Exxon Mobil Corporation

Good morning, everyone. Welcome to Exxon Mobil's earnings call. Today's call is being recorded. We appreciate you joining us. I'm Jim Chapman, and I'm joined by Darren Woods, Chairman and Chief Executive Officer, and Neil Hansen, Senior Vice President and Chief Financial Officer. This quarter's presentation and pre-recorded remarks are available on the Investors section of our website. They're meant to accompany this quarter's earnings release, which is posted in the same location. During today's presentation, we'll make forward-looking remarks, including comments on our long-term plans, 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. We also provide supplemental information at the end of our earnings slides, which are also posted on our website. And now, I'll turn it over to Darren for opening remarks.

Good morning, and thank you for joining us. Unfortunately, as all of you are aware, the conflict in the Middle East continued through the second quarter, impacting our employees, partners, and operations in the region. I want to begin this morning by recognizing the service of the men and women engaged in the conflict and the hardships being endured and losses suffered by those in the region. They remain at the forefront of our thoughts, and we continue to pray for a quick resolution. As a company, we remain committed to mitigating the global impact by maximizing production and providing the energy and products essential to modern life. While we didn't anticipate the current situation, we were prepared for it. In our markets, disruption is inevitable. Establishing globally diverse production at scale across value chains built on a foundation of durable advantages provides a robust platform for creating value through price cycles and market disruptions. The second quarter demonstrates the strength of our approach. Despite the temporary loss of approximately 10% of our upstream production, we delivered exceptional financial results. including industry-leading earnings of $14.5 billion and cash flow from operations of $23.6 billion. Performance was strong across the company. In the upstream, excluding the Middle East, we delivered our highest production volumes in more than two decades. In energy products, our integrated U.S. Gulf Coast refining operations ran reliably as global diesel supply tightened. The business delivered record second quarter diesel production, helping meet market needs. In chemical products, our North American facilities with advantaged feed and record first half reliability helped meet the shortfall in supply caused by disruptions in the Middle East, driving a roughly 180% increase in chemical product margins versus the first quarter. In specialty products, our integrated approach down the value chain, reformulation capabilities, global footprint, and strong execution help meet customer needs despite significant supply challenges, delivering best-ever base stock margins and record quarterly and first-half adjusted earnings. Guyana remains one of the clearest examples of our advantage growth. In the quarter, Guyana delivered gross production volumes of approximately 900,000 barrels per day Our fifth FPSO set sail toward Guyana in June and remains on track for startup by the end of the year. The next major step in Guyana's continued development. Longtail is on the path toward final investment decision and we are evaluating the potential for a ninth FPSO. The success of this development has set a new standard for the industry and frankly has exceeded our own expectations. Delivering on tight schedules at industry-leading cost with strong reliability and optimized production has resulted in recovering our capital and costs nearly two years earlier than anticipated, increasing NPV and desaturating the cost bank. This is great news, but as a result, our volume entitlements will change as reflected in our 2030 plan. As always, our focus remains on value, not volume. Turning to the Permian, this quarter we set another production record of more than 1.8 million oil equivalent barrels per day. More importantly, we continue to improve recovery and lower capital costs through new technologies deployed at scale. Our industry-leading acreage position supports extended reach development, including four-mile laterals that drive superior capital efficiency. In the first half of the year, we drilled more than 80 four-mile wells, supported by our Houston-based remote operations center and real-time data that helps ensure safe, efficient, and effective execution. During the quarter, we had to work through some complex conditions. Logistics were tight, supply chains were constrained, and customers were short of critical products. Our global trading and supply chain organization put our new operating model to work, optimizing feedstock and product placement, balancing supply across regions, and responding to localized disruptions. Those actions kept our operations running and customers supplied. It helped avoid roughly $750 million in annual disruption cost through advanced modeling, fleet reallocations, product reformulations, and alternate supply sources. At the same time, we continue to make progress on our transformation. On July 1st, we integrated Upstream Operations into our global operations organization, bringing together approximately 31,000 employees across more than 150 sites in 48 countries. This is an industry-first operating model. The objective is clear. Make the most of what we have while raising the standard for safe, reliable, and efficient performance across all our assets. With this new organization, we expect to deliver improved margins and industry-leading operations excellence, improving safety, reliability, maintenance costs, and turnarounds across the portfolio. We are also advancing our enterprise-wide process and data platform transformation. As I've said before, this is redesigning end-to-end processes and connecting data, transactions, and decision-making across every business, geography, and function. Early deployments have gone well, building a strong foundation for larger rollouts in 2027. The work is already simplifying processes, improving line of sight, and replacing fragmented reporting with more consistent enterprise data. As it progresses, it will help us learn and act faster, better leverage our scale, and accelerate the adoption and value of AI. The value of this transformation is showing up in our results. Cumulative structural cost savings have increased to $16.3 billion since 2019, with centralized organizations contributing nearly half of the year-to-date savings. Financially, this was a strong quarter with more than $14 billion of earnings, more than $17 billion of free cash flow, and a more than $7 billion reduction in net debt. That strength allows us to keep investing in advantaged opportunities, return surplus cash to shareholders, and maintain one of the strongest balance sheets in industry. Cash capital expenditures were roughly $7 billion and we returned more than $9 billion to shareholders through dividends and share repurchases. Finally, in the quarter, shareholders overwhelmingly supported redomiciling Exxon Mobil from New Jersey to Texas, which we completed on July 1st. The move aligns our legal home with our headquarters and where we have operated for more than three decades while providing a stable, predictable, and efficient governance framework that supports sound decision-making, long-term value creation, and shareholder rights. I want to thank our shareholders for their support and the quality dialogue we had across the year's engagements. Stepping back, the second quarter was shaped by disruption but defined by execution. Thank you, Darren. Thank you, Darren.

Before we move to Q&A, two things to note. First, as a reminder, the investor section of our website provides further data on our results and operations, and we encourage investors to take a look. And second, I want to highlight that we plan to publish our annual Global Outlook in September, a comprehensive report detailing our latest views on global energy demand and supply through 2050, which forms the basis of our long-term business planning. So with that, we can move to Q&A. As a reminder, we ask each participant to keep it to one question. An operator will ask you to please open the line for the first question.

Thank you. The question and answer session will be conducted electronically. If you'd like to ask a question, please do so by pressing that star key followed by the digit 1 on your telephone. The first question comes from Steve Richardson of Evercore.

Hey, good morning. Darren, I was wondering if we could start on Guyana. Obviously, what we've all known is a really high-quality project. Can you just talk about this desaturation point, obviously in light of cost, performance, and higher commodity price, and maybe just how the timing compares to maybe what your previous expectations were? Also curious if we could talk a little bit about exploration. There's a mention in the disclosure about using AI tools and generating prospects. I think people are also curious about what the exploration outlook in Guyana is particularly as you think about parts of the block that maybe are underexplored close to the maritime boundary.

Sure. Good morning, Steve. Thanks for your question. I think as you point out, it's a real success story what we've achieved in Guyana, delivering, frankly, the production units faster than we had originally anticipated, at a lower cost, running those assets above the investment basis, and then obviously the market prices have been higher than our base assumption. So all that means... More cash sooner, which is good for the project, good for NPV, good for Guyana and the people of Guyana. Obviously, we recover our costs back faster and therefore desaturate quicker. which is a good story and I would say that was a moving target as prices manifested themselves as we delivered those units and continued to grow production we kept updating it and then based on price forecast our assessment would happen later this year early into next year and that's obviously come forward now with where prices have been so I think a really good news story with respect to exploration I think too another good news story we obviously have A large chunk of acreage which is in force majeure waiting for the ultimate ruling from the International Court of Justice on the Venezuela dispute. When we'll see what happens there, we feel there's an opportunity then to start shooting seismic and understand what that acreage potentially holds. And we've got more work to do in the acreage that we've already shot and the work that we've been doing. I think Neil Chapman had mentioned at a prior conference this year that we've really... for a lot of effort into artificial intelligence and training models based on what we found already, all the drilling that we've done, the characterization of that subsurface, and have unleashed that in the rest of the block and have four new discovery opportunities above and beyond what we thought were opportunities. So we're optimistic there. Obviously a lot more work to do to confirm those, but I think our view is we're not done yet in Guyana, and we continue to see a really bright future there.

Maybe Darren, just to add to the comments and Guyana, I think this reinforces why we are the partner of choice, especially for developments of this scale. And if you look at the desaturation, and Darren mentioned the price impact, but even if you took out that price impact, we saw a two-year acceleration of our investment recovery. And those go back to the things that we mentioned earlier. The ability to execute these projects at industry-leading cost and schedule, running the FPSOs at above 98% reliability, optimizing, being able to produce at 100,000 barrels a day above the investment basis. So even without the price impact, we're seeing accelerated recovery of our investment. And as Darren mentioned in his opening remarks, this is about value, not volume. And going forward, we're going to see Two times the level of free cash flow in 2030 than we saw in 2025. So again, just speaks to the tremendous success that we're seeing in Guyana. Thanks very much.

The next question comes from Neil Mehta of Goldman Sachs.

Yeah, thank you so much. Darren, just love your perspective on the business that you spent a lot of time growing up and on the refining system. It's obviously the bottleneck in the petroleum system right now and margins are exceptionally high. So two perspectives on that. One is, you know, how do you see the situation evolving as you think about the product? And then Neil Hansen, there's probably a question for you on the quarter itself. It did feel like relative to some of the independents The refining earnings were a little softer than I would have thought, and so maybe it was more timing or operational things, but how do you see that progressing as we move into the third quarter?

Yeah, good morning, Neil. I'll start and then hand it over to the other Neil. I mean, as I mentioned this morning, we are a very large refinery, much larger than any of the other IOCs. In fact, we're the number two in size in the world behind China and outside of China. We are the largest refinery. Thank you very much. Thank you for joining us. and the organization is now very focused on in the short term with these significant constraints in product flow, maximizing production and getting the most needed products to the market and meeting customer demands where there's such a critical need today that's not being met. I see that, frankly, the challenge here is, obviously, with the straight close, we've got about roughly 3 million barrels a day of capacity that's not available to the marketplace. China has stopped exporting. There's another couple million barrels a day of refinery capacity that is not available to the market. And then, of course, Ukraine's been pretty effective at taking Russia refinery capacity out. Thank you for joining us. and so from our perspective we think we're going to continue to see a very robust refining market with very high margins and of course our job will be to continue to push as hard as we can to maximize production and try to meet that need because we do recognize that these high margins lead to high product prices which we also know has a significant impact on consumers and people's Thank you for joining us. Thank you for joining us.

The portfolio high grading that we've done and then the day-to-day efforts that we put into place to optimize throughput and capacity and all those things combined with the growing capability and trading really has resulted in a step change in earnings in that business and energy products. In fact, if you look at the contribution from energy products to our overall business line earnings, it's gone from about 9% Thank you for joining us. The reliability exceeded 95% in the quarter. So again, we feel really good about what we've done to strengthen that business over time and how we operated in the second quarter. I think when you look at the quarter relative to consensus, I think some of that is, as Darren talked about, I mean, there are a lot of moving parts, especially with the volatility and the disruption that we saw. So I think that had an impact on projecting some of those refining margins, but no underlying concerns with how that business has performed, and we're benefiting from the investments and how well we're operating in energy products.

Yeah, very clear. Thanks, Neil. Thanks, Darren.

Thank you.

The next question comes from Arun Jayaram with J.P. Morgan.

Yeah, good morning and thanks for taking my question. Darren, I was wondering if you could help us understand what you're seeing on the ground in terms of the Strait of Hormuz. Perhaps you could highlight what you saw in July, just given the disruption impacts. And I guess my overall question as well, I wanted to see how you're thinking about with your partner Exxon's intention to invest in the repair of the two Qatar LNG trains. If you come up with your partner on the plans to repair those facilities.

Yeah, sure. Good morning, everyone. Thanks for your question. I don't think I have a lot of additional perspective on the ground with respect to what's happening in this trade. I think it's fairly well covered in the media. And frankly, any discussions I tend to have with the administration is more focused on our perspective of the market and the implications of the constrained supply and how that will manifest itself. I will say, you know, as a A big supplier in the marketplace. It is ultimately down to the shipping companies and the crews on those ships to make those transits. And I think the more volatility there is, the more back and forth with respect to disruptions and attacks, you create more uncertainty, more concern, and therefore less willingness to transit. So I think there's going to be a continued inhibition For movement, which will, even once we get things cleared up, I think it'll take some time for folks to gain some confidence there to continue to ramp things back up to a very high level. And frankly, we're prepared for that with respect to what we're trying to do. With respect to the broader question, our presence there and the work that we're doing with Qatar, you know, I just come back to the medium to long-term fundamentals, which, you know, the world needs the resources in that region. and it needs to have the straight open and transiting back at levels it was prior to this conflict. And so we're convinced that that will come to be at some point in the future. I can't really predict when it'll happen or exactly what it will look like. I just know that it's too critical to the overall health of world economy and to meet people's standards of living to have that disrupted for perpetuity. So it will come back. It will be needed. We've got a long relationship there. We value the partnerships we have. We're in dialogue with Cutter Energy. I think we have a significant role that we can play to bring our expertise to help Thank you for joining us. certainly very focused on how we figure out the path forward here to get production back on and flowing as soon as we're able to. Great, thank you. Thank you.

The next question comes from Devin McDermott of Morgan Stanley.

Hey, good morning. Thanks for taking my question.

Good morning.

Good morning.

Darren, you highlighted morning really strong non-Middle East upstream production in the quarter, the highest in over two decades. You talked a little bit before about Guyana and one of the other drivers of growth is the Permian. You had volumes hit 1.8 million BUE a day in the quarter in line with your full year guide. I know that this year marked a big step up in some of the use of advanced prop-in and other new technology. And I was wondering if you could just give us an update on how that's progressing versus expectations, typically as it relates to capital efficiency and recoveries that you're seeing there across the basin.

Thanks for the question, Devin. You touched on one of the really important variables there, which is all the progress we're making with respect to the technology portfolio. We've been talking for some time now that we've got 40-plus technology developments that we're working and have been going out and trialing in the field. The value of those technologies, most of them are stackable so that you keep building on the success and Thank you for joining us. We have an opportunity set that will do more than that. And when you risk it for all the uncertainties associated with that portfolio, we're getting really close to that objective. And it's just a function of continuing to deploy those technologies and getting it to a critical mass to where it's transparent to the rest of the market as we continue to develop. Thank you for joining us.

Yeah, I think, Darren, maybe just to add to that, I mean, there is a lot of excitement around the technology that's being developed and will be deployed. But I think you can easily look past the expertise and the technology that's already being used in the Permian. You look at things like extended reach laterals. I mean, we're leading the Permian in long lateral development. I think in the opening remarks, we mentioned 83 four-mile wells that we've drilled year to date. But if you look back, and you look at all the Permian producing wells since 2020, anything above three miles or longer, we have 1200 wells. I think our nearest competitor is around 400 and you would have to go to the next six competitors to get to that same level of 1200. So you look at the extended reach laterals, surfactants, AI machine learning, all of that is contributing to very strong performance even before we start to deploy some of these other technologies.

Thank you.

The next question comes from Doug Luggett of Wolf Research.

Thanks. Good morning, everybody. Darren, I hate to beat on Guyana, but good morning. I wonder if I could come back to Guyana on a couple of clarification points or maybe more than that, perhaps. So I think there's some confusion between production entitlement and free cash flow. Maybe it's for Neil. But I wonder if you could just opine on, although your production entitlement goes down, what happens to your free cash flow? That's my first kind of part of that. And I guess I can't help but notice phase nine is now part of the story. What is your latest thinking on gross production sustainability through the end of the decade and maybe a little beyond that? Thank you.

Yeah, thank you, Doug, and good morning. I'll let Neil talk a little bit about the free cash flow portion of the question. We're going through our plan process currently, which we will finalize as we get to the end of the year and then come out and talk about it as part of our corporate plan update. As part of that, every year we revisit what are the opportunities, what progress have we made, how has our thinking developed. Indeed, one of the things that we now see an opportunity for is this ninth FPSO. and really take advantage of what we've done with Longtail to replicate that and get some significant capital advantages to apply. And so our view is that's looking promising. We haven't finalized that obviously but we're progressing and it looks pretty attractive at this stage. I think longer term, we've got more work to do. As I mentioned, responding to one of the earlier questions, there's a lot of acreage yet to fully take advantage of. And so we're continuing exploration, continuing to look for opportunities. I mentioned that. with some of the AI tools that we've trained with what we've already found in the drilling we've done. We have seen some new opportunities to explore that we hadn't previously identified. So I would tell you this thing, the tape hasn't run out on this play yet, and we're going to continue to evaluate that and see what we can get from it. But you can rest assured the organization is very focused on maximizing the value of that acreage for the benefit, obviously, of Exxon Mobil, but more importantly for Guyana, the government of Guyana, the people of Guyana. But I'll let Neil talk a little bit about the free cash flow.

Yeah, let me try to answer your question, Doug. So, again, as we mentioned, at this point, we've fully recovered the $55 billion of investment along with all the operating costs. And the way the contractor agreement works is we can recover that investment up to 75%. After that, the remaining production is shared 50-50 between us and the government of Guyana. And so if you think about, if you just stop today and there's no additional investment, then more of your production and revenue is going to flow towards cash flow, again, shared between us and the government of Guyana. The reality is we have more investment. To the extent we have the investment come in and operating costs, it'll still go into the cost bank. We'll still recover that at that 75% cap. Thank you for joining us. So hopefully that helps, but we would anticipate, and I think we showed that in the slides, that now that we've reached full recovery of that significant investment, more of our revenues will go towards cash flow, free cash flow, versus recovering cost and investment. Hopefully that helps, Doug.

Neil, just to be clear, so is it fair to characterize this as an inflection in free cash flow then? as opposed to a decline in production entitlement.

Is that a reasonable way to frame it? It's very much an inflection into free cash flow. Absolutely. And this, you know, for us, Doug, and I assume for you as well, this is about value. It's not about volume, right? Even though there's a slight decline in the entitled volume, the focus we have is on the value that we've created for ourselves and for the government of Guyana. And at this point, there's an inflection to where you're going to see a much larger amount of free cash flow come in. It is a very positive, exciting story. Thanks, Doug.

The next question comes from Betty Jang of Barclays.

Hi, good morning. We're seeing an increasing number of resource-rich governments looking for partners to accelerate the development of their resources. As Neil said earlier, Exxon's track record just really position you guys as a partner of choice. I imagine these are large scale, long duration resources, but can also come with different set of risks. How do you evaluate these opportunities for Exxon and their competitiveness relative to what you already have in the portfolio?

Thank you for joining us. Thank you for joining us. Thank you very much. The results of that are manifesting themselves today in all the investments we've made over the last 10 years. That's not going to change going forward. And so I'd say first and foremost, as we look at new opportunities, you've got to clear that hurdle. Do we bring an advantage? Do we end up with a project that's advantage versus the rest of the industry? And is it at a very low cost of supply and therefore generate above? Thank you very much. Thank you for joining us. and having a very diversified portfolio is we can diversify out of specific risks. So we don't have to bet the farm on any one location or any one place and we keep a very close eye on the overall exposure of the portfolio and look at how that's developing and as we make investments is that portfolio risk changing significantly or not. So that's how we do it. What we've seen today, you see it today with some of the disruption in the Middle East. You saw it several years back with the Russia disruptions that the portfolio is robust to some of these unexpected events and that's how we'll manage it.

And Betty, I think you're absolutely right. I think our track record and a recognition of our capabilities certainly is leading us to being the clear partner of choice. And when we talk about that, you look at being in a capital intensive business like we are, it's the ability to execute large scale projects, leverage technology and then operate at a very high standard and a very high level. If you look at just the ability to execute projects, we're doing about twice the number of megaprojects in our nearest IOC and we're doing it up to 20% lower project costs and our project delivery schedules are 20% faster than industry average. When you look at resource owners, I think there's an absolute recognition of that capability, that track record of being able to do those three things really well. and then as Darren mentioned I mean when we look at any opportunity obviously look at the terms but more importantly is can we bring something unique and different can we leverage those competitive advantages to provide an outsized return for our shareholders so that's kind of how we think about it but we are in a I think in a nice position with resource owners given what we've been able to accomplish in places like Guyana.

Great thank you.

Thank you.

The next question comes from Bob Brackett of Bernstein Research.

Good morning. I'm struck by the combination of lower base volumes on the energy product side amidst record diesel production. That diesel production could be cyclical, you're playing around with set points or whatnot, or it could be structural, and I suspect it's structural. You all will continue to break that diesel production record over time. And sort of a quick follow-up, How did you decide around scheduled maintenance and choices around deferring scheduled maintenance and maybe grabbing opportunistically some better product prices?

Yeah, good morning, Bob. I think, you know, one of the things you hit on is this drive we've had across our portfolio to continue to high grade the bottom of the barrel, the low value molecules and the higher value molecules. And distillate, obviously, is one of the higher value in demand molecules that come out of our refinery. So if you look at what we've been doing, you know, over the last 10 years with investments in, you know, Antwerp, investments in Rotterdam, the investments that we've made and Thank you very much. If you look at just what we've accomplished here in the last three years, our global throughput is up 11% and the production of jet and diesel is up by 15%. So it is reflective of the work that we've been doing.

Anything to add to that, Neil? And Bob, I'm not sure what time frame you're looking at, but certainly there's an impact from planned maintenance and turnarounds in the quarter. And there's a number of scheduled maintenance activities that we have completed this year, and that's had an impact, obviously, on volumes. And we've done everything we can, certainly, to consider the current refining and margin environment. If we can safely defer some of that, that's Thank you for joining us. What we've seen relative to the last time we did a similar turnaround or in the previous cycle, we've seen a 30% improvement in cost and a 60% improvement in duration. So harder to see, but that certainly helps us to ensure we're not leaving anything on the table in this type of environment is when we do execute those turnarounds, we're executing them at leading edge, certainly in the first quartile.

Very good. Thanks.

The next question comes from Dheeraj Borgatarye with RBC.

Hi, thanks for taking my question. It's on the downstream. And Darren, you've been vocal about EU policy in the past and some comments today as well. I don't want to get into the debate on that. I think we share the same view. But as of yesterday, one European country approved windfall taxes effectively on the downstream. And given what's happened to product prices and refining margins, Thank you. Thank you.

Yeah, thank you, Baraj. I think, you know, there's a huge temptation all around the world to deflect attention to the bad policies that governments have been implementing over time and scapegoat the industry. And, you know, the reality is we saw a long time ago with the emphasis that Europe has been putting on, frankly, de-industrializing their economy and shutting down refineries, that there would come a point in time when they would be short product. And we see that today. and so anytime you get into an environment where demand spikes and there's a shortage of supply versus demand and it's trying to be met that refinery margins will rise and those who've stayed in that business and tried to improve that business to be successful across the cycle will make money penalizing the businesses who've stood by those countries and provided that product going forward is very short-sighted and leads us from the past windfall profit tax to invest even less. So we canceled investments that we had planned for Europe based on the last time they passed a windfall profits tax, and in fact we're suing the EU because we don't think that's a legal taking for the industry. I think the discussions I've been having with many of the leaders there recognize the – Thank you for joining us. address concerns of their base, but we'll have to see if any of that actually manifests itself in real policy and regulation. If it is, it's just another great example of misguided policy that ultimately is going to inflict more higher cost and lower standards of living on their population. And I hope at some point in time that the European population wakes up to the very poor policy decisions being made there. Thank you.

The next question comes from Jean Anne Salisbury with Bank of America.

Hi, good morning. There are many gas pipelines coming on in the Permian starting now. A lot of investors, including us, think that it could lead to a shift to materially more gas and NGL growth out of the Permian as operators are no longer making decisions around constraining their gas to oil ratio. As the largest operator in the Permian, do you anticipate your gas volumes or gas to oil ratio in the Permian will inflect as a result of the new pipe?

Good morning, Jeanne. And we have a very similar assessment as you do with respect to the balances on the piping. And that market will now clear and we won't see the disconnects that we've historically seen. I don't, you know, my sense of things is, and I can't speak for the entire industry, but as we're developing pipelines, We're looking at the economics, and there's a clear incentive to have higher oil production. I think that's been, I'd say, a general trend within the industry. As you look at economically maximizing the value of every well, you want more oil and less gas, given the constraints in the gas market. I think that's not going to change. My sense would be you get more into, if you've got the takeaway capacity, it just opens up your ability to produce more oil, and the gas then comes with it, and so we may see some additional gas come onto the marketplace associated with that. But the real driver will be unconstrained takeaway capacity and maximizing oil production.

That makes sense. Thank you.

You bet. Thank you.

The next question comes from Jason Gabelman of TD Cowen.

Hey, morning. Thanks for taking my question. I wanted to go back to the Middle East footprint and specifically on the LNG side. I think you have over two-thirds of your LNG portfolio primarily in Qatar. And as you assess the changing risk profile in that region, are you looking to either accelerate LNG projects into your queue Thank you.

Thank you, Jason. I guess I'd start by just saying we're not extrapolating current events to kind of a long-term change in the stability of the region. As I said earlier in the call, ultimately the world has to resolve the conflict there and Thank you very much. So I would say that's generally how we think about it. If you look at our portfolio of opportunities in LNG, it has, through the opportunity set that we have, diversifying our production away from the Middle East just based on where the opportunity set is. And so Mozambique, we hope to FID that project. We've got Papua and Papua New Guinea that we look to FID later this year. Got Golden Pass coming on. So I think continue to see opportunities and very large opportunities that are on the left-hand side of the cost of supply curve coming online. So that's going to achieve some diversification. But I would also tell you that, you know, as we continue to look for future opportunities, given the important role that natural gas is going to play, we won't shy away from the region.

Great. Thanks for the call there, Darren.

You bet. Thank you.

The next question comes from Manav Dutta of UBS.

Good morning. I wanted to go a little bit into specialty products. What's the margin environment looking like? Because, you know, lubes are extremely tight right now. Lube's margin are uniquely high and you do have a strong base stocks business. And then also wanted to understand how Mobil One is tracking and any further updates you can give us on Proxima, how the traction with new clients is going on Proxima. Thank you.

Sure, thank you, Manav. Well, I'd say especially business is no different than any other sector business that we have, which is significant supply disruptions, significant challenges with meeting the base demand. And base stock is clearly where it starts, particularly given the importance of Middle Eastern crude with respect to base stock production. One of the advantages that we've had is with the investments that we've made both in Singapore and in Rotterdam. Thank you very much. We're also quite advantaged with respect to the value chain that we participate in and being part of Baystocks. Obviously, running the refineries, running the Baystock productions, running that Baystock marketing business down to finish lubes, coupled with the technology organization that we have, a lot of work the organization has been doing around reformulating to kind of find ways with the available resources Thank you for joining us. Thank you for joining us. Like what we're seeing there, the size of that market is huge, and all the applications that we've been testing and the work we've been doing continues to demonstrate a very high value and use for our customer base. So we've got the 35,000 KT expansion, 35 KTA expansion that's come online, and then we've FID'd the next large step in our approximate blending plant. We see a big opportunity. It'll take time to kind of realize that opportunity because you're obviously starting a brand new market, a brand new product for some very attractive markets. But we see, again, the customer feedback says there's high demand for that. It'll just take time to penetrate. But we see a long term attractive potential here.

And maybe just go back to specialty products. I think for the reasons cited, the investments that we've made, including the Resit Upgrade Project in Singapore last year, which allows us to continue to grow high-value products, for that business, specialty products, it was a record earnings for the quarter, and it's also record earnings for the first half of this year. And so, again, that just demonstrates prices certainly were supportive, but it's all about those advantaged investments we're making. The focus on growing high-value products is clearly yielding very strong results for specialty.

Thank you so much.

Thank you.

The next question comes from Sam Margolin of Wells Fargo.

Good morning. Thanks for the question. On the structural cost savings, you've made tremendous progress, but you have been fighting inflation, and it looks like there's some environmental drivers that are potentially adding some more friction. Can you talk a little bit about the way that the mix shift in your portfolio and the development of major projects and the life cycle that you're at today might influence this Cost Out Progress. It feels like as you enter these new phases, a free cash flow sort of oriented phase in Guyana and you bring on fewer developments at a time simultaneously, there may be some levers to offset the inflation impact. But in any case, would just love your thoughts on that whole trend. Thank you.

Yeah, sure. Thanks, Sam. Thanks for the question and good morning. I would just say maybe just step back and talk a little bit about the philosophy that we started back in 2018, which was we knew we wanted to grow the business. We wanted to make these investments and recognize that as we did that, that as you start new facilities, bring new projects online, that you incur more operating expense. And as you develop new products to go into new markets, you're Thank you for joining us. Thank you for joining us. The cost savings have come, I'd say, primarily through the transformation we've been driving into the business and creating the value chain, giving organizations a clearer line of sight and more direct accountability for end-to-end profitability. That puts a very high focus on operating expenses. The synergies that we're capturing through the consolidations that we're making in the centralized organizations are driving huge value and cost reductions. and I would tell you we just announced on July 1st the formation or the completion of our global operations organization where for the first time in the company's history we have all of our operations in one organization which again will open up opportunities to identify efficiencies that have been implemented in some parts of our portfolio but haven't been spread across the whole. So we've got a long ways to go on I think structural Thank you. Thank you. frankly our growth or the projects that we pursue based on trying to meet an artificial overall cost target we have a very clear and separate objective on growth and a focus on cost and cost efficiency and that continues I think to play out very well. I think if you look at our cash cost from last year versus this year and ignore production taxes and Energy Prices we're basically holding cash costs flat so we're basically offsetting the inflation that's out there and that's the objective here.

Maybe just an additional point on that Darren just to demonstrate the progress that we've made you know Darren mentioned the year over year comparison but if you took our cash expenses this year and you just annualized it our cash OPEX would look even with 2019 and again that's what All the growth that we've had, you mentioned the inflationary impacts. I think it just demonstrates the hard work and the focus that we have on removing across the enterprise. And that's regardless of the market conditions, that's regardless of Thank you.

We have time for one more question. Our final question will be from John Royal of Piper Sandler.

Hi, good morning. Thanks for taking my question. So we've seen some news flow over the past couple months about talks of an expansion of the Khashoggan project in Kazakhstan. I was hoping maybe for some thoughts on where you are in those discussions and what a project could ultimately look like there.

Yeah, good morning, Jon. Thanks for the question. I would say, you know, obviously a huge opportunity, we think, in Kazakhstan to optimize what's been going on there and to help the government achieve its objectives of growing production, growing the benefit of their natural resources for the benefit of the Kazakh government and the people of Kazakhstan. We're very early in those conversations. I think many of the companies involved in the business there are engaged in discussions. We've got some hurdles to clear and some short-term issues with the government and then continuing to look longer term around the different options available to the industry broadly and more specifically to Exxon Mobil in terms of what we can bring to bear to help achieve ultimately the government's ambition of growing production there and growing their revenues. But I would say we're too early in that process to give you much detail on that. Thank you. You bet.

Thank you, Jon. And thanks everyone for joining this call. Thanks for your questions. We're going to post the transcript of the call to the investor section of our website by early next week. And have a good weekend.