Exxon Mobil : First Quarter 2022 Earnings - transcript

ExxonMobil First Quarter 2022 Earnings Call Transcript

This transcript presents ExxonMobil's first quarter 2022 earnings call held on April 29, 2022.

Operator: Good day, everyone. Welcome to this ExxonMobil Corporation First Quarter 2022

Earnings Call. Today's call is being recorded. At this time, I'd like to turn the call over to the Vice

President of Investor Relations, Mrs. Jennifer Driscoll. Please go ahead, ma'am.

Jennifer Driscoll: Good morning, everyone. Welcome to our first quarter earnings call. We appreciate

your interest in ExxonMobil. Joining me today are Darren Woods, our Chairman, and Chief

Executive Officer; and Kathy Mikells, our Senior Vice-President, and Chief Financial Officer.

The slides and our prerecorded remarks were made available on our Investor Section of our website earlier this morning along with our news release. In a minute, Darren will provide opening comments, and reference a few slides from that presentation. Then, we'll conduct a question-and-answer session.

We expect to conclude the call by about 9:30 AM Central Time. Let me encourage you to read our cautionary statement, which is on slide 2. Please note we also provided supplemental information at the end of our earnings slides, which are posted on the website. Now, I'll turn the call over to Darren Woods.

Darren Woods:Good morning, and thanks for joining us today. As we laid out at our most recent

Investor Day, our goal is to sustainably grow shareholder value through the execution of our strategic priorities as seen on this slide. As we think about recent events, our job has never been clearer or more important.

The need to meet society's evolving needs reliably and affordably is what consumers and businesses across the globe are demanding, and what we delivered this quarter. First, wecontinue to build our competitively advantaged production portfolio, bringing new barrels to market today driven in part by the high-value investments.

We continue to progress through the pandemic-driven downturn in prices. A prime example of the benefits of our continued investments is Guyana. This quarter saw the successful start-up of

Liza Phase 2. Production is ramping up ahead of schedule, and is expected to reach capacity of 220,000 barrels of oil per day by the third quarter this year.

Combined with Liza Phase 1, it will bring our total production capacity in Guyana to more than 340,000 barrels per day. Our third project, Payara, is running ahead of schedule with startup now likely by yearend 2023. Yellowtail, the fourth and largest project to date on the Stabroek block, received government approval of our development plan, and is on schedule to start up in 2025.

Further adding to our portfolio, we have made five new discoveries this year that have increased the estimated recoverable resources to nearly 11 billion oil-equivalent barrels. Turning to the US, we continue to grow production in the Permian Basin. In March, we produced about 560,000 oil-equivalent barrels per day on pace to deliver a 25% increase versus 2021.

Looking forward, we are also growing our globally diverse portfolio of low-cost, capital-efficient

LNG developments. In Mozambique, the 3.4 million-ton-per-year Coral South Floating LNG production vessel is being commissioned after arriving on site in January. Coral South is on budget with the first LNG cargo expected in the fourth quarter.

In addition to investing in high-value opportunities in our existing businesses, we are also advancing opportunities in our Low Carbon Solutions business. During the quarter, we announced plans to build a large-scale hydrogen plant in Baytown, Texas. We anticipate the facility will have the capacity to produce up to 1 billion cubic feet of hydrogen per day.

Combined with carbon capture, transport, and storage of approximately 10 million metric tons of

CO2 per year, this facility will be a foundational investment in the development of the Houston

CCS Hub, which will have the potential to eliminate 100 million metric tons of CO2 per year, and represents a meaningful step forward in advancing accretive, low-carbon solutions.

We also reached a final investment decision to expand another important carbon capture and storage project at our helium plant in Wyoming. In addition, we received the top certification of our management of methane emissions at our Poker Lake development in the Permian.

We are the first company to achieve this certification for natural gas production associated with oil. At the end of the first quarter, we implemented a series of organizational changes to further leverage the scale and integration of the corporation, improve the effectiveness of our operations, and better serve our customers.

We combined our downstream and chemical operations into a single Product Solutions business.

This new integrated business will be focused on developing high-value products, improving portfolio value, and leading in sustainability. As a result of these changes, our company is now organized along three primary businesses: Upstream, Product Solutions, and Low Carbon

Solutions.

These three businesses are supported by corporate-wide organizations including projects, technology, engineering, operations, safety, and sustainability. Before I cover our financial results, I wanted to provide our perspective on the market environment. In the first quarter, a tight supply/demand environment primarily due to the low investment levels during the pandemic contributed to rapid increases in prices for crude, natural gas, and refined products.

Clearly, the events in Ukraine have added uncertainty to what was already a tight supply outlook.

Brent rose by about $22 dollars per barrel or 27% versus the fourth quarter. Today, natural gasprices remain well above the 10-year historical ranges driven by tight global market conditions and ongoing European supply concerns.

The same tight supply/demand factors have also pushed refining margins near the top of the range. Chemical margins in Asia have fallen sharply with product prices lagging the steep increases in feed and energy costs. In our case, the US ethane feed advantage provided a significant positive offset versus this global view.

With that market environment as the backdrop, let me turn to our first quarter financials. Earnings totaled $8.8 billion, excluding an identified item, the after-tax charge associated with Sakhalin-1.

As you know, we are discontinuing our Sakhalin-1 operations in Russia, which represented less than 2% of our total production last year, about 65,000 oil-equivalent barrels per day, and about 1% of our corporate operating earnings.

As the operator, our priority continues to be the health and safety of our people, and the protection of the environment. Of course, we remain in full compliance with all US sanctions, and are closely coordinating with the US Administration. Turning to structural savings, we continue to drive further efficiencies now delivering more than $5 billon of annual savings versus 2019.

Capex totaled $4.9 billion for the quarter in line with our full-year guidance of $21 to $24 billion.

Cash flow from operations was $14.8 billion, maintaining our strong balance sheet. Our debt-to-capital ratio remains near the low end of our 20%-25% target range, while our net debt-to-capital ratio dropped to about 17%.

We returned $5.8 billion to shareholders, of which about two-thirds was in the form of dividends and the remainder share repurchases, consistent with our previous program. We said during our

Corporate Plan Update in December that we expect to repurchase $10 billion dollars of our shares.

This morning we announced an increase to the program, up to $30 billion dollars in total through

2023. This move reflects the confidence we have in our strategy, the performance we are seeing across our businesses, and the strength of our balance sheet. Before I leave you with a few key takeaways, let me share one other decision we made this month with respect to our workforce.

Continually investing in our people and maintaining a strong culture are core strategic priorities and essential to achieving our long-term objectives. As part of that effort, we are tripling the number of employees eligible for stock grants by bringing in high-performing employees at earlier stages of their careers.

Our goal is to increase our people's ownership in the company, and importantly in our financial and operating results. Secondly, in June, we will implement a 3% off-cycle compensation adjustment in the US to maintain competitiveness. Our compensation and benefits programs are a key element of our total value proposition that enables us to continue to attract and retain the best talent in the industry.

Let me leave you with a few key takeaways. We had a strong first quarter, and I'm proud of the organization's progress. The impact of weather on the upstream volumes and derivatives and timing impacts in the downstream obscured a strong underlying performance. We anticipate an absence of these impacts and strong refining margins will position us very well in the second quarter. We are making outstanding progress on our high-value growth developments in

Guyana, the Permian, and LNG. Our new Corpus Christi Chemical Complex is up and running ahead of schedule, and generated positive earnings and cash flow in its first quarter of operations.

We have strengthened the balance sheet and are creating value for shareholders through an attractive dividend and increased share repurchases. We are advancing hydrogen, biofuels, and