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.