Exxon Mobil Corporation (XOM) Earnings Call Transcript & Summary

Good morning. My name is Betty Jiang. I cover the U.S. integrated and E&P space. I just want to welcome everyone to day 2 of the Barclays 39th Energy and Power Conference. I am delighted to have Jack Williams for Exxon Mobil to be our next speaker. Jack, you have been with Exxon for over 38 years. And during that time, I'm sure you have seen how the company have evolved and as we were talking last night, the company is more laser focused on cash flow growth than ever before. So with that, I'll have you start with some prepared remarks if and we'll go into Q&A.

Thanks, Betty. Appreciate it. Really good be here with all of you all today and spend a few minutes talking about our company. I'm looking forward to it. Starting with the "and" equation that you've most likely heard us talk about before, which is producing the energy the world needs and also reducing emissions at the same time. And we just published our new global outlook, it's on our website if you're interested. And it kind of doubles down on that "and" equation and makes the point makes the case for both needs. The world does continue to need a lot more energy as we look out to 2050 and we are not meeting our climate aspirations. So we need more emissions reduction as well. Looking at Exxon Mobil and our opportunity slate, it's really, in my time with the company, I've never seen an opportunity like what we have today, very, very deep, long pipeline. We'll talk some about and have the street plans out to 2030 lined out in terms of earnings and cash flow growth. But even beyond 2030, we have a lot of opportunities all based on these competitive advantages and capabilities that we have with the corporation that we've been really focused on making sure that we're leveraging to the fullest. As I said in 2030, the firm plans looking at 10% annual earnings growth, $20 billion of earnings growth over that time period, $30 billion of operating cash flow growth. over that time period. And then again, setting ourselves up for continued growth beyond 2030. And we like to think we have a pretty good track record in terms of delivering on that over the last 5 to 7 years, we came out in '17, '18, '19 period, talked about a lot of investments. Those have kind of manifested themselves, and we've seen a lot of cash flow growth and earnings growth over the past number of years, 5-year leading TSR on the basis of that. And the result is a lot of start-ups that have already happened and some that are coming up and starting up this year as we speak. On the right-hand side, the list of the 10 start-ups that we have planned for this year. And I'm pleased to say 7 of them are already in startup operations right now and the other ones all on track. So a lot of growth coming this year. In total of these projects, that would be $3 billion of earnings capacity that we'd see in 2026. And what that generates, that's kind of a good down payment, if you will, on our 2030 story that you see on the left-hand side of the chart. And that's just -- we're showing the consensus for our growth out to 2030 and our competitors. And you can see the leadership position that we have. If you think about share and Exxon Mobil and the benefits, what I've been talking about is this 10% earnings growth out to 2030 that we -- the organic growth that we plan to deliver and have, again, concrete plans in place, some of which come from those 10 projects that I showed on the last page, but we also have a dividend -- a competitive dividend yield in the 3.5-plus percent range. And then we've -- we're currently buying back shares at a pace of $20 billion a year, this year, and we've -- we forecast that for next year as well, and that would translate into the numbers shown. So when you add all that up, it's an 18% annual return expected between now and 2030. So an exciting, we think, a very exciting future for the near term and then long term beyond that as we think about beyond 30 time period, we have a lot of LNG investments. We have a lot of new technology coming on, so we have a lot of visibility beyond 2030 as well. So with that, Betty, I'll turn it back over to you, and we can talk about a few questions.

Great. So maybe starting with the global energy outlook, which you mentioned you guys just put out. Over -- since last year, we have seen more macro volatility, more geopolitical tension. And then the top of the drawer is AI, where we need more and more electricity demand. How is Exxon's energy outlook incorporating some of these changing dynamics? And along that line, I know Exxon plans very long term. So is there any implication on your planning focus areas?

Yes. So the energy outlook, which we now call the global outlook as we go beyond just energy, we talk about emissions as well. There's not a tremendous amount of change year-on-year. We -- if we look at that, you see oil demand flattening. When people talk about a peak. We don't really see a sharp peak. We see more of a flattening. If you look at the 2050 oil and gas are still over 50% of the energy mix. And we've talked about, you've heard time and time again talking about depletion mechanisms and how much you have to invent just to stay flat. So to continue to grow a little bit beyond that, it takes a lot of investment -- continued investment in oil and gas. The -- as we think about the -- you think about 1.5 billion more people on the planet by 2050, 25% energy growth supporting a doubling of GDP and importantly, growing living standards in the developing world. And one of the stats that we talked about in the global outlook this year that I find quite sobering is that if you think about kind of meeting basic human needs, you talk about utilizing about 50 MBtu a day of energy for per capita. The developed world is triple that. But there's half the world that doesn't meet that 50 MBtu threshold, half the world that doesn't have enough energy to meet basic living standards. So a long way to go, a lot of energy use in terms of raising up people's quality of life and in terms of meeting that economic growth and more people on the planet up to 2050. So clearly, a case to be made for more energy. And then, as I said, we're not meeting our missions goals, and we have some thoughts on how better to do that, but we definitely need to make more progress in that area as well. And so that is the basis of our long-term plans. That's what we're looking at, and that's why we're continuing to invest heavily in oil and gas, but also continue to invest in lower emissions technologies as well.

And we definitely need Exxon to be doing all of that. Maybe pivoting more to the company level, the M&A has been a big topic. And do you think that over the last quarter, probably more explicitly last quarter, the -- Exxon is taking more of a proactive stance on M&A and that you're seeing opportunities across business units or business segments. My question is, what's driving that view? Do you think there is a widening value gap between what Exxon can do versus the rest of the market? Or is it more driven by the macro volatility that's creating these opportunities?

Yes, it's a good question, Betty, and it has been a topic as of late. And just to clarify, nothing's fundamentally changed about how we're approaching M&A and thinking about M&A. I would say, 1 development is that we're very proud of the Pioneer merger acquisition. We thought that went very, very well. We continue to increase our synergy expectations as a result of that. The Pioneer employees coming into organizations are working out really, really well, a welcome addition, bringing in a lot of capabilities. So we're very pleased with that acquisition. And so some of the comments are just reflecting the fact that we're really, really pleased with where we are with that. But when you -- you kind of hit on it, Betty, when you think about it, fundamentally, for value to be created in an acquisition, you have to go to bring more -- get more value out of the businesses and assets than the current owner is currently getting. And when you think about these competitive advantages, capabilities that we've been building up, scale and technology and integration, execution excellence and everything our people are bringing and the deep capabilities with these central organizations that we have in project management and technology and operations and supply chain and trading, we do feel like we can bring a lot of additional value in assets. So when you -- when we've been really, really focused in the last decade or so on building up these capabilities and when we think about assets out there, we think we can -- we have an array of possibilities because of what we could bring, the value that we can bring to these assets. And so I think we're saying is that we have a lot of organic. I showed you those 10 start-ups. We have a lot of organic opportunities, continued growth in the Permian Basin through beyond 2030 running over 30 rigs there and bringing a lot of technology there. The Guyana development and our fourth FPSO out there and more coming on. And then on the Product Solutions side, we've borrowed big steam cracker in China, the big Singapore upgrade project. We're looking at more U.S. Gulf Coast upgrades. We have more technology and new product lines with Proxxima and carbon materials. So we have a lot of organic and that's fundamentally what we're building our plans on is all organic opportunities. And as I said earlier, we have a very, very good slate of those. However, we're just acknowledging there's another tool in the toolbox that is acquisitions. And when you can bring more value and you can bring more value out of assets and businesses in the current owner, then that's open for us as well. And that's really the only thing. But fundamentally, nothing has really changed other than the fact that we're very pleased about the Pioneer transaction.

Right. We do hear a lot about the upstream. But I guess from a value creation standpoint, it's across upstream and downstream. So when you think about the portfolio, do you want to lean more? Or is there a balance between upstream and downstream chemicals areas?

Yes. It's a good question. The -- and of course, I've been on both sides, as I spent a large part of my career in the upstream early on in the last 11 years on the management committee, 8 or 9 of those have really been more on the product solutions side of the chemicals and downstream side. And we don't have a formula on how much downstream, how much chemicals, how much upstream. And if you look over our history, it's varied quite a bit over time. And -- but we do want to make sure that we are -- we have businesses that we are -- we have advantages in that -- we have fundamental advantages, and we're continuing to invest in and grow. And whether those are across -- whether it's in chemicals, whether it's downstream, whether it's upstream, we're going where the best opportunities are. But when we do find where there's a business where we're not able to continue to invest, then that would be something we'd look at divesting. And a good example of that would be the Santoprene business in our chemicals portfolio that we invested several years ago, it was a good business. But the problem was we needed to keep investing in R&D in that to keep it developing and the opportunities weren't competitive with the rest of our slate. So we ended up divesting that asset. And so that's what we're continuing to look at is keeping that mix fresh and making sure that we're -- we really have competitive advantages in all the businesses that we're choosing to continue to participate in and then making those investments and fulfilling those advantages. So it would not surprise me to see between upstream, downstream chemicals, that's changing over time, and that's perfectly fine.

Great. Maybe doubling down the upstream story, but you highlighted the synergies with Pioneer. It was a big claim when Exxon said you think you can double the resource recovery in the Permian. There's a lot of questions around how do we get there, what is Exxon seeing. What do you think the market or the industry is underappreciating from Exxon's technology edge over the peers?

Yes. It's really -- it is a pretty aspirational goal. I will readily admit that. I think we all readily admit that. And Darren will readily admit that who gave a challenge to the organization. And -- but -- so we absorbed the goal and aspiration. And as usual, when we have clear marching orders and what we want to go do, we get after it and start working on it. And we've been working on it for a number of years. This is not a new aspiration. It's been around for 6, 7, 8 years that we've been working on it. And we're kind of steadily adding to the technology portfolio. We talked a lot about lightweight proppant. And was a great example of leveraging the full corporation in terms of that additional recovery mechanism. But we have -- we're spending $1 billion a year in R&D. And we have -- one of the big things when we form these central organizations in the corporation was we formed 1 technology organization. We had our talents, technology talent divided among several different technology organizations, ball that together to where we could really put a corporate prioritization, easily put a corporate prioritization on the portfolio. And we put more focus on how can we -- we have this massive unconventional resource base. How can we get more out? Because if you take a 7% recovery to 8%, 9%, 10% much less if we can take it to 14%, that's big additions. A small incremental change on what's a very low recovery on a very big resource, a lot of oil in place, gives you a lot more resource. So we think -- we thought it was definitely worthwhile spending a lot of our resources working on that. And so when you think about the doubling recovery, we don't have a silver bullet. We're not saying we have this 1 technology that's going to double recovery. But we have -- last we reviewed -- I saw call it a couple of dozen different technologies that we're working on that we think collectively certainly has the potential of double recovery. Now all those work out as we hope? Probably not. But when you look on a risk basis, it's substantial and what we think we can deliver. And I can't talk about all the individual ones today, but -- but there's just a lot of things we're working on in addition to lightweight proppant, I think, was something that people didn't see coming in terms of using pet coke in that mechanism. But we had some of our -- quite frankly, our folks that were downstream researchers kind of connect the dots there. So it's a really good example of integration, and we're continuing to bring those types of ideas to this resource. So still ways to go, and we recognize it's an aspirational goal, but we think we've got a lot of opportunities there.

Expect to see continued steady improvement from here. So -- in contrast, though, I'll say, the Guyana resource has been kept at 11 billion barrels for a while. And new marketing that number is too conservative. And then despite the technology innovation for the seismic infill drilling. So can you just speak to the conservatism there? Or what's the upside could we see from the Guyana assets?