Earnings Call: Q4 2018

Feb 1, 2019

Good day, everyone. Welcome to this ExxonMobil Corporation 4th Quarter 2018 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the call over to the Vice President of Investor Relations and Secretary, Mr. Neil Hansen. Please go ahead, sir. Thank you. Good morning, everyone. Welcome to our Q4 earnings call. We appreciate your participation on the call and continued interest in ExxonMobil. This is Neil Hansen, Vice President of Investor Relations. Joining me on the call today is our Chairman and CEO, Darren Woods. As we'll discuss on the call today, we are very pleased with our performance in the Q4 and with our full year results. This was a quarter highlighted by continued value generation from our integrated business model, additional growth in liquids production and successful high grading of our downstream portfolio. In addition, we made significant progress on investments that generate long term accretive value for our shareholders. After I review the quarterly financial and operating performance, Darren will provide his perspectives on our business, reflecting on 2018 and the year ahead. Following this, Darren and I will be happy to take your questions. Our comments this morning will reference the slides available on the Investors section of our website. I'd also like to draw your attention to the cautionary statement on Slide 2 and the supplemental information at the end of this presentation, which starting this quarter, you'll notice includes a listing of significant non operational events that impacted quarterly earnings. Moving to Slide 3, I'll now highlight the developments that influenced 4th quarter performance. Crude oil prices decreased during the quarter with Brent down $7.51 and WTI down $10.62 Conversely, gas realizations were up in the 4th quarter, supported by strong LNG prices and seasonal demand. Henry Hub was also up 0 point 7 $4 Production in the Permian increased another 12% relative to the Q3 and was up 93% from the Q4 of last year. Exploration success continued offshore Guyana with the Pluma discovery, our 10th find so far on the Stabroek block. The resource estimate in Guyana is now greater than 5,000,000,000 oil equivalent barrels. In Mozambique, we secured offtake agreements for the Rovuma LNG project as we progress toward a final investment decision, which remains on track. Industry refining margins weakened across the globe with lower seasonal gasoline demand and higher inventories. This was partly offset by stronger distillate margins. In North America, we successfully leveraged our logistics capacity to capture significant value by moving advantaged crudes from the Permian and Western Canada to our manufacturing facilities. We also started up the 3rd of our 6 key refinery projects, the advanced hydrocracker at our Rotterdam refinery. This advantaged investment increases our capacity to produce higher value products, including ultra low sulfur fuels and Group II premium lubricant based stocks. We continue to high grade our downstream portfolio with the divestment of our Augusta refinery and related terminals in Italy and our Germany retail assets. Our long term fundamentals remain strong in the chemical business, margins weakened during the quarter. The supply length from recent capacity additions pressured realizations. We safely completed a turnaround at our Singapore facility and progressed integration of our Jurong acquisition with our nearby petrochemical complex. I'll now go through a more detailed review of 4th quarter results, starting first with the upstream on Slide 4. 4th quarter upstream earnings were $3,300,000,000 a $900,000,000 decrease relative to the Q3 of 2018. The absence of favorable U. S. Tax reform impacts and current quarter asset impairments negatively impacted earnings by 6 $70,000,000 Crude realizations decreased by 18% during the quarter with a decline in industry markers and wider North American differentials. The estimated unfavorable impact of those wider differentials on upstream earnings relative to the Q3 was $350,000,000 However, integration with logistics and manufacturing resulted in more than that value being realized in the downstream. Having takeaway capacity that exceeds our upstream production allowed us to realize a corresponding estimated benefit, again relative to the 3rd quarter of approximately $600,000,000 in the downstream. Gas realizations increased 18% in the 4th quarter on stronger LNG pricing and seasonal gas demand. An increase in production driven by continued volume growth in the Permian and seasonal gas demand in Europe contributed $660,000,000 to 4th quarter earnings. Favorable foreign exchange effects and other items each positively impacted earnings by $100,000,000 Moving to Slide 5 and a comparison of 4th quarter upstream production to the Q3 of this year. Production in the Q4 was 4,000,000 oil equivalent barrels per day, an increase of more than 200,000 oil equivalent barrels per day. If you exclude the impact of entitlements and divestments, volumes were up 5% as a result of seasonal gas demand and continued liquids growth. The absence of impacts from the downtime event that occurred earlier this year at Syncrude and volume growth in the Permian resulted in a 3% increase in liquids production in the 4th quarter. Natural gas production was up 11%, primarily due to seasonal gas demand in the Netherlands. Moving to Slide 6 and a comparison of 4th quarter upstream earnings with Q4 of 2017. If you exclude the effects of U. S. Tax reform and impairments, earnings increased $1,200,000,000 higher prices increased earnings by $660,000,000 driven by a $2 increase in natural gas realizations, partly offset by a decline in crude realizations and again that resulted primarily from wider North American differentials. We estimate the unfavorable impact of those wider differentials on the upstream, again relative to the Q4 of last year to be approximately $750,000,000 The estimated corresponding margin benefit that we captured in the downstream from our fully integrated value chain was $1,200,000,000 again compared to the Q4 of last year. Liquids growth driven by Permian and Hebron increased earnings by $180,000,000 Favorable foreign exchange effects contributed approximately $80,000,000 while all other impacts increased earnings by $270,000,000 Those other items included favorable non U. S. Tax impacts and the absence of unfavorable one time items from last year, and that was partly offset by some higher operating and exploration expenses. Slide 7 provides a comparison of 4th quarter volumes relative to the same period as last year. Liquids production increased 7%, excluding the impact from entitlements and divestments. That growth included a 93% increase in Permian production and additional volumes from Hebron. Now while not shown on the page, I also wanted to highlight that full year production was 3,800,000 barrels per day. And if you exclude the effect of entitlement and divestments of approximately 130,000 oil equivalent barrels per day, Volumes finished the year essentially in line with 2017 levels and the guidance we provided at the March 2018 Investor Day. Now moving to Slide 8, I'll review Downstream 4th quarter financial and operating results, starting first with a comparison to the Q3 of this year. Downstream earnings of $2,700,000,000 increased by $1,000,000,000 with the capture of significant value from our North American integrated operations and portfolio high grading. Downstream refining margins weakened during the quarter. However, this was more than offset by the value we captured from North American crude differentials with our integrated logistics network. This allowed us to connect barrels to our manufacturing facilities and contributed to a favorable margin impact in the Downstream of approximately $500,000,000 We had higher scheduled maintenance in the quarter, which decreased earnings by $460,000,000 Proceeds from the divestment of Germany retail assets and the Augusta refinery and fuels terminals contributed $870,000,000 to earnings. Improvements in refining yield and sales mix, supported by the start ups of the Beaumont hydrefiner and the Antwerp Coker, partly offset by some related expenses, contributed $70,000,000 to earnings. All other items included favorable inventory impacts and tax items. Turning now to Slide 9 and a review of current quarter downstream earnings relative to the Q4 of last year. Again, if you exclude the effects of U. S. Tax reform and impairments, downstream earnings were up almost $1,800,000,000 Margins had a $550,000,000 positive impact on earnings with significant value from wider crude differentials in North America. And in fact, we estimate a benefit across the integrated downstream value chain of approximately $1,200,000,000 relative to the same quarter as last year. This was partly offset by lower lubricants margins and lower refining margins in some regions. Significant reliability improvement was partly offset by higher scheduled maintenance, resulting in a positive contribution of $130,000,000 The divestment of the Germany retail assets and the Augusta refinery and fuels terminals, which was partly offset by the absence of a Norway retail divestment that occurred in 2017, contributed $680,000,000 in the 4th quarter. Improvements in refining yield and sales mix with the start up of new refinery investments and a growing retail network in markets like Mexico, partly offset by some related expenses resulted in a positive contribution of $200,000,000 All other items reflect favorable inventory impacts and tax. Turning now to Slide 10 and a review of current quarter chemical earnings relative to the Q3 of this year. 4th quarter chemical earnings were $737,000,000 Lower margins negatively impacted earnings by $110,000,000 as polyolefins margins declined with lengthening supply from new industry capacity additions. We had a one time non U. S. Tax impact that resulted in a positive contribution of $210,000,000 Other items included higher expenses from new assets and growth initiatives. Turning now to Slide 11 and a review of current quarter chemical earnings relative to the Q4 of last year. Excluding the effects of U. S. Tax reform and impairments, chemical earnings decreased $190,000,000 from the prior year quarter. Lower margins resulted in a $350,000,000 decrease, again driven by lengthening polyolefin supply with new industry capacity. An increase in polyethylene sales from new assets had a positive contribution to earnings of $100,000,000 Scheduled turnaround activities in Singapore, which we completed in the 4th quarter, had a negative impact of $90,000,000 The same one time non U. S. Tax impact resulted in a positive contribution of $210,000,000 while all other items included higher expenses from new assets and growth initiatives. Slide 12 provides a review of sources and uses of cash. 4th quarter earnings adjusted for depreciation expense, changes in working capital and asset sales gains yielded $8,600,000,000 in cash flow from operating activities. And it's important to note that depreciation in the quarter was higher than the normal trend line due to the previously mentioned current quarter asset impairments of approximately $700,000,000 on a before tax basis. We experienced a $1,300,000,000 negative working capital impact in the quarter. This was driven by an inventory build for planned maintenance in the downstream and some seasonal tax payments mostly in Europe. Other non cash items of approximately $1,000,000,000 included adjustments for gains on the Q4 divestments in Germany and Italy. As a reminder, although both the Germany and Augusta divestments occurred in the 4th quarter, we actually received the cash proceeds from the Germany divestment in the Q3. Had those proceeds been received this quarter, our cash from operations and asset sales would have fully covered investments and distributions. 4th quarter PP and E additions were 6 point $5,000,000,000 driven primarily by increased activity in the Permian Basin. We also reduced debt in the quarter by $2,300,000,000 I'll now move to Slide 13, which summarizes full year 2018 financial results. 2018 earnings excluding the impacts from U. S. Tax reform and impairments were $21,000,000,000 up 40% from the prior year, driven by higher prices, liquids growth and the value from North American integration. Cash flow from operations and asset sales was $40,000,000,000 including $4,000,000,000 in proceeds from asset sales. Now that $4,000,000,000 in asset sales was slightly above the previous 5 year average that we have of asset sales of about $3,300,000,000 2018 CapEx was $26,000,000,000 $2,000,000,000 above the guidance provided at last year's Investor Day, largely driven by incremental acquisitions during the year, notably related to Brazilian acreage in the upstream and the Indonesian lubricants company that we acquired in the downstream. Free cash flow after investments was $20,000,000,000 more than enough to cover the $14,000,000,000 in dividends paid during the year. Debt ended the year at $38,000,000,000 a $4,500,000,000 decrease compared to the end of 2017. Now let me provide a few observations regarding the Q1 before I hand it over to Darren. Upstream volumes should be largely consistent with 4th quarter levels. In the downstream, we are seeing significantly weaker industry refining margins, with lower seasonal gasoline demand and excess production. In addition, the curtailments in Canada, coupled with additional logistics capacity coming online in the Permian, has led to much narrower crude differentials to start the year. While these changes will impact results versus the Q4, they again demonstrate the advantage of integration as opportunities open and close across the markets along the value chain we are positioned to capture them. Scheduled maintenance this year will be like what we experienced in 2018 with the level of activity in the Q1 similar to what we saw in the Q4 of 2018. Chemical margins are expected to remain under pressure as the market continues to work through supply length from recent capacity additions. We expect quarterly corporate and financing charges to be somewhere between $700,000,000 $900,000,000 And finally, we do not expect any significant asset sales in the Q1. At this time, I would like to hand it over to Darren. Thank you, Neil, and good morning, everyone. Great to be on the call today. Let me just start by providing my perspective on the past year. I think as you all know and will recall, in March of last year, we laid out an investment plan to structurally improve the earnings and cash flow potential of our business, while improving our returns across a wide range of price environments. As I reflect on 2018, I am extremely pleased with the progress we've made on those plans. We not only delivered on our commitments for the year, we identified additional upside. The price environment in 2018 was unpredictable, which once again demonstrated the value of our integrated business model. We saw significant swings in commodity prices compounded by the transportation constraints in the Permian Basin in Western Canada. Our upstream integrated logistics and manufacturing position allowed us to avoid the impact of market dislocations and thus capture the full value of our barrels. This reflects a deliberate strategy to leverage the scale and breadth of our integrated business model, which certainly paid off in 2018. Against the backdrop of a fairly volatile margin and price environment, we met earnings expectations for the year and generated $40,000,000,000 in cash flow from operations and asset sales, the highest level since 2014. This in turn enabled us to fund our ongoing investment program, reduce our debt and consistent with one of our long standing priorities, increase the dividend. In 2018, we increased our dividend by 6%, marking the 36th consecutive year of increases. Central to our plans for growing value is the advancement of a portfolio of advantaged investments. Throughout the year, we continued to develop and rigorously test our investments to make sure that our company's competitive advantages were translating directly into project advantages, giving us some of industry's lowest cost of supply. Developments over the past year have reaffirmed our belief in the strength of our investment portfolio, which is the best we've seen since the merger of Exxon and Mobil. In fact, as we work through the year, we identified significant upside to our plans, which brings me to a critical focus area of 2018, delivering on the project milestones for the plans that we laid out back in March. We remain extremely confident in our ability to deliver on our plans. And let me give you a brief overview of the advances that we made in 2018. I'll start with the upstream. Each of the 5 growth area growth opportunities we outlined back in March saw significant progress over the year. In Guyana, our track record of exploration success continued with 5 additional discoveries during the year, resulting in an updated resource estimate of more than 5,000,000,000 oil equivalent barrels. With our success, we added another drillship to accelerate the pace of exploration and appraisal drilling. We now see the potential for at least 5 FPSOs producing more than 750,000 barrels per day by 2025. Another key focus for deepwater development is Brazil, where we have quickly built an industry leading acreage position. Since the Investor Day last year, we increased our acreage position to 2,300,000 net acres. In the Permian, we continue to expand and accelerate activities. We believe we have a unique opportunity here to bring the full strength of ExxonMobil to the development of unconventional resources, to bring scale, bring fundamental science and technology, bring large scale efficient development and bring an integrated well to market approach. It's one of the reasons we moved XBO to Houston to integrate their work and skills into the broader capabilities of ExxonMobil. It's why we believe our approach will deliver the lowest cost supply and give us a significant advantage over the rest of industry. As we've optimized our development with further drilling and delineation, we see additional upside, well beyond the growth trajectory that we shared previously. We'll discuss this in more detail in March when we meet at our Investor Day. We continue to make good progress on projects in our LNG portfolio. PNG and Mozambique remain on track for a final investment decision. We've also been working very closely with QP, our partner in Golden Pass to advance that investment and look forward to announcing something here in the very near term. In the Downstream, the widening crude differentials in North America are a good reminder for why it's important to keep our growth plans for the Permian integrated with our logistics and manufacturing footprint in the Gulf Coast. We've been very active in securing additional takeaway capacity for production in the Permian, as well as putting plans in place to ensure that our logistics capacity grows in tandem with our production and refining expansions. To meet growing demand for higher value fuels and lubricants, we are progressing 6 major refining investments, all advantage versus industry. Over the past year, 3 of those facilities started up, namely the Beaumont HydroFiner, Antwerp Delayed Coker and the Rotterdam advanced hydrocracker. These projects significantly enhance the earnings and cash flow capacity of our downstream business and position us well for the upcoming IMO spec changes next year. The remaining three projects are progressing in line with the plans that we shared in March. In our Chemical business, we outlined plans for 13 new facilities to meet growing demand, 7 have been brought online, the remaining 6 are on schedule. We expect these investments to support a 30% growth in sales by 2025, driven by our proprietary technologies that provide advantaged products and applications. We made excellent progress towards this objective in 2018 with sales growth of 6%. As we said last March, all of our investments leverage some combination of our competitive advantages to deliver industry leading returns. Technology almost always plays a critical role. A great example is our advanced hydropacker project in Rotterdam. The project uses a first in the world combination of proprietary process and catalyst technology to convert heavy intermediate streams into Group 2 base stocks, a significant upgrade. With this investment, Rotterdam becomes the only world scale Group 2 base stock producer in Europe, and it supplements our Group 2 production in the U. S. And Asia, allowing us to more effectively serve our global customer base. We expect this one project alone to double earnings for the Rotterdam site, making it one of the most competitive refineries in Europe. As we speak today, the hydrocracker is up and running and producing on spec product in line with our expectations. We shift now to 2019 and some key themes for the year ahead. Starting in the upstream, we expect to sanction a number of key projects, including the next two phases of Guyana, Liza II and Payara, as well as 2 significant LNG projects, Mozambique and Golden Pass. Let me just add here too that we advanced the FID of Payara in the middle of 2020 to late 2019, again reflecting the development plans and the progress that we're making beyond the plans we laid out last year. Later this year, we plan to mobilize the FPSO for the first development of Phase in Guyana, putting us on track for early 2020 start up. With the advances we made in our Permian development plans, we expect to accelerate the pace of our investments and increase our production profile. Consistent with this, this week we announced a final investment decision for the Beaumont refinery expansion, which will further add to our integrated Permian advantage. We also announced the formation of the Wink to Webster JV to address the Permian long haul pipeline that will give both Baytown and Beaumont the industry's most efficient transportation link to the Permian. We brought 3 important refinery projects on in the back year of last year, back end of last year. In 2019, our focus will be on fully leveraging their advantages. In addition, we're going to continue our push into new growth markets like Mexico and Indonesia, ensuring that we capitalize fully on our brands. In the chemical business, we're on track for a midyear startup of our Beaumont polyethylene expansion, further strengthening our position in the Gulf Coast. We also plan to FID 2 projects at Baytown that will produce Vistamax, which is a high growth, high performance propylene plastomer and linear alpha olefins used in packaging oils, waxes and other specialty chemicals. These projects along with the others we've discussed will allow us to continue to grow sales of high value, high performance products. As I step back and reflect on the opportunities we have across all three of our business sectors, I remain very excited by the potential to generate significant value for our shareholders. As you may have seen yesterday, we announced the formation of new upstream and project organizations. These new organizations will help to facilitate the successful delivery of our investment opportunities. The Upstream is reorganizing into 3 companies, down from 7. The Upstream Oil and Gas Company will have 5 distinct global businesses. Each business will have full accountability for end to end results, from resource development to production to marketing over the entire life of the resource from discovery to abandonment. The upstream integrated solutions company will provide functional expertise to bring the full advantage of the company's scale, our technology and experience to each global business. 3rd company, Upstream Business Development. We'll receive the upstream strategy and activities to upgrade the asset portfolio through exploration, acquisitions and divestments. This will increase the focus on portfolio optimization and ensure that we continue to aggressively pursue all available value added opportunities, including divestments. We're also combining the projects organizations from the upstream, downstream and chemical into 1 global projects company, which will allow us to more effectively leverage the company's proven project capabilities. Great. We understand the webcast drop. We apologize for that. So we are going to turn it back to Darren and let him finish and then we will take Q and A. I will try to pick up where I understand we dropped off, which was turning to 2019 perspectives in the chemical business. I was saying that we're on track for a mid year startup of our Beaumont polyethylene expansion, which is going to further strengthen our position in the Gulf Coast. We're also planning to FID 2 projects at Baytown that will produce Vistamax, which is a high growth, high performance propylene plastomer and linear alpha olefins used in packaging oils, waxes and some other special chemicals. These projects along with the others we discussed will allow us to continue to grow sales of high value, high performance products. As I step back and reflect on the opportunities we have across all three of our business sectors, I'm very excited by the potential to generate significant value for our shareholders. You may have seen yesterday that we announced the formation of new upstream and project organizations. These new organizations will help to facilitate the successful delivery of our investment opportunities. The Upstream is reorganizing into 3 companies, down from 7. The Upstream Oil and Gas Company will have 5 distinct global businesses. Each business will have full accountability for end to end results from resource development to production to marketing over the life of the resource from discovery to abandonment. The upstream integrated solutions company will provide functional expertise to bring the full advantage of the company's scale, our technology and experience to each global business. The 3rd company, Upstream Business Development, will oversee the upstream strategy and activities to upgrade the asset portfolio through exploration, acquisitions and divestments. This will increase the focus on portfolio optimization and ensure that we continue to aggressively pursue all available value added opportunities, including divestments. We're also combining the project organizations from the upstream, downstream and chemical into 1 global projects company, which will allow us to more effectively leverage the company's proven project capabilities across our entire investment portfolio. We already implemented many of the concepts behind the new design about a year to 18 months ago. The Permian development and the chemical cracker in Corpus are two great examples of what came from that. Rewiring the organization will allow us to sustain the new way of working and make it easier to leverage across all of our businesses and opportunities. In addition, it will improve the upstream integration with our downstream and chemical businesses. This is particularly important given the growth and value opportunities we are capturing. With the increased upside, particularly in the Permian and Guyana, we expect CapEx to be $30,000,000,000 in 2019, an increase of about $2,000,000,000 from the guidance we gave in March. Before I hand it back to Neil, let me just offer a few closing thoughts. We remain fully committed to growing shareholder value. That commitment is the driving force behind the growth plans that we've shared with you. We feel good about the progress we made in 2018 and the delivery on our commitments. We remain very confident in our ability to execute our forward plans and are very excited about the additional upsides. The management team and I are looking forward to reaffirming the plans we laid out last year and sharing additional detail on the upside when we meet next month at our Investor Day. With that, let me hand it back to Neil. Thank you for your comments, Darren. We'll try again on Q and A. So we'll turn it over now for any questions you might have. Thank you, Mr. Woods and Mr. Hansen. The question and answer session will be conducted electronically. We'll take our first question from Doug Terreson with Evercore ISI. Good morning, guys, and congratulations on your results and your progress. Thank you, Doug. Good morning. Yes. So Darren, while the returns profile of your investment portfolio looks to be pretty strong, I think you highlighted that. As a super majors refocused on areas of competitive advantage during the past decade or so, They use divestitures as a fairly productive capital management tool. And on this point, while you guys have had divestitures too, your activity levels have been below peers, whether including BP, which obviously had an event or not. And so you talked about this a minute ago. I just want to see if you would elaborate on your comments about divestitures as a portfolio management tool or portfolio optimization tool, I think is the way you termed it. Whether there's a philosophical reason why ExxonMobil hasn't been some of the peers and whether divestitures might be more prominent for you guys in the future given the restructuring that you highlighted? Sure. Thanks, Doug. Thanks for the question. Happy to spend some time talking about that. I think we made reference to it last March. One of the advantages that we have today is as we've as the prices came off in the back end of 2014 and we leaned into the market and as we've talked about loaded up our pipeline of investment opportunities with some very attractive projects. That has allowed us to re optimize and look at the total value of portfolio. If you go back in time, we've had a pretty regular divestment program investing about $50,000,000,000 worth of assets since 2,008. What we can now do in the upstream with this additional project and these investment opportunities we have is increase the focus there. So I would expect to see more activity in divestments in the upstream side of the portfolio. That's going to be driven really by the opportunities that the market brings. We've got a, I think, a pipeline of assets that we think would make sense to market. We're actively doing that and we'll see as we go through the year what opportunities kind of come to fruition. I would add though, Doug, that this is a value play. We're not trying to hit some schedule associated with it. We're really trying to make sure that we can realize the maximum value out of the assets that we have in our portfolio. Okay. As I mentioned, the new organization is going to help us with that. No, I am sure. Thanks a lot, Darren. Thank you, Doug. Thanks, Doug. Next, we will go to Phil Gresh with JPMorgan. Hey, good morning, Darren, and thanks for being on the call today. I guess the first question would be around, you talked about some areas where capital spending is moving higher and your Permian rig count has certainly accelerated versus what you talked about in March. So without getting too far ahead of what you want to talk about at the Analyst Day, maybe you could talk about at least you're thinking about 2019? Are you comfortable with the level that you're running at now? Or do you see further opportunity? Yes. Hi, Phil. Thanks. What I will say, if you look at 2018 and as Neil mentioned, the additional CapEx we spent there was really the acquisition of a couple in a couple of areas, Brazilian acreage, and then we had, I think, a real nice opportunity in Indonesia to supplement our lubricants business. And so I think ex the acquisitions that weren't built into the plan, we were pretty much in line with where we expected to be on CapEx. As I just said, going into 2019, we expect to be around $30,000,000,000 and that does reflect the progress and the opportunities that we're seeing in Guyana, the upsides that we've seen there as well as the Permian. Let me just talk a little bit about the Permian because I think one of the things we challenged ourselves with and looking at the unconventional resources is what value, what unique value can ExxonMobil bring to this resource play. And so we have spent the year really making sure that we understand the plays that we've got, doing some delineation, but at the same time leveraging the full capability of ExxonMobil to bring scale and scale development along with technology, additional technology and research into the Permian. So I think what you'll hear in March is a good overview around how ExxonMobil is uniquely coming into the unconventional resources to make this a low cost, long term successful development play. Okay. And I guess just my second question would be on chemicals. That would be if you think about 2018, that was an area I think you expected to see some earnings growth in 2018 and it was a bit more challenging. So maybe you could just talk a little bit more about what you're seeing both from macro factors, but whether maybe there are any company specific factors there as well or if it was all just kind of a macro situation? Yes. I think, the chemical business, across all of them, frankly, one of the points we tried to make at the analyst meeting is it's we don't try to take a position on price or margins and where things are going to be. We try to make sure that the investments we're making are robust to the cycles that we see in these businesses and are aligned with 1, our advantages, but 2, the long term potential for these businesses. So if I look at chemical, the growth that we see in chemical remained and the foundational elements of that business and industry remain very strong, continue to see demand growth above GDP going out into the future. Saw that in 2018, 4% demand growth. So very comfortable with what we see as the macro trends from a demand standpoint in chemicals. The challenge that we saw in 2018, I think will carry some into 2019, is the amount of supply that's come on. If you look at the demand growth and focus on steam crackers for a minute, you probably need about 3 to 4 world scale steam crackers every year keep up with demand. In 2018, I think 6 came on. And so a lot more supply than what the annual growth would be, but the industry will grow out of that and we positioned ourselves to make sure that we capture that long term growth. We don't get overly focused on the timing of every project and when they are going to show up, those things shift around a bit. We've got more projects, the industry projects coming on in 2019. That timing will move around and I think we'll see margins move with timing of that new supply coming on. But again, I think that the current environment is not a concern for us. We've leveraged all those projects we put in place that leveraged our advantages and made sure that we are on the low cost of supply. So irrespective of where we're at in the cycle, we're going to be advantaged versus the rest of industry. Okay. Thank you. We'll take our next question from Sam Margolin with Wolfe Research. Good morning. Good morning. I was you touched on this a little bit, Darren, in your perspective section, and Neil quantified it too with the integration benefit of $1,200,000,000 But I was hoping to ask you to elaborate a little bit in the context of the pipeline and the refinery FIDs in the U. S. That were announced this week. You've got a lot of crude coming on stream in other places. And so is the fact that there's a lot of U. S. Kind of value chain investment a function of trying to balance the portfolio and the U. S. Is the easiest place for you to do that given your existing footprint? Or is there something commercially about the U. S. And where these supply chains go through that kind of makes you feel like the U. S. Is a place where you really want to be an exporter of finished products and not necessarily incremental crude. Just a little bit of background on the molecules you specifically want to target in the U. S. Versus internationally? Sure. Happy to do that, Sam. Thank you. And good morning. Yes, I think as we look at that in the value of integration, it is really a function of the market that you're in and the structure of those markets. So let me just give you an example of why we think there's a big opportunity here in the Permian. It's a very fast growing area. It's inland and so you've got key unique logistics to move in and out of that. And so as we're rapidly growing production in the Permian, as the industry is rapidly growing production in the Permian, there are going to be periods of disconnect as the pipeline and logistics systems try to keep up with that rapid production growth. Our view is we don't want to be exposed to those disconnects and so we have been looking across our integrated chain and one of the advantages ExxonMobil has is we can see across that whole value chain because we participate along the whole value chain. And so making sure that as we are developing our plans in the Permian, at the same time, we're developing our plans and our logistics systems, developing the plans in the refineries, so that we make sure that that stays connected. The refinery investments that we're making stand somewhat alone. They accommodate our production, but they are somewhat alone and disconnected from our physical molecules. The opportunity there is just take advantage of the transportation differential between bringing crude in from the West Texas and the Permian versus importing it in from some of the locations. So that's the margins and what we expect to get out of the refinery expansions is really a transportation differential in play. And that combined with our advantages make those attractive. So when you look at us and hear us talking a lot about the integration, it is really with Western Canada crude and in the Permian because of the specific nature of those markets. And some of the other markets we're in where you're close to Tidewater, you don't have the same kind of market dynamics, that value doesn't manifest itself as explicitly. Okay. Thanks so much. And then just a quick follow-up. You mentioned that the small step up in CapEx in 2018 versus your Analyst Day guidance was a function of some acquisitions, some opportunistic acquisitions you had specifically in Brazil. Going forward, are you going to try to pay our asset sales with opportunistic acquisitions like that? Or are these ads just a function of returns and there is no sort of cash balancing consideration at work here as well? Yes, I would tell you, we are not we don't have a formula where we are trying to balance ins and outs. It really comes back to maximizing value. So if we see an acquisition and an opportunity there that we think has some high potential and is accretive to value, we are going to pursue that. I would also say at the same time, we recognize as we bring more attractive opportunities into our portfolio, that gives us an opportunity to trade out some of the existing assets. And the more we bring in front end load the pipeline and we prioritize across the highest value investment opportunities, by definition, some will get moved out. As we move those assets and those projects back, we have the opportunity to trade on that. Others that don't have the same pipeline of opportunities that we do will see a higher value sooner and it gives us a chance to trade. So I would expect to see that ramp up and I don't think we are going to constrain ourselves to try to balance those things out, but I'd expect to see more divestments coming out of the upstream. And I know Neil Chapman and his team are very focused on that. Okay. Thank you so much. You're welcome. Thanks, Sam. Next, we'll go to Neil Mehta with Goldman Sachs. Good morning and thanks, Darren, for being on the call today. The first question I had was just on the base business. And can you just talk about outside of the major capital projects when you think about the balance of the existing portfolio, how you see declines playing out from here? What are you doing to mitigate those declines? And talk about some of the larger legacy assets like Groningen, where we have seen some volume declines? And how do you intend to either offset that or do you look to allow that to continue to happen as you try to maximize returns and cash flow? Sure. Hi, Neil. Good to hear from you again. Let me just say too, I'm happy to be on the call to spend some time talking about our business. I'm real happy and pleased with how the organization is kind of come together and we've challenged them to make sure that we're maximizing and leveraging the full capability of the corporation. One of the changes driving our upstream reorganization is to make sure that the upstream businesses have the accountability and the ownership to maximize profitability and value for their assets and for their value chain. And that philosophy, as I mentioned in my comments, have already been pushed out into the organization. And so what we're seeing in terms of short term day to day operations is, I think, a real aggressiveness at looking for opportunities to grow value. I mentioned to you that we've identified a number of upsides as we went through the year. Those were bottom up upsides as the organization really focused on where they could find and extract additional value, not just from the new projects, but also from the base business. So I feel good about that. And they will do they will make decisions day to day around what's economic in terms of offsetting decline and making sure that we're getting a good return for every dollar that we spend to bring that production back. With respect to Groningen, that's a slightly different dynamic there as you know with some of the tremors and the concerns, legitimate concerns expressed by the community there. We worked fairly closely with the government and made sure that we had a mechanism to kind of address those concerns in a responsible way. That agreement that we reached with the government entailed a change in the fiscals, taking the fiscals for the Groningen resource back in line with the rest of the gas business and the Netherlands. And so I think all of that, that has been reflected in our go forward plans and very comfortable that what we're doing and the growth that we've got will more than offset any reduction that we see there. Appreciate it. And the follow-up question is just on Liza. Just as we talked about in Miami, it sounds like you guys are full steam ahead towards that 750,000 barrel a day long term target. Do you see a potential upside to that base case number? And then curious how you're thinking about the timing of Phase 2, especially given some of the uncertainty from political perspective down in Guyana? Yes, we still feel really, really confident about what we're doing there and advancing Aliza. I think as we've talked about already with the discoveries that we've announced, we see additional FPSOs there. And that resource, we're still a long ways, as I mentioned, in Miami from fully exploring the opportunity set there. So as we continue to advance that exploration, we'll see how it plays out and we're optimistic that we'll find some additional opportunities there and that will continue to grow that resource. With respect to Phase 2, Liza 2, that continues to be on track with the schedule that we put in place. And let me just address this, the comment that you made around the government and some of the things happening there. I think it's important to keep in mind, when we go into countries, we go in with the mindset that we're going to be there for a lifetime, 30 to 40 years. You can't have a successful development if you're only talking to a subset or a narrow section of your stakeholder group. So we have been engaged with the sitting government, with the opposition, with communities, making sure that the development and what we're doing is understood and the people are aligned on that. So the opposition understands the contracts that we have in place. I think they understand the value that that development will bring to Guyana and the people of Guyana. So, I think it's very consistent with how we think about a long term approach to engaging with companies and countries. Thanks, Darren. We appreciate the increased transparency. Sure. Next, we'll go to Alastair Syme with Citi. Hi, thanks for taking my question. My first question just as you look at the LNG market, you're clearly trying to sanction a lot of projects over the next couple of years. So historically ExxonMobil has sought to secure most of the offtake before sanction. Is that still the way you look at the market and the interesting observations about the changing market dynamics? Yes. Thanks, Alistair. You're right. That has been the historical model. I think as you kind of make reference implicit in your question, is that market is evolving. I'm not sure it's going to evolve as quickly as some people are predicting it, but we certainly see a change. And I would anticipate as we make those investments and bring LNG on that will evolve along with the market and make sure that we're positioned to maximize the value of those investments. And that may mean more portfolio activity in the future. But again, we're going to pace that in that development consistent with how that market develops. Okay. Thank you. My quick follow-up question, just a point of clarification on the CapEx. I think in 2018, you had around about $3,000,000,000 of acquisition capital. Does your 2019 budget incorporate something around a similar level? Is that the way you think about the budget? No. Typically, when we are putting together our plans, if we have got something, a line of sight on something that we think has got a high chance of closing, we will try to reflect some of that. If we don't have any of those, then they won't show up in the plan. So it tends to kind of vary depending on where we're at and the line of sight that we have on the opportunities. Great. Thank you for taking my questions. You're welcome. Thank you. Next question comes from the line of John Herrlin with Societe Generale. Yes. Hi, Darren. With respect to the upstream reorg, are all these new entities or groups going to report still to Neil or do they report to the committee? So the new streamlined organization, one of the big benefits that we have there is moving from 7 upstream companies down to 3. Those 3 companies and presidents will report to Neil Chapman. Okay, great. Then the next one for me is, I guess for Neil. Could you address what the impairments were in the U. S. And internationally upstream? Yes. So John, I think as I mentioned, there were and you can see the detail in the supplemental information as well. We had about $400,000,000 after tax and impairments in 2018, about half of that related to a U. S. Gulf of Mexico asset and then the other half related to unconventional activity in North America. Okay. I missed that. Thank you. You're welcome. We'll next move to Biraj Borkhataria with RBC. Hi, thanks for taking my question. It was on LNG again. Could you just talk a little bit about the rationale to move forward with the Golden Pass project? And then also how that competes with some of the other options you have, particularly Mozambique and then a potential Qatar expansion if you were to participate there? Thank you. Sure. Thanks, Biraj. Let me just maybe start with the philosophy of how we look at competing investments, if you will, or the opportunities within our portfolio. I have said this before in different audiences, but our strategy here and the way we make decisions on investment is those investments have to compete versus the whole of industry, not just what we have in our portfolio. So the emphasis that we put on our different projects is how do they fit in with the industry's projects and the additional capacity that they're going to bring on and make sure that those projects have the advantages needed to be on the lower end of the cost of supply curve so that they will be very competitive versus any other industry projects to come on. That's very important because as we've just talked about with the Chemical business in a high growth, while we see a lot of high growth opportunities in LNG, capacity will come on in big chunks. It won't be necessarily coordinated. So we'll see, I suspect, periods of oversupply. And so when we see that period, we're going to have to make sure that our investments are robust to lower market prices. And then as the growth continues and the market tightens up, we'll see advantages there as well. So So the focus is really on making sure our projects are competitive in the landscape of the industry. With respect to Golden Pass, I think it's got a lot of strategic value. If you think about the gas business in the U. S, the quantity of gas available to the marketplace, the associated gas that comes on with some of the crude development, we continue to see from a supply standpoint a very attractive supplied gas market in the U. S. For us then, we've got an opportunity to leverage our existing terminal facilities, which gives us an advantage. And then it also allows us with a supply point here in the Atlantic Basin in North America for a lot of optimization as we look to supply the global markets. And so I think we've got some unique advantages with existing facilities. We've got advantages with the industry supply source here in the U. S. And then we've got advantages in terms of a global LNG business and the ability to optimize across that whole portfolio and including the work that we do with QP and optimization with that integrated portfolio. Can I just ask a very quick follow-up? In terms of timing, you've got Mozambique, which may be FID 2019 2020 and then Golden Pass moving forward. Would you expect to be going through both of those developments concurrently? Or should we expect one to be pushed back a little bit? Yes. Each of them will be a function of kind of the contract availability and how that plays itself out. I would tell you with the strong growth that we are seeing in the LNG market, lots of demand that supply is going to chase here. And so I think we'll let those make sure what we're going to make sure is those developments occur on a very efficient, cost effective way. And then as I said before, with the advantages that we are building into these projects, we'll be low cost of supply and so less worried about what others are doing and making sure that we bring those on in a cost efficient, effective manner. Great. That's helpful. Thank you. You're welcome. Next question comes from the line of Doug Leggate with Bank of America Merrill Lynch. Thank you. Apologies folks. I don't know if there was a technical issue on your end as well, but I had to dial back in again. So sorry about that. First of all, Darren, let me also reiterate my thanks for you getting on the call today. But I wonder if I could preempt you a little bit on the upcoming Analyst Day. Your rig count in the Permian is about 50% above what you guided last year or at least the target for the end of the year. And clearly, there's multiple additional growth potential in Guyana. Is your intention at a high level to would that notionally increase the targeted growth or would you intend to do more with less or perhaps accelerate disposals to keep the overall kind of scale of your expectations through 2025 the same? Yes. Thanks, Doug. Well, I think in March, we're going to have a really comprehensive conversation about how all this pulls together. I'll tell you with what we laid out for the Permian last March, that was very early into the development of that resource. And this what I talked about earlier with respect to trying to leverage the capacity and the skills of not only XTO, but the full ExxonMobil advantages has led us to, I think, a very unique concept for developing there the Permian resource. And so I think and we'll lay that out in Mark's talk about how we're approaching that and the investments that we're making there. And so that will be a kind of a story unto itself. We're also with Guyana as we continue to see opportunities and leverage what we're already doing is a lot of efficiencies at continuing to roll into production as we have more discoveries and find resources that we can bring on. So I think again, we're going to we'll update you with that, but we'd continue if we continue to have success in exploration, continue to build on that momentum, take advantages of the efficiencies and bring on very attractive, very low cost supply. As all that kind of comes to fruition, our expectation is we'd see more earnings and more cash and bring in more returns. And at the same time, we've got the opportunity now to kind of flex that portfolio and we'll optimize to make sure that we're not leaving any value on the table. We want to bring NPV forward as much as possible, but do it in a way that keeps cost in control and stays within the capability of our organization. So that's kind of a constant evaluation and testing that we're doing. I think the new organization that we're putting in place is going to help us more effectively advance some of these investment opportunities. So we will kind of roll all that together and lay out what the implications are going forward in March. I appreciate that. My follow-up, hopefully a quick one is just on the reorganization. I realize your disposals this year run a tick above the kind of guidance or the loose guidance you've typically given in the past about what you would expect that scale to be. Should we read the reorganization and somehow accelerates or brings forward the focus a little bit more? In other words, would you anticipate your disposal program to get even larger as you move forward? I'll leave it there. Thanks. Yes. Thanks, Doug. I think as we mentioned, we've got the Upstream Business Development Group, which is really their the projects portfolio and optimizing that portfolio. And the projects portfolio and optimizing that portfolio. That I think is going to bring an additional degree of focus into that space, not only from an exploration standpoint, but from an acquisition as well as divestment. So I would anticipate from an upstream standpoint, we will see the pace of divestments accelerate. If you step back and look at it in the context of the corporation and you go back in time, a lot of the divestments we've seen came out of the downstream. And so the mix will change as we go forward and then the level may be slightly up or consistent with what we've done in the past. Next question comes from the line of Roger Read with Wells Fargo. Good morning and like everyone else, welcome to the call. Darren? Thanks, Roger. I guess, if we could maybe just talk about the CapEx plan this year, the $30,000,000,000 And you were able to pay off some debt last year, but I think if we were to take the CapEx back up to the $30,000,000,000 level, we'd be more of a neutral level in 2019. And then if you adjust crude prices to the strip, we'd probably be looking at a little bit of a debt add in 2019. I was just curious not so much whether or not you need to borrow a couple of $1,000,000,000 or pay back a couple of $1,000,000,000 but just understanding how you're thinking about CapEx within the overall cash flow environment and then what that could mean for increased shareholder distributions presumably at this point just on the dividend front? Sure. Let me kind of maybe just remind, reemphasize the priorities that we've got around capital allocation, how we're approaching that. 1st and foremost, if you're looking at the long term value of our corporation, particularly on the upstream side, which is a depletion business, you've got to have a healthy pipeline of attractive investment opportunities. And that has been one of the things that I know over the last several years, the management team here has really been challenging themselves with around reloading that pipeline and making sure that we got projects and project opportunities that go way out to the future to bring value in. And our intention would be to bring those projects on consistent with our plans irrespective of the price environment. And the reason for that is we've built those projects and tested those projects to make sure they're robust to a low price environment. So if we were to find ourselves in an environment where price is below, that would actually, I think, benefit those projects in terms of as activity falls away in the industry, you tend to get lower cost construction. So that might play in our favor, but we would continue on that path. And then consistent with that and one of the reasons why we keep a balance sheet the way we do is to allow that to happen and not have to adjust the business up and down with the cycles that makes for a very inefficient capital development. It also prevents you from taking advantage of the down cycle and a lot of the things that come positive from a down cycle. And so our strategy has always been to make sure that we've got a robust capital structure to support continued investment in CapEx through the cycle, making sure we've got enough dry powder to take advantage of the down cycle if an opportunity presents itself, an acquisition opportunity potentially, and at the same time, make sure that our cost of leverage is remains very competitive. And to do all that with investments, with our balance sheet, continue to fund a reliable and growing dividend. We feel like that's an important priority for a lot of our shareholders. So that's kind of the equation. Then we get into buybacks. I'll tell you, we've challenged ourselves on the investment front. You've seen we've challenged ourselves, our organization and our ability to effectively deliver the advantages that we have as a corporation into bottom line results. I think you've seen changes there. And we are also challenging ourselves around the optimum capital structure and what we want to make sure that we are leveraging the full advantage of that capital structure. That's what's going on and I'm very optimistic that we've got a very strong portfolio of investments that are backed up by a very strong capacity and capability of the corporation. Okay. Thanks for that. And maybe just as the follow-up, as we think about maybe more dispositions coming from the upstream sector, What do we how should we think about the cash flow that comes from that? Is that to reinvest in the upstream? Or do you think as you move forward, obviously nothing in Q1 probably, but as we think about the latter part of 2019 and into 2020, does the cash flow go to the balance sheet? Or is it CapEx supporting? Or is that maybe what you're thinking about in terms of getting back to more of the historical shareholder returns? I would say, as we progress that divestment program and to the extent we have success, find buyers out there that put a value on it that we think is attractive for a transaction. We're not waiting for that in order to fund our CapEx. Our investment program is not a function of waiting for cash to come. So I would not expect to see as divestments progress, see that translate into additional projects in capital investment. That is an independent decision, again, related to some of the things I talked about in terms of the strength of the opportunities we're looking for, which then says, any additional cash would come in would come back to the point I just made around the optimum capital structure and whether we pay that down in debt or whether we move it out as a buyback. And as I said, we're taking a real hard look at that and making sure that we're striking the right balance there. All right. Your next question comes from the line of Jason Gabelman with Cowen. Yes. Hey, guys. Just a couple of questions. Firstly, on Guyana, what's going on in the government there? I appreciate that you've already addressed this question a bit, but if I could push a little deeper. If there is kind of a pause in who's running the government, I mean, are you, 1, concerned that you may have to ramp down investment there? And 2, is there somewhere else where you would put that money to work in if there is a potential pause or slowdown in the pace that you're developing that asset? Yes. I frankly, given the discussions that we've had since really coming to Guyana with the stakeholders that we've got across the political spectrum there, given the discussions about the advantages this development brings and the recognition of those advantages by a very wide constituency in Guyana, we really don't have any concerns about the political dynamics that are happening there. We understand that that's the nature of governments and countries around the world. We basically expect governments to change over time. Again, when you're coming into a country for 30 plus years, I think it would be extremely naive to think that you're only going to have one constituency there for the timeframe. So again, we take a very broad based approach. I think all the feedback we have got, the alignment that we have in country supports what we are doing here, because they recognize the value that it's going to bring to Guyana. So real happy about that. And as I said, I think the Phase 2 is on track, remains on track. We don't see that coming off at this point. And obviously, we'll see how things develop there, but we're not particularly worried about it given the value and the strength of that investment. That's very clear. Thanks. Secondly, just on capital spend and I appreciate the 2019 guidance that you provided. Do you have a view on what 2020 beyond is going to look like relative to the guidance you gave at the at your last Analyst Day? Yes. Jason, I think I am going to stick with the guidance we gave for 2019. I think in a month's time, we are going to kind of lay out the longer term plan, again consistent with the 2025 timeframe, talk about the upgrades that we are seeing, the opportunities that we are seeing and how we are factoring that into the plan. We will provide some better perspective at that time. All right. Thanks a lot. You're welcome. Next, we'll go to Jason Gammel with Jefferies. Thank you very much, gentlemen. My first question relates to the technology that you have deployed at the hydrocracker in Rotterdam. It seems to be a pretty significant uplift on margins relative to the old technology. I was just curious whether this is something that you would be able to deploy on a wider scale or there's something unique about Rotterdam that really kind of restricts it to that location for now? Yes. Thanks for the question. I think, so what that development or that project in Rotterdam leverages is the catalysis and the technology we have, the advantages that we have in catalysis. And so that's a unique application based on our understanding and our ability to develop a unique value added catalyst. Opportunities like that exist across the portfolio. Obviously, it may involve different catalysts, but we have talked about our Singapore project where we are looking at upgrading heavy residue molecules. That would also look to leverage some of this technology and use some of this proprietary catalyst to make that conversion from a very low heavy, low value residue into higher value products, diesel and loose base stock. So, there is broader application. Obviously, it depends on the nature of the molecules that you are trying to upgrade. But we feel and that's one of the reasons why we have challenged ourselves. For a long time, we weren't investing in the downstream because and I can say this with a lot of intimacy because I was involved in it at the time, we weren't going to put in kind of a FOG standard industry technology and get industry returns. We are going to force ourselves to find technology that allowed us to get above industry returns. Rotterdam is a great example of that. I think Singapore port will be another great example of that. And hopefully, we'll be able to share some additional examples as we move forward and find additional applications. I'm pretty optimistic. Look forward to that. My second question also relates to the LNG portfolio. Can you discuss whether you were interested in participating in the expansion at Qatar LNG? And if so, how would that rank relative to the 3 other LNG opportunities that you have in the portfolio currently? Yes. We've got a very long term presence and partnership in Qatar. I think we value that. It's a good partnership. We've had a lot of success working with QP there. And I would certainly look to continue to extend that. I think we're aligned to how we think about the business and the opportunity and value each other's partnership. So absolutely interested in continuing to partner with that and to develop resources and opportunities in Qatar. It is a very low cost supply gas, which as you've heard me talk about is an important element in the LNG projects that we're advancing. With respect to how that would fit into our portfolio, I'll come back to the discussion we've had. We are looking at these opportunities not on the basis of what we have in our portfolio, but on the basis of what industry has in this portfolio. And we're going to advance the opportunities that we think are advantaged versus the rest of industry. If we can't find an investment that does that, even if it looks good in our portfolio, we won't pursue it because frankly it's going to have compete on an industry wide basis. And that is the hurdle that we're using. We don't want to make decisions based on what we have. We want to make decisions based on how competitive we'll be in the industry. And that applies not only to the investment standpoint. Appreciate your thoughts, John. Thank you. You're welcome. All right. We'll next go to Paul Cheng with Barclays. Hey, guys. Good morning. Hey, Paul. Good morning, Paul. First, I just want to say thank you to Neil Hansen that to put in the page identified the large earning item impacting on the quarter that we really appreciate on that. For Darren, couple of questions then. First, with your reorganization, you talked about how that you may accelerate your asset sales effort. How about on the other side of the ledger on the acquisition side, is that going to have any meaningful impact? And also if you can comment on what you believe today in the market, yes, the bit off environment is still too wide apart or you actually think that there is a reasonable expectation on the environment at this point? Okay. Yes. Thanks, Paul. I think it's hard to what I would tell you is the reorganization is definitely going to improve the focus that we have on both sides, divestments and acquisitions. So I would expect to see additional thinking and focus and opportunities on both sides of the ledger there. Whether that results in anything or any acceleration on the acquisition side, I think it's very difficult to tell, because frankly comes back to your second question, which is the bid ask spread. I mean for us to pursue an acquisition, it has got to have to bring some unique value to our shareholders. We are not going to do a me too deal out there. And so I think what we have to look for is something that fits in the portfolio and allows us to leverage something unique to ExxonMobil, which brings more value than on a standalone basis. And I think that's going to be the key driver. I don't think anybody is out there looking to discount their business and so it's really got to find a way to bring some value there that doesn't exist otherwise. And I think those opportunities are there. It's just a function of finding them and then seeing where the market goes and how welling sellers are and what their expectations are. So I'd just say we're going to stay very focused on that and see what opportunities bring us. Second question that I think digitalization seems to be the buzzword among some of your peers and some people may even trying to quantify that how big is the potential impact or the saving to the business. But Exxon, given your technology that we were actually a little bit surprised that you guys haven't really talked too much about that and then really coming up with any quantification that how much it may mean to your business. Is there something that you can share on that? I'm sure that you guys all have the expert looking at that. Yes, you're right. We do. I think it is, as some of our peers may have talked about, a very high potential area, a lot of opportunity to bring additional value. We've got an organization dedicated at looking at that. I think one of the advantages that we have, that organization is not is looking across the entire portfolio. There are a lot of synergies when it comes to digital across our manufacturing production platforms, across our operations in chemicals downstream and the upstream. And so we think given our size, given the fact that we participate all along the value chain, the data that we have probably is the best in industry and then our ability to mine and leverage that data to improve operations, I would say our capacity continues to grow. We're taking a what I would say is a thoughtful, methodical approach to it to make sure that we are building structures and data structures and digital tools that allow us to do that in a comprehensive way across the globe and to leverage that value. And so, it's a very important area. I would not expect us to start putting numbers on that and sharing it. I think for us, it's an advantage. It's going to be a competitive advantage. It's one we will keep in house. I see. All right. Very good. Thank you. You're welcome. I think we have time for one more question. Yes, sir. We'll take our last question from Pavel Molchanov with Raymond James. Thanks for squeezing me in guys. Just one question for me. You've alluded to the well known regulatory issues at the Groningen field. But when we look at your total European gas volumes down 12% versus a year ago. Even if we exclude Groningen, there would be close to a double digit decline. So what explains the continual declines in your North Sea gas outside of Groningen? Well, you know, we divested our Norway business last year and so that's going to have a material impact and that's probably what you're seeing there. And then on top of that, obviously, gas demand and gas production is very seasonal depending on weather and temperatures and that's going to play into it as well. Okay. Wasn't this kind of a cold winter though in Europe? Not if you look at compared to previous, no. Okay. Okay. Okay. Thank you, guys. You're welcome. Thank you, Pavel. Great. Thank you for your time and thoughtful questions this morning. We appreciate you allowing us the opportunity today to highlight a Q4 and full year that included strong earnings and cash flow performance supported by continued liquids growth and value capture from our integrated business model. We look forward to seeing everyone on March 6 at our Investor Day in New York. Again, we appreciate your interest and hope you enjoy the rest of your day. Thank you.