ExxonMobil (XOM) Q3 FY26 Earnings Call Transcript

Jim Chapman00:00

Good morning, everyone. Welcome to ExxonMobil'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.

Jim Chapman00:45

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.

Prepared remarks

Darren Woods01:06

Good morning and thank you for joining us. In the third quarter conflict in the Middle East continued to create uncertainty across the region and beyond disrupting trade flows and constraining supplies of crude diesel gasoline and other finished products critical to economies around the world this lack of supply led to short markets and higher market prices.

Darren Woods01:23

We recognize the impact high prices have on people's lives and economic growth. We always have. Which is why we have been constantly focused on efficiently growing advantage production to keep markets supplied. That focus and commitment pays off in times like this.

Darren Woods01:36

Over the past decade we've invested more than 200 billion dollars we've stayed focused on the fundamentals of demand and developing competitively advantaged projects that grow supply across the commodity cycle.

Darren Woods07:17

That discipline has helped us build a bigger stronger business that outperforms our competitors. Our manufacturing complex in Beaumont Texas is a good example of that in 2023 we completed a 2 billion dollar expansion that added the equivalent of a medium sized refinery that investment paid for itself in about three years and is playing a critical role in meeting today's demand that is just one of the many decisions we've made over the years that are helping address current market challenges particularly in refining we are the largest non-state owned refiner in the world every day we run about 3.6 million barrels of crude through our refineries and sell about 5.7 million barrels of gasoline diesel and other finished products into markets around the world with products in short supply our teams have done everything they can to keep prices down by maximizing production year to date we have produced industry leading volumes of diesel roughly 1.1 million barrels per day global utilization of our fuels manufacturing facilities excluding Middle East impacts is at its highest level on record that helped put more products into the market when they were needed most we're continuing to make investments to help meet future demand our US Gulf Coast asset reconfiguration projects are expected to increase distillate yield by about 100,000 barrels per day with the first phase already underway at Baytown we have additional phases planned across our US manufacturing sites to increase yields of diesel lubricants and chemical feedstocks our global outlook projects that global energy demand will continue to grow through 2050 with oil and natural gas supplying more than half of the world's energy meeting that demand reliably will require continued investment across the industry including in the Middle East the value of our investments is increasing with the organizational changes we've made this quarter our global supply chain and trading teams move quickly as markets shifted securing feedstocks redirecting molecules and moving products where they were needed most since 2019 energy products unit earnings per barrel on a constant price and margin basis are up threefold we're seeing the benefits of our investments in upstream as well excluding Middle East impacts production volumes are up year over year supported by continued growth in the Permian and Guyana in Guyana production from the Stabroek block surpassed 1 billion barrels of oil just 11 years after discovery no other major offshore development has reached that milestone as quickly the closest took roughly three years longer we expect our fifth development Uaru to start up in the fourth quarter in LNG we're continuing to strengthen our portfolio cumulative LNG production and PNG has now surpassed 100 million tons with plans on track to further grow PNG production with the Papua LNG project where we agreed to increase our working interest and assume operatorship in Mozambique we reached an agreement with ENI that will increase our operated interest in Rovuma LNG to 50% and exit our non-operated acreage position together these developments represent a significant step forward in building an advantaged LNG portfolio we're also continuing to build our low carbon solutions business we received approval for the Rose carbon storage project and began carbon capture and storage operations for Nucor our third CCS startup for a third party customer and second this year technology continues to drive performance across the business in the Permian we're the only operator currently using automated drilling rigs we have three in operation today in addition to significantly improving safety they are delivering some of the strongest drilling performance in our fleet we expect to expand their use to about 25% of our Permian fleet next year and approximately half by 2028 helping us continue to grow US production safely and at a lower cost structural cost savings since 2019 are 16.9 billion dollars well on our way to 20 billion dollars of cumulative savings by 2030. our stronger earnings power was reflected in 15.4 billion dollars of gap earnings and 25.7 billion dollars of cash flow from operations this quarter that financial strength gives us the capacity to keep investing in advantaged opportunities while returning cash to shareholders this quarter we invested 7 billion dollars in the business and returned 9.4 billion dollars to shareholders through dividends and share repurchases today we announced a 4% increase in our dividend per share marking our 44th consecutive year of annual dividend per share growth we also announced plans to maintain share repurchases at 20 billion dollars in 2027 assuming reasonable market conditions reflecting our confidence in the strength of the business and our strategy to consistently grow shareholder distributions across commodity cycles finally I'd like to recognize a positive development in Europe as you all know I've been very critical of European policy makers and their ill-informed attempts to reduce emissions with impractical regulations that suffocate their economy and weaken the continent's energy security they've done a lot of damage that their citizens will be paying for far into the future the EU methane regulation was the most recent example we support the objective of reducing methane emissions and we've backed that support with action Since 2016, we've reduced methane intensity by more than 60% and recently received gold standard recognition from the UN's oil and gas methane partnership.

Darren Woods07:27

The problem with the methane regulation is the unachievable schedule. The EU passed the law and set a compliance date without putting in place the regulations needed to implement it.

Darren Woods07:43

They in effect required companies to follow a rule book before the rules were written. The result was an unworkable compliance problem for industry. We made clear that ExxonMobil would comply with the law and without a workable path to do so we would stop importing into Europe.

Darren Woods07:55

Fortunately last week the European Parliament voted to delay implementation by three years giving the global industry time to implement systems to comply. once the steps required to comply are defined.

Darren Woods08:44

We are encouraged by this decision and hope it is a sign of things to come the message is simple sound policy must work in practice it should reduce emissions without sacrificing affordability reliability or energy security it also shouldn't seek to penalize companies that are meeting the critical needs of their people stepping back the third quarter reinforced the strength of our strategy and the value of choices we've made over many years the results we're delivering today were made possible by disciplined investments through the last decade and we're not done we'll continue to invest and strengthen the business helping meet society's need for reliable affordable energy and products while growing earnings cash flow and long-term value for shareholders thank you

Jim Chapman09:46

Thank you Darren before we kick off Q&A just one housekeeping item to note unlike the approach of the last several years we do not plan to host a formal corporate plan update event in December instead following approval of this year's plan by our board of directors we will reaffirm key 2027 planning metrics through a press release later this quarter and we expect to provide additional color during our fourth quarter earnings call in late January we continue to be enthusiastic about our outlook and our execution against the long-term plans we have previously communicated so with that we can move to Q&A throughout Q&A references made to earnings may be related to adjusted earnings and as a reminder we ask each participant to keep it to one question and operator we'll ask you to please open the line for the first question

Questions and answers

Operator10:02

Thank you. Today's question and answer session will be conducted electronically. If you'd like to ask a question please do so by pressing the star key followed by the digit five on your telephone. Our first question will come from Devin McDermott with Morgan Stanley.

Operator10:04

Your line is open please go ahead. ahead.

Devin McDermott10:57

Hey good morning thanks for taking my question. So I wanted to start on morning wanted to start on refining it was really strong operational and financial results this quarter and it looks like you're also able to optimize feedstocks to improve Asia throughput a bit in light of everything going on but I really wanted to dive in further Darren on some of your comments around the what's next you're one of the only companies that's materially expanded US refining capacity over the last decade with the Beaumont project that you highlighted you've been a leader in reconfigurations you got another one underway in the US Gulf Coast so it's like looking beyond the near term how are you thinking about the longer term outlook for refining what does that mean for your appetite for further expansions reconfiguration projects and give us some details on the specifics or steps that you're undertaking to continue to boost the profitability of that business

Darren Woods13:24

Sure and thanks for the question Devin as you know we've been really on this journey of transforming the competitiveness of our refining circuit by investing selectively and refineries which have scale which have an integrated portfolio of high value products whether it's lubricants chemicals high value petroleum products and so the work we've been doing is either investing to improve the yields and make them more competitive on a global cost of supply curve or and for refineries that didn't have the scale or some of that diversified product slate looking to find value where others see more opportunity than we do and so we've been on that journey I think we're at a stage today where the portfolio we have we feel real good about and the organization's now been very focused on how can we continue to high grade our product slate and improve the yields across those refineries and that's in our traditional petroleum products but we're also you know expanding the aperture and not limiting those facilities to historical products but thinking more broadly about how can we transform further transform hydrogen carbon molecules to make products that meet the needs of modern life and you know some of those examples that we've been talking about more broadly hydroxima and carbon materials and in my view is we'll continue to look for ways that we can leverage existing facilities to continue to make products that have high margins high value in the short term you know what we see is an opportunity to invest at a much lower than grassroots cost you can think about you know leveraging the existing facilities and infrastructure at a site you can bring on capacity at you know half the cost roughly of grassroots facilities so the economics work very well and it's just a function of what technology can you bring to bear and with our now you know global technology organization and the focus that the organization has on growing earnings and delivering bottom line value we're finding more and more opportunities so today we're investing in Baytown our plans include investments in Baton Rouge and Beaumont and that will significantly improve our production of diesel chemical feedstocks and lubricants and so that's the path we're on

Neil Hansen14:16

Yeah and Devin maybe I can provide just a little bit of context on the benefit that we're seeing from having that approach of investing based on long term fundamentals having the financial capacity the capital discipline to do that if you just look at the diesel yield that that was mentioned we're up about three and a half percent higher on diesel yield compared to 2019 for this year alone that represents another one and a half billion of quarterly margins or if you look at it from a year-to-date perspective it's three and a half billion so that that approach to investing is really resulting in a more competitive more resilient business and I think we highlighted in the slides that on a constant margin basis those investments have improved that volume and mix combined with lower structural costs have tripled the underlying unit earnings of energy products since 2019.

Devin McDermott14:21

Great results appreciate the thoughts thanks

Operator14:24

Thank you

Operator14:30

Your next question will come from Neil Mehta with Goldman Sachs your line is open please go ahead

Neil Mehta15:00

Yeah good morning Darren and team want to spend some time on capital returns another dividend bump this morning but also gave some clarity into 2027 where you fix the buyback at around 20 billion dollars so just your perspective on that and that 20 billion dollars is that a variable payment or should we think of it as fixed in other words if oil was not $120 and oil was $60 is that still a commitment that you'd be able to make

Darren Woods17:32

Yeah sure good morning Neil thanks for the question I'll I'll start off here and then let's see if the Neil here wants to jump in with any comments but you know the way you know from the time really early on that I got into the job we've been really focused on breaking out of this commodity cycle and you know chasing the cycle but instead trying to drive a consistency across the business and you know that manifested itself very early on by investing counter cyclically which was at the time pretty unusual in the industry and we continue to stay very focused on that that we do not want to be subject to the market forces and have to flex our what we believe are foundational value pillars with capital investments based on the commodity cycle we want to ride through those similarly we want to provide a level of certainty reliability in a shareholder distributions and primarily manifested in a continuously growing dividend that's something we've talked about for a long time and our track record demonstrates our commitment to that 44 consecutive years of increasing annual dividends and so we're our strategy is to map a path to continue on that pace and obviously to do that and remain robust to bottom of cycle conditions you want to be very very cognizant of the dividend obligation that you create with that strategy because from our perspective you know we're not going to ever cut our dividend so any increases we add becomes an obligation that we've got to commit through to the future share buybacks help us maintain that and so you can think of the strategy as we continue to grow dividends we continue to buy back shares and we maintain a fairly consistent level of dividend obligation we think makes sense and we do that across the cycles And so in the good times when prices are high and incomes high cash generations and high we don't get over exuberant and commit to things that we don't feel like we can sustain for the long term and likewise and when times are a little tougher and you're at the bottom of cycle we don't pull back from that commitment and continue and we use the balance sheet to supplement that and we think over time that results in a more effective capital allocation strategy one that's more consistently engaged in the marketplace with respect to buybacks and one that satisfies our shareholders with a continued growth that they can count on

Neil Hansen19:02

Yeah and Darren maybe just to add I mean our ability to undertake that strategy and eliminate really the distribution volatility across cycles with a you know a deliberate growth in the dividend and rateable share purchases you're only able to do that if you have the financial capacity to do it and you know as we've talked about that is something that's really important to us we further strengthen that balance sheet this quarter lowering net debt by more than 9 billion our net debt to capital is the strongest in the industry and really stronger than any maybe except for one large cap industrial so you have to have the financial capacity to be able to provide that that certainty or less volatility in your distributions across cycles and we've talked about you know it's the 44th year in a row that we've increased the dividend and if you look back from the time that the ExxonMobil merger occurred we have bought back 345 billion in shares and that represents across that time frame which is about 27 years an average about of 13 billion of share buybacks every single year so again the strategy to do that only allows you you're only allowed to execute that strategy if you have the financial capacity to do so and if you think back to the beginning of this year at the beginning of the year we were actually leaning into the balance sheet a little bit to keep those distributions consistent of course now in this price and margin environment we're building cash but that financial capacity allows you to undertake that strategy.

Neil Mehta19:06

Thanks, Neil.

Neil Mehta19:09

Thanks, Darren.

Operator19:17

Your next question will come from Arun Jayaram with JPMorgan JPMorgan your line is open please go ahead.

Arun Jayaram19:19

Yeah good morning Darren and Neil

Darren Woods19:20

Morning

Arun Jayaram19:53

I was wondering if you could take a step back good morning and discuss your global gas strategy you announced kind of increasing your interest in Mozambique and recently in Papua I was wondering if you could just talk about those projects obviously you're ramping at Golden Pass and perhaps you could weave in just maybe a little bit an update on Qatar which are clearly a pillar of your natural gas portfolio.

Darren Woods23:15

Sure happy to do do that Arun thanks for the question I would say maybe just starting with the fundamental strategy and where you've seen us increase our ownership and then move into operatorship is that's pretty fundamental from our perspective you know over the last decade we have really concentrated on growing a capability set that essentially is the best in the industry with respect to developing projects we've developed I think best in the industry technology capability and we've you know we've established a global operating organization to continue to increase the differentiation we have in our ability to operate facilities and from my perspective those three areas technology projects and operations are fundamental value pillars that form the foundation for everything else that we do and in order to bring that advantage to bear and have it manifest itself in returns and bottom line results is we've gotta operate facilities and bring that capability set to each of the projects in each of the operations we're involved in so that's I would tell you know a fundamental strategy that we're executing across the portfolio and you're seeing that today in our LNG portfolio and some of the changes that we recently announced with respect to Papua and Rovuma and part of that is making sure that we have a share that's large enough to warrant the dedication of resources so that's I would say what you see playing out in the short term here that we've announced you know I think more longer term we have we recognize the role that natural gas is going to play in powering the world far into the future and bringing those capabilities to bear to meet that need we're growing our natural gas and LNG portfolio and our intention is to continue to do that so you see continued growth the steps that we're taking in Mozambique and Papua Papua New Guinea are I would say you know stepping stones and actually represent what we think are even greater opportunities in those areas to grow the gas business and so very focused on that and using our equity portfolio then trade around the world and so that's what you see kind of happening and having supply points geographically distributed that brings a lot of optionality and flexibility to supply the customer base with respect to Qatar I don't have much of an update I think he's been out very explicit about you know what they see happening with the damages they've had at their facilities I would just say we continue to see Qatar as being a incredibly important source of supply for the world for LNG that somehow some way that the issues in the Middle East are going to have to be resolved and the straits going to have to open because those resources are critically needed and we have a continuing to commitment to Qatar to participate in their business and their ventures with them and continue to find ways to maximize the value and I see that relationship you know going far into the future.

Arun Jayaram23:19

Thank you.

Operator23:22

Thank you.

Operator23:27

Your next question will come from Bob Brackett with Bernstein your line is open please go ahead.

Bob Brackett23:45

Good morning had a question around golden pass third party data suggests it's approaching nameplate capacity on train one you've got train two and three coming next year what have you learned from train one and how should we think about the pace of ramp of train two and three

Darren Woods25:11

Yeah thank you Bob good morning you're right we've made good progress on train one obviously you know we had the challenges a while ago with the contractor that we had engaged going bankrupt it's been a challenge to come in and take it over like we did and progress it on the schedule that we did and so I think everything that we learned through that process and bringing on train one and some of the challenges we've experienced in that have been learned and embedded in what we're doing with train two and train three so we have very high expectations that as we bring those trains on that we're going to see all the benefits of working through the challenges on train one we're making good progress on train two our expectation is you know we're going to basically be substantially complete by December start the facilities commission and get that underway and then expect to achieve mechanical completion on train three in mid 2027 is kind of the time frame that we're working on but I I think our organization have really leaned into the opportunity there and we've challenged ourselves to make sure that everything that we've learned through this challenging period with the contractors and then working with the remaining contractors and with Qatar Energy that we take those and build them into the go forward plans.

Darren Woods25:15

Feel pretty good about that.

Bob Brackett25:16

Very good thank you.

Operator25:19

Thank you.

Operator25:26

Your next question will come from Stephen Richardson with Evercore your line is open please go ahead.

Stephen Richardson26:02

Hey good morning Darren I was wondering if you could come back to 48 you know you hit your Permian guidance number earlier in the year productions holding in there from you know our you know from the outside perspective I was hoping you give us a sense of what you're seeing in the program I'm assuming you know you're pushing forward with some of the efficiencies and some of the technologies and you know your 2030 numbers haven't changed but how should we think about the kind of cadence of either growth or capex changes as we get into 27 from 48

Darren Woods28:17

Yeah thanks Steve appreciate the question you're right we've made good steady progress in the Permian you know we never we've always said that production you know be a bit lumpy as we come in and so when we talk about a year in number you know and what you've seen in this case is we've achieved that a little ahead of schedule that's not inconsistent with I think our history where we're as the work in the wells are coming on we you know we're managing that we're not real focused as you know on necessarily the volume target it's really around making sure that we're executing it efficiently deploying the capital efficiently and then very importantly leveraging the technology work that we've been doing to maximize the value of that development project that's been one of the I think real challenges is I feel really good about the effort between our the operation and the technology organization around continuing to innovate and find opportunities to deploy you know first in the world approaches to what we're doing there in the Permian and I would tell you the energy level in the company and the expectation of meeting the challenge I laid out several years ago about doubling recovery you know we think there's a line of sight to that it's really a function of deploying the technology and then giving it time to manifest itself and I think that's probably the biggest frustration is with the size of that development as we start to feather in these technologies see some early signs of improved productivity just takes time for that to manifest itself you know in the portfolio given the base size of it but we feel really good about what we're seeing and we're early in I would say the demonstration of the benefits but extremely enthusiastic with what we're seeing and I think as we get a little more time under our belt little more wells where that's deployed and a little more run time on those wells where we've deployed it we'll continue to adjust what we expect to deliver based on what we're learning there but I would say i'm very very optimistic

Stephen Richardson28:20

Thank you

Operator28:23

Great thank you

Operator28:28

Your next question will come from Betty Jiang with Barclays your line is open please go ahead

Betty Jiang28:55

Hi good morning uh Steve um team me up perfectly because I have a follow-up on the Permian technology discussion um and I want to specifically if I can ask about secondary recovery technologies just wondering if there's things that you have tested to date and how big that opportunity could be in helping you achieve that aspiration of doubling resource recovery

Darren Woods29:00

Yeah, thank you Betty. I think you touched on a really important

Darren Woods29:19

Element of that meeting that objective. So yes it will be an important part of achieving the ultimate objective and yes the team is working on ideas for how we can improve secondary recovery and I think again in that space are pretty enthusiastic.

Darren Woods29:29

What I will tell you is in order to maximize the opportunity set there the primary recovery needs to be

Darren Woods30:16

Optimized and thought about with that in mind as well and so it's not just come back around and think about it after you finish the primary it is you've gotta think about secondary as you're developing your plans on the primary and that understanding and the interdependencies of the technologies and how we're thinking about it we feel really really good about and so my sense is that piece of the equation will start to manifest itself further down the line probably you know much more materially in the outer years beyond 2030 than what we're seeing here in the early years which is really focused on the primary side of the equation but absolutely critical part of what we're trying to do and the team's very focused on that as well

Darren Woods30:18

Thanks for the question.

Betty Jiang30:18

Thank you.

Darren Woods30:22

Yep you bet.

Operator30:29

Your next question comes from Doug Leggate with Wolfe Research your line is open please go ahead

Doug Leggate31:02

Thanks good morning everyone um Darren I realize you're not going to do an update in December but the portfolio seems the longer term portfolio seems like it's continuing to evolve with some of the changes you've made specifically LNG but so I wonder if you could just touch on how you see the trajectory evolving post 2030 I know it's early but I want to be specific on Guyana because you've had a number of additional discoveries it looks like you're maybe lining up a ninth or a tenth boat there any color you can offer would be great thanks

Darren Woods31:47

Yeah well as usual Doug you're you kind of right in my way of thinking with respect to you know going longer term we are very clearly focused as an organization and all the businesses and centralized organizations you know are clearly planning beyond the 2030 horizon because in this business you've gotta think long term and be trying to develop discrete plans well well past any horizon that we I think the street cares about and so we have been working those plans we've got a pretty good line of sight to those plans beyond 2030 and frankly the thing that we're

Darren Woods33:27

Working on is increasing the level of confidence and specificity of those opportunities before we kind of bring them out and start talking about them publicly so we're working to bring that and to get it out so people can see the things that we are planning to do beyond 2030 but your observation is is the right one which is we've got a really good portfolio of projects going to manifest itself well beyond 2030 and we're anxious to share that with you but want to make sure that when we do that we've got the level of confidence necessary to make those commitments because as you know when we put a plan out and within the organization and externally I view those as commitments and so that's how we think about it we don't want to get ahead of ourselves but it's looking pretty promising your point about Guyana I think it's a good one there's we think there's still a lot of room to run the team's you know working on that pretty focused and I think again we will continue to bring that on you you've accused us of being conservative in the past I I share that conviction with you that's generally my management philosophy when I'm working with our teams is you know and it comes back to making sure that we can deliver on the commitment so we don't want to be forecast heroes here but my expectation is we'll do better than what we've come out and talked about simply because as we go forward we'll learn and we'll take those learnings into what we're doing and we'll get better than what we thought and hopefully as we go forward we'll keep rolling that those expectations out and defining those for you more clearly

Neil Hansen34:49

And and maybe just to highlight a few other areas you know Doug you mentioned Guyana obviously going to be a continue to be a contributor to that growth post 2030 we talked about Papua and Rovuma I think another key critical driver for our growth going forward is exploration you know and it's a core component of our portfolio we're committed to it we I think invested a billion dollars a year over the last five years you mentioned the discoveries in Guyana but we've also had discoveries in Angola and Cyprus and we continue to expand our acreage portfolio and the rights for exploration so I think that's going to continue to be a key part of that story post 2030 and then if you look at the product solution side we've talked a lot about this strategy of upgrading lower value products into higher value products that's certainly the case with the investments that we've made to produce more diesel but it also extends to areas like graphite materials and Proxima systems so those areas again I think will be a key part of that that growth going 2030 so it's certainly Guyana but it is a portfolio of activities with a strong focus on the desire to continue to grow the business after 2030 and certainly excited when we get to the right point to disclose those plans with you as we go forward

Doug Leggate34:52

Appreciate that guys thanks so much

Darren Woods34:53

Thanks Doug.

Operator34:56

Thank you

Operator35:03

Your next question will come from Biraj Borkhataria with RBC your line is open please go ahead

Biraj Borkhataria35:33

Hi there, thanks for taking my question um I wanted to follow up on Mozambique um it's a very interesting announcement today where you it looks like you're swapping the interest in the floating development for the larger onshore part and I completely understand the rationale for that deal on both sides I think it makes a lot of sense um just wondering if you're still targeting an FID for you this year and could you just touch on the sort of remaining gating factors or anything outstanding there thank you

Darren Woods36:58

Yeah, I appreciate the question, Baraj. I'm glad that you see the logic behind what we're trying to do there in Rovuma and yeah we are working with the partners and the government to advance that FID we're still very much expect to FID that here as we get through the back end of this year that is the current plan and expectation but and as you know with all these projects you've got a number of stakeholders and a number of hurdles to clear and the team's working with those folks to kind of clear all those but we're pretty optimistic that we'll close it by the end of the year here and then we'll get busy on execution I do feel you know again by bringing that making that change and bringing the upstream part of that development into the portfolio and managing it as one continuous project we're already beginning to see opportunities to improve upon the capital and make that even more efficient so feel really good about the changes that we've made here and the ability now today to bring the full weight capabilities and capacity of ExxonMobil to the full development end to end development so I think we're going to see some benefits from that that we've yet to quantify so feel good about the changes that we've made there and looking forward to getting started on it thank you

Biraj Borkhataria37:01

Understood thank you very much Darren

Operator37:07

Your next question will come from Manav Gupta with UBS your line is open please go ahead

Manav Gupta37:27

Good morning you have one of the biggest global refining footprints I'm trying to understand given all the capacity downtime that we are seeing globally how long do you think it will take to you know replenish this depleted product inventory I'm trying to understand when could we see normalization of the refining cracks that are out there right now

Darren Woods38:23

Well thanks for the question Manav as you know it's a hard one because there are a lot of variables impacting that that frankly I certainly don't have a line of sight on in terms of how they're going to play out so way we've been thinking about it is you know different scenarios and what could develop but you know I think you know the first thing that's ultimately going to have to happen is the world's capacity has to get back to where it was prior to these conflicts and that's certainly the Strait of Hormuz opening up and the attacks on refining capacity in the region to stop and for those facilities to get repaired and then product moving out of them consistently that's going to be a critical piece of the equation right now I'd say a third of the shortage out there roughly is just the inability to get clean products out of the Middle East and onto the world markets.

Darren Woods39:04

The impact of Ukrainian bombing Russian refineries is significant as well you know Russia we estimate kind of see roughly about half of Russia's refining capacity is been taken offline so you know a country that used to be a net exporter of clean products is now a net importer and so that's a material impact on the world balances and that I suspect it's going to take some time ultimately when the conflict stops for those refineries to get rebuilt so my expectation is and again that's probably a little over a third of the capacity that you know that's capable of restoring

Darren Woods39:44

Because two things have to happen. Stop the hostilities and then start the repairs um and then the third area where there's an opportunity is you know China's got capacity they could bring online and run a little higher rate to put more exports out there. I think that's the other piece of the equation that can help bring markets back into balance. So I think you know those are the three variables that I see difficult to predict any one of those frankly my guess would be it will take you know certainly well through next year before we see things getting back you know closer to normal but it could be longer than that frankly.

Neil Hansen39:47

And I think you know Darren without

Manav Gupta39:48

Thank you so much.

Neil Hansen40:36

Without knowing exactly how or when things will normalize I think the one thing we are seeing is our ability um to impact supply at scale and you certainly seen that with the investments that we've made over the last decade and our ability to bring on additional supply when the world needs it but it's also the operational excellence I mean the fact that we've been able to run our refineries at record utilization levels around 84% running our Gulf Coast refineries at crude unit utilization around 100% so even though we don't know exactly how things will normalize and when they'll come back to normal levels what we are seeing is the organization is responding and our ability to provide supply to society at scale I think is a differentiator.

Manav Gupta40:40

Thank you so much.

Neil Hansen40:43

Thank you, Manav.

Operator40:49

Your next question will come from Jean Ann Salisbury with Bank of America. Your line is open. Please go ahead.

Jean Ann Salisbury41:10

Hi, good morning. You noted in the prepared remarks that trading and optimization volumes are 4x what they were in 2019. Can you talk about whether that's mostly due to a structural strategy to build that business and maybe any specific examples that you've done there versus 2026 being um an extremely volatile year and perhaps not representative of the norm?

Darren Woods44:26

Sure, thanks for the question, Jean Ann. Let me maybe just start with a broader context because I think you know there are trading organization has over the years people have kind of come in and out of that asking questions. You know the way we look at that for a long time we didn't have what I would say is a typical trading organization and in 2018 as we moved the organization to value chain so kind of coming out of that functional construct that we had where we had refining and you know marketing separate but instead piecing all that together and running the business as a value chain we recognize the opportunity to take advantage of these integrated global businesses take advantage of the scale that we had and the breadth that we had across the world and across these integrated value chains to use trading as a channel to optimize our assets and I think that's a really important distinction between maybe many of the trading houses out there who tend to be more you know taking positions on a marketplace our trading organization has been focused and is focused on maximizing the value of our assets and so I look at it as just another channel to market and their job is to basically and understanding the value chain you know having a line of sight all along that value chain we should be better informed and able to optimize and take positions and move barrels in a way that maximizes the value of the assets and that's exactly what you see happening and so rather than you know simply going out and taking positions or capturing arbitrages there's I think a much more sophisticated approach to thinking about our footprint and how we maximize the value of that and we look at trading as a channel to market just like we do retail and INW and other parts of the business and so that's the context I'd ask you to think about you know that organization and their primary objective and that has been working very very well and we have slowly been growing it and you know that's the other thing is we're not rushing to bring in what I would say are you know traditional merchant traders we're looking to bring in people who recognize this is a unique opportunity to contribute to the value of the corporation in a unique way with access to a very unique and advantaged portfolio and so it's a very different approach to trading and we're finding the right kind of people who value that approach and so that's been you know a slow growth and one that we're quite willing to take our time on to make sure we have the right capability in place that's been happening and what you see in terms of the volume one is just because that organization continues to bring people on and get bigger and my expectation is we'll continue to do that in the right way with the quality of the individuals coming in the key kind of critical path in terms of how quickly we grow and then the final point I'll make is you know you can't discount the market and the size of the opportunity so certainly that is weighing in on the results but I would say it's on top of that broader strategy and approach that we're taking.

Neil Hansen45:24

Yeah maybe just to reiterate that point I mean as you would imagine those optimization capabilities are critically important and they're more manifest when trade flow shift like we're seeing and so that that global reach that we have gives us more options to secure feedstock redirect molecules move products where they generate the most value for society and for the corporation and so as Darren mentioned it is a channel for us it is an opportunity or a way for us to maximize the value of our assets and the products that we sell it gives us the optionality and the flexibility and it particularly is manifest when you think when you see things like today when those trade flows shift but our ability to then place products where they generate the most value where they're most needed the ability to place you know feedstocks in our refineries is is a true differentiator for us but it's again all around this desire to maximize the assets and the value of our fully integrated value chain.

Jean Ann Salisbury45:28

Very Very clear. Thank you.

Operator45:31

Thank you.

Operator45:37

Your next question will come from Jason Gabelman with TD Cowen. Your line is open. Please go ahead.

Jason Gabelman46:06

Yeah, hey, hey, thanks for taking my questions. Um in the spirit of kind of exploring the portfolio beyond 2030 you know there's been reports both on your interest in Venezuela which maybe has moved to the fore a bit more quickly than we had anticipated earlier in the year and then also interest in expanding your operational footprint in Kazakhstan with the Kashagan project.

Jason Gabelman46:11

So I was hoping you could just touch on your aspirations in both of those regions. Thanks.

Darren Woods49:08

Yeah sure happy to do that Jason I think first of all I would just caution everybody to take what's reported in the press with respect to Venezuela and ourselves with a little pinch of salt I think sometimes there's some maybe a little more exuberance than is warranted you know we're in my mind we're not behind or ahead of anything that I talked about going all the way back to January you know we recognize and I think the world does that Venezuela has a lot of resource it's a challenge resource with respect to the qualities of that that crude and the challenges of producing it so we absolutely see a need for that that resource at some point in the future but it's going to have to be produced and developed at a very competitive cost in order for it to compete on the world markets that's going to require a scale and a technology capability and operating capability that frankly very few companies have we believe we have advantages in that space and therefore ultimately will have a role but like I said earlier it's going to require you know some substantial changes to the way things have historically been done in Venezuela there is progress being made on those areas working on fiscal regimes working on legal regimes working on investor protections number of things that are kind of in progress but there's a way to go and I would just tell you know we're going to make sure that before we commit that those are in place and we have confidence that we have a viable project that's sustainable and will generate the returns required to compete in our portfolio and I expect that to take time so we're working our way through it we're not in a rush we think that opportunities going to be there for a while and so we're trying to be methodical and thorough and I'd say that's how it's working with Kazakhstan I just think again another potential opportunity I think you know some of theconstructs of the past have introduced a lot of complexity that hasn't allowed us and the industry to effectively develop those resources and so we've left a lot of I think potential trapped and as these ventures kind of proceed we think there's an opportunity to optimize that and we're working with the partners there we're working with the governments to see if we can't find a better win-win proposition for all the players there including ourselves and for the government of Kazakhstan and we see a line of sight to that but again it's it'll take time to work our way through and we're we've got some very constructive discussions happening today and hopefully those will come to fruition sometime here in the near future but it's a work in progress.

Jason Gabelman49:12

Got it. Thanks for taking the questions, Darren.

Darren Woods49:16

You bet. Thank you.

Operator49:22

Your next question will come from Sam Margolin with Wells Fargo. Your line is open. Please go ahead.

Sam Margolin50:05

Hello. Thanks for taking the question. I guess continuing on the theme of bringing an advantage to wherever you are, you know on the inorganic side in the industry transaction pace is picking up you know some of what's going on is is probably small for you but nevertheless it's it seems fairly active and you know you're moving to a place where the balance sheet has you know a tremendous amount of capacity and so just wondering what your latest thoughts are on the capability to do something inorganic and you know deliver some of your proprietary edge to an asset that that could stand for some improvement.

Darren Woods51:13

Yeah well thank you Sam I I agree with your kind of your thesis in the way you're thinking about it and frankly going all the way back when we started this effort to really focus on these core capabilities try to build an advantage so we can improve you know our own operations and organic investment opportunities as well as inorganic one so our view is this lever was going to help us across the board and frankly as we look forward with the ambitions that we have to grow earnings and cash flow we're going to need every lever available to us so we're going to need exploration and going out and finding new resources we're going to need the ability to optimize the resources that we have and maximize recovery and then we're going to need to take advantage of inorganic opportunities that are value accretive to the portfolio and so I would tell you we're actively working all aspects of that because we recognize it that all aspects are going to be required so I I think that opportunity is there obviously it's a function of finding the right

Darren Woods51:39

Partner organization and one where you know you can arrive at a mutually agreed you know value share but I definitely think there's something there and we're continuing to work it and I my suspicion is that as we get better and realize the advantages more deal space opens up and potentially more opportunity but that's a kind of a I'd say an evolving space.

Neil Hansen52:45

You know Sam maybe I mean you referenced this in your question that that we bring you know a set of unique competitive advantages that that inherently create deal space and if you just look back on the prior acquisitions we've done recently taking you know for example with Pioneer and we've been able to double the synergies of that acquisition from 2 billion to 4 billion a year you look at Denbury and the acquisition of the green line and the impact that's having on our approach to building out a CCS business I mean we now have I think 11 MTA under contract across eight customers so you know the history and the experience we've had is we've been able to demonstrate bringing those advantages those things that we do really well more unique than anyone and we're able to accrete additional value to shareholders and so again as Darren mentioned certainly a tool that that will continue to look at but we have to be patient and find those opportunities where we can bring that value and accrete additional value for shareholders.

Sam Margolin52:49

Thank you so much.

Darren Woods52:52

Thank you Sam.

Operator52:58

Your next question will come from James West with Melius Research. Your line is open. Please go ahead.

Unidentified speaker53:00

Thanks and good morning Darren.

Darren Woods53:01

Morning James.

Unidentified speaker53:54

Something we've been looking into morning something we've been looking into and thinking more about and occurred over a longer period of time is is as Exxon has evolved over the last decade or two you've taken much more of an operatorship or a control stake in projects and I'm assuming that's something that you've done you try to do this but you've also proven that you have that operational expertise and so curious if you could just talk about has this been a disciplined approach is this the approach going forward is this how you're thinking about the business and are we thinking about it correctly that you have meaningfully increased your operatorship percentage over time

Darren Woods55:58

Yeah thanks James you're spot on I think what you're observing is is is a reflection of the approach that we're moving towards and we won't be able to execute it in all circumstances but if you go back to the value thesis that we've been executing for the last decade it's really you know we are uniquely positioned with a scale that frankly none of our competitors have and a portfolio of businesses with the synergies that none of our competitors have and so as we started transforming the organization and creating value chains and then centralizing these core capabilities so think technology projects and operations we're now for the first time in the corporation's history capable of learning you know taking all the best practices and learnings across our portfolio and in projects whether those practices came from our you know traditional or history historical refining projects organization or upstream projects organization or chemical projects organization or in fact from our technology company those are all now in one organization and that that organization is taking the best of the thinking that we have across the company irrespective of what business or function it was in and applying that to the portfolio and for projects which was the first organization where we started that we've seen huge benefits and improvements and kind of bringing the best thinking of ExxonMobil across our entire portfolio together into and to bring those to bear on our toughest challenges technology was the second core organization that we did that and again we're seeing the real benefits of that where rather than organize ourselves around the company and the businesses that we've set up instead organize ourselves around the capabilities and then apply the best capabilities to the hardest problems.

Darren Woods56:26

And you know I give you just one quick example of how that paid off the lightweight propant that we're now seeing deployed throughout the Permian and bringing significant value that was refining technologists who work on cokers applying their understanding of coke morphology to a challenge in the upstream organization and coming up with a brand new a cost effective propant.

Darren Woods57:37

So we wouldn't have had that without the technology and we're seeing that again across all aspects of technology and so that's bringing a huge advantage and then we just for the first time ever in the company established one operating organization so that you know people running LNG facilities are you know working with and collaborating with you know people who run refineries or you know traditional chemical plants and same with our offshore platforms so so today we're seeing a great mix across that and that learning is unique to ExxonMobil in the industry and that and we see huge value from that and then in order to realize that value we've gotta be in a position where we can bring it to bear on the projects that we're engaged with which means we need to be an operator and in order to justify that effort and that allocation of resource we need to be an operator with you know a significant level a significant share of the project and so that's how we're thinking about it we think we bring real value there we bring value to our partners and we bring value to the resource owners and to date that's really beginning to demonstrate itself

Neil Hansen58:21

Yeah maybe I'll just add Darren that that desire for more direct control over operations and project execution really is the direct result of the confidence we have in the organization and we've talked about the operational excellence this quarter but you look at Darren mentioned global projects and their performance over time you know we're executing double the number of mega projects than any of our IOCs and that performance is is yielding results they're delivering projects at 20% lower cost and 20% faster schedule time and so so part of this desire to take more direct control of operations and project execution is the organization continues to perform really well in those areas.

Unidentified speaker58:27

Very clear. Thanks, guys.

Operator58:27

Thank you.

Operator58:35

We have time for one more question. Our final question comes from John Royall with Piper Sandler. Your line is open. Please go ahead.

John Royall59:03

Hi, good morning. Thanks for taking my question. So my question is on the Middle East. You guided to a 350 KBD impact unchanged in 4Q and I know a lot of that is wrapped up in Qatar LNG where you've had some damage but can you speak to the egress side in the UAE in terms of you know what you've been able to get out of the strait or divert barrels elsewhere applicable and just you know how that's evolved over the past quarter or so since the MOU ended.

Darren Woods1:00:12

Sure. Yeah. Thanks for the question, John. I think you're right. The the impact that we're seeing from a volume standpoint is concentrated in Qatar and the loss of those trains and then the inability to flow at the rates and transport LNG at the rates we were prior to the conflict UAE production has been back up again essentially consistent with where we've historically been the sales though have been deferred just based on the constraints and so what we're seeing is while the production is being booked the realization of that production is in delayed simply as a function of the logistics and the ability to move the barrels out our we're working to basically improve upon that I know the UAE is very focused on developing more logistics routes to get barrels out and we're working with them on that so our expectations with time we'll start to see the sales revenue catch up with the production numbers but that today is certainly impacting us in the short term.

John Royall1:00:15

Thanks for the question.

Darren Woods1:00:16

Thank you.

Jim Chapman1:00:28

Alright thanks John thanks everybody for joining this call and for your questions we're going to post the transcript of this call to the investor section of our website by early next week and have a good weekend