Exxon Mobil Corporation (NYSE:XOM) Q3 2023 Earnings Call Transcript

Exxon Mobil Corporation (NYSE:XOM) Q3 2023 Earnings Call Transcript October 27, 2023

Operator: Good morning everyone and welcome to Exxon Mobil Corporation’s third quarter 2023 earnings webcast. Today’s call is being recorded. I’ll now turn it over to Ms. Jennifer Driscoll. Please proceed, ma’am.

Jennifer Driscoll: Good morning everyone. Welcome to Exxon Mobil’s third quarter 2023 earnings call. We appreciate your joining the call today. I’m Jennifer Driscoll, Vice President, Investor Relations. I’m joined by Darren Woods, Chairman and CEO, Kathy Mikells, Senior Vice President and CFO, and Neil Chapman, Senior Vice President. This presentation and pre-recorded remarks are available on the Investors section of our website. They are meant to accompany the third quarter earnings release, which is posted in the same location. Shortly, Darren will provide brief opening comments and reference a few slides from his presentation, then we’ll take your questions. In conjunction with our recent announcements regarding Pioneer Natural Resources and Denbury, we’ve included additional information on Slide 2 related to comments or information included in today’s presentation.

An aerial view of an oil and gas refinery, with its tall smoke stacks and complex piping.

Please be aware that this presentation is not intended to be a solicitation of any vote for approval. During today’s presentation, we’ll make forward-looking statements which are subject to risks and uncertainties. Please read our cautionary statement on Slide 3. You can find more information on the risks and uncertainties that apply to any forward-looking statements in our SEC filings on our website. Please note that we also provided supplemental information at the end of our earnings slides, which are posted on the website. Now please turn to Slide 4 for Darren’s opening remarks.

Darren Woods: Good morning. Thanks for joining us today. We delivered another robust quarter of earnings, cash flow and shareholder returns, reflecting our ongoing efforts to structurally improve our company and drive sustained industry-leading performance. We reported $9.1 billion of earnings, an increase of $1.2 billion compared to last quarter. While the market provided a bit of tailwind, our success was enabled by the continued strength of our operational performance, which reflects the hard work of our people across the company. Whether it’s continuing to drive efficiency in maintenance and turnarounds, running at high throughputs and utilization rates, or delivering big projects at first quintile cost and schedule, the excellent work of our people underpins our results and sustains our drive to deliver industry-leading performance in everything we do.

The work is fundamentally strengthening the underlying earnings power of the company, establishing a strong foundation to deliver industry-leading results in any price environment. Consistent with our capital allocation strategy, we continue to share the success of the company with our shareholders. This morning, we were pleased to announce a 4% increase to the quarterly dividend to $0.95 per share. This year is our 41st consecutive year of annual dividend increases, a record that we’re proud of and that we know our investors value highly. We continue to strengthen our portfolio of businesses by investing in advantaged high return opportunities while divesting businesses that are no longer a strategic fit. During the quarter, we closed on the sale of our Thailand refinery, bringing our year-to-date cash proceeds from asset sales to more than $3 billion.

We followed this in October with the close of the refinery sale in Italy. Recently announced acquisitions are great examples of the and equation, meeting the world’s needs for energy and essential products and reducing emissions. Acquiring Denbury strengthens our position to economically reduce emissions in hard-to-decarbonize industries, which today have limited practical options. We see the potential to drive strong returns with the capacity to reduce the nation’s carbon emissions by 100 million tons per year - that’s 20 times our current CO2 off-take agreements with CF Industries, Linde and Nucor, which by themselves could reduce CO2 emissions by an amount equivalent to replacing two million cars with EVs, roughly the same number of electric vehicles currently on U.S. roads.

We expect to close the transaction in early November with Denbury shareholders scheduled to vote next week. Earlier this month, we signed an agreement to acquire Pioneer Natural Resources in another all-stock transaction. This combination will further strengthen our already advantaged upstream portfolio and create significant value for the shareholders of both companies. Together, we will recover more resource more efficiently and with a lower environmental impact. We plan to accelerate Pioneer’s Permian net zero ambition by 15 years and fully leverage their advances in water recycling. This deal is a win any way you look at it - good for our shareholders, good for the environment, good for the economy, and good for U.S. energy security. Neil will say more about the benefits of the transaction in a few moments.

We’re also continuing to drive profitable growth organically. In energy products, we achieved the highest third quarter refinery throughput on record, driven by our Beaumont refinery expansion. At a time of strong demand and low inventories, this project is providing 250,000 barrels per day of much needed new capacity to the market. In addition, we recently started up our Baytown chemical expansion, which grows volume and improves mix. It provides 750,000 tons per year of new performance chemical capacity, including 350,000 tons of linear alpha olefins, marking our entry into this growing market. We delivered another quarter of strong operational and financial performance with earnings of $9.1 billion and cash flow from operations of $16 billion.

These results reflect the structural earnings improvements we’ve delivered over the past several years as we’ve improved our mix of assets and driven significant structural cost reductions, while maintaining our focus on industry-leading safety and reliability. We have lowered our structural costs by $9 billion since 2019, meeting our plan, and expect to deliver additional savings in the fourth quarter. We continue to identify opportunities to improve our base operations, including enhancing our maintenance and turnaround processes, strengthening our digital capabilities, and optimizing our supply chain. Our year-to-date production of 3.7 million oil-equivalent barrels per day is on track with our full year guidance. Capex investments of $18.6 billion year-to-date are on plan.

We expect 2023 capex to finish the year at the top end of our guidance range as we continue to invest in high return advantaged projects, our top priority for creating long term shareholder value. As always, we remain focused on sharing the company’s success with our shareholders. We delivered $8.1 billion in shareholder distributions in the third quarter, $3.7 billion in dividends, and $4.4 billion in share repurchases. With that, I’ll turn it over to Neil.

Neil Chapman: Thanks Darren. Good morning everyone. As we said with you recently, Pioneer is arguably the best Permian pure play company with the largest undeveloped Tier 1 inventory in the Midland basin. Pioneer’s premier asset base is matched by the quality of its workforce. Its employees are innovative and hard working and possess a deep knowledge of unconventional operations in the Permian. When you combine these attributes with our technology and industry-leading operational capabilities, we’re confident we can unlock far more value together than either of us could do alone. We expect synergies of approximately $1 billion before tax annually, beginning in the second year post closing, and an average of about $2 billion per year over the next decade driving double-digit returns.

This transaction not only strengthens our current position but it also transforms our portfolio, increasing our exposure to short cycle low cost to supply liquids in the United States. Based on our initial assessment, we expect our combined Permian production to increase to approximately 2 million oil-equivalent barrels per day by the end of 2027. Downstream, this merger also increases the integration between high value light Permian crude and our premier refinery and chemical footprint on the U.S. Gulf Coast. Finally, we’ve said many times that we’re working to solve the end equation, providing the energy and products society needs and reducing emissions, both ours and others. This transaction reflects both parts of our commitment. We will increase our Permian production with plans to accelerate Pioneer’s net zero plan to 2035 from 2050, and decrease our combined Permian emissions.

With that, I’ll pass it to Jennifer.

Jennifer Driscoll: Thank you Neil. We have two quick announcements to share with you. First, please mark your calendars for our annual corporate plan update scheduled for Wednesday, December 6 at 9:00 am Central time. [Indiscernible] and Kathy are going to provide formal remarks and take live questions from our sell-side analysts [indiscernible]. Second, please keep an eye out for our 2024 Advancing Climate Solutions report. We expect to publish it online in mid-December. With that, we’re going to begin our Q&A session. Please note we continue to ask analysts to limit yourselves to one question as a courtesy to others; however, please remain on the line in case we need any clarifications. Operator, please bring us the first caller.

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