Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Exxon Mobil Corp (XOM, Financial) delivered earnings of $9.2 billion, marking their second-best second quarter results in the last 10 years.
- The company set production records from their advantaged assets in Guyana and the Permian, with Permian production surging to 1.2 million barrels per day.
- Sales of high-return performance products rose 5% sequentially to a new record.
- The integration of the Pioneer acquisition is exceeding expectations, with significant upside potential in synergies.
- Exxon Mobil Corp (XOM) continues to develop new technologies and products, such as Proxxima and carbon materials, which have significant market potential and profit opportunities.
Negative Points
- Overall market conditions were soft in the second quarter, impacting performance.
- The company faces challenges with the supply side in the chemical business, with a lot of new capacity coming online.
- There is a six-month delay in the Golden Pass project, pushing the first LNG production to the back end of 2025.
- Europe's economic conditions are challenging, and policies being implemented may further drag on the economy.
- The low-carbon solutions business faces complexities in building new value chains and markets, which are not yet fully established.
Q & A Highlights
Q: Can you build on your comments around how the Pioneer acquisition is performing from a volume and type curve perspective relative to expectations? And can you help delineate what those synergies tracking ahead of expectations are?
A: Darren Woods, Chairman and CEO: Early days yet, but the Pioneer assets delivered a record performance in the second quarter. The teams are working well together, identifying more value opportunities than anticipated. We see significant upside potential in both magnitude and pace of delivering synergies. Kathy Mikells, CFO, added that Pioneer has brought valuable learnings to ExxonMobil, such as their remote logistics center and procurement strategies.
Q: Do you think the current production performance in the Permian is likely to continue, and is it translatable to future projects?
A: Darren Woods, Chairman and CEO: The organization is focused on maximizing value, and we are seeing significant improvements in production rates. While each development is unique, our teams have a history of safely increasing capacity, and I would bet on our people to continue this trend.
Q: Now that you've got Pioneer in the door, what does it mean for the portfolio in terms of high-grading opportunities going forward?
A: Darren Woods, Chairman and CEO: We've been aggressively going after the tail of our portfolio, having divested about $15 billion in Upstream assets and a few billion in Downstream. We continue to assess all assets to ensure they are competitively advantaged. If not, we either invest to make them more competitive or look to divest.
Q: What milestones are you focused on to start allocating more capital to low-carbon initiatives?
A: Darren Woods, Chairman and CEO: Our low-carbon investments must compete in the portfolio and generate good returns. For carbon capture and storage, we are building a new business and advocating for initial policies. For blue hydrogen, we await final regulations to ensure attractive project returns. For lithium, we are developing new production methods and ensuring competitive advantage.
Q: Can you talk about the drivers of the legacy CapEx bumping up to $25 billion for the year?
A: Darren Woods, Chairman and CEO: The range in CapEx is due to evolving opportunities. We see a lot of attractive opportunities, which puts us at the top end of the range. Kathy Mikells, CFO, added that the exact pace of projects coming online in 2025 also influences the CapEx range.
Q: Can you provide more color on the major projects coming online in 2025, such as the Permian crude pipeline, Golden Pass, and the next Guyana development?
A: Darren Woods, Chairman and CEO: All projects are progressing as planned, with expected contributions and returns. We ensure these projects can compete in any market cycle. Kathy Mikells, CFO, noted that 2025 is a big year for our E&PS business, with several major projects coming online.
Q: Are the teams continuing to bring new and interesting projects in E&PS and chemicals beyond 2026-2027?
A: Darren Woods, Chairman and CEO: The restructuring has opened up more opportunities. Our Product Solutions and technology organizations are focused on applying core capabilities to new business challenges, unlocking new applications and markets. We expect to continue bringing in new opportunities well beyond 2027.
Q: What are you seeing in terms of demand and supply across your products, particularly in chemicals?
A: Darren Woods, Chairman and CEO: Chemical demand is returning to pre-pandemic growth rates, but the challenge is on the supply side with a lot of new capacity coming online. In the U.S., economic conditions are reasonable, while Europe faces more challenges. Oil demand continues to be at record levels, and gas demand is growing.
Q: Can you provide more examples of what's driving the improvement in cost savings and how you plan to reach $15 billion in savings by 2027?
A: Kathryn Mikells, CFO: We're optimizing maintenance, supply chain, and leveraging centralized organizations to drive efficiencies. Standardizing processes and applying technology will further drive savings. Darren Woods, Chairman and CEO, added that the restructuring allows us to focus on synergies and apply best practices uniformly, leading to significant cost savings and revenue improvements.
Q: Is the complexity in the lithium business more about marketing and downstream use or upstream processing?
A: Darren Woods, Chairman and CEO: The complexity is broader, encompassing new technologies and building new value chains. For lithium, it's about integrating new production methods with established technologies. In low-carbon solutions, building new markets and infrastructure adds complexity, but we are leveraging our capabilities to manage these challenges effectively.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
