Welcome to Saudi Aramco's Q1 2023 Results Call. We'll be holding a question and answer session following the presentation. If you'd like to ask a question, please press star followed by one on your telephone keypad at any time. I shall now hand over to Mr. Peter Hutton to begin.
Hello, welcome to this audio webcast discussing Saudi Aramco's first quarter 2023 results. I'm Peter Hutton, Senior Vice President of Investor Relations at Aramco. Our webcast today will comprise a presentation followed by a question and answer session, and we anticipate the entire call lasting up to an hour. It gives me great pleasure to be joined today by Amin Nasser, President and CEO, and Ziad Al-Murshed, Executive Vice President and CFO. I would also like to remind you that this webcast and conference call are being recorded and to draw your attention to this cautionary statement. During today's presentation, we may make forward-looking statements that refer to estimates, plans, and expectations. Actual results and outcomes could differ materially due to factors we note on this slide. Please also refer to our regulatory filings and website for more details.
With that, I now hand the call over to Amin.
Thank you, Peter, and welcome everyone and thank you for joining us today. In the past couple of years, we have increased the depth and frequency of engagement with the investor community in various ways. We have held one-to-one meetings, participated in investor conferences, and we also held an investor day in March this year. We are now moving to conduct quarterly earning calls. You can expect more engagement from us going forward. Moving on, I will provide a brief overview of our progress in the first quarter. Ziad will then take you through our strategic developments in more detail of our operational and financial performance, and he will be sharing the company's intention to introduce a mechanism for performance-linked dividends, which we have announced this morning. Overall, the company continued to deliver strong performance in the first quarter.
Operationally, we continued to deliver high reliability and low cost of production. Financially, we continue to generate strong earnings and cash flows, further administrating our ability to deliver through oil price cycles. Our mid to long-term view of the market has not changed. We continue to believe that oil demand is likely to grow, and we believe that the world will continue to need oil and gas for the foreseeable future to support a sustainable and affordable energy transition. Our concern remains that the industry is not investing enough to meet expected future demand. Our growth strategy remains on track. We continue to move forward, expanding our oil and gas capacity in the upstream, and we also made significant progress in our downstream business, where we completed a key acquisition in the U.S. and important investment and partnership in China and South Korea.
I will now hand over to Ziad to take you through more details.
Thank you, Amin, and welcome everyone. As Amin explained, we're on track in executing the largest capital program in our history to help meet the world's energy needs and to maximize long-term value for our shareholders. Our capital investment guidance remains at $45 billion-$55 billion. Our upstream expansion plans are on track. We are commissioning the compression projects at Haradh and Hawiyah fields, both of which are expected to reach full capacity later this year. We also achieved significant progress in executing our downstream strategy to grow our presence in key markets and to direct up to four million Aramco would supply 60% of the throughput, which amounts to 480,000 bbl per day into a facility that has a significant conversion rate into chemicals in excess of 50%.
Our joint venture, HAPCO, has broken ground on a new highly integrated refining and petrochemical complex. Our 30% ownership in this JV gives us the right to supply 70% of the throughput, which amounts to 210,000 bbl per day into a facility that also has a very high conversion rate into chemicals of more than 50%. Combined, those two investments would see Aramco supply about 700,000 bbl per day of crude oil to high chemical conversion assets in China, which is a major achievement in our downstream strategy. In addition to this, we broke ground on our largest investment in South Korea to develop one of the world's largest refinery-integrated petrochemical steam crackers through our affiliate, S-OIL. This would be the first commercial deployment of Aramco's Thermal Crude to Chemicals technology developed in collaboration with Lummus.
We completed our acquisition of Valvoline's global product business, which will advance our international lubricants growth strategy and leverage our global base oil production and R&D capabilities. Moving to our operational and financial highlights for the quarter. We generated $31.9 billion in net income and a free cash flow of $30.9 billion. We also paid $19.5 billion of dividends in the first quarter, which is a 4% increase in our base dividend, which we always said would be sustainable and progressive. The IPO, we demonstrated the sustainable aspect of our dividend, and in the first quarter, we started delivering on the progressive aspect with this 4% increase.
At the same time of increasing the base dividend, we further reduced our balance sheet gearing to -10.3%. We continued to prepay the deferred consideration related to the SABIC acquisition. Having said that, we continue to stress that we are focusing less and less on balance sheet gearing and more and more on maintaining a high investment-grade credit rating across oil price cycles. The execution of our growth strategy is evident in our capital investment, which was about $11.3 billion in the first quarter, including external investments. Our organic CapEx was $8.7 billion, which increased by 15% compared to the first quarter of last year. Our full-year capital investment guidance remains unchanged at $45 billion-$55 billion.
Looking at the two main segments, you can see that the market environment affected the profitability of both upstream and downstream compared to the same period of last year. Upstream EBIT was strong at $57.4 billion, but was about 18% lower than the same period last year, almost entirely in line with the 17% reduction in average realized oil prices. Downstream EBIT was $3.4 billion, which was lower than the same period last year, mainly due to the impact of much lower prices on inventory valuation movements, as well as weaker chemical margins, partially offset by stronger refining margins. Finally, on earnings, we realized a financial gain of $1.2 billion pre-tax from the prepayment of promissory notes relating to the SABIC transaction. ROACE, which we report on a 12-month rolling basis, was 29.3%.
All in all, strong performance in the first quarter with a robust net income and cash flows and a stronger balance sheet. Before I get into the specifics of the dividends, let me first emphasize that our cash flow allocation priorities remain unchanged. Our first priority is still sustaining capital to maintain our assets and competitive advantage. Next comes our base dividend, which we always said would be sustainable and progressive. Like I said earlier, since the IPO, we demonstrated the sustainable aspect of our dividend, and in the first quarter, we started delivering on the progressive aspect with the 4% increase in base dividend announced and delivered in the first quarter. Comes growth investments, where we're executing our largest capital investment program in our history. Finally, to use any excess cash for deleveraging or additional distributions or both.
We have been deleveraging for some time, we're comfortable enough to introduce a mechanism that increases dividends in a way that shares the upside depending on company performance. To be clear, our strategy on the base dividend remains intact. We continue our aim to maintain our base dividend as sustainable and progressive. In addition to that, the company intends to introduce a mechanism for performance-linked dividends, targeting 50%-70% of the group's annual free cash flow, net of the base dividend and other amounts, including external investments. The amount would be based on the annual results and intended to be distributed quarterly. Having said all of this, it is important to reiterate that dividends are declared at the board's sole discretion after considering the company's financial position and ability to fund commitments, including growth capital plans and in accordance with the company's dividend distribution policy.
With the introduction of performance-linked dividends, we believe that we will have a balanced framework that provides protection on the downside through a sustainable and progressive base dividend that has already been demonstrated, even in a severe down cycle, one that shares the upside of our performance with shareholders, and all that with strong reinvestment in the business to capture unique, high-quality opportunities to create significant shareholder value over the mid to long term. We believe this combination offers a very attractive proposition to investors. Thank you very much for your attention, ladies and gentlemen, and we are looking forward to answer your questions.
Thank you. To ask a question, please press star followed by one on your telephone keypad. To withdraw your question, please press star followed by two. When asking your question, please ensure you are unmuted locally. I shall now hand back over to Mr. Hutton.
Thank you, Charlie. We'll move straight through to Q&A. We've got several on the line, and follow the instructions that you were just given, if you wish to ask. I'll pass you back to the operator who can lead us through. Thank you.
Our first question comes from Martijn Rats of Morgan Stanley. Martin, your line is open. Please go ahead.
Yeah. Hi. Hello. I want to ask you two questions. I think the dividend plan is entirely clear. That was not one of my questions. I want to ask you two things instead. We've been reading a lot about the unconventional gas plants in the country, and I saw TotalEnergies being mentioned, some of the Chinese companies. I was wondering if you could elaborate on what your plans are in that area.
Then secondly, yeah, I'm not quite sure I'm gonna get an answer, but I'm gonna ask the question nonetheless. There's of course an awful lot of Russian oil, particularly in Asia, going into countries where we would naturally expect the demand growth for oil to be concentrated. With so much alternative oil, it does strike me that market share of Aramco is under some pressure. Now, this might be temporary, but I was wondering if you could reflect on the company's market share position, particularly in India and China, to what extent you're still sort of happy with the levels and the trends that they're currently on.
Thank you, Martin, for your question. With regard to our unconventional gas, we are developing the Jafurah, as you know, the largest unconventional project. That project will bring approximately two billion standard cubic feet of gas by 2030. Part of that will also be dedicated for the blue hydrogen project. The good thing about our Jafurah gas, this will bring also approximately more than 400 million standard cubic feet per day of ethane and 630,000 bbl of liquid, additional liquid. We have already awarded contracts exceeding $10 billion, with the capital expenditure expected to reach $68 billion over the next 10 years. It is a massive project. The upstream part we are developing.
In the midstream part, we are in discussion with different companies regarding participation on the midstream part of that project. The upstream part we are conducting on our own. With regard to your second question about Russian barrels, you are absolutely right. There's a lot of Russian barrels heading to Asia. We've seen a big pickup on India. India based close to 1.7 million bbl of Russian crude. China is also picking up, airborne close to 1.2, 1.3, and there is piped Russian crude going to China of about 900. Considering our reliability and customer base and the relations that we have enjoyed with our customers around the world, no impact in placement of our barrels in China or India.
As I said, the reliability of 99.7% and assailing five type of crudes for any customers when they come up pick up their crudes and the relations that we have established over the long term with our customers made sure that we are able to place our barrels spite of these additional barrels from Russian. Others definitely were impacted in the regions because of the additional Russian barrels.
Wonderful. That is fantastic. Thank you.
Thank you. Our next question comes from Mazen Al-Sudairi of Al Rajhi Capital. Mazen, your line is open. Please go ahead.
Congratulations for your great result. I have an inquiry. I have inquiry related to the new dividend policy. For how long do the company plan to have this policy? Any time horizon? I mean, is it five years or longer than that? Thank you.
Thank you, Mazen. The intention is for this to be, the, mechanism going forward. We intend to do this, for the foreseeable, future.
Yeah. Okay. It will, as you mentioned, will give the upside, correlate the investor and the stock with the upside of the, of the market and the chain development and efficiency of the company.
Absolutely, Mazen. The intent is that we have a base dividend that is sustainable and progressive. It provides protection, if you will, on the downside. This mechanism will share the upside with the investors as well. We think this would provide a good balance going forward. Keep in mind that all of this is at a time when we're heavily reinvesting back into the business in what are very attractive, unique opportunities.
Many thanks. Very clear. Thanks.
Thank you. Our next question comes from Karen Kostanyan of Bank of America Merrill Lynch. Karen, your line is open. Please go ahead.
Yeah, gentlemen. Thank you very much for making this quarterly call, and congratulations on the new dividend policy. I have a follow-up question about Jafurah. You know, the press has mentioned potential LNG plans, and I know you have been concentrating on blue ammonia. Is this a departure? Are you also looking into LNG opportunities in this very tight market? My second question comes about, you know, we discussed in March during the visit to your facilities two challenges. One was a potential dividend, and second was the liquidity of the stock. You with this move, you solved the dividend question. Is there any plan? Are there any plans to solve the potential liquidity issue with the shares? Thank you.
If you can, I'll take the first question. Ziad will take the second. With regard to Jafurah, definitely hydrogen is low hydrogen is something that we are currently working on. We might expand that even further. We are looking at opportunities for LNG. Nothing that comes, I mean, in affirm in terms of constructions or engineering, but we are looking at an opportunity as we have excess gas, and we are exploring what is the potential for expanding our blue hydrogen further or looking at additional demand in the kingdom or going into LNG. All of these are currently being evaluated. In addition, we are looking at LNG opportunity outside of Saudi Arabia currently with other partners globally, in the U.S. and in Australia and other parts of the world.
Karen, on your second question regarding liquidity. You know, we recognize that average traded volume compared to a stock of our size is not high. We feel that the new mechanism of market making in the Tadawul Exchange will or should help resolve this. We'll continue to do everything that we can to see how this can be resolved. As you may appreciate, a lot of this is not under the direct control of the company. The a lot of the shareholders are, you know, holding the shares, and therefore, the traded volume is not too high.
We'll, we have our eyes on this, and we're trying to figure out, how to take best advantage of the market making regulation that just came in.
Thank you very much.
Thank you. Our next question comes from Iyad Ghulam of NCB Capital. Iyad, your line is open. Please go ahead.
Salaam alaykum. This is Iyad Ghulam. I have two questions. The first one is about the downstream. How is the alignment with SABIC and other subsidiaries in regards to the CapEx and operations? If you can shed some light on the progress of Jafurah field. Thank you.
Thank you, Iyad. You know, the alignment is going very well. SABIC is considered to be our chemical arm for all the projects that we will be executing when it comes to liquids to chemicals conversion. The first big project of 400,000 bbl in Ras Al-Khair was announced by SABIC recently. In terms of also marketing of our chemical products from our existing assets and future assets when it comes to integrated refining, SABIC is handling that. Very well integration going. Our plans in terms of achieving $3 billion-$4 billion is going very well by 2025. Actually, we are ahead of that plan when it comes to the integration benefits. Now, with regard to Jafurah, as I said, you know, we are progressing. We have awarded contract exceeding $10 billion.
The progress is, you know, we expect to the first increment to come on stream in 2025, and then ramp up to reach the two billion by 2030.
Thank you.
Our next question comes from Michele Della Vigna of Goldman Sachs. Michele, your line is open. Please proceed.
Thank you very much. Congratulations on another very strong set of results. I wanted to ask you a question around what you're seeing from a demand perspective. As the world's largest energy company, you really feel the pulse of the world energy demand. We are seeing weakening refining margins, especially on diesel. We still see depressed chemical margins. Where are you seeing demand weakness in this environment? Or do you think that perhaps the market is overreacting and that the global demand for energy and for oil products still remains robust? Thank you.
Thank you, Michele. In our view, the global oil demand will remain relatively healthy this year. Prediction, it will be 102 million barrels as an average, driven primarily by developing countries, especially China and India. China alone will contribute about 60% to the global growth or about 1.2 million bbl of that, driven mainly by the transport fuels, gasoline, jet fuel, partly naphtha as a petrochemical feedstock. India is also exhibiting a very strong oil demand growth. We expect the demand will grow from 4.8 million-5 million bbl this year. Growth in the jet fuel will lead the way, followed by gasoline and then diesel. In jet fuel, in terms of oil products beside China, jet fuel is a major contributor to oil demand growth this year.
Around 1.1 million barrels. If you think about jet fuel Before the pandemic, it was around 7.9, 8 million bbl. We are expecting to reach by the end of this year 7.3. We are closing the gap in terms of demand for jet fuel. What you mentioned about the recent weakness in the oil market. In our view, the recent weakness seen in the oil market was driven by concern over tightening of monetary policy by central bank and effect on economies. This was also worsened by the crisis involving regional banks in the U.S. and a concern over its contagion effect. In our view, the markets overreacted to the situation, resulting in the sell-off by traders. The situation is slowly, also partially, reversing.
Chemical margins, as you mentioned, is in the low end, but as you know, chemical always go through these cycles and recovers over going through a down cycle.
Thank you.
Our next question comes from Biraj Borkhataria of RBC. Biraj, your line is open. Please go ahead.
Hi. Thanks for taking my questions. I just have a couple of follow-ups on gas. You touched on this before, but could you just taking a step back, can you clarify your intentions on the LNG front? I know you've been in talks to buy equity stake in a U.S. liquefaction facility pre-pandemic, and then there's talks of other international players looking to buy into Saudi infrastructure going forward. What is the broader strategy on the LNG front there? Secondly, I wonder if you could just compare and contrast your views on economics timeline and opportunity set for Aramco between LNG and then blue ammonia, sorry, blue hydrogen or ammonia.
Is it fair to think that hydrogen is your main focus and LNG is secondary to that, or am I getting that wrong? Thank you.
Thank you, Biraj. You know, our priority for gas, we do have a significant amount of gas available in the kingdom. Our priority is for any local demand. That is our priority number one. Priority number two, which we decided with the additional gas that we have, we will grow our blue hydrogen. This is where we talked about the two million ton of hydrogen to the market in terms of export. Of course, additional, we would love to expand our blue hydrogen because, you know, if you talk about the transition and wanting less emissions globally, blue hydrogen is more advantage compared to LNG. Of course, LNG, you know, if you think about it in barrel of oil equivalent, is around $70-$80, depending on which market you are selling it to.
Blue hydrogen, you're talking about $250, the barrel of oil equivalent, so it's more expensive. The issue with blue hydrogen, we wanna expand our market base in blue hydrogen, honestly. The issue is offtake. Finding an offtake agreement. It was very difficult to find, identify any offtake agreement in Europe, considering and they explained it's because of the high cost. It costs much more than LNG. We have in discussion with customers in Japan and Korea, and even the customers in Japan and Korea are waiting for their government incentives. Until they get these incentives, it will be costly for them to pursue that blue hydrogen. We are on track for the first increment in blue hydrogen, which about approximately $1 billion of sales gas going to blue hydrogen.
We do have additional quantities of gas, and we are in discussion allocation of gas. Here it is allocated by the Ministry of Energy. Based on that discussion, depending on the markets, if the markets open up in terms of finding offtake agreement, blue hydrogen is a viable potential to expand the 1 billion sales gas going more than that in blue hydrogen. However, if offtake agreement is difficult to achieve, then, we need to consider either additional local demand as a priority or exporting as LNG. This is the discussion that is currently going on with the Ministry of Energy. Globally, yes, we are looking at LNG. We put our discussion at the back burner in the past during the pandemic with regard to our out of kingdom LNG opportunities.
We started the discussion with our partners globally with LNG opportunities, as I said, in the U.S. and in Australia and other parts of the world. We are currently in discussion with other partners with growth in our LNG potential from outside Saudi Arabia as well.
Just one follow-up to that. On blue hydrogen, is it fair to say that you would need the offtake agreements signed before you sanction projects? Because obviously, you know, these things take a few years to develop, and some companies are sort of building in the hopes that the market will be there and other companies are waiting for, you know, contracts to be signed. Where does Aramco sit on that front?
Oh, yeah, even for LNG, by the way. Even from LNG, if you want to do LNG, you want an offtake agreement. LNG is much cheaper and it costs much less than blue hydrogen. You are not going to sanction a project at $250 per barrel oil equivalent if you don't have an offtake agreement. This is very expensive program. It costs a lot of capital to do and deliver, and you need customers. We will not sanction a project and deliver without securing an offtake agreement.
Very clear. Thank you very much.
Thank you. Our next question comes from Christyan Malek of JP Morgan. Christyan, your line is open. Please go ahead.
Hi, thank you for taking my questions, Amin Nasser, on the dividend and the results. I have a few questions, if I may. First of all, you've clearly taken the feedback, and you've made a much more attractive proposition around your cash return, which is great to see. I wonder to what extent, and maybe I'm interpolating here, whether this is a precursor to a listing either elsewhere or an increase in liquidity potentially, given, you know, still 2% of listed equity is arguably difficult in terms of even if you want access to Aramco, and exposure abroad, you know, from abroad. The question is whether liquidity can be improved.
I wonder what, whether you and the board have given any consideration to the liquidity point following now what is a very attractive cash return proposition. My second question is regarding the ability for Aramco to expedite the spare capacity or the capacity increase that's slated for 2027. I say that in the context of, you know, if we were to see significant deficits over the next few years, or at least in terms of our thinking around a super cycle, to what extent could you react and, you know, invest or expedite that ability to respond, particularly if others cannot, such as shale and such international majors? That's my second question. If I may. The third one, if I'm allowed, is LNG.
I'm struggling to understand the industrial proposition of investing in LNG, given everybody seems to be doing it exactly the same time, whether it's Qatar, U.S. Are there particular milestones that you need to be comfortable with at the macro level? For you obviously, it's clear that there's an economic case to do it in Saudi. I just wonder at a more industrial macro level, whether there is particularly if there's a lot of supply coming online in the next few years. Interested in your thinking on that? Many thanks.
Thank you, Christyan. I will answer the last two questions, and I'll leave the first one to Ziad Al-Murshed. Yeah, you know, it's very hard to build. Our MSC will grow to 13 by 2027. Today, you are carrying two million of spare capacity. That million barrel is gonna come 2025. Part of it will come 2026. It's not all gonna come on 27. It's gonna come over time. Very difficult to build additional. The cycle for bringing increments is five to seven years, and we have started this since 2020. Very difficult to build capacity beyond what we have planned. It takes you, as I said, five to seven years just to bring additional barrels if you make the decision today.
With regard to the LNG, you know, it's, some of the projects that we are looking at is, existing projects with an offtake agreement already, there out of the kingdom. Of course, as I said, you know, we are looking at different opportunities. Some of them is the, grassroots projects that you just started, depending on the opportunity and the offtake agreement for that project. But some of the projects that we are considering are existing, operating, and they have an offtake agreement. Ziad.
Christyan, on your first question, the mechanism that we're introducing is only a precursor to be able to share the upside with investors, and it shouldn't be read as anything else. In terms of the liquidity, yes, the board and management are aware that liquidity or more accurately, the average traded volume daily is relatively low. Like I said, we are hoping that the market-making mechanism that is being introduced will help with the liquidity issue. We're monitoring it closely to see to what extent this will help. It's certainly front and center. We see it as one of the things we need to improve.
Thank you. Our next question comes from Kim Fustier of HSBC. Kim, your line is open. Please go ahead.
Hi, good afternoon, and thank you for taking my questions. I have two, please. First one is just following up on the new performance-based dividend. Just curious, how is the 50%-70% range determined, and what will determine exactly what that percentage will be within that range? Just a clarification on the calculation of excess free cash. Could you confirm what external investments will be included? For example, will SABIC prepayments be included in that number? Secondly, just going to the downstream. I was wondering if you could talk about the potential returns on things like the acquisition of 10% of Rongsheng Petrochemical. It seems that that deal was priced at a bit of a premium to the market price.
I guess a slightly bigger picture question, I take the point about downstream enabling the upstream to place barrels in the market. Would it be possible for Aramco to place barrels in China and elsewhere in Asia without having to take direct equity stakes in downstream assets? Thank you.
Thank you for the questions, Kim. On the dividends, what determines the range or where we end up in the range depends on quite a few things. Like the financial strength of the company at that point, our views on our ability to be able to fund the investment program going forward. The, you know, macro conditions, the price outlooks, all of these things. The board considers all of this and then determines where in the range we would end up. We're targeting between 50%-70%. Specifically on the other part of your question, which is what is included in the external investments.
This has not changed from what we have previously referred to as external investments when we provide the forward capital guidance. These are investments like you've just seen us close the Valvoline deal. That would be an external investment. You referred to the prepayment of the SABIC transaction. We've pretty much prepaid for that. Going forward, that's a non-issue. These are external investments where we're either acquiring or increasing our investments in existing. It's the non-organic parts of our capital program.
Just to answer your question, Kim, about Rongsheng. You know, having placement rights is important for us. You are right that the 10% allowed us to place 480,000 bbl. It's de-risk our upstream in one hand, and at the same time, we are investing in facilities that is operational and have high integration into petrochemical. If you think about it, this is an 800,000 integrated refining and petrochemical with 63% of liquid going to chemical on that facility. Basically, we achieved two parts of our strategy, placement of our barrel in high realization market, which give us additional flexibility when you look at these markets today. We do have good placement rights through Motiva in the U.S., in Korea, but in China, which is a major market, we only have Fujian.
Having these two investment and Rongsheng and HAPCO, the 300 grassroots refinery and petrochemical complex, will give us the additional flexibility to put our barrels in the right market with the right conversion to petrochemical as part of our strategy to convert 4 million bbl by 2030 to petrochemical.
Kim, maybe just one thing to clarify. When Amin was referring to placement rights, we're not talking about just regular sales. We can't just compare it to, and you asked, can we not just sell? Yes, we can sell, but these are long-term agreements. These are, you know, 20, 25-year agreements where we lock up this supply in very high conversion into chemical plants. Being a shareholder is one of the main ways we actually protect the long-term agreement and keep it in place.
That's right. Thank you.
Thank you. Our next question comes from Henri Patricot of UBS. Henry, your line is open. Please proceed.
Yes, hello everyone. Thank you for the presentation and good to have these quarterly call going forward. Just so firstly, a follow-up on the dividend question under the 50%-70%. I mean, it looks to me that you're in a pretty strong financial position at the moment with the $43 billion of net cash. Would it be fair to expect that you'd be, you know, playing at the upper end of this range? You know, if I think about the next few, two quarters, you'll be going into even just larger net cash position. Are you comfortable with this? Or could the 50-70 change over time?
Second one just on the CapEx, thinking about free cash flow generation for the year, organic CapEx up about 15% in the quarter, first quarter. Is that a good run rate for the rest of the year? Or should we expect an acceleration in the growth over the rest of 2023? Thank you.
Thank you, Henri. The two questions you had. On the 50%-70%, we're comfortable with that range going forward. This is why the 50%-70% is chosen. Your analysis on our performance in the first quarter and whether that would mean that we would end up at the upper end of the range is precisely the type of discussion that the board will have. It's looking at financial strengths, the ability to fund the macro conditions going forward, and so on. Introducing this mechanism came after we're fairly comfortable with our ability to fund the investment program going forward, as well as the financial strength of the company.
This is the exact discussion that will take place at the board in deciding where in the range we will come. Sorry, before I move to the second question. Continuing on the first question, you mentioned that or keep in mind that over the past couple of years we've been heavily deleveraging. If you think of our cash priorities, we've always said that our top priority is the sustaining CapEx, followed by the sustainable and progressive dividend, and then in the investment growth. We all said that the fourth priority is additional deleveraging and/or additional distributions. In the last couple of years, you've noticed we've done considerable deleveraging, and now we're introducing the mechanism for additional distributions.
On your second question on the CapEx run rate, our guidance remains $45 billion-$55 billion. Our capital and external investments in the first quarter came in at $11.3 billion. This is actually higher than the same period last year. As you saw last year between the quarters, this is not a linear trend throughout the year that you can just apply. I caution against just taking the CapEx number and multiplying it by four. We believe we're on track to be well within the $45 billion-$55 billion range.
Okay, thank you.
Sorry, maybe one more thing, just to give you specific numbers. If you look at the lower end of the range of the CapEx, the 45-55, it has increased by about 12 and a half% from the lower end of last year. Our organic CapEx in the first quarter came in actually at 15% higher than Q1 of last year. We're well on track in even the increase. Again, it's not linear. It picks up throughout the year.
Thank you. Our final question comes from Amy Wong of Credit Suisse. Amy, your line is open. Please go ahead.
Good afternoon. Thanks for hosting this call and squeezing me in. Most of my questions have been asked. I just have one last question on your credit rating comments. You mentioned, you know, you're continuing to be happy where it is. Could you remind us kind of where you are, what your status is with the various credit rating agencies? Would you be, you know, still be looking to push it a bit, maybe a notch higher within that A grade rating, please?
Our rating Fitch just upgraded our rating to A+ with a stable outlook. We're actually happy with it here. We don't see much value in putting a lot of attention in trying to increase it more than that, because we feel that it is good where it is. We would rather, you know, introduce the mechanism that we're introducing now for return distributions, as opposed to focus on increasing this further, because the value that we would get if we would increase it further, is just not there. We're comfortable with where we are.
Like I said, we've been deleveraging considerably over the past couple of years, and now is the time to introduce this mechanism to share the upside and reward our shareholders.
Very clear. Thank you.
Thank you. We have no further questions. I'll hand back over to Peter for any final remarks.
No, thank you for joining everybody today. Appreciate the call and, thank you to CEO, CFO on board for joining us. Of course-