Exxon Mobil Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 2, 2024

Key Takeaways

  • In 2023 ExxonMobil delivered $36 billion in earnings, strong cash flows and a 15% return on capital employed, effectively doubling earnings on a constant price basis versus 2019.
  • The 2024 plan calls for $23–25 billion of investments in advantaged, low‐cost assets, pursuing $15 billion of structural cost savings by 2027 and over $20 billion of lower‐emission opportunities targeting 15% returns.
  • The Pioneer Natural Resources acquisition, expected to close in Q2, will add value‐accretive upstream assets, create significant synergies and accelerate Pioneer’s net‐zero ambitions by 15 years to 2035.
  • ExxonMobil’s operational excellence drove industry-leading safety and environmental performance, record upstream and refining reliability, and top-quintile cost and schedule delivery on large projects.
  • The company expanded low-carbon solutions by entering the lithium business (targeting supply for ~1 million EVs by 2030), piloting new direct air capture technology and integrating Denbury’s CCS network.
AI Generated. May Contain Errors.
Earnings Conference Call
Exxon Mobil Q4 2023
00:00 / 00:00

There are 14 speakers on the call.

Operator

Good morning, everyone, and welcome to the ExxonMobil Corporation's 4th Quarter 2023 Earnings Webcast. Today's call is being recorded. I would now like to turn the call over to Ms. Jennifer Driscoll. Please go ahead, ma'am.

Speaker 1

Good morning, everyone. Welcome to ExxonMobil's 4th Quarter 2023 Earnings Call. We appreciate you joining the call today. I'm Jennifer Driscoll, Vice President of Investor Relations. I'm joined today by Darren Woods, Chairman and CEO and Kathy Michels, Senior Vice President and CFO.

Speaker 1

This presentation and pre recorded remarks are available on the Investors section of our website. Are meant to accompany the Q4 earnings news release, which is posted in the same location. Shortly, Darren will give you an overview of our 2023 In conjunction with our recent announcement about acquiring Pioneer Natural Resources, We've included additional information about the transaction on Slide 2. Please be aware that this presentation is not intended to be a solicitation of any vote or approval. During today's call, we'll make forward looking statements, which are subject to risks and uncertainties.

Speaker 1

Please refer to 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. Note that we also provided supplemental information at the end of our earnings slides, including an overview of full year results, which are posted on the website. And now I'll turn it over to Darren.

Speaker 2

Good morning and thanks for joining us. I want to start with the theme of the quarter, which frankly has been a theme of the year, Excellence in execution, whether it's operating our facilities, building projects, deploying technologies, trading, marketing, Sales, supply chain or any of our other activities, the men and women of ExxonMobil are setting in holding themselves to very high standards as they execute their responsibilities. Their hard work and commitment drove the strong results we reported today and are the foundation of our success. At the end

Speaker 3

of the day, it's all about our people that make the difference

Speaker 2

and are delivering industry leading results. And nothing is more important than the safety of our people. Keeping them safe requires intense focus and relentless discipline, 24 hours a day, every single day. For many years, we've outperformed industry benchmarks for workplace safety. Over the last several years, we've been implementing improved systems for managing both personnel and process safety, leveraging best practices from across our company and industry, our own and others.

Speaker 2

These efforts are paying off with continued improvements in the number and severity of incidents. The discipline needed to consistently deliver industry leading safety performance manifest itself in all of our work. We see it in our project teams. We're delivering large capital projects at top quintile performance on cost and schedule. We see it in the reliability of our operations where we achieved record performance in both the upstream and refining.

Speaker 2

We see it in our environmental performance where we set several new records and we see it in the successful management of transformational reorganizations we've made over the last several years. Results are clear. By any measure, 2023 was an outstanding year. We delivered $36,000,000,000 of earnings, strong cash flows and a 15% return on capital employed. Our strategy introduced in 2018 coupled with consistently strong execution is delivering results that lead industry across a range of metrics, including earnings and cash flow growth, total shareholder distributions and total shareholder returns since 2019, the baseline year of our plans.

Speaker 2

On a constant price basis, we more than doubled earnings in 2023 versus 2019, demonstrating the improved earnings power of the company. The growth and profitability reflects significant progress high grading our portfolio of assets through advantaged projects, divestment of less strategic operations and significant cost reductions. During the year, our divestments generated more than $4,000,000,000 of cash proceeds. We also announced 2 value accretive acquisitions. Danbury, which closed in November, provides opportunities to profitably accelerate our low carbon solutions business with a compelling end to end customer decarbonization offer.

Speaker 2

Pioneer, which is expected to close in the second quarter will further differentiate our advantaged upstream portfolio. The synergies will create significant shareholder value accelerate Pioneer's net zero ambitions by 15 years to 2,035. In 2023, We made significant advances in a number of innovative solutions. We entered the lithium business where we see an opportunity to supply approximately 1,000,000 electric vehicles per year by 2,030 with economically advantaged production that has a much smaller environmental impact than today's supply. In the carbon capture and storage space, we recently completed the construction of a pilot plant to further develop a unique proprietary technology, which has the potential to significantly lower the cost of direct air capture.

Speaker 2

We also launched Proxima, a thermostat resin with a high value in use for coatings, infrastructure, automotive parts and wind power made from low value components used in gasoline. We also took a further step in reducing cost, leveraging scale and improving effectiveness with the formation of 3 new centralized organizations, Global Supply, trading and global business solutions. This change provides additional opportunities to grow across a broad portfolio of critical business capabilities. Today, we're convinced that no other company can match the depth and breadth of development opportunities that ExxonMobil offers. It's no surprise that for the 11th year in a row, We were recognized as the most attractive U.

Speaker 2

S. Employer in the industry for engineering students. This is another key competitive advantage. Our plan for 2024 remains anchored in our existing strategy, building on world class execution and the performance we delivered last year. We set a high bar for ourselves across all aspects of the business from safety to operational excellence to financial performance and have confidence in our team's ability to consistently deliver.

Speaker 2

For 2024, we expect to invest $23,000,000,000 to $25,000,000,000 to grow our portfolio of advantaged low cost of supply assets, further shift our product mix towards higher value, higher margin products and reduce emissions, both our own and others. Our plan also continues to structurally reduce cost to achieve $15,000,000,000 in structural cost savings through 2027. We have opportunities to enhance supply chain efficiency, further improve maintenance and turnarounds, modernize data management and simplify business processes. In low carbon solutions, we'll continue the integration of Denbury and look to add additional customers to our U. S.

Speaker 2

Gulf Coast network. As we noted during the corporate plan update in December, we're now pursuing more than $20,000,000,000 of lower emission opportunities, evenly split between reducing our own emissions and reducing third party emissions. Overall, Our portfolio of low carbon investments is expected to generate returns of approximately 15%. Our upstream portfolio will be further transformed when we the transaction with Pioneer. By combining the capabilities of our 2 companies and leveraging the advances we've made in technology, We expect to recover more resource more efficiently with lower emissions.

Speaker 2

We'll provide more detail about this compelling combination at our spotlight event following the close. Our results in 2023 once again demonstrated the strength of our strategy. As I reflect on the past year, I have tremendous pride in what our people accomplished and a strong level of confidence and our continued ability to lead in the years ahead. Finally, I want to thank our shareholders for their continued confidence and support. Now I'll turn it back to Jennifer.

Speaker 1

Thank you, Darren. Now let's move to our Q and A session. As a courtesy to others in

Speaker 4

the queue, we ask all

Speaker 1

of our analysts to limit themselves to one question. However, please remain on the line in case we need any clarifications. With that operator, let's open the line for our first question.

Operator

Thank you. Mrs. Driscoll, the question and answer session will be conducted The first question comes from Neil Mehta of Goldman Sachs.

Speaker 5

Yes. Good morning, Darren, team, and congrats on the Strong results. My question was around the structural cost savings. So we're at $9,700,000,000 versus 2019 And targeting $15,000,000,000 by 2027, can you talk about the progression over the next couple of years? What are the key buckets and milestones we should be watching out for as it relates to those cost savings?

Speaker 3

Sure. Thanks, Neil. Good to hear from you again. Maybe just start with a little bit of perspective. If you think about Where we have been driving efficiencies and what lies behind the improvements cost, we've made tremendous changes in the organization.

Speaker 3

And we've been doing that each successive year, sequenced with respect to what needs to come 1st, 2nd and third to make sure that we can effectively manage that. We're still in the early stages of Taking advantage of all the changes that we've made going back in time with our Global Technology organization, with our product solutions organization that frankly brought refining together with our marketing and then together with chemical. And so a lot of restructuring, a lot of And all the organizations see a path to significantly improved effectiveness in executing the business. And to your point, significant path to efficiencies. On top of that, we just Launched our global supply chain organization.

Speaker 3

We just launched our global business solutions organization and our trading organization. So They're early in their process, and all of them have seen significant opportunities for efficiency. So I would say The 9.7 is a reflection of the hard work coming from the reorganizations that we've done and we're early in that and then we've got additional reorganizations to take advantage of. That $15,000,000,000 that you referred to is not a target. It is in our plans and the plans reflect what the organizations are working on.

Speaker 3

So what are some of the areas? We've seen a lot of benefit today by a centralized approach to enhancing our maintenance and our turnaround processes. We've taken a lot of cost out with respect to that. We see an to bring further cost reductions there. The supply chain organization brings a huge opportunity.

Speaker 3

In the past, we had very fragmented supply chain organizations across all of our businesses. We've now consolidated all that. We see a lot of opportunities to bring together our data and our processes and harmonize those and do those consistently across all of the organization. And then a lot of continuing optimization within the base business, taking advantage of the new construct and learning from one another. That's a huge part of the go forward reduction.

Speaker 3

So I would just tie all that to the ongoing change and the fact that we now have a good line of sight across all of our organizations around the best way to do things and the most efficient ways to do things. I'll hand it over to Kathy, if there's anything to add to that.

Speaker 4

The only other thing I would add is how we're looking to leverage technology to both drive incremental efficiencies, but as importantly to drive effectiveness. So things like how we use artificial intelligence and chat box in our Customer care centers, right, which gives our customers better service and obviously, that drives efficiency for the company. How we use predictive analytics and things like driving maintenance turnarounds to top kind of quintile type performance or similarly how we use those predictive analytics in our drilling and fracking centralized operation here in Houston. Bringing together our information technology organization with our engineering and research organization will just further enhance, I think, how overall we as a technology company fundamentally try to use technology to both drive efficiency, but obviously to drive value in the business.

Speaker 5

Thank you, Kathy. Thanks, Deriv.

Speaker 3

You bet. Thank you, Neil.

Operator

The next question is from Doug Leggate of Bank of America.

Speaker 6

Thank you and good morning everyone. Darren, 2018 was

Speaker 7

a long time ago obviously and A lot has changed since you pushed the doubling of cash flow from 25 to 27, including much greater and perhaps faster progress in Guyana. So I guess my question is, where do you where would you suggest we are in 2024 and moving towards that doubling of cash flow target? And specifically, what should we read about your CapEx comments in terms of the timing of Guyana as part of that target?

Speaker 3

Good morning, Doug. Thanks for the question. Maybe I'll start with the back end of your question around the CapEx. And I mean, it should be clear, hopefully it's clear, we've provided guidance in a range in CapEx to give you a perspective of when we start the year based on the plans that we put together the previous year where we think we're going to end up in our spend across the year. Obviously, as we're going through the business, each of the businesses are clear on their objectives to find value accretive opportunities and to capture those as quickly as possible.

Speaker 3

So we've got an ongoing process. If we see an opportunity that we weren't aware of At the time of putting together the plan, we're not constraining our activities based on some artificial number or the guidance that we've put out, we're very focused on making sure that it's going to be an effective use of capital that we can efficiently execute what's required for that capital and then that there's value behind it and there's an advantage in it. So that's How we're managing what we talked about in the release with respect to our CapEx in 2023 reflects just that, incremental optimizations as we're going through the year. And my view is we'll continue to do that as we go forward into the planned years. Obviously, we've given you some guidance that we believe reflect where we'll end up.

Speaker 3

But as we work the opportunities, we're very focused on that. I think The short term, what we've done with Guyana, you're seeing today in Payara, when we brought that online and frankly, in January, well ahead of our plans reached nameplate capacity and part of that was around the optimization of the drilling and making sure that we had what we needed to bring that up quickly. In terms of the broader objective to get to 2027, I mean, we're on that plan and we're actually delivering the value that we laid out in 2018. So I feel really good about the progress we've made. We noted in the release that If you look at just from 2019, the year before the pandemic, the advances that we've made in the business, we've on a flat price, Take margin, take price out of it.

Speaker 3

We've doubled the earnings capacity of the corporation from 2019 to 2023. We've grown earnings at on a compounded annual basis by 40%, greater than 40%. We've grown cash flow from operations Almost 20% greater than 15%. So I think significant progress we've demonstrated at the work that we're doing, Projects that we put in place, the reorganizations that we've executed, the cost that we're cutting out of the business are all driving us towards this improved valuation and frankly, the plans we have going forward are going to continue to do that. So the targets that we've laid out, what we communicated in our December company plan release.

Speaker 3

Basically, those are plans and we feel that we're right on track, if not slightly ahead of delivering on those. Kathy, anything to add to that?

Speaker 4

Yes. I mean, Doug, I'll just try to grind kind of back to those numbers a little bit more just so you understand it. On an earnings basis, we actually more than doubled earnings on again that constant price basis that we used in our corporate plan, which Darren is referring to in the numbers that he just mentioned. So I would absolutely say we are ahead of our plan in terms of what it is that we're achieving. And it's that earnings improvement that is flowing through to cash flow.

Speaker 4

And so as you think about Cash flow, our earnings expectation in the corporate plan, in terms of doubling it out to 2027, it's well ahead of doubling And then those earnings just flow through to the cash flow growth. So I would describe us as being ahead of plan in terms of where we today and feeling very good about the future.

Speaker 7

I think we would concur.

Speaker 6

Thank you very much indeed.

Operator

The next question is from Devin McDermott of Morgan Stanley.

Speaker 8

Hey, good morning. Thanks for taking my question. So I've gotten some inbound this morning just on the 2023 Spending and Darren, you kind of alluded to it in your response to the prior question, you're able to pull forward some CapEx for Guyana and Permian in 4Q. I was wondering if you could talk a little bit more about the drivers of that types of efficiencies that you're seeing and what specifically you're to accelerate and then how that influences your outlook for spending and production in both out for both assets in 2024?

Speaker 3

Well, if you think about sure and good morning, Devin. You think about the complexity of what the organizations are dealing with and in particular the upstream that as we as you go through course of the year, and they're drilling and they're collecting data and we're seeing the production, we've got a real time optimization loop that takes the experience that we've had and build it back into our go forward plan. So it is a very dynamic process. And we've got, to Kathy's point, a lot of we're using a lot of technology to make sure that we're learning from all the data that we're collecting as we go and that we're adjusting our plans to optimize value. And I would tell you, the organization understands it has an obligation to drive value and to find the value opportunities and to make sure that when we decide to spend money that We know that spend is going to be productive spend and that we're going to be efficient in executing that spend.

Speaker 3

And beyond that, they're not constrained. If they find that we're going to hit a constraint or we're going to hit something that's not incorporated in the plans, we have a conversation about that. So I would tell you it is a very Well controlled process. Your point about capital coming forward in the Q4, I would tell you the decisions that we made that led to going a little above the guidance weren't made in the Q4. Those were made as we were going through the year with a recognition that if we took some of the steps as we were going through the year that as we got to the end of the year, those numbers would grow and potentially bud up on slightly above the guidance and we made the decisions as we were going.

Speaker 3

And it's a very dynamic process. So I think that's how I would think about it that we're going to continue doing that going forward. Obviously, the Permian, we continue to learn with the technologies that we're bringing in there, the techniques that we keep evolving. So my expectation is we'll continue this to adjust as we go to maximize the value of the production and what we're learning through the technologies that we're deploying. And then with Guyana, I mean, don't underestimate the complexity of these reservoirs and the the organization has.

Speaker 3

So as they're drilling and gaining information, we're optimizing that as we go as well. And if we see an opportunity to advance The development and bring it forward and bring NPV with that, we'll take that. And so I would just tell you, it's hard to predict because what are you going to learn? I mean, if we knew that now, it wouldn't be a learning, we'd know it. It would be built into the plan.

Speaker 3

So it's hard to really predict the learning piece of it. Anything to add, Kathy?

Speaker 4

I'd just say if you look at the specifics of what we delivered as a result of actually Spending a little bit more on CapEx, I think you see that just goes hand in hand to how we drove value for shareholders. So in the Permian, we had guided to 600,000 kind of oil equivalent barrels, we came in at 620. In Guyana, we had said $380,000,000 we came in at $390,000,000 right? And you think about where we're at in Guyana today and we've got Prosperity, The 3rd boat which is in the Payara development already up to nameplate capacity as we stand here today. And that's because we made the decision, to drill more wells to ensure that we could get that boat up to capacity as quickly as possible and our absolutely delivered on that.

Speaker 4

So those were the right economic decisions that drove value for our shareholders. Great.

Speaker 8

Yes, I agree the strategy is certainly yielding great results. Thanks so much.

Operator

The next question is from John Royall of JPMorgan.

Speaker 5

Hi, good morning. Thanks for taking my question. So my question is on Payara. You've expressed some confidence that you can ultimately get above the nameplate as you have on the first two platforms. Should we expect kind of a continuous ramp towards a higher number or does it run closer to nameplate for a period of time and then further unlock happens Kind of more in a step change.

Speaker 3

Yes. Good morning, John. Thanks for the question. I think, just maybe Step back and talk a little bit about the process. Organization does its best to design the projects for the capacities that we want to deliver.

Speaker 3

And And as they hand the cap, the projects group hands that off to the operating group. They're obviously as they begin operation testing to see where we're at with respect

Speaker 9

to constraints and every the advantage

Speaker 3

that we have here is that, The advantage that we have here is that we've tried to stick to some consistent design. This design 1, build many concept, we've tried to the extent possible maintain consistency from boat to boat. Obviously, as the subsurface and the complexity of the developments change, we have to make adjustments. So it's not Quite a cookie cutter approach, but we tried to maintain a level of consistency. 1, because that keeps your capital cost down.

Speaker 3

But 2, it allows us to take the learnings from the previous boats and apply it to the one we just start up and advance things faster to do things quicker. And a great example for Prosperity is how quickly we managed to bring that unit up and get flaring down and get to nameplate capacity. That was we did that essentially at record times, which is a reflection of the fact that The organization as they've been bringing these units, these production units on online that they're learning and then taking those learnings forwarding it to the next post. So my expectation is you'll see us move faster and faster as we go. Difficult to predict exactly what that ramp up looks like the step changes, if you will, because it will be a function of what they bring into what the next constraint that they overcome to make we can continue to run those facilities safely within all the operating limits, but at the same time maximize their value.

Speaker 3

And so I would say take previous ramp ups as a basis and then our expectation is the organization will find ways to do it even better.

Speaker 4

And then if you don't mind, I'm just going to add because I know everybody is now going to be modeling what it's going to look like for the year. So this is just a reminder that at some point in the second half, we're working on the gas to energy project, right, and laying the pipeline down to bring that gas from Liza 1 and Liza 2 onshore to basically kind of plug it into the power plant that ultimately will drive down costs for consumers in Guyana and we will be taking Liza 1 and Liza 2 offline for a period of time as we kind of hook them up to that pipeline. So that's just a reminder that we'll have a little bit of downtime at some point in the second half.

Speaker 5

Thank you.

Operator

The next question is from Bob Brackett of Bernstein Research.

Speaker 10

Good morning all. At the risk of oversimplifying, if I think about 2023, it was a very strategy focused year, Denbury, Pioneer, Lithium. If I look at 2025, it's a major project delivery year. 2024, is this a year of execution or could there be some level of strategic interesting moves that we should think about?

Speaker 3

Yes, good morning, Bob. I would just say you have oversimplified it. I would start with every year as a year of execution. And I think it's the fact that we have managed maybe in comparison to some of our peers to make it look easy and have executed I think at a high level. Make no mistake, the organization that is a continues to be a real Challenge across all of our operations and I think the minimum limit of ExxonMobil have done an outstanding job of consistently executing to a very high standard as I said in my prepared remarks.

Speaker 3

So I don't want to take anything away from that. And I also don't want to suggest that we for a minute take that for it or take our eye off of that ball. And so that's job number 1. And even in bringing these projects online, that is takes a tremendous amount of focus and discipline from an execution standpoint. So that is job 1.

Speaker 3

And then obviously the strategy, that is also an emphasis every year. It's just as we've always talked about, it's really a function of can we find the right opportunities, the right equation It brings value to our shareholders and if it's M and A, it's got to be 1 plus 1 has to equal 3 or more. If it's a project, it's got to be advantage. It's got to position ourselves on the very far left hand side of the cost of supply curve. And so We've laid out what we know of and what we see ahead of us certainly in the capital standpoint, but as the organization continues to execute and continues to look for ways to translate the strategy into bottom line value.

Speaker 3

We find new opportunities and then we don't hesitate to go after those. If they meet our criteria with back to the advantages and they are within our ability to effectively execute. So I wouldn't say 2024, there's any different emphasis than there was in 2023. The project piece of it, frankly, that's the way the projects have been developed and kind of the work that's required to deliver those has led to that 2024 year of execution, but I wouldn't read more into that than just the scheduling of the projects. Very clear.

Speaker 3

Thanks. You bet. Thank you, Bob.

Operator

The next question is from Ryan Todd of Piper Sandler.

Speaker 5

Great. Thank you. Maybe if I could ask one with the Denbury deal now closed, Can you talk about what we might see over the course of the next year or 2, particularly on the carbon capture business? Should we start to see announcements or notable signs of acceleration or efforts on that side?

Speaker 3

Yes, sure. I think the Denbury acquisition, just maybe a slight update on that first is we brought we closed that we've been going through the integration process and frankly continue to be very pleased with what we see as the opportunities to integrate that with the work we're doing around our low carbon solutions business and carbon capture. So we see huge potential In terms of linking together all the opportunities to reduce emissions, high concentration emissions along the U. S. Gulf Coast and along that pipeline system.

Speaker 3

So the team is doing a lot of work around developing the business there, a lot of work with potential customers around how we can help capture their emissions and a lot of work around the operations and improving and growing the capacity of that pipeline. So all that's ongoing. My expectation is with time when we as we negotiate the opportunities with customers, we'll see more and more deals that bring emissions into that pipeline. That's certainly the plan. But I would tell you, We're very focused on building this business for the long term.

Speaker 3

If you think about what we're trying to do there with respect to addressing the risk of climate change and significantly reducing emissions for emissions for 3rd parties. That's a business that doesn't exist today anywhere in the world. We're trying to make sure that as The first mover here that we established a very strong foundation for business that we expect to be around for decades to come. And so My guidance to the team is while we want to move quickly to reduce emissions and to get customers and to grow the volume of we're reducing. We don't want to do that and sacrifice the value opportunity here.

Speaker 3

And so we're striking that balance. And I think what you'll see happen is We'll bring on customers and grow that business in a way that is value accretive and generates the returns that we need for the capital

Operator

We'll go next to Biraj Borkhataria with RBC.

Speaker 9

Hi, thanks for taking my question. I had a question on gas realizations because they were just well ahead of at least what we had modeled using the kind of rules of thumb and the portfolio mix you put out before. So is it just a case of the trading contribution coming into that number? Or is there something else driving that? And then just one quick clarification on the underlying cash flow from operations.

Speaker 9

Again, that was ahead of where the earnings beat would have suggested it would have been. So is there anything one off in nature in the CFFO number that we should be aware of 4Q? Thank you.

Speaker 3

Yes. I'll let Kathy address the cash flow thing and I'll just say from a gas realization standpoint, I don't think there's anything unique in terms of what was realized as we went through the quarter. Obviously, we've been growing Our trading business and that is going to manifest itself and our results we're going to see that in our energy business. We're going to see that in our gas business. So that will continue to kind of and as volatility changes and opportunities in the market change, we'll see that kind of ebb and flow.

Speaker 3

But expect to see with time a continued growth structural improvement in the earnings with the work that we're doing in the trading space. And then I think quarter on quarter, we're going to see changes in mix as we move across the quarters. And so we'll see some variation there. But I don't I wouldn't put anything structurally other than the trading work that we've been doing with and to our realizations. And I'll hand it to Kathy for any other comments on that and the Cash flow.

Speaker 4

Yes. And so I'll just speak specifically to cash flow from operations and I think you're referencing the quarter, but I'm to talk about the quarter and the year. Our cash flow from operations, if you look at the quarter was $13,700,000,000 If you working capital, we would have been at $15,900,000,000 You're mentioning a beat relative to the Street and so was there anything unusual going on? As I look at people's models, I think sometimes they struggle to get depreciation and amortization right. So that's only thing I'm going to speak to.

Speaker 4

And when we have a quarter where we're taking impairments then we get an increase kind of in terms of the non cash add back that flows through to cash flow from operations and we obviously took an impairment in the quarter. So that's my best guess As to anything that might be nuanced otherwise, no, nothing particularly unusual going on.

Speaker 9

Okay, understood. Thank you.

Operator

The next question is from Sam Margolin with Wolfe Research.

Speaker 11

Hello, good morning. Thanks for taking the question. I'd like to come back to CapEx if possible, just because When the organization is performing so well as it is, there's it feels like there's always going to be opportunities to pull something forward Or for people throughout the organization to kind of pursue their incentives and spend a bit more. And obviously, this is something that's been topic in the industry for a long time. And so, particularly like as we look at your Permian results, it looks like your 23 wells are still And everything is getting better.

Speaker 11

So I guess the question is, how do we think about this with respect to your planning when it feels like there's always going to constantly be opportunities for you to add kind of nickels and dimes to CapEx to do some quick and high return opportunities? Thank you.

Speaker 3

Good morning, Sam. I would I guess I'd take exception to the characterization that you've laid out there. It's not a function of the organization throwing additional nickels and and dimes. We have pretty focused work programs to drive value here. And Frankly, any discussion about spending additional money or making additional investments above and beyond, What we plan for has to come to the management committee.

Speaker 3

And so we've got pretty tight controls around making sure we understand what's the value proposition, how unique is the value proposition. This is not something we just turn loose to the organization and they start throwing on money as and when they see the opportunities to do that. So I think the characterization that it's hard to hang on to this. I would think I would point to the success that we've had to date where we've delivered what is a very accretive advantage set of capital projects. I think our track record demonstrates that we are not about going after volume or going after marginal Investment opportunities, these things have to be unique.

Speaker 3

The hurdle to get into the capital plan is pretty high. We have if you look across the industry, we have a clear of cost of supply, we know where we sit on the cost of supply curve. We know as new projects or opportunities come forward, we look at those in terms of where they sit from a competitive standpoint, they have to have a structural advantage, they have to be robust and resilient till it's bottom cycle conditions. If you lay all those conditions on, It's a fairly tight funnel that people have to get their spend through and that doesn't change. That has not changed.

Speaker 3

And so I would just say if we spend additional money, that money is going to deliver more than what was in the base plan frankly because it's on the margin. And I'll come back to at the end of the day, we're not judging ourselves By basing by hitting some number that we've or guidance that we've given from a year ago, we're judging ourselves on the ability to generate advantaged projects. And again, I'd just point you to the results that we were delivering. To grow earnings on a compounded basis at twice what the nearest competitor has done or to grow cash flow from operations at twice what the next nearest competitor has done. It doesn't come from investing in things that don't have the advantage that I just talked about.

Speaker 3

So I think our track record and the results that we're delivering demonstrate that the approach that we've taken here is working. And we're not going to vary off of that approach.

Speaker 5

And then I'd just

Speaker 4

Add one more comment and that is we almost take for granted how many projects we've actually been able to pull forward Sample of that, it was originally targeted to actually start up in 2024 and we were able to pull it forward. We were then able to pull forward incremental well drilling in order to get that FPSO up to operating nameplate capacity in an extraordinarily short amount of time. I'd say this is one of the areas that really differentiates ExxonMobil from other companies, our Top, really top performance and execution and pulling projects forward is always a positive economic decision, right? Because We're going to end up then getting the benefit of the profits from those projects sooner or later. So very much that's aligned with driving value, which is what sits behind all of our decision making.

Speaker 5

Thank you.

Operator

The next question is from Jason Gabelman of TD Cowen.

Speaker 12

Yes. Hey, morning. Thanks for taking my questions. I first wanted to get your take on the Outlook for the chemicals market going forward, 2023 was a bit of a trough year. Some The industry participants are saying maybe we're getting close to turning the corner, and that would be meaningful given all the underlying investments that Exxon has made in the chemicals business.

Speaker 12

So just wondering your view on for margin improvement and seeing the full force of some of those investments come through?

Speaker 3

Sure. Good morning, Jason. I think I would concur with your characterization of 2023 as being kind of at the bottom of the trough. It was Definitely a challenging year, well below I think the bottoms of previous cycles. But I would say that and we're quite Proud of the fact that the investments that we've brought on were earnings and cash positive in the bottom of the cycle, which frankly is exactly in line with I was just talking about the strategy that we have and the criteria that we require that they have to be robust to bottom of cycle conditions.

Speaker 3

And in the chemical business, we definitely demonstrated that, that The new projects that we've brought on that had some run time in them are earnings and cash positive even in these very challenging conditions. So I think like many others in the chemical industry, we'd like to see us come out of the trough. And when we do, our expectation is the capital that we've brought on will Obviously, performing even better with better margins. I would say as well with respect to turning points, we have seen some certainly saw in the Q4 some slight improvements. There's still a lot of capacity that's come on out there.

Speaker 3

We're still seeing reasonably good growth, particularly For ExxonMobil in our performance product category, we have set some pretty aggressive targets to grow our high performance high value chemical products and we're seeing that happen. So we feel really good about the pipeline and the development of ourselves. And then the question is when does the broader industry turn and you start to see margins improve. My expectation is 20 2024 might be marginally better than 2023, but we're not expecting significant change and the vector, but more of a gradual one. As we work our way through all the supply that's come on in the recent years and some of the supply will come on in 2020 in 2025.

Speaker 3

So I think it'll be a gradual recovery, but frankly, one that we feel very comfortable with based on the advantages that we have with our capacity, the advantages that we have with our footprint and the flexibility we have to optimize on feed and products. So, we're positioned for this kind of market. I think the results demonstrate that and we're going to ride it and see where the market goes.

Speaker 12

Got it. Thanks.

Speaker 3

You bet.

Operator

The next question is from Paul Cheng of Scotiabank.

Speaker 13

Thank you. Good morning.

Speaker 8

Good morning.

Speaker 13

Darren and Catherine, I want to ask about the trading operation. I think it Seems like it's a very good trading year for you and a lot of your peers in Europe. Can you help us to maybe quantify that what is the trading benefit for the year, Whether in terms of millions of dollar or in terms of improvement in the return and whether that Do you think that is repeatable? And after more than the last 2 or 3 years, what have you learned? Is there anything that you would do differently Going forward in your trading operation and whether you see the Q1 optimization opportunity set, is it Similar to what you've seen in the Q4 or is it getting worse or getting better?

Speaker 13

Thank you.

Speaker 3

Yes. Thank you, Paul, and good morning. I'll Give you a perspective and then let Kathy build on that. And maybe just to go back in time a little bit, we talked about the trading opportunity within Mobile for quite some time. I think there was some skepticism out there as to whether we could actually build that business.

Speaker 3

But the foundation of our trading operations is a function of the global footprint that we have, the span of the businesses that we have, the integrated nature of the businesses that we have that we felt like gave us a physical footprint and presence in markets all around the world to effectively trade on and to build a business from that footprint and obviously the perspectives and insights that come with operating that footprint in those mix of businesses. And that I would say as we've grown our trading capability on that premise, optimizing our assets, building on our sets that it has proven to be very effective that, that strategy is bearing out and that we see continued opportunity to grow that. And I think as we've talked about here, we were going to take a very measured approach And we weren't in a hurry, we weren't going to rush through this. We're going to make sure that what we do is structurally sound that we're not and that we're managing the risk as well as the rewards and we've been doing that. So, 2023, I think, was off of the highs we saw in 2022 because of where the market's at, but still reflected, I think, very solid contributions based on the capabilities of the organization that we've been building.

Speaker 3

And we've got more to do there. My expectation is that you will see improved trading results embedded in our businesses because frankly those that trading organization's objective is to enhance the value of the businesses. We're not we don't want a trading organization that's competing against the base business. We want a trading organization that's working with the base business to optimize value for the corporation. And they're doing that and those earnings accrue to the businesses that they're trading on behalf of.

Speaker 3

But I'm very pleased with what we saw in 2023. Obviously, the market in is going to have a function will function heavily or play a heavy function year in year in terms of what we actually deliver. But structurally, we've got a really sound base that we're growing and I think we're going

Speaker 2

to continue to see improvement in that space. Kathy, anything to add?

Speaker 4

Yes. The only other thing that I'd add to that is if you looked at our trading results on a year on year basis, On upstream, we were lapping kind of a big mark to market gain in 2022, right? So that impacted our results.

Speaker 9

And I've mentioned time and time

Speaker 4

again that quarter, Our results and I've mentioned time and time again that quarterly results, especially as a result of that movement in mark to market, will to ebb and flow and sometimes we get price timing nuances in the quarter. As we came to the end of this year, those price timing nuances that we saw in the Q3 had fully unwound by the Q4. So I think we start the year overall in a pretty good place.

Speaker 13

Catherine, is there Number you can share in terms of what's the contribution for trading for the year?

Speaker 4

No, we don't disclose that. And I think All our peers have a pretty high sensitivity to just competitive sensitivity in terms of Closing that number, but I think Darren, put overall things into a good context, which is last year was earnings for the company and it was record trading earnings. And so we had a strong result this year in trading, but it was down a bit on a year over year basis. And then I mentioned specifically in upstream that we were lapping favorability in terms of mark to market favorable gain in 2022.

Speaker 13

Okay. Thank you.

Operator

The next question is from Neal Dingmann of Truist.

Speaker 8

Good morning, Darren and team. My question is on the Permian, specifically your continued record production to play. It appears, at least from what I'm seeing going forward, your pro form a permitting activity is likely to continue trending higher. And I'm just wondering maybe Darren, how you'd respond to Maybe any critics who suggest all U. S.

Speaker 8

Companies should instead maintain flat production in order to, I guess, appease Saudi and the others maybe more so?

Speaker 3

Yes. Well, thanks for the question. No, I would just tell you there's we're not going to run the business to appease an external Internal member out there. I think the way we look at it is, can we find is It comes back to every dollar that we choose to invest and spend. Do we see a return?

Speaker 3

Are we convinced that we're effectively spending that money and we're efficiently. That's the criteria that we're using. That's the plans that we've built. We expect to grow our volumes in 2024 to about 6.50 kilobytes D. And then we're going to continue that growth through to the targets that we've laid out in 27 of about 1,000,000 barrels a day, close to 1,000,000 barrels a day.

Speaker 3

So that's the plan that we have. We're executing to that plan. And As we've said before, year on year, it's not straight ratable growth. It will be lumpy growth, but Over time, it will average about 13% and we haven't seen anything to date that would say that's going to change. Obviously, as we bring Pioneer in into the fold, we'll bring their production in and look to kind of optimize across That portfolio that both companies have and as we've said before that once we close on that, we'll come back out and have a spotlight We share what the implications of bringing these two companies together and the impact on our Permian production.

Speaker 8

Yes, makes a ton of sense. Thank you.

Speaker 5

You bet.

Operator

The next question is from Lucas Herman of BNP Paribas.

Speaker 6

Yes, thanks very much. And looks like I have the opportunity to talk with you. Following on from the Permian question actually, Darren, when you were asked about pace of growth in 2024 in the Permian, I think at the time of the capital budget release, one of the comments you made was a desire to build drilled on completed wells. And I just wondered whether you could talk a little bit around the concept of building inventory. Why the need?

Speaker 6

Why Put more wells into inventory. Is it very simply adding flexibility to the business in order to maintain production profile going forward? So what's the thinking? Thank you.

Speaker 3

Sure. Yes, no, happy to do that. And you remember correctly, we did say we were going Build some more DUCs. And I would think about that and you use the right word inventory Like any inventory that we have in the business, which is if you're optimizing what is a pretty complex system of drilling and fracking and managing simultaneous ops and how you schedule all that and how it interfaces with each other and the planning piece of it. You want to have a little bit of inventory that allows you to continue at a pace and manage around some of the complexities and conflicts that you have in developing the acreage.

Speaker 3

And you'll recall that what we are doing in the Permian and in the Delaware in is this manufacturing approach where we're laying out the spines and then executing like a manufacturing organization down that. And so it is a very paced and continuum of work and production. And so there are Constraints that you hit as you're doing that consistently across all that acreage and having some DUCs available to us allows us to when we run into an issue with what we're doing in the immediate vicinity. We have some other opportunities to continue the production. So it's we use it like any other inventory.

Speaker 3

Now obviously, the trick is to get that inventory level right. You don't want a bunch of capital sitting there that isn't earning its return. This we think we've got to an optimized level that allows us to keep a very efficient, I'd say manufacturing process running versus a focus on production and production process.

Speaker 6

Okay. Thank you. That's helpful.

Speaker 3

You bet.

Operator

We have time for one more question. Our final question will be from Jeffrey Lamjohn from Tudor Pickering and Company.

Speaker 5

Good morning, everyone. Appreciate the time. Going back to carbon capture, I was interested in the comment early on about the pilot plan and the lower the costs of direct to air capture. I imagine there are limitations on what you can share just given as you mentioned the proprietary nature of the tech here. But With other key players in the energy space, particularly on the service side, exploring new technologies for this, just thought it'd be great to get any commentary you can speak to on Key learnings so far from this pilot plan and the magnitude of potential savings, where you see the most opportunity to improve the cost structure And what kind of capital investment that I guess the low carbon solutions business overall might involve over the near term?

Speaker 3

Yes, sure. I think and you Rightly so pointed out the proprietary nature, so I will limit some of the details of what we're talking about there. But maybe just From a broader contact standpoint, we're convinced that carbon capture is going to play a really important role and helping society meet its ambitions to get to net 0 or to make certainly significant reductions in carbon emissions. I think it makes a lot of sense to rather than tear up and throw away the existing infrastructure and the industries that we have in place that are intensive energy users that we find a way to deal with the problem, which is the emissions. And so I think carbon capture plays a role there.

Speaker 3

The technology that we have today, frankly wasn't developed for this application. It has a use and can be It deployed today for high concentration streams, but as you move down the emissions profile and get to lower and lower concentrations of CO2 streams, the existing technology is challenged. And so It becomes very expensive for every ton of carbon that you reduce. And so the challenge is use the existing technology today for these high concentration streams where you can make the economics work, but then find a lower cost method to deploy for these less concentrated streams that still make it economic. So that's been the challenge that we're working on recognizing that the existing technology was designed for a different purpose.

Speaker 3

We need a new technology here. We're trying to take advantage of material science development, things that have happened with Materials with nanostructures, there's a lot of advances in technology since the existing technology was developed. So there's a question of how can we better capture CO2 by using advances in the existing technology. We think we've come up with an opportunity to potentially do that, but it's early days like all these technology developments. And so we've built a pilot plant and we'll see and test out some of these new capabilities and test the cost effectiveness capture.

Speaker 3

I'd say the first our first step, we're looking to get about cost reduction of about half. But I would tell you that's still not enough. But if we can see a significant step change in that cost or path to that Cost reduction, that gives us hope that we can then continue to advance that and get it back get it down to something that is more competitive and then economic to deploy across the world. And if we can crack that nut, as I've said many times before, the Holy Grail in addressing emissions is direct air capture. And the challenge for the industry is to find ways to do that more cost effectively.

Speaker 3

And frankly, we're at the very early stages of the technology and the technology development. So whether we're successful or somebody else is successful, I feel like this is an area worth exploring and I think our technology companies have got some great ideas, know how to scale things, know how to optimize not only materials but processes and bringing all that To see if we can make a step change here is the objective and it's too early to judge how successful we'll be, but I Certainly feel like we've got the capabilities and should be working hard to try to make advances here.

Speaker 5

Great. Looking forward to your updates in the space there. Thank you.

Speaker 3

You bet. Thank you.

Speaker 1

Thanks everybody for joining our call today and for the questions you asked. We'll pose a transcript of the Q and on our investor website later this week or early next week. Have a nice weekend everybody. And with that, we'll turn it back to the operator to conclude our call.

Operator

This concludes today's call. We thank everyone again for their participation.

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