they support. So while it may not be intuitively obvious, that change in structure and the way we think about and talk about the business has also opened up a lot of white space in terms of the challenge here is how do we take our core advantages, core capabilities, Some of it includes our existing footprint, but a lot of it includes our ability to upsell and to identify value and use applications and combine that with a technology organization that's very focused on applying core technology capabilities to business challenges and business opportunities, which is starting to unlock applications that, frankly – in the past wouldn't have been identified because they didn't fit in the context of the organizations that we had in place. But today, the aperture is much broader and the playing field is much, much bigger. And so we see that with Proxima and Carbon Ventures. My expectation is as we go forward, we'll continue to talk about those markets and we'll talk about the applications that we're developing. And the technology organization is continuing to look at how else can we use our capabilities in manipulating the molecules and particularly hydrogen and carbon molecules to make products that society needs and at the same time reduce emissions. So I think that organization has been given a license, a hunting license, to go out and find how we can lean into and create more value out there and grow earnings. So my expectation is as we go forward, well beyond the 2027 timeframe, we're going to continue to bring in opportunity sets as we unlock them through the work of both our product solutions organization, but also our technology organization. Then, of course, we can take advantage of our projects organization to then go off and build these things at scale and do it at a lower cost than anybody else. So I think there's a really powerful combination there. And our horizon extends well beyond the 2027 in terms of thinking through the pipeline and and making sure that we're positioned to be successful well into the future. And I would just quickly add then, and that's true for product solutions, which has got the chemical portfolio, our specialty portfolio, and then what I would say are the energy portfolio, but more specifically the molecules that go into energy that we expect to become feedstocks of the future, like they are today for our carbon ventures and the Proxima ventures. On the upstream side, We've got a lot of, obviously, growth potential through the back end of this decade, but this is a depletion business. We recognize that, and so that organization continues to look well beyond the 2027-2030 time horizon, making sure that we have got a good understanding of what it's going to take to keep that pipeline full. I feel really good about that. I think the way we've organized the businesses and the central organizations that we've put in place to serve those businesses is going to have huge payoffs here in this space.

The next question is from Roger Reed with Wells Fargo. Yeah, thank you. Good morning.

Since you all have probably the most geographically diverse set of operations of anyone we cover, I was just curious, you know, the most recent news this morning shows maybe a few cracks in the economy. If you could kind of give us an idea as you look across the products and the chemicals side, thinking, you know, that's where we really see the demand parts. What you're seeing, you know, kind of let's say China back around to our side of the globe?

Sure. Good morning, Roger. I think the key message I would leave you with across our businesses when you look at kind of pricing and margins is there's two pieces, two halves to the equation. There's the demand side and there's the supply side. On the demand side, frankly, to start with chemicals, we see the demand basically returning to the kind of growth that we've seen prior to the pandemic. So basically growing at 1% to 2% above GDP. And so that's back on track from a growth standpoint, and certainly that's what we're seeing in the first half of this year. The challenge in that business with the margins has been, frankly, from the supply side of the equation, with a lot of capacity coming on and a queue of capacity yet to come on. And so that's been more of the story in chemicals, less of a demand and growth story and more of a supply story and a lot of supply coming on in the short term. And like the past, the challenge in the chemical business, given the large chunks of capacity that come on in discrete times, that you've got to grow through that capacity to get your margins back up again. One of the reasons why we stay so very focused on low cost of supply, feed advantage, and importantly, performance products, is to make sure that we've got advantages above and beyond the commodity cycle. And you see that playing out now in our chemical business with earnings that frankly are well above what would be expected given the challenging market conditions that we see in the margin environment. China is growing, you know, despite maybe some of the, it's not growing at the rates that we've seen historically, the very high rates, but it's still growing at a healthy, healthy clip. And as you come around to the U.S., we're seeing kind of reasonable economic conditions and growth in the U.S. as well. Europe, I think, is probably the most challenged area of the globe. And frankly, with some of the policies we see Europe implementing, my expectation is it becomes even more challenging, quite frankly, and unfortunately, particularly unfortunate for the folks living in Europe, given the, I think, the drag that the policy they're putting in place is going to put on their economy. So I think China's looking reasonable. India is growing and looks very, very healthy. The U.S. is looking reasonable with good growth. Demand on the energy side of the equation with petroleum products continues to be very high. Record levels of demand around the world. And again, I think very good supply coming into the equation there, which has brought margins from those very high levels that we've seen in the first quarter and then back into last year. we're now getting back down into more typical ranges. And frankly, all of our plans anticipated that. It's always difficult to call the timing of it, but we certainly knew that the elevated margins that we were seeing in the refining business would ultimately come back into normal ranges. My expectation going forward then is we'll continue to see what I would say is historical volatility levels in that. We'll see times when the margins spike, and we'll see times when the margins are challenging. But Again, we've built our refining business to be robust to those, and if you look at the work we've been doing to high-grade that portfolio, we've taken out a lot of the low-margin, less-advantaged refineries and are now focused on the integrated refineries that have a mix of high-value products that we're producing and are advantaged from a size and scale and cost standpoint. And then on the... Gas side of the equation and the oil side of the equation, oil demand continues to be at record levels. Last year was a record. We anticipate this year will be a record, and then next year will be a record. So demand continues to be fairly healthy from an oil standpoint. It's just a question of working through the supply that's coming on, most of that led by what's happening in the Americas. And then on gas, you know, that's going to continue to grow in demand, and it's another, again, a function of the capacities coming on. So I think the good news is we're seeing the industry be very responsive to the demand, and frankly, it's very consistent with the foundation of the strategy that we put together, which is you've got to be low cost. You've got to be on the left-hand side of the cost-to-supply curve.

Thanks, Roger. The next question is from Josh Silverstein with UBS.

Thanks.

Good morning, Darren and Kathy. You continue to make good progress on the cost savings front. It looks like there was an uptick of about $600 million sequentially. It looks like you called out kind of a $200 million turnaround savings in energy products. Just wanted to see if you could provide some more examples of what's driving the improvement and how you take the current kind of 10-7 to the $15 billion over the next few years. Thanks.

Great. Thanks very much for the question. And so you're right, if we look on an after-tax basis, we had about $600 million overall on a pre-tax basis for the year-to-date where our structural cost savings is about $1 billion, so making really good progress. Continuing to optimize maintenance is a big driver of overall savings. We gave a number of $200 million in energy products in terms of my prepared remarks, and that was just noting that in the half we had a particularly heavy turnaround slate, and if we looked back at that same turnaround slate the last time we did it, we did it much more quickly and we did it at lower cost, hence the $200 million savings number that that you mentioned. You know, we're also obviously driving savings in terms of supply chain, you know, and looking to get more efficient there. And all of our centralized organizations, which we've kind of stood up over the last couple of years, are really responsible for driving savings into the business. So whether that's global business solutions or whether that's supply chain or, you know, our global operating and sustainability group who works on our maintenance activities, we're really starting to see the uptick from the benefit that those organizations can bring by simplifying things and standardizing things and bringing better data analytics to optimize our overall organization. So that's what you're going to continue to see on a go-forward basis. And then I would say longer term, As those centralized organizations start to standardize processes for the company, which are quite disparate as we sit here today, we'll be able to apply more technology to get, I would say, even more automated in the things that we do, which will drive further efficiencies for us long term. So whether it's getting more efficient on logistics or getting more efficient because we're standardizing now between ourselves and Pioneer, standardizing all the materials and things that we're buying those are the types of things that will continue to drive savings and I think we have both the largest program by far you know of anybody in the industry and now a very proven track record that we feel quite good about you know typically over delivering on the initial plans that we developed. So we're feeling good about the progress we're making and that, you know, overall target to get to $15 billion in savings between 2019 and 2027.

Yeah, I would just, I guess one other way to think about it, Josh, is, you know, for the first time in the history of our corporation, we've organized ourselves to take to focus on every aspect of delivering the business, irrespective of what that business is, looked at where the synergies exist, and are now taking the experience, the collective experience of the corporation and the expertise in each of those areas and focusing it on an opportunity set. So the size of our business, it gives us a huge advantage here. And so a lot of these things you're seeing are accruing by basically taking the best thinking approach that had occurred around the organization, around the world, and then applying that uniformly everywhere it's relevant. And that's happening time and time and time again. And so I think a very unique capability and capacity that, frankly, others can't match. And the benefits are showing up in these structural cost savings for sure, also showing up on the revenue side of the equation with respect to you know, better marketing, better ability to sell into value. So there's a huge benefit to the changes we've been making.

We have time for one more question. Our final question will be from Bob Brackett with Bernstein Research.

Good morning. I'd like to paraphrase a comment Darren made that lithium complexity is misunderstood by the industry, and I'm intrigued. Is that a comment around the marketing and the relative youth of the downstream side, or is it a comment around maybe the upstream and the complexity of processing?

Good morning, Bob. Yeah, that comment I meant to imply for more broadly the whole low-carbon solutions business set, where as you look at each of those businesses, they've got their unique set of complexities. For lithium in particular, you're taking what is essentially a brand-new technology, marrying that with some established technologies for subsurface, some established technologies above surface, consistent with our processing experiences and refining and chemicals. And so putting those things together in a new business to make a product I wouldn't say has complexities that people can't comprehend. I would just say they're new and there haven't been very many people who have worked their way through that. Where some really unique challenges are is in the building brand new value chains and the carbon capture market as an example where there's not an existing market today that pays for carbon removal that's being incentivized with government policy. Government policy is forming while at the same time you're trying to build the infrastructure to support that market, the logistics, the supply, and then at the same time develop a customer base. And so the complexity that I see in the low-carbon space, that's a particularly challenging one because of all the moving parts and all the work that has to be done to try to piece those things together to come up with, frankly, a business-in-business model that, one, is sustainable for the long term, and two, that generates returns that are competitive in the portfolio. But I have to say, we're geared to do that kind of work. Our experience lends itself to that. And frankly, what Dan and the team is accomplishing, leaning on a lot of the core capabilities of the organization, we're tackling those challenges and making really good progress. I think on the hydrogen side of the equation, there's not a a real vibrant market or a strongly economic market for a low, virtually carbon-free hydrogen. So that's being developed. Obviously, the government incentives are supporting that in the short term, but we've got to work our way to a market-driven forces so that we are competing in an open market and not relying on government subsidies. So that's, I think, one of the challenges in that space. But I think my comment was more generally that there's a lot of optimism around the low-carbon businesses in general, but if you think about where progress has been made today, most of that's been in the wind and solar and EV areas, and all those are playing into well-established markets. Power generation market is very well-established. The automotive industry is very well-established. Now, they're bringing in new technologies that have some of their own unique challenges, but they're not building brand-new markets. In our case, and some of the businesses, we're building brand-new markets.

Yeah, that's very clear. Thanks for that.

You bet, Bob. Good talking to you.

Thank you, Bob. And thanks, everybody, for joining the call and for your questions. We're going to post the transcript of this call to the Investors section of our website by early next week. But before we wrap, I want to draw your attention to a couple of topics. First, a reminder, later this month, we will be issuing our annual Global Outlook. which includes our latest views on energy demand and supply through 2050, and which forms the basis for our business planning. And second, please mark your calendars for our corporate plan update and upstream spotlight, which is going to be on Wednesday, December 11th. And for more information on that, again, please see the investor section of our website. So with that, have a nice weekend, and I'll turn it back to the operator to conclude.

Thank you. This concludes today's call. We thank everyone again for their participation. You may disconnect at this time.