Exxon Mobil Corporation

2024 earnings call. Today's call is being recorded. We appreciate your joining us today. 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 quarter's presentation and pre-recorded remarks are available on the Investors section of our website. They're meant to accompany the fourth 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, 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. I'll focus my comments this morning on ExxonMobil's 2024 results and the company we've become. In her prepared presentation available on our website, Kathy dives deeper into our results and long-term growth outlook. What our 2024 performance makes clear is that the transformed company we've built is delivering. We strengthened and further capitalized on our unique competitive advantages, technology, scale, integration, execution excellence, and of course, people. We demonstrated the strength of our consistent strategy now in its eighth year of driving greater value for society and shareholders alike. We set and achieved ambitious objectives. When we say we'll do something, we deliver. And we expanded our unrivaled set of opportunities for profitable growth, both now and long into the future. The ultimate source of cash, distributions, and shareholder value is unchanging. Investments in advantaged high return assets and projects. The proof of our transformation shows up in our performance. Operationally, we delivered strong results across the board, including safety, a bedrock commitment underpinning everything we do, reliability, where we achieved record performance in our product solutions business, and emissions, where we've achieved a more than 60% reduction in methane intensity since 2016. Financially, we demonstrated our steadily improving earnings power across a range of metrics. We delivered earnings of $34 billion in 2024, our third highest result in a decade, despite softer market conditions. Over five years, we've grown earnings, excluding identified items, a compounded annual growth rate of nearly 30%. We generated cash flow from operations of $55 billion, also our third highest in a decade, to fund profitable growth, maintain our financial strength, and reward shareholders. Excluding working capital, our free cash flow more than covered shareholder distributions. And we delivered a return on capital employed of 13%. Over five years, our average return on capital employed is an industry-leading 11%. When you set aside cash balances and capital in projects that are under construction and yet to start up, our 2024 ROCE rises to roughly 17%. with a five-year average of about 15%. Our disciplined approach to investing continues to generate returns well above our cost of capital. Every part of our business contributed to our success. We built the best upstream portfolio in the industry. In 2024, we achieved the highest ever production from our advantaged assets and the highest liquid production from our overall portfolio in more than 40 years. In the Permian, we delivered record production from both our Heritage ExxonMobil assets and our Pioneer assets. Together, the two are even stronger. As we said last month, we now see an average of more than $3 billion per year of synergies from our combined assets, with production growing from 1.5 million oil equivalent barrels per day at the end of 2024 to 2.3 million barrels per day by 2030, a more than 50% increase. This growth will further strengthen U.S. energy security and will do it with even better overall environmental performance. In Guyana, we delivered record production from the world's premier deepwater development. We've gone from discovery to 650,000 barrels per day in just 10 years, a pace for deepwater projects the world has rarely seen. The benefits are tremendous, not just profitable growth for ExxonMobil, but rapidly rising living standards for the Guyanese people. The GDP per capita more than tripling since we started production in 2020. Turning to product solutions, we further enhanced our already industry-leading portfolio by divesting non-strategic assets and establishing the foundation for new-to-the-world products that outperform existing alternatives. The Advantage projects we brought online over time drove record sales of high-value products in 2024. Our ongoing shift to a more profitable product mix is a key driver of earnings improvement in product solutions. We also advanced our plans to develop and grow new businesses, most notably our Proxima resin systems and carbon materials, with an estimated total addressable market of $100 billion by 2030. Within low-carbon solutions, we demonstrated strengthening commercial interest through additional customer contracts and equity partnerships. We're the only company in the world today with an end-to-end system capable of capturing, transporting, and storing carbon emissions. At 6.7 million tons per year, we've contracted more CO2 for transport and storage than any other company by far. We're also well-positioned to meet surging demand from data centers for low-carbon power. And on a timetable that alternatives such as nuclear simply can't match. On the hydrogen and lithium fronts, we announced new equity partnerships and offtake agreements that demonstrate the significant market interest these new businesses are generating. Our success in 2024 and every other year is due to our people. It's not just that we recruit the best or that we give them the most challenging assignments to build the best capability. It's our culture, our mindset. When this team takes the field, we expect to win. That drive underpins our value creation in 2025 as well. We'll bring online a full slate of major projects to increase profitable volumes, make more profitable products, and lay the foundation for profitable new businesses. To name a few, we'll start up Yellowtail in Guyana, our fourth and largest development to date. In the Permian, we'll further improve resource recovery using our next generation cube design and patented lightweight propant. This is the right kind of growth, low cost of supply, low emissions intensity, and high returns. At our Singapore refining and chemical complex, our resit upgrade project, we use new-to-the-world technology to transform bottom-of-the-barrel molecules into a new grade of high-value lube-based stocks. We'll transform high-sulfur, low-value export fuels into higher-value diesel for the U.K. market at our expanded refinery at Folly. We'll expand our capacity to produce higher-value performance polyethylene and polypropylene at our petrochemical complex in China. And we'll add new advanced recycling facilities at Baytown to meet the growing demand for certified circular polymers, which has the added benefit of keeping hundreds of millions of pounds of plastic waste from being burned or buried. Earlier this month, we sued the California Attorney General and activist groups for defamation and interference in our advanced recycling business. As our filing made clear, this suit is about abuse of the public trust and the hijacking of the legal system for financial and political gain. I want to emphasize that we don't take these actions lightly. Unfortunately, it's another example of what it takes to defend our company and preserve the value we create for our customers, shareholders, and broader society. Overall, the major projects we start up in 2025 will deliver more than $3 billion in earnings potential in 2026. at both constant and current prices and margins. And this earnings gain excludes the uplift from our Permian growth plans. As we showed at the corporate plan update, ExxonMobil's runway of profitable growth extends along into the future. Our new technology-driven businesses, such as Proxima Products and Carbon Materials, creates huge opportunities to expand beyond traditional fuels and chemicals into higher growth, higher margin markets, They're decoupled from commodity price fluctuations. This year, we expect to start up a new facility that can produce 25,000 metric tons of Proxima products and plan to grow to nearly 200,000 tons by 2030. We're committed to investing in these new businesses in a stepwise fashion. Progress is in tandem with demonstrated success in the marketplace. To change in administrations in the U.S., I want to say a few words about the right policy framework. for successful energy future. I'll begin by noting that through 2030, roughly 90% of our planned capex is allocated to established, fully functioning markets for energy and products that require no policy support. Only about 10% is earmarked for nascent, lower emissions markets where market forces have yet to fully take hold. The case in point is our Baytown low carbon hydrogen project. which requires incentives under Section 45 of the Inflation Reduction Act to be economically viable. We believe these incentives are critical to establishing a fully market-based future where hydrogen competes head-to-head with traditional fuels. But the end goal is clear, a system where no energy source remains dependent on government subsidies. Just as energy sources should not be supported by governments in perpetuity, they should not be artificially discouraged either. The prior administration's moratorium on new LNG export facilities and its executive order limiting offshore drilling were policy mistakes that the new administration is right to reverse. Oil and natural gas remain essential to economic growth, jobs, and national security, both for ourselves and our allies around the globe. Over the longer term, to achieve broad decarbonization, Government policy should set carbon intensity standards on products. We believe this is the best way to engage the collective efforts of industry and leverage competitive market forces. To drive further innovation and reduce the most emissions at the lowest cost, policies must remain technology agnostic. Government should not pick winners and losers. Intensity standards establish a level playing field and have a strong precedent. They were most recently used to successfully and affordably reduce sulfur and marine fuel. In closing, I want to say again how proud I am of the people of ExxonMobil and how pleased I am that we are creating unmatched value for our shareholders. Compared to the IOCs, over the last five years, we've grown cash flow from operations at a roughly 15% compounded annual growth rate, more than double the closest competitor. We've distributed more than $125 billion in dividends and buybacks, $30 billion more than the closest competitor. And we've delivered a total shareholder return compounded annual growth of 14%, 600 basis points higher than the closest competitor. Looking ahead, the value creation arc of the company is equally distinguished. We're going to build an even more advantaged asset portfolio. with 60% of our upstream production from advantage assets by 2030. That's nearly the same amount as the next largest IOC's total production. We're going to develop an even more profitable product mix, with 80% growth of high-value product sales and product solutions by 2030. We're going to be an even more efficient operator, taking an additional $6 billion in cost out of the business. We're going to generate even more earnings in cash on a constant price and margin basis, we're confident we'll deliver 2030 by 2030, $20 billion more in earnings and $30 billion more in cash flow, all of which enables us to keep our commitment to sustainable, competitive, and growing shareholder returns.

With that, I look forward to your questions. Thank you, Darren. Now let's move to our Q&A session.