Exxon Mobil Corporation (XOM)

Analyst Meeting

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Mar 2, 2016

Ladies and gentlemen, good morning, and welcome to ExxonMobil's 2016 Analyst Meeting. We are pleased to have you all join us here this morning at the New York Stock Exchange and of course as well as those people participating on the audio conference and the webcast. So we are looking forward to a very informative and engaged discussion this morning. For those that I have not had the opportunity to meet, my name is Jeff Wilburat. I'm the Vice President for Investor Relations and the Secretary for the Corporation. Before we begin, I'd like to cover just a couple of administrative matters. First, our safety procedures. In the case of an emergency evacuation, there are two points of egress from this building. The first one is in the front here to the right down the hallway. There's a stairwell to the right that takes down to the street level. The second one is out the back where you came in this morning, take a hard left in the lobby area before you get to the elevator bank and you'll see another stairwell. Now of course, if we do have emergency evacuation, the exchange personnel will come and provide us guidance throughout the event. The second safety item I'd note to you is that there are number of power cords on the floor that are taped down. I just ask you to watch when you're walking around. Like we say at ExxonMobil, walking is working. The 3rd point I'd like to make is, I'd ask everybody just take a moment and just recheck your electronic devices, make sure you silence them, both your cell phones, your presentation. So with that, let me turn to the cautionary statement. And as you know, this statement contains information that is pertinent to today's discussion. You can also access our website at exonmobile.com to get additional factors that affect our future results as well as the definitions for some of the terms that we're using in today's presentation. So next, I'll move to the agenda. And Rex Tillerson, our Chairman and Chief Executive Officer will lead the discussion this morning. We'll begin with key messages, then we'll move into corporate strategy, our energy outlook, we'll talk about our recent performance, and then we'll focus in on our forward business plans. Next, we'll move into how the ExxonMobil is unlocking upstream resource value as well as growing our advantaged portfolio in the downstream and chemical businesses. After the presentation, we'll take a short break and then the management committee will join Rex up on the platform to answer your questions. Without further ado, it's my pleasure to introduce Rex Tillerson. Thank you, Jeff, and morning all. Yes, sounds like I'm on now. Okay. Well, good morning to all of you and again, I want to add my welcome to that of Jeff to all of you that are here with us in person. I also want to welcome those that have dialed in by phone to listen in or maybe participating on the webcast. As always, every year, I'm pleased to have this opportunity to discuss our company's business strategy, our investment plans and our financial and operating results with you. Now before I go any further, I do want to also thank the New York Stock Exchange personnel for allowing us to hold the meeting at this location for 14 consecutive years, not necessarily this room, but certainly on the exchange. And we truly appreciate the support they give us, not just to us, but to all of our investors as well. The cover photo that you see behind me is the Antwerp Refinery, one of the most efficient refineries in Europe. And as you no doubt have read, we're progressing construction of a major project to install new delayed coker at this facility. When we complete the construction in 2017 next year, the new facility will upgrade lower value bunker fuel oil into higher value products, including premium diesel. This is just one example of how we do invest through the cycle to strengthen our competitiveness of the entire integrated business chain. So let me begin with the key messages that we hope to leave you with today. ExxonMobil's strategy, our constancy of purpose and competitive advantages continue to create superior long term shareholder value. Regardless of the business environment, we maintain a relentless focus on the fundamentals, those factors that we can control. Our integrated business model remains resilient through the price commodity cycle. We are continuing a disciplined and paced investment approach focused on creating value, while maintaining our commitment to a reliable and growing dividend. We are demonstrating differentiated performance that has become all the more visible over the last year. We lead the industry in return on capital employed and most importantly, long term shareholder returns. Now over the next few slides, I'm going to provide an overview of our corporate strategy, which underpins our success in creating value through the cycle. An example of our approach to long term resource capture and value generation can be seen on this photograph of the Deepwater Champion that successfully drilled the Liza-one exploration well offshore Guyana. We're very pleased with the initial results and we'll discuss our plans for Guyana later in today's presentation. ExxonMobil provides industry leadership to meet the world's energy needs. Key elements of our strategy are shown on the chart. Our approach has been consistent for decades, and through systematic implementation and continuous improvement, these elements have become resilient competitive advantages. Risk management and operational excellence are at the very core of our business activities. Investment and cost discipline, along with world class project execution, result in the best asset mix in the industry. We continuously seek to high grade our portfolio beyond our exploration program through creating accretive acquisitions, restructurings and asset sales. And as I'll discuss in the coming slides, we capture significant value added benefits from our vertical integration. Our long standing commitment to technology leadership stimulates innovation and provides unique advantages, and our high performing workforce drives premier results across our business. Our employees are the best of the best, and their dedication produces the results that I share with you today. In short, we are delivering on our commitments and achieving differentiated performance with a relentless pursuit of growing shareholder value. Now as all of you well know, the business environment has changed dramatically even since we met last year, with a sharp decrease in crude oil and natural gas prices. The graphic is a stark reminder of the volatile and cyclical nature of commodity prices in our business. The corporation is uniquely suited to endure these conditions and outperform competition, leaving us best positioned to capture value in the upturn. Throughout this period, we have maintained the same discipline with continued emphasis on the business fundamentals. Operational integrity is an organizational imperative. Operating safely, reliably and effectively is essential to our success. Lowering costs and increasing efficiency maximize the value of our existing asset base. Our integrated business has a distinctive competitive advantage, which enables us to create additional value as market conditions change. Our investment decisions made with a long term view are informed by our energy outlook and tested across various economic parameters, including a broad range of commodity prices. Finally, once we decide to invest, our world class project execution delivers competitive, reliable assets. These fundamentals, applied daily throughout our portfolio, deliver leading results that create value through the cycle. As I mentioned earlier, risk management is at the core of our business. Everything we do contains elements of risk, whether it's technical, operational, financial, environmental or geopolitical. As such, it is incumbent on each and every one of our employees risk. To help us do that, we have developed and implemented the Operations Integrity Management System, also known as OIMS. OIMS is a proven approach, which is rigorously applied uniformly around the world by employees and our contractors. The focus on risk assessment and management of safety, security, health and environmental risk help us achieve operational excellence. ON starts with leadership and capable people who implement policies and standards with clearly defined accountabilities and expectations. We then identify potential hazards and put into place appropriate barriers and controls to reduce the risk. OIMS provides appropriate emphasis on both personnel and process safety as well as minimizing environmental impacts associated with our operations. Bottom line, OIMS helps us achieve superior reliability and operational performance, which ultimately leads to better business performance. So now let's take a look at our approach to environmental protection. We recognize that meeting the world's growing energy needs while protecting the environment is one of today's grand challenges. We are committed to lowering emissions, reducing spills and minimizing waste to mitigate the environmental impact of our operations. We have developed and deployed advanced technologies and enhanced products that have lowered greenhouse gas emissions across the value chain. Sustainable improvements in our operations have reduced cumulative greenhouse gases by more than 20,000,000 metric tons over the past decade. For example, we've increased our energy efficiency significantly over time by installing additional cogeneration facilities in our operations, making us an industry leader with current gross capacity of 5.5 gigawatts. And products we produce like cleaner burning natural gas also help to reduce global emissions. At ExxonMobil, we do take the risk of climate change seriously. We have studied climate change for almost 40 years, and we consistently collaborate and share our research with leading scientific institutions, top universities, the United Nations and other public stakeholders. We also engage in constructive dialogue on climate change policy options with NGOs, industry and policymakers. Let's now take a look at how our integrated business creates shareholder value. ExxonMobil's business integration is a sustainable competitive advantage that is difficult for others to replicate. Our businesses work together across the value chain by sharing knowledge, insights and best practices. This collaboration leads to better informed decisions, more efficient operations and higher quality investments, delivering unique value and resiliency. Our diverse asset base provides market optionality and operational flexibility to optimize value every step of the way from the wellhead all the way to the consumer. This structural advantage enables our differentiated financial strength and superior results. ExxonMobil captures the highest value for every molecule that flows through our facilities. Because we are highly integrated, we react more effectively and rapidly to changes in the business environment. For example, our global supply organization utilizes sophisticated demand planning and marketing tools that provide insights to achieve the best value for our up stream production. Approximately 80% of our refining capacity is integrated with chemicals and or lubricants manufacturing. This integration provides ExxonMobil with unique manufacturing flexibility to maximize value with changing market demand. To build on this advantage, we are selectively investing across the value chain, employing high impact technologies that further expand feedstock and product flexibility. A continuous focus on long term efficiency capture has positioned ExxonMobil to be durable and competitive in the current business climate. We maintain a dynamic approach to both organizational effectiveness and asset optimization. Our global functional structure, along with centralized research and technology development, provide the foundation. Shared services and centers of expertise promote an integrated learning organization and encourage a culture of continuous improvement. The new Houston campus further promotes collaboration, business innovation and synergies. We maintain a focus on asset optimization through integrated operations, portfolio management and sales channels sales channel enhancements, along with improved facility reliability and utilization. This dynamic, thoughtful approach to both organizational effectiveness and asset optimization lowers our total cost, creates additional value and high grades the capital employed base. Staffing efficiency is just one example of the benefits of our ongoing focus on organizational effectiveness regardless of where we are in the price cycle. The corporation today is 38% leaner since the Exxon and Mobil merger in 1999. We managed staffing effectively over time, capturing efficiencies while supporting business growth by increasing productivity, deploying technology and harmonizing processes. The result of this constant focus is that we operate a larger combined asset base, including the acquisition of XTO with a workforce of less than 80,000 people, which is lower than the heritage Exxon staffing just prior to the Exxon and Mobile merger. Cost leadership is a fundamental expectation that requires continual focus at our company. Regardless of business conditions, we expect to lead the cost curve and are benefiting from ongoing efficiencies and cost deflation. Our global procurement organization is dedicated to capturing the lowest life cycle cost for goods and services. As you can see by the graphic, we are achieving significant market savings in the current business climate. As a corporation, we achieved a total net reduction of $11,500,000,000 in both capital and cash operating cost in 2015. Upstream unit costs are down 9% and in refining, our unit cash costs are 15% below the industry average. This focus on cost leadership also reduces project cost, which fundamentally improves the longer term returns of our investments. Our approach to asset management incorporates achieving maximum value for our shareholders by being active in the marketplace at all points of the business cycle. We are not event driven, rather we test whether the marketplace is a higher value on assets that are no longer strategic to us than we place on continuing to hold them. This approach avoids forced sales at the wrong point in the cycle. And that the specifics of those sales are set by our groups of assets based on their highest value. We maximize shareholder value through ongoing asset management. Results of divestment and restructuring activities over the last decade are shown in the table. As you can see, we've sold a significant number of assets across each of our business lines. We are high grading the capital employed base and achieving business simplification through continuous portfolio assessment and strategic action. We tend to divest end of life and non strategic assets. We are opportunistic. We sell assets when they command the best value in the market, not because we have to on the flip side. Any acquisitions that we choose to pursue must compete with our existing portfolio of opportunities and must be accretive to long term financial returns. To be clear, our decisions are driven by value choices, not by volumes, market share or any other event. ExxonMobil has and continues to maintain leading financial flexibility within the industry. As the chart indicates, our relative low leverage and large capitalization give us substantial capacity to invest through the business cycle and capture bottomless cycle opportunities that are not available to capital constrained companies. Our relative financial strength and capacity to access debt markets on the most attractive terms is a distinct competitive advantage. Our capabilities, size and sound financial condition are significant assets when negotiating with governments and business partners, both of who value our ability to deliver on our commitments. We are viewed as a stable, attractive partner and a very capable investor. So let's now take a look at the energy outlook, our view to the year 2,040. As most of you know, ExxonMobil publishes annually our outlook for energy in which we share our long term view of global energy demand and supply, and that view guides our company's business strategies and investments. These investments help provide the world with the reliable and affordable energy necessary to advance economic prosperity and to improve living standards. By the year 2,040, the world's population is expected to increase to 9,000,000,000 people. As populations grow, we expect global economic output to more than double, sparking a dramatic expansion of the middle class. These fundamentals will continue to drive energy demand growth. As a result, ExxonMobil's 2016 outlook for energy forecast an increase in global energy demand of about 25% during this period. That's even after taking into account the offsetting impact of very significant energy efficiency gains. Non OECD nations shown in blue on the chart are expected to drive growth in GDP. And with that, the growth in energy use, accounting for about 70% of global energy demand by the year 2,040. The world's middle class is expected to increase by about 3,000,000,000 people, mostly from the non OECD nations. This means better living standards for 1,000,000,000, and it will be enabled in large part by improving access to modern technology and affordable, reliable energy. The demand outlook for OECD countries shown in red highlights the important and significant effects of energy efficiency. GDP in these countries is expected to grow about 70% by the year 2,040. However, as you can see, energy demand is likely to remain essentially flat as expanded use of energy efficient technologies and practices leads to significant energy savings. Without these efficiency gains, we would estimate global demand growth would be about 4 times our projected 25% increase. So now let's move to a discussion of energy supplies that are needed to meet this demand. As the world's population grows and living standards improve, the energy landscape will continue to evolve driven by advances in technology, available resources and trade. Oil and natural gas will continue to meet about 60% of global demand in the year 2,040 and will continue to be the most important of the of all of the energy mix. We expect oil will maintain its position as the leading energy source as it remains essential to meeting growing needs for transportation and as a feedstock for petrochemicals. Demand for natural gas will increase more than any other energy type, surpassing coal to become the 2nd largest source. In part, that will be driven by tripling of global LNG trade. Natural gas is abundant and well suited to meet rising power generation and industrial needs, while also providing a cost effective option to reduce carbon dioxide emissions. Our outlook continues to anticipate that stringent government policies will increase the cost of CO2 emissions over time. These policies will work to boost the growth of energy types with low carbon intensity, including natural gas, nuclear, solar and wind. Our view reflects the reality that abundant energy supplies are vital to modern life. Greater access to affordable and reliable energy will remain fundamental to reducing poverty and advancing standards of living for 1,000,000,000 around the world. To sustain progress and further expand prosperity, the world must increase the availability of affordable energy solutions. Therefore, meeting the growth in global energy demand will require diverse energy supplies from conventional and unconventional oil and gas sources to liquefied natural gas to nuclear and renewables. We should pursue all that are economic. Fortunately, technology advances continue to expand our energy options while helping to minimize our environmental footprint, unlocking previously unrecoverable or uneconomic oil and gas reservoirs as we have witnessed certainly in North America. Furthermore, access to high quality resources and substantial investments will remain fundamental to meeting this challenge. Equally critical is our ability to develop secure sources of supply, both safely and responsibly. And free markets supported by sound and reliable public policies remain vital to development of new energy supplies. This includes policies that promote free and open trade and encourage private sector investment. I'll now turn to a recap of our 2015 performance, followed by a review of how our business lines delivered on their commitments. Diligent execution of our business strategy has consistently led to differentiated performance. The photo shows the marine operations at our largest U. S. Refining and petrochemical site in Baytown, Texas. We achieved strong results in our Downstream and Chemical businesses this past year, driven by our capability to process advantaged feedstocks in the manufacturing of fuels, lubricants and chemicals. ExxonMobil's approach to business operations and corporate citizenship is built upon a commitment to integrity in all that we do. Nowhere is that more evident than on our commitment to safe operations. As the chart shows, our Workforce Safety performance for both employees and contractors remains very strong relative to the industry. Total corporate earnings last year were $16,200,000,000 with a return on average capital employed of 7.9%. We generated $32,700,000,000 of cash flow from operations and asset sales and invested $31,000,000,000 in the business. Total shareholder distributions, including dividends and share purchases, were $15,000,000,000 I'll discuss these results on the next couple of slides, beginning with return on capital employed. ExxonMobil's return on capital employed consistently leads the competition. In 2015, our return on capital employed of 7.9% was significantly impacted by the drop in oil and gas prices, but was nearly 4 percentage points higher than our nearest competitor. Over the past 5 years, return on capital employed averaged 18% and about 5 percentage points higher than the next nearest competitor. Sustained leadership and capital efficiency reflects our commitment to a disciplined investment approach, effective project management and innovative technologies to grow a well balanced portfolio. Our efficient asset base enhanced by new investments positions the corporation for long term performance across a broad range of business conditions. The quality of ExxonMobil's portfolio is also evident relative to significant recent asset impairments by our competitor group. Not shown are North American pure play E and P Companies, which if you look at the last couple of years, took impairments of over $120,000,000,000 And if you look at the last 8 years, took impairments of over $200,000,000,000 Now while these impairments will improve competitor return on capital performance, capital employed performance in the future years, they represent a significant destruction of shareholder assets. Our investment discipline delivers industry leading returns and a portfolio that is durable across a wide range of commodity prices. Effective project execution provides the lowest installed capital cost, which along with optimized operations creates a long term value that simply outpaces our competitors. This chart provides perspective on the quality of our upstream assets. Upstream capital efficiency underpins long term financial performance. The plot illustrates ExxonMobil's structural advantage in capital employed per barrel of crude reserves, which leads competition at $6.50 a barrel. Our high quality, efficient capital base is Our high quality, efficient capital base is an outcome of our investment approach, consistently applied for decades. Importantly, 73% of our proved reserves are developed and are in production, contributing to the bottom line. Next, I'll discuss reserve replacement, which is an outcome of our disciplined investment approach. ExxonMobil has a successful track record of long term proved reserve additions, demonstrating the strength of our global strategy to identify, evaluate, capture and advance high quality opportunities. The corporation has a diverse resource base of 91 1,000,000,000 oil equivalent barrels, all in various stages of evaluation, design and development. As you can see in the graphic, we consistently convert sizable portions of the resource base along with newly acquired resources into proved reserves, which currently total 25,000,000,000 oil equivalent barrels. We have consistently added about 1.5 to 2000000000 all equivalent barrels of resource to proved reserves each year, replacing over 100% of production for over 2 decades. We have a long reserve life of 16 years at current production rates, which does lead the competition. Last year, we replaced 67% of production, adding 1,000,000,000 oil equivalent barrels of crude reserves in both oil and gas. But that reflects also a 2 19% replacement of crude oil and other liquids. The level of reserve replacement in any given year is an outcome of our investment choices, and it is not an objective. We are value focused, making the best long term decisions for our shareholders, progressing opportunities at the right time and deploying capital efficiently to create that long term shareholder value, even if it means interrupting a 21 year trend. The quality of our resource opportunities remain strong into the future. They have not diminished in the current business climate. ExxonMobil maintains a rigorous reserves evaluation process and with all aspects of our business, we approach the reporting of reserve balances with the highest integrity. Next, I'll discuss another aspect of portfolio quality, upstream unit profitability. ExxonMobil's upstream profitability led the competitor group again in 2015. The plot shows that while we are price takers, we take deliberate action to continuously improve our results. Our performance reflects the strategic choices and actions we have taken to improve the production mix. These activities include major projects and work programs, improved reliability, portfolio high grading, cost savings and enhanced fiscal terms. We will continue as an ever present focus on upstream profitability to ensure our portfolio delivers the maximum value that the business environment will allow. Robust operating cash flow performance drives our ability to generate industry leading free cash flow over the long term. ExxonMobil generated $6,500,000,000 of free cash flow in 2015 and almost $100,000,000,000 of free cash flow over the past 5 years, outpacing competitors. We continue to pay a reliable and growing dividend and invest in attractive opportunities to create long term value. Although the share buyback program was tapered in 2015, we maintained industry leading distributions. On average, dollars 0.48 of every dollar generated by the business over the last 5 years was distributed to our shareholders, while continuing to invest in an advantaged portfolio of projects. We continue to grow the dividend. ExxonMobil's long term dividend growth rate exceeds the S and P 500 and industry competitors. 2015 marked the 33rd consecutive year with a dividend increase and annual dividends have increased 10% per year over the past 10 years. ExxonMobil was the only competitor to materially increase the dividend in 2015 to $2.88 per share, up 6.7%. Our dividend payments are made with a view to building sustainable long term shareholder value and providing reliable dividend growth. Share purchases are an efficient and flexible way of returning cash to our shareholders. The corporation purchased $3,000,000,000 in 2015 and prudently tapered the program consistent with changes in the business environment and the corporation's cash requirements. In the Q1 of 2016, ExxonMobil quarter. Purchases to reduce shares outstanding in the quarter. While the future pace of share purchases will reflect the market environment and cash flow at that time, we continue to regard this as a flexible method to return value to shareholders and manage our long term capital structure. Since the Exxon and Mobil merger, we have reduced total shares outstanding by 40%, including the impacts of shares issued to purchase XTO in 2010. Over this period, total shareholder distributions were $357,000,000,000 To put this number in perspective, it is larger than the individual market capitalization values of 4.97 of the S and P 500 Companies. So now let's turn to a discussion of forward plans and outline the differentiated value proposition of our business. These investment plans include the picture showing the expansion at our Baytown Petrochemical Complex with construction of a new steam cracker now well underway. This is yet another example of our capability to invest through the cycle to grow and strengthen the integrated business. As I mentioned, ExxonMobil maintains a disciplined and paced investment approach focused on creating long term shareholder value. 2015 CapEx totaled $31,000,000,000 $7,400,000,000 lower than in 2014 or a reduction of 19%. As a result of ongoing capital efficiencies, market savings, reduced activity and timely project delivery. So it's really a combination of things. In 2016, we expect to spend around $23,000,000,000 which is $8,000,000,000 or 25% less than last year. This plan reflects lower upstream project spending as we continue to bring major projects online. Downstream and chemical plants reflect unique opportunities to grow and strengthen those businesses. We anticipate the 2017 budget will be less than the $23,000,000,000 budget this year. We're selectively advancing the investment portfolio with a continued emphasis on effective project execution and capital efficiency, while managing cash flow in the current environment. This outlook includes actions to pace and high grade the opportunity set, tactically sequencing project FIDs while we continue to optimize designs and enhance the fiscal terms. We have a flexible, high quality opportunity set and have the capability to accelerate the investment program based on market demand fundamentals or adjust future spending levels lower if conditions warrant. In short, by selectively investing through the cycle, we remain positioned to capture market savings and consistently deliver better financial returns. Next, I want to talk about our prudent approach to cash management and potential value growth. This chart provides a representation of our cash management approach. Cash flow from operations and asset sales are shown in the red along with net investments and shareholder distributions in the two shades of green. I'll note the range of future cash flow shown on the chart is based on a $40 to $80 barrel price range. There's nothing magic about that. You can take your rulers out and go either direction if you like a different number. We are managing cash to optimize both shareholder distributions and long term investing consistent with changes in the business environment. We anticipate growing cash flow through the decades and not solely on the back of potential crude price increases. Although we certainly stand to benefit from any improvement in the commodity price cycle. But at any given crude price, we are prudently managing the business to grow underlying cash flow from completed new projects that have been underway for the last few years through continued operational excellence of our asset portfolio and through self help initiatives that create additional margins. We are delivering pacesetting operational results today. As a result, Exxon has the ability to fully cover both shareholder distributions and investments into the future. We maintain financial flexibility to pursue attractive opportunities that may become available and have the capability to accelerate the investment program as market demand conditions may warrant. We also have the capacity for continued dividend growth. The share buyback program remains flexible and consistent with past practice and will be evaluated quarterly based on a variety of factors, including the business environment, available cash flows, new opportunities and the corporation's other commitments. We remain steadfast in our mission to create superior long term shareholder value. Planned deliverables are summarized on this chart. We manage the business to achieve industry leading returns throughout the commodity price cycle. We work maximize value chain benefits across the integrated portfolio, adjusting through changing product demand and improving the portfolio mix. Capital discipline remains paramount to our continued success. We have paced the investment program, selectively investing in attractive opportunities while maintaining flexibility. Upstream volumes are an outcome of an investment program, and we anticipate a range of 4.0000000 to 4.2 1,000,000 oil equivalent barrels per day of production through 2020. Our focus will remain on making choices to enhance shareholder value. Cash flow grows from new investment, continued operating excellence, reduced spending and self help initiatives. And we continue to share the corporation's success with our shareholders. Distributions are made with a view to building long term value by providing reliable and growing dividends. So I'll move now to a review of our upstream business, where we are executing our proven strategies and plans to unlock resource value. The photo that you see is an example of how our upstream folks are pursuing these strategies. It represents 1 of the 4 artificial islands at the Upper Zokom Development Offshore Abu Dhabi. ExxonMobil along with our partners developed the island drilling concept, which has significantly reduced total capital development cost. ExxonMobil's upstream business consistently leads in returns on capital employed, a direct result of our ability to capture high quality resources and convert them into maximum shareholder value. We have a large portfolio of high quality assets. Throughout the upstream, our scientists and engineers develop and deploy technology that creates additional value. Our drive to achieve operational and commercial excellence, combined with a culture of continuous improvement, deliver business performance that leads the competition. So let me tell you a bit more about the upstream strategy. We have a consistent long term approach in this segment of our business. We focus on reliable production, maximizing the value of installed capacity by both minimizing operating cost and optimizing production from every well in the portfolio. The scale and diversity of the production base, along with strong operating capabilities, generate reliable cash flow for the corporation. We target efficient development of our large and diverse resource base and are very selective in choosing the right investments at the right time. Exceptional project execution ensures that new capacity is added on schedule within budget in a safe and responsible manner. Finally, we add high quality opportunities that are accretive to our resource base. Potential partners and resource owners recognize our expertise across all resource types and our distinct capability to apply advanced technologies and create value. These strategies are underpinned by our commitment to operational integrity and technology leadership. So let me say a few words about how we are developing and deploying technology to unlock upstream value. Through sustained investment in scientific research, ExxonMobil maintains a significant competitive advantage in the development and deployment of advanced technologies across the upstream. Our next generation seismic imaging technology called full wavefield inversion utilizes more information from the seismic signal to provide an improved, more detailed understanding of the subsurface. We have used this technology to improve subsurface characterizations in our recent exploration and appraisal programs in the Romanian Black Sea and offshore Guyana. Our reservoir simulation platform enables us to efficiently translate subsurface characterization into cost effective development plans, lowering capital cost. We have increased production and reduced cost by applying advanced digital technology to production and equipment surveillance. Drilling and completion technologies are improving recovery rates and lowering cost. For example, our fast drill process, which we have mentioned to you in the past, has delivered 1,000,000,000 of dollars in reduced drilling costs. Proprietary technology is improving performance in every part of our business, from unlocking new opportunities in frontier basins to improving profitability of our core assets. Now for a closer look at how we're maximizing the value of existing production. So we have production activities in 24 countries across various resource development types. Currently, we're producing 2,300,000 barrels per day of liquids and 10,500,000,000 cubic feet a day of gas. These base operations provide long term cash flow to the corporation. I'd like to share a few examples of how we maximize the profitability of this large and diverse production base, particularly in the current environment. Over the past 4 years, reliability improvements delivered 100,000 oil equivalent barrels per day of sustained additional production, just keeping things running. Proactive maintenance, repair procedures, improved critical sparing and effective supply chain management have reduced long duration downtime events. Further, production optimization activities delivered an additional 105,000 oil equivalent barrels per day of incremental production by improving wellbore and reservoir productivity through gas lift optimization, well restoration and pressure maintenance. These activities also improve ultimate recovery of the resource. In Nigeria, for example, last year, we increased production by about 25,000 barrels per day through well optimization and restoration. In total, we added over 200,000 oil equivalent barrels of production simply through reliability and optimization efforts, which represent some of the most profitable barrels in our operation as they are delivered at little or no capital cost. This volume is equivalent to multiple major projects at much lower cost. ExxonMobil improves the profitability of each asset through a disciplined approach to cost management. We employ tailored contracting strategies, capture market driven efficiencies and share best practices throughout our global operations. Cost management is deeply embedded in our culture, and we expect to lead the cost curve throughout the cycle. As you can see, we continue to outperform the peer group in total unit cost and achieved a 9% reduction in 2015 unit cost. We're progressing a large inventory of profitable drilling and work program opportunities across the entire producing asset base. These opportunities leverage existing infrastructure and provide low cost production uplift. The blue bars on the chart show net interest production from our work programs in 2015 as well as planned future activities. These opportunities are flexible, giving us the ability to quickly respond to changing market conditions. We will selectively drill profitable opportunities from our diverse inventory at a measured pace commensurate with the market conditions. The gray portion of the bars show the potential incremental production from a higher activity level, which could result in an additional 200,000 barrels equivalent per day of production by 2018. Now let's discuss our U. S. Unconventional portfolio, which is an important part of this flexible program. Our U. S. Unconventional resource base is over 15,000,000,000 oil equivalent barrels. We continue to focus on liquids growth, mainly through development in the Permian and Bakken plays with 2,100,000 net acres and current net production of 220,000 barrels per day. In 2015, we increased net Permian and Bakken production nearly 25%. The Permian unconventional production component nearly doubled as we increased horizontal drilling in the Wolfcamp formation in the Midland Basin. Additionally, we continue to enhance our acreage position through trades and farm ins. Since 2014, we have completed 5 transactions in the Permian targeting the Midland Wolfcamp and Spraberry area and now have roughly 135,000 operated net acres in the heart of the play. We operate over 80% of our U. S. Unconventional assets. Our ownership and operating position enable flexible development. For example, we've reduced our rig count over 60% from peak 2015 levels, and we have flexibility to quickly take activity up or down depending on the market conditions. Now this chart showcases our progress in improving U. S. Unconventional profitability using the Permian as an example. Since early 2014, we've drilled 118 wells targeting the Wolfcamp and Spraberry formations. In a very short amount of time, we have significantly reduced drilling and completion cost, increased productivity and aggressively improved total unit development cost. We reduced drilling cost per foot in our Permian Wolfcamp wells by more than 60 percent, driven by a reduction in drilling days, increased lateral lengths and market savings. We've implemented efficiencies and captured market savings that have reduced fracture stimulation cost per foot by more than 70%. With longer lateral lengths and improved completion designs, we have improved recovery per well more than 80%. Lower drilling and completion costs and higher recovery have resulted in a 60% reduction in Permian Wolfcamp development costs, which are now less than $10 a barrel. We achieved similar results in the Bakken play where we reduced unit development costs by more than 50% since 2012 to today less than $11 a barrel. We've quickly transferred learnings from the Bakken to the Wolfcamp, dramatically accelerating the learning curve benefits in just 18 months. With cash operating cost at less than $10 per barrel, our Bakken and Permian developments remain attractive and competitive even in the current environment. ExxonMobil's reliable production base and financial strength provide the ability to progress attractive opportunities through the cycle to meet long term energy demand. We have a diverse portfolio of approximately 100 projects to develop over 20,000,000,000 oil equivalent barrels, which gives us multiple options, enabling us to be selective and to pace investments. These projects are at varying stages of development, including those under construction, like the ADAPT-two Stage 2 in Sakhalin, Russia projects in the design stage, such as the Tengiz Expansion Project in Kazakhstan and projects where we are working on concepts to expand development around existing infrastructure, such as deepwater tiebacks in West Africa. We have unmatched opportunities across multiple resource types, including both short and longer cycle opportunities that provide tremendous investment flexibility. ExxonMobil achieved leading economic returns and profitability through this disciplined approach to investing. The graphic demonstrates our approach, which shows the majority of projects in the development portfolio will be accretive to ExxonMobil's existing producing assets. We began by securing high quality resources with stable, competitive fiscal terms, and we choose to invest in only the most attractive and strive to deliver them on schedule and within budget at the lowest installed cost. Throughout the process, we develop and apply high impact technologies and commercial strategies that further improve performance and lower investment cost. And we deploy world class project execution capabilities that deliver on these expectations. Over time, this approach enhances our portfolio, increasing the overall financial returns and profitability of the upstream business. Once we decide to invest, we implement fit for purpose designs that optimize development scope and maximize resource value. Our development planning and project management teams draw from experience across different types of developments, operating climates and political structures. Potential risks are identified, mitigation plans are developed. Where appropriate, similar projects are developed in phases in order to capture learning curve benefits from similar engineering designs, execution planning and construction activities. Good examples of this approach are the Arkathun Doggy and Hebron gravity based structures or GBSs that you see in the photos. These projects were sequenced to transfer learnings from 1 to the other. Both are designed to withstand the effects of harsh winter conditions. At the same time, developments are also customized where appropriate maximize value. Innovative technologies and techniques are applied to reduce cost and improve execution efficiency. For example, extended reach drilling and innovative completion technology is utilized to improve profitability at our Katoondaghi, whereas Hebron's oil separation and processing systems are designed to improve both reliability and minimize facilities, reducing overall cost. Where possible, existing infrastructure is utilized. The objective of development optimization is to take an already attractive project concept, make it better and deliver even greater value. This development expertise is complemented by our industry leading project execution. The graph shows ExxonMobil's advantage in project management, both in terms of schedule and cost performance relative to projects operated by others where we have a participating interest. So the data is pretty good. Cumulative project management experience, engineering expertise and effective contractor interfaces deliver exceptional cost and schedule performance. We complete comparable projects more timely and at a lower cost than our competitors. Each project that we execute is reappraised for performance and learnings are incorporated into future project planning, design and execution, further strengthening our capabilities and using every project as a learning experience. Since 2012, ExxonMobil has started up 22 major projects, adding more than 940,000 oil equivalent barrels per day of working interest capacity. 6 of those startups occurred in 2015, and we're on track to deliver an additional 10 startups by the end of 2017. So let me comment on the recent startups. 2015 project startups added 300,000 oil equivalent barrels per day of working interest capacity. In West Africa Deepwater, we added 70,000 oil equivalent barrels per day of working interest capacity with 2 capital efficient projects that leveraged existing infrastructure. The Eirhan North Phase 2 project in Nigeria and Kazama Satellites Phase 2 in Angola, Both started up ahead of schedule and below budget. The Kearl Expansion project started up 5 months ahead of schedule. The project incorporated learnings from the initial development phase and doubled Kearl's production capacity to 220,000 barrels per day. In Indonesia, the Banyu Europe project added 75,000 oil equivalent barrels per day of working interest capacity. Production is expected to ramp up to full capacity by midyear this year. Moving to 2016 2017 project startups. We expect to complete 10 projects this year and next, adding about 450,000 oil equivalent barrels per day of working interest capacity. In Australia, the Gorgon Jantz LNG project is expected to start up in the near future. Offshore Gulf of Mexico, Gilead, is a capital efficient deepwater project. Phase 1 is expected to start up by mid-twenty 16 and add in excess of 30,000 barrels per day of gross production capacity. Subsea wells tie back to an existing production facility, avoiding of new infrastructure. ExxonMobil is supporting the North Caspian operating company to complete pipeline replacements at the Kashagan project in Kazakhstan. Pipeline installation is well advanced, and we anticipate production to restart in the Q4 of this year. The Hebron project in Eastern Canada is expected to recover over 700,000,000 gross barrels of oil. Construction is 77% complete and start up is anticipated by the end of next year. Let's take a closer look at ADOPT-two Stage 2 Offshore Sakhalin Island and the Tuscarum Offshore Abu Dhabi. ADAPT-two Phase Stage 2 is a phased expansion of the existing ADAPT-two development on Sakhalin Island in the Russian Far East. The project will add 55,000 barrels per day of gross production capacity while developing an incremental 290,000,000 barrels of oil, more than doubling the total recovery from ADOPTU to almost 500,000,000 barrels. 27 world class extended reach wells will be drilled from the shoreline to reduce cost and minimize the environmental footprint, eliminating offshore drilling in the sensitive area. Six wells will exceed 8 miles in length. Well designs incorporate intelligent completion technology to enhance reservoir management and to maximize recovery. We are expanding production facilities and adding new well sites to the south of the existing site. Early gas injection was initiated in February of last year ahead of schedule, supporting an oil production increase of 30,000 barrels per day. Construction is progressing and startup of the northern well site expansion is expected in 2017. The Upper Zakim field located offshore Abu Dhabi is the world's 2nd largest offshore oilfield. Upper ZAKAM 750 comprises 4 artificial islands with 173 wells and processing facilities. The artificial island concept is saving 1,000,000,000 of dollars in development costs by dramatically reducing the development footprint. Island construction is complete, drilling is progressing and gross production has increased from 560,000 to over 660,000 barrels per day. The production rate will reach 750,000 barrels per day and be sustained for 25 years. Beyond this, we are evaluating an opportunity to expand the capacity to more than 1,000,000 barrels per day. ExxonMobil is advancing attractive next generation opportunities across our diverse resource base to grow the long term value. These opportunities are at varying stages of readiness, ranging from ready to drill to engineering design to concept selection. Timing of investments will be consistent with our objective to maximize the value of each of these opportunities. We have an inventory of over 50,000 U. S. Unconventional drill well locations. This inventory has degree of development timing flexibility, and we will progress drilling at a pace supported by market conditions. Net production could grow to an incremental 1,000,000 net oil equivalent barrels per day. Design and concept selection of several conventional and deepwater opportunities are progressing in a number of locations. Our globally diverse LNG opportunities could add up to 300,000 net oil equivalent barrels of production and will be progressed on a time line consistent with market demand. And lastly, we are evaluating plans to develop up to 7 1,000,000,000 net barrels of heavy oil. We're deploying technology that will enhance profitability of these large resources. We recently completed a technology pilot that improves in situ recovery by adding solvent to steam assisted gravity drainage or SAGD. This new technology has the potential to increase both oil recovery and profitability while providing environmental benefits. By 2,030, these opportunities collectively could contribute a total of 2,400,000 oil equivalent barrels of net production. Turning to our exploration portfolio. As shown on the map, we're pursuing a diverse set of high quality resource opportunities to selectively add to our resource base. We hold more than 110,000,000 net acres from underexplored regions with higher risk, higher reward potential to more established low risk basins close to existing infrastructure. We recently captured 10 new opportunities covering over 2,000,000 net acres, gaining exposure to multiple plays in established areas and in emerging basins. The yellow stars marked the 8 discoveries we made in 2015. We added 1,400,000,000 net oil equivalent barrels to our resource base, including the Liza exploration well offshore Guyana, which was the industry's largest oil discovery last year. Additional resource was added in Iraq, Nigeria, Romania, Australia and onshore North America. While our aperture is wide open, we are highly selective in what we pursue. Exploration activity is focused on 2 themes. The first is exploring near some of our most profitable areas, such as in Papua New Guinea, West Africa, Gulf of Mexico and offshore Newfoundland, where discoveries can be tied back to existing infrastructure. ExxonMobil has recently made significant discoveries in these areas. We have acquired additional seismic data and are using our knowledge of the regional geology, existing infrastructure and established relationships to further enhance our position. The second focus area is exploring in new areas with potential high resource density, such as Guyana, Uruguay, Cote d'Ivoire and South Africa, as shown by the blue dots. These areas carry moderately higher risk, but much higher potential. Guyana is an example of a new area with large resource potential. We recently acquired an operating interest in the Conje Block adjacent to our existing Stabroek Block. This brings our total position to 8,100,000 gross acres. To put this in perspective, this is the equivalent of 1400 Gulf of Mexico Blocks. We have nearly completed acquisition of our largest ever 3 d seismic survey across the area, and we have initiated a multi well exploration and appraisal drilling campaign with the spud of the Liza-two well last month. The data for the discovery well and 3 d seismic is being evaluated to assess development and commercial alternatives. In summary, we're well positioned to enhance the value of our upstream business. The focus on operational excellence is resulting in improved recovery and profitability from our producing assets. We maintain flexibility in the portfolio to respond to changing market conditions with many quality opportunities both near and long term. Revisiting the opportunity plot on the left, we are selectively converting the resource base into new producing assets that are accretive to the portfolio. Additionally, we are pursuing new opportunities through acquisitions and selective exploration that have the potential to be even more profitable. These are represented by the blue circles on the chart. Across the Upstream business, we continue to apply high impact technologies to reduce exploration risk and increase the profitability of our new developments. This time tested approach delivers industry leading returns on capital employed and will enable us to grow cash flow through the cycle. So now let's take a look at the Downstream and Chemical businesses, where we feel we have a very strong portfolio of advantaged assets that we can continue to enhance and selectively invest into, and they will be robust across the business cycle as well. The photo that you see is the recently completed specialty elastomers project at our Kenya joint venture facility in Saudi Arabia. The facility builds on an already existing world scale commodity asset, which benefits from lower feedstock and energy costs help meet growing demand for premium synthetic rubbers. At ExxonMobil, we have long held the view that there is significant value to be captured from a diversified integrated business that is robust to industry cycles. Our focus on competitively advantaged value chains has resulted in a downstream and chemical businesses that are the most profitable in the industry. ExxonMobil is one of the world's largest refiners and manufacturers of lube based stocks, a leading marketer of fuels and finished lubricants and one of the largest chemical companies in the world producing both commodity and specialty chemicals. We approach all of our businesses with an unrelenting focus on operations integrity and efficiency. We optimized our integrated businesses across the entire value chain. Through investments in technology, including leading edge manufacturing processes, the development of high performance products and innovative customer offerings, we have grown higher value product sales and enhanced our portfolio of world class brands. Ultimately, the value of our approach is best measured by the return on capital employed. As you can see, our Downstream Chemical segments have a return on capital employed that outperforms the industry across the business cycle. During the last 5 years, the Downstream and Chemical portfolios generated $52,000,000,000 of earnings, nearly 2 times that of our nearest competitor. These businesses are resilient over a range of commodity prices and they play an important countercyclical role in contributing to the corporation's financial commitments. In today's low price environment, they generate solid cash flow and support investments across all our portfolios. Underpinning the success of our Downstream and Chemical businesses are proven strategies that maximize the integrated value of the fuels, lubes and chemicals value chain. We underpin our success with an unwavering focus on operational excellence and increased efficiency. At our large integrated manufacturing platforms, we are pursuing efficiencies enabled by shared site resources, interconnected facilities and harmonized operating practices. We continually expand feedstock flexibility and the production of higher value refining and chemical products, both of which are enabled by integrated facilities and shared technology platforms. We leveraged strategic midstream assets such as pipelines, terminals and lubricant blending plants to access advantaged feedstocks and to expand our product outlets. And finally, integrated business teams work together to optimize the marketing channels of fuels, lubes and chemical products around the world. In line with this strategy, we are selectively investing in projects and marketing programs help drive advantaged returns. I'll be discussing these investments shortly, but first let me provide an overview of our integrated manufacturing platform. You will notice from the points on the map that we have manufacturing assets in all major regions of the world, supporting the marketing of our products in more than 130 countries. Our scale, integration and balanced portfolio of assets in refining, lubricants and chemicals provide opportunities to capture the highest value for each molecule while driving operating efficiency. These integrated manufacturing facilities form the foundation of our competitive advantage, allowing us to better serve our customers and outperform our competitors. Let me provide a little more detail. In the Downstream, we gained significant advantages through cost efficient operations and feedstock flexibility. We leveraged the size and scale of our sites, which are 70% larger than the industry average. Integration and reliable operations to run our refineries at an industry leading cost efficiency We rigorously benchmark our assets both internally against ourselves and externally and develop plans to achieve best in class operations. As shown in the chart, ExxonMobil's refining cash operating costs are 15% below the industry average. We are achieving 1st quartile industry performance across the cycle, delivering an advantage of around 1.5 $1,000,000,000 in annual cost savings. Additionally, we leveraged selective investments in leading edge technology to lower raw material cost by increasing the ability to process advantaged fees. Against the backdrop of unconventional liquids growth in North America, we have increased the capability to process domestic crude, both light as well as our equity production on heavy barrels from Kearl. That increase represents a 70% improvement over the last 5 years. We have also made investments in midstream assets, such as the joint venture rail terminal in Edmonton refineries. We're pursuing additional opportunities to increase access to the market and debottleneck facilities to further optimize our feed slate and lower our raw material cost. While low operating costs are essential in a commodity business, we go beyond cost to differentiate ourselves from competition. Production of higher value products, such as premium distillates, lube based stocks and chemical feedstocks is needed to further enhance profitability. This has been a focus area for many years now. Leading edge process and catalyst technology have supported site optimizations and capital efficient investments to increase our yield of high value products by more than 60%, as shown on the chart. Since 2006, we have used proprietary technology to double our production of premium distillates, including ultra low sulfur diesel and expanded production of high performance lube base stocks. We have also increased our blending capacity for finished lubricants by 8% over the past few years. And we gained value by upgrading lower value molecules to chemical feedstocks. With completion of projects that are currently funded, production of high value products is expected to increase an additional 10% over the next few years. The final step in maximizing the value of our downstream business is making sure we get products to the market through the highest value channels in a cost efficient manner. Here, we leverage our global marketing organization to expand the market position of world renowned fuels and lubricant brands such as Esso, Exxon, Mobil and Mobil 1. Our broad product offering is underpinned by quality and reliability, along with technology development and support, which enables us to bring new high performance products to market and further grow our brands. A good example is our leading synthetic lubricants business, which includes products such as Mobil 1, MobilDelvac 1 and Mobil SHC. Over the past decade, we have more than doubled sales of synthetic lubricants, further strengthening our leadership in this growing high value segment. Within the fuels value chain, we have increased branded retail sales volumes and expanded our network to more than 20,000 Exxon, Mobil and Esso branded stations. Across fuels and lubricants, we are expanding sales networks and reducing complexity to efficiently capture market value, while lowering operational risk and required capital. We are also focused on innovative brand marketing and technology programs to deliver a superior customer offer. Next, let me highlight our Premier Chemicals business. Our chemical company has a long history of capturing advantages from flexibility to run lower cost feedstock. Chemical facilities are highly integrated with our refineries around the world and have access to attractive upstream feedstocks such as ethane. As shown by the chart, we have increased the volumes of low cost ethane processed by our steam crackers in the United States. Our facilities produce a higher percentage of ethylene from ethane than the industry average. Around the world, we have designed our plants with proprietary technology to run a wide range of feedstocks. We optimize production runs in response to a variety of factors, such as feed pricing and product demand. Additionally, we have the flexibility in our manufacturing processes to crack both liquids and gas feeds as the advantage shifts from time to time. As a result, we are processing nearly 30% more advantaged feed than the industry average. ExxonMobil captures additional value by leveraging our high volume commodity capacity as a base platform to support specialty manufacturing growth. So next, let me tell you what we're doing to expand our chemical product portfolio. Middle class growth is driving increased demand for chemical products to serve large markets such as packaging, automotive, consumer goods and construction. As can be seen by the green and the blue lines on the chart, global chemical demand has grown faster than the global economy at 4% per year over the past decade. Most of this growth has come from emerging economies, and we expect these demand trends will continue well into the next decade. To capture this growth, we have expanded our capacity with a focus on the higher value premium and specialty products. One such example is our metallosine based products from polyethylene film used in plastic packaging to specialty elastomers used in automobiles to synthetic base stocks, which are important in lubricants. As shown by the red line on the chart, we have tripled our sales of metallosine based products over the past decade. These products are growing faster than commodity chemicals and have higher margins due to their performance and sustainability advantages. With our global supply chain capabilities, world class technology centers and commercial resources around the world, we are well positioned to serve growth markets in Asia Pacific and Latin America regions. To grow the value of our downstream and chemical businesses, we are progressing a diverse portfolio of attractive investments. Consistent with our strategy, these investments capitalize on several value chain opportunities, which include increasing feedstock and logistics flexibility. In Baton Rouge, Louisiana, we are increasing sour crude oil processing capability by expanding sulfur handling capacity by 40%. The site is also implementing multiple lower cost debottleneck opportunities to improve access to advantaged North American crude. At our refinery in Beaumont, Texas, we are leveraging connectivity to multiple domestic pipelines and expanding capacity to run attractive light crude oils by 20,000 barrels per day. In Chemicals, we are constructing a multibillion dollar ethane steam cracker and associated polyethylene facilities in Texas to capitalize on the lower cost North American feedstock. It is designed to be one of the world's most competitive grassroots petrochemical projects through its scale, integration with existing manufacturing facilities and the production of premium metallocene polyethylene. Now I'll cover investments focused on upgrading molecules into higher value products, which are largely at our integrated refineries in Europe. The longer term industry fundamentals of European refining are expected to be challenging due to the excess refining capacity. However, at the same time, the European market lacks sufficient capacity to convert fuel oil into cleaner fuels such as low sulfur diesel. As a result, we are selectively investing in our largest low cost refineries in Europe to strengthen their competitive position. As mentioned earlier, at the Antwerp refinery in Belgium, we are constructing a 50,000 barrel per day delayed coker. The new facility will upgrade bunker fuel oil currently produced at our Northern European refinery circuit into higher value ultra low sulfur diesel. At the Rotterdam refinery in the Netherlands, we are expanding the hydrocracker unit to upgrade lower value hydrocarbons into premium lube base stocks and ultra low sulfur diesel. The project will utilize proprietary technology and ExxonMobil will be the 1st large scale producer of Group 2 base stocks in Europe. We are leveraging our integration with chemical manufacturing at our Fawley refinery in the United Kingdom and our Singapore refinery. At these sites, we are debottlenecking existing units to upgrade refinery distillate streams into higher value chemical intermediate streams. All of these attractive projects will further improve the competitive position of our downstream and chemical assets. And finally, we're making selective investments across our lubes and chemical value change to grow specialty products. As I mentioned earlier with our Saudi joint venture partners, we are currently commissioning a specialty elastomers facility to produce synthetic rubbers, polyolefin elastomers and carbon black to serve the auto industry. In Singapore, we're expanding finished lubricant manufacturing capacity to support growing sales of our industry leading synthetic lubricant product, Mobil 1. Also in Singapore, construction is underway to capture added value from a recent steam cracker expansion. We will produce premium synthetic rubber for the growing tire market and premium resins for adhesive applications. These investments will strengthen ExxonMobil's leading global position and high growth products. In closing, our balanced portfolio of assets and brands, business integration and technology leadership, coupled with a relentless focus on business fundamentals, position our Downstream and Chemical businesses to deliver superior results when the cycle turns the other way. We will continue to drive improvements in operating efficiency, advantaged feeds and logistics flexibility to further reduce manufacturing costs. We will also grow production of higher value products to further increase margins. Selective investments in advantaged projects across our fuels, lubricants and chemical value chains will position us to capture profitable growth and increase shareholder returns. As highlighted by the current industry environment, these businesses are resilient to lower commodity and continue to generate solid cash flow, allowing us to deliver on our commitments through the cycle. So let me leave you with just a few final thoughts to recap what we've talked about today. Regardless of the business environment, we maintain a relentless focus on the fundamentals, those factors that we control. Our integrated business model remains resilient through the commodity price cycle, providing the cash flow and the financial strength to continue a disciplined and paced investment approach focused on creating value while maintaining our commitment to a reliable and growing dividend. In short, we are structurally resilient and sustainable and sustain competitive advantages, and we're well positioned to create long term shareholder value. So at this time, we're going to take a 15 to 20 minute break before we set up for the Q and A, and I'll have the management committee join me and we'll look forward to your questions at that time. Thank you. Welcome back everyone. We look forward to having about an hour here to take your questions. Before we start, let me just make sure you know who we've got sitting up here. This is the management committee of the ExxonMobil Corporation. So this is my team of folks that help us manage the corporation's affairs and handle the direct contacts with all these business lines that I was talking about today as well as all the support functions that it takes for us to deliver on the results and the commitments we have. Over here to this side, Mark Albers, Mark, Senior Vice President of the Upstream, has responsibility for exploration and the development company. Andy Swiger, also kind of an upstream mix guy now, I've stretched him, but Andy has responsibility for gas and power marketing, but he also serves as our Principal Financial Officer. So all the financial and tax functions report to Andy as well, which keeps him fully occupied along with the important commercial aspects of our business. Darren Wood, President of the Corporation. Darren maintains direct contact responsibility for the refining business. He also has a portion of the research organizations, And he has an important support function called the Global Services Company, which has been in existence since the merger and all of a significant part of the organization that handles things like procurement, IT, real estate, environmental remediation. They have a wide portfolio of responsibilities and it's a very large part of the organization globally. Darren has responsibility for that. Jack Williams, upstream, Jack has responsibility for the production company, for XTO and also has a portion of the research organization. And on the end, Mike Dolan, Mike's Senior Vice President, has responsibility for the chemicals company and the downstream fuels lubricants marketing organization because there's a real nice synergy between those businesses as well. So this is the team. And as you saw, I was drinking more water this year than normal. I guess it's a sign of getting old because I don't I can't make it without sipping some water. So I'm going to hopefully direct traffic, but we welcome your questions and I want to hopefully give you a chance to hear from some of these folks as well. There's microphones if you'll wait for those, so people that are listening in or watching the webcast can hear the question as well. So we'll start right over here. Thanks, Rex. Doug Leggate from Bank of America. I've got 2 questions, if I may. The first one is just on the production numbers. Obviously, you've moved away from the 4.3% to 2017 numbers you had before to a range. But can you talk about what happens to the mix? You used to talk about liquids, liquids lint increasing, gas declining in the U. S, underlying decline ratio, just some of the moving parts in there. My follow-up, and I'm going to chance this one for Mark maybe and see if he'll answer it. But obviously, you talked a little bit you dedicated one slide to Guyana, but didn't give a lot of detail. The government is on record saying that they believe this is at least a 700,000,000 barrel discovery and a play opener. But they're as I understand that they were using sort of industry standard recovery factors. Your partner is suggesting the recovery is significantly better. I'm just wondering what you could raw quality and so on. Just wondering if you can give some scale, some perspective on plans and ultimately what you see behind your decision to do the largest seismic in the company's history? Thanks. Well, on the production mix, I'd really like to let Jack speak to that. But you're correct that generally, as you've seen for some time, the gas volumes, we've let some of those decline just because of weak market conditions. And oil, if you look at the project, makes you see it's very heavily liquid weighted. But Jack, do you want to add any color to any of that? Yes. I would say from a base and a work program standpoint, much the same. There's nowhere that we're really ramping hard on gas volumes. Certainly in the U. S, we're letting gas volumes decline. And so I would say it's going to gradually change to a little more oiling mix, but I wouldn't say it'd be significant over the next several years. Now the overall production mix will gradually get a little oiler over that time period with gas falling off just a tad and oil probably growing a bit. So on Guyana, as you know, is kind of our culture. We never try to get out in front of what we're confident saying, which is why you didn't see more of my presentation. Having said that and to give Mark a proper warning on what he says. I'll let Mark give you a little more color. I would say it is an exciting area. We're very excited about it. Yes. Certainly very, very pleased with the initial discovery, very significant resource. As you think about the size of what it could be, you have to remember, we've got a 10.5eight inches hole in the middle of 6,600,000 acres. So where the resource could go, obviously, has got a lot of directions, which is why it's so important to get this first well down. We'll sidetrack it to really get sort of 2 appraisals of the resource, test it, which is going to be very important. But beautiful looking log, high quality sand, high quality oil, very excited about it. But obviously, we have to do our appraisal to see what's the best way to develop it, how large is it. So stay tuned. We'll drill this well and then 3 more, at least 2 of those next three wells will be exploration wells and maybe a third appraisal, again, just depending on what we see. So it's a huge area, lots of prospectivity. That's why you're seeing a very active program planned for this year. And I would the only downside is there's really there's 2 kinds of players we're working with there, which makes it really exciting. So it's quite interesting. Doug Terreson here for Corus. Rest during the past decade, the super majors have struggled to grow and when they did grow, it all came at expense of returns and valuation and higher financial leverage. And while Exxon has performed in superior fashion and you've done a lot better than the peers and the model is clearly time tested, which I think you demonstrated today. But my question is, when you consider these broader outcomes, how does the company think about the future balance between growth and returns? And is there a need for adjustment there? And also, how do changes in industry structure during the past decade or so play into your strategic thinking that is when you and or do you consider them to be an important part of the equation when you're thinking about the future? Well, as we've said many times in terms of growth, whether it's volume growth, reserve growth, market share growth, We really do our approach to the business has never changed. We really are trying to undertake the most attractive opportunities that we see, thinking about them in terms of 30 years. Are we going to be happy with this over the next 3 decades? Not are we going to be happy with it over the next 3 or 4 years. So all of the pieces that have been put in place, even those that have characteristics that would appear to be short term in nature And our North American unconventional position, the whole strategy behind the acquisition of XTO to get ourselves in a position to participate in what we realized was going to be an emerging important new resource base for the world. I would not try to fool you or lead you to believe that we knew what was going to happen because we did not. It has exceeded anything we could have imagined. But I am very, very glad that we had the organizational capacity to participate that participate in that evolving and emerging new resource area the way we have been able to participate. We would not have been able to do that, but for that earlier strategic decision. So even that decision, while the characteristic of their activity and their decisions on a day to day basis are fairly short term, our decisions on how we're approaching that are with a 30 to 40 year time horizon in mind. So and it's the reason we don't get overly exercised about what's going on in any given quarter, any given year, rather how do we get how are we going to get the value for the shareholder over the next 30 years. So nothing has changed fundamentally about our approach in terms of trying to achieve growth for growth sake. And that's why we took a lot of grief and we take a lot of commentary when the volumes don't grow or when the volumes went down 100,000 barrels a day instead of going up 100,000 barrels a day. I think if you had us all take our shirts off, you'd find we have pretty thick skin. So it doesn't bother us. We are unpersuaded by any of that. We know that what it's all about is I got a dollar to shareholders' money. What can I do with that, that they would be proud of? And they would say that was a good investment and thank you. And that it is supplying the dividend for the future, it's supplying the capability to replace what's depleting, because we are in a depletion business. And I think one of the things that seems to be lost on people is just staying flat when you're running a depleting business, that's quite an accomplishment just to stay flat. So we invested something like $190,000,000,000 from the 10 year period prior to 2015. And the $190,000,000,000 that's more than half our current market cap over the last 5 years. So people say, well, you're not growing. Well, that just tells you how hard it is to hold your own in a depleting business. It's the nature of what we do. We all understand that. And so what we're really trying to do is just deliver best value and nothing has changed about that. And Rex, on the question on the industry structure, I mean, is it I mean, it's always changing, but is it more difficult now for you guys to execute it than it has been in the past? And if so, what do you do about it? Or is this just another phase? No. Quite frankly, I think we're finding it easier to execute now because of a couple of things. And it really is the maturing of the global functional organization, the maturing of our organizational processes. And I know I kind of sound like a broken record droning on about the integration and how we get value out of that integration. Our organization is getting so much better every day at learning from each other and realizing there's a guy in the downstream that all of a sudden realizes there's something of value to him over the fuels marketing organization. He goes and gets it. That we are really on the front end of what I think is yet another step change in our organizational capacity to accomplish work more efficiently first, but to accomplish work and create more value from how we do that. So I would say this current environment actually plays to our strengths. Over the past decade, what has changed really it started with the merger, the recognition at that stage of where energy supply and development was that we were into a period of globalization, we were into a period of massively complicated projects and massively complicated geopolitics. And we had to get organized to deal with that. And that was the genesis of the global functional structure was to deal with that. Then the emerging North America, we had to adjust to that. How do we do it? Well, so we went out and made the acquisition. So we constantly are self assessing, are we positioned for the world we're in, not just today, but the world we think where it's going. And that's geopolitical, it's resource driven, it's driven by a lot of things. We are never standing still. We are constantly evolving internally, and we do it quietly on purpose because we think a lot of what we do has enormous competitive advantage. And even if people figure it out, for whatever reason, they don't do it. And I think part of it is, it takes a lot of courage to do these things and a lot of trust in your people. Thanks. Yes, back over here. Thanks. It's Blake Fernandez with Howard Weil. I had a question for you on divestitures. Most of your integrated peers have an explicit divestiture target, while you do not. And I'm curious if you have a bias in one direction to sell assets or maybe take advantage of an awful lot of assets coming to market. And then secondly, if you could revisit the mix, the liquids gas mix, it seems like in your long term outlook, you're fairly constructive gas. I didn't know how impactful that is in your project sanctioning process or potential opportunities moving forward? Thanks. Well, on asset management, the sale of assets, no, we do not set a target. We don't go into the year in the strategic plan with a target. The only thing that is in our plan is if we've got an asset sale that's already we have an SBA. So we build it in, then it will close. That has been fundamental to our business for the last 20 years, at least. And it is I tried to lay that out in that chart that we view and our line organization understands we view, they're constantly looking at the portfolio of assets they have and challenging themselves, are we getting the best value for this asset? It belongs to the shareholder. Are we getting the best value? And if from time to time, we need to go test the market to convince ourselves that we're going to get more value out of it keeping it than we are to sell it, then we're not doing our job. And so it is just a base part of our business and we have parts of the organization and all the business lines that that is their charge. That's what they do. And so they are constantly engaged with the marketplace to understand where something may have value. We will make strategic divestments as we are changing the business itself. So I would say we undertook a fairly comprehensive strategic assessment of our refining assets about 5, 6 years ago. They concluded that we got a lot of assets that are just not going to compete in the future. And we looked at them and said, well, could we invest into them? Could we change something about the logistics? Could we make them put them in a position where they will deliver the value? And we did an assessment. We know what that's going to take. And then we went to the market and said, well, how would someone else value this? And so for a lot of other people's strategic reasons, we sold we're able to sell a lot of refineries and a lot of logistical assets that went with them, terminals and some pipelines and things like that. And when we looked at it, we said, gee, that was a great value for us, because then we take the human talent that was working on trying to make that better and we put them on things that deliver higher value and redeploy it. So we don't issue a target because we never have run the business that way. It is it's just we view it as a part of base business. And I think not getting yourself in a position where you have to sell something. And we've never put ourselves in a position where we had to sell something. And on the flip side of acquisitions, nor have we ever tried to get ourselves in a position where we had to buy something. So it is always with a view that this has got a long term outcome to it that we're trying to achieve. So you won't ever see us announcing that we have a divestment target. Why others do it? You'll have to ask them. I think it's foolish. You're signaling the market. I think you're destroying value when you do that, but it's their business. They get to run it how they want to. On the mix itself, again, if you look at the portfolio of projects, we have a lot to choose from. And it always each of those will compete. And whether it's a gas development that's going to put new natural gas capacity into the marketplace or whether it's a liquids or crude oil, we're I mean, we're agnostic. What's the return? What are we going to get? What's the value that's created? I don't care if it's a gas molecule or a crude oil molecule. It may even matter to me. The only thing that matters to me is how much money do we make at the end of the day, because that's what's important is how do we take those molecules and convert them to something of value. And they're all carbon molecules. Some of them have to be in a gas form, some of them have to be in a liquid form. And we're in the conversion business. Take a molecule from its site of origin and convert it to something that consumer wants and get some value. How do we do? And I don't really we're agnostic on the gas oil mix. Over here. Thanks. Good morning. Roger Read, Wells Fargo. Two questions. First one at the corporate level. As we think about an ultimate oil price recovery, your CapEx, the recent debt issuance and then share repurchases, can you give us kind of an order of how we should think about where you deploy, call it, free cash as things work out 2018 through say 2020, 2022? Well, I kind of take a view that we generate cash and we have a couple of choices, either invest it or we give it back to the shareholder, okay. So what we have always endeavored to do is to be reliable with the dividend and we've been pretty predictable, 33 years now, we've been very predictable. The level of change is will be tuned to our capacity to deliver back to the shareholder. Then look at our investment programs and if we need to borrow to invest, we'll do that. Because if I'm borrowing money at rates that we got yesterday, If I can't generate a return multiples of that, I'm really somehow messed this thing up. So we are the way I view the borrowing is we're really borrowing because we got opportunities to put that money to work and it's low cost and let's go put it to work. So your question of priority is, yes, the dividend is a high priority because it's part of why we are important to long term shareholders. You've heard me say many times, we're not for the short term shareholder necessarily. That's not what we build the business around. It's not how we run the business. We run the business for people that are going to own these shares a very long time. We hope they're in their trust that they leave their children and their grandchildren. And whenever we run into challenges and I get have to think about how am I going to pay the dividend, I think about those people. And so we're going to pay that dividend. That's why we're important to people. And we'll borrow to invest. We'll borrow to these projects have returns that are multiples over our borrowing costs. So that's the way I'd do the borrowing is we're going to put the money to work. I'm not going to borrow to write a check to somebody. Fair enough. Thanks. And then my follow-up, in the unconventionals, you had the 200,000 barrel equivalent potential growth 2018 depending on price. And then longer term, if I understood correctly, the 600,000 to 1,000,000 barrels equivalent of production. Is that all within that $40 to $80 price range if you put on the other charts? Or is that a ultimate recovery over 15 years, not necessarily price dependent. I was just curious what makes the toggle of $200,000 and then ultimately the $600,000 to $1,000,000 Jack, do you want to handle that? Yes. First of all, on the couple of 100,000 barrels a day extra in 2018, that's largely Bakken and Permian and clearly makes sense at $40 a barrel. As you look longer term, that 50,000 drill inventory over 18 to 30, a lot of that is actually gas. So we still have a lot of liquid inventory that looks more attractive to us right now. And that looks good in the current environment. The gas environment is less attractive to us today for investments in oil. So we're going to focus on that. But we have a lot of gas prospects in the U. S. That we can add on at later stages as the market matures and looks a little better for us. Okay. Over here. Thanks. Phil Gress, JPMorgan. My first question is just around the capital budget outlook. You gave a wide range of outcomes for CFO, obviously, based on the oil price. As we look at 2016, 2017, you gave a fairly fixed number for the capital budget, with upstream looking pretty flat. So I guess I was trying to think about this upstream guidance. And as these major capital projects roll off in 2016, 2017, maybe you could just talk about the degree of flexibility there, where that reinvested capital is going, given that the outlook is basically to keep production flat? Well, again, just to reemphasize, the volumes will be what the volumes are. We don't have an objective to keep production flat. As you look at the forward CapEx, the number we set this year, as you saw, most all almost in fact, all of the down is in the upstream. And it's a reflection of coming off some very high levels of investment the last few years to execute some very large projects, which are nearing completion, and we reviewed those that are going to be starting up. So we've got a rundown in capital spending on major projects. And as has been noted by many, we did not take decisions on a significant number of new major projects. Now a lot of that has to do with partners because we're in all of these projects, we have partners. And so we don't decide alone the pace with which we will move these next large multibillion dollar developments along. A lot of that depends on our partners as well. But there has been, I would say, a bit of a pause appropriately so on the next wave of major multibillion dollar multiple year type projects to make final investment decisions on, doesn't mean there's not a lot of work going on because a lot of work going on to go back, relook at engineering designs, relook at contracting strategies, retest the market on are we have we got the best contracting approach here. So taking a pause is really a prudent thing to do. So if you looked at the chemicals, their spending is about flat. Refining is actually up 10% in capital spending this year. And then going forward, chemicals comes down. That's just their big projects rolling down. Refining is about flat next year. And so the down is, again, it's a view of further rundown in major upstream projects. The level of spending for the unconventional portfolio, we'll just set that vernier dial based on kind of what the market is telling us. I've commented somewhat during the break, I mean, I don't know why we push a rope on these things. We shared some data with you in terms of their economic attractiveness. Stuff, which we don't really have to do. We're holding acreage. It's not going away. And so we'll maintain a level of activity that is sufficient to hold acreage and sufficient to continue that steep learning curve because we're getting a lot of value out of the work activity itself. So the swing, it will be upstream is where we'll swing and it will be dictated by the market and the next big projects that are to be sanctioned, they'll be that'll come around when the work's been completed. And so we didn't talk a lot about new projects. We mentioned some big projects that are in that stage of relooking at the cost. The Tengiz expansion is a good example. And as you know, our operator there, they'll control a lot of the timing of that as well, but we're very supportive of what they're doing. A quick follow-up is just on the M and A front. Exxon is obviously a free cash flow today story and a lot of these U. S. E and Ps are kind of free cash flow tomorrow stories. So when we think about that dynamic, how does that play into your thinking around M and A in particular in the U. S? Because if you were to issue treasury stock to acquire these assets, it could be dilutive to your free cash flow per share. You are correct. All right. We'll leave it at that then. Let's go ahead and go right here. Paul McCrea at Tower Bridge Advisors. Hypothetical question, it's 2017 and the sanctions have been removed against Russian Federation. With oil prices, were they to be comparable to where they are now, would ExxonMobil be interested in starting up again the joint venture with Rosneft in the Barents Sea? Yes, we would. We'd be interested in getting back to work. As you know, that strategic cooperation agreement had 3 programs. One was the Arctic program, one is the Black Sea Deepwater program and the other was the unconventional program in West Siberia to look at their tight oil potential. Obviously, getting back to work, in particular in the Arctic, will take us a while because we had to dismantle all of the capability and the infrastructure. So the first step would be to get back to reengaging on the studies. There's an enormous amount of engineering and geoscience study work that has to be done before you're ready to take a next step out there. So it'd be a but we're very anxious to get back to work there. It's a really interesting, exciting area. We're very interested to get back to work in the Deepwater Black Sea. We think there's a it's a very prospective area as well. We could probably get to work there faster than we could get to work in the Arctic just because the Arctic takes so much pre planning. The Black Sea as well takes some but the logistics challenges are not quite as daunting as the Arctic. And then the onshore stuff in the title, we would love to help them take a look at that, but we'll just have to wait. They understand the situation. We understand the situation. We're going to remain in full compliance with the sanctions. I'll tell you, we're in constant conversation with the U. S. Government around ensuring that we're able to protect our rights in Russia while we have to stand still, and they've been very supportive of that. So I'm thankful that they have never done anything to try and make the situation worse. They've, in fact, they've done things to help us hang on to the rights we have. We've been through sanctions in countries before, and that's something governments to work out. We would just like to make sure we can maintain our position and when new time comes, we're ready to go back to work. Let's go back over here. Thanks, Rex. Paul, thank you. Wolfe Research, Rex. What stopped you from doing a deal, given that we're obviously in a down cycle now? The past year, I think we came out of the meeting last year thinking it would be likely that you might be looking to make acquisitions. What's held you back? And what would change to make you do a deal over the coming 12 months before we meet again? Thanks. Well, I think there's been 2 things have happened over the last year or so. First, expectations are yet to come in line on the part of sellers versus buyers. And that's a fairly common I mean, that's a theme you hear from everyone. But I think the other thing that's happened is there's been a fair amount of value destruction in the last year of some of these companies as they have continued to access capital markets and levered up as they've issued additional shares and diluted their existing shareholders down. And so when we do those evaluations and we look as you can imagine, we look on an ongoing basis to understand how would that impact our results and is it going to be accretive? Is it going to add value or is there has the value just has kind of been destroyed and it's not there anymore. It's like buying a home with a big mortgage on it and there's not a lot of equity left there that you can build on. And then when you bring it into our consolidated results, it's really you're pushing a big bow wave to try to get over that. Doesn't mean we couldn't do it, but it certainly didn't. So you have that tension between the value some of the value has been destroyed and the expectation hasn't changed. And so it's gotten even I would say it's gotten more difficult, not easier. And that's what I hear when I talk to others and it's what I experience when when I chat from time to time with some people who I think would like to do something, but they've gotten themselves in a position that they can't figure out how to explain to their shareholders now. And so it's a tough place that they're in and it's tough for us. We would like to do something. We would. We see there's a lot of quality resources out there. It's just how they've been encumbered. So what we're finding is we're spending more of our time on asset deals because that's still a space that people are willing to do and they need to do and want to do. And so we're still pursuing asset deals of varying sizes at this time and we stay open to something more, but it's it has become more challenging for certain companies in particularly the pure play E and P sectors become more challenging. Thanks. And then a follow-up is that you talked about how the rate of efficiency continues to amaze everyone in U. S. E and P. Do you feel that you've got enough I think you mentioned Jack mentioned that there's 50,000 locations, a lot of that is gas. Do you feel you've got enough exposure to this oil theme in the U. S. Or that you need to add acreage and more position, particularly in the Permian. Could you just refer to the prices that are implied from this? Are we now looking at a structurally lower oil price because of what's going on in efficiency? Thank you. Well, I think we have now built a position where we have the critical mass necessary and you just said and a lot as Jack explained a lot of the 50,000 locations are natural gas. They're not all oil. But we have built a significant position now where we have exposure to this resource type in the global energy mix that we wanted to achieve. Having said that, there are some really quality acreage out there that we would certainly love to be able to do something and build that position now just because we now have developed the capabilities, the understanding, the technology and the organizational capacity to take those molecules and convert them to a lot of holdings if we can get it at good value. And the last part of your You want me to talk about oil price? Yes. Yes. There's always a structurally lower oil price. I'm not asking, can we go down from here? Yes, we can go down from here. The it's more than I think people need to understand, it's more than just about the North American piece of the supply. There's more to why we are where we are than just here. This certainly was a triggering event, but it's not the only reason why we are where we are. Rex, could I just clarify a comment real quick? I didn't mean to imply that by 2018, our inventory in the Bakken and Permian is depleted. We can drill about 10 years over 20 rigs a year in those plays and all that looks attractive to $40 a barrel. So we have a pretty good inventory in the Permian and Bakken today. Let's go to the back there. I don't want to ignore the hands back there. Thank you. Thank you for the presentation. Guadalupe Siegfried, Raymond James. My question goes to this year's presentation. You introduced some guidance up to 2020 production in capital spending. And my question is, what has changed in terms of visibility that could make it possible to exceed those numbers? Well, I don't know if the question is the fact that we gave a little forward out to 2020 is due. We've generally always given about 5 years forward in these reviews. We've not been as granular with it this year. And I think not because we're trying to suggest anything in particular other than we're in a highly uncertain environment right now. And so it's we're very mindful of trying to meet our commitments and we don't want to suggest we know more about the future than we know. What we tried to give you an understanding of is the nature of our opportunities and how they can perform in a fairly broad range of possible pricing futures. And then we've laid out that for the next couple of 3 years, based on everything we've got kind of in the works and a lot of this and I mentioned the projects are going to start up, a lot of this future production, it's already baked in. It's coming on when these projects start up. And so the swag around that, so to speak, is really just a view that and I said it many times that we can dial some things up and down pretty quickly to deliver volumes in another year out. It takes about a year to 18 months before you'd see a meaningful impact if we were to dial activity in North America up to a certain level. So other than I don't know if that's responsive to your question, but that's really what we're trying to portray today in terms of that forward opportunity for volumes. Let's go to another in the back there. Good morning. This is Kartik Misra from Sanford Bernstein. I had a couple of questions, fairly different. The first one was to do with decline rates. So you had talked briefly last year about decline rates for your legacy assets, and you said around 2% to 3%. I know that the capital expenditures obviously coming off significantly. Are you also seeing a increase in these legacy decline rates? The second question has to do with your LNG portfolio. There are a variety of different opportunities that you have that are at the early stages for LNG development. Could you maybe give more color as to what the timeline might look like? Because you said earlier that it had to do with the LNG demand picture becoming more clear? Well, let me let Jack handle the decline rate question and then I'll let Andy comment, give you a little color on the LNG markets and kind of how we fit into that. Yes. I would say that our decline rate really hasn't changed over the last year since we gave guidance last time. It does imply some optimization that goes along with our base. I think we're doing actually a better job of today with a little more focused on it. But we have a mix of long plateau assets and some of the unconventional. And when you kind of combine that portfolio, I think that's still at description of where we are in terms of base decline. On the LNG portfolio, I think you're quite right that we have a number, a large number of projects, a very widespread in terms of maturity. Some are quite mature, getting ready to go. We'd like to see the cost worked on very hard in the time between now and when we get to NFID. And there's some in the engineering stages where we have a lot to do and there's some that are concept selection. The comment really on letting the market dictate, it probably has to do more with our philosophy, which has been about ensuring for these big long capital investment, these big long cycle projects that we're able to have the confidence through contracting of where the molecules are going to go, particularly in the sort of environment we face in the near term. We have always been about long term contracting for these projects, and that's what we're out in the market doing, and we're having some success on that. We're obviously very quiet about it. You'll see some things from time to time, perhaps in the near term, perhaps not and so forth. But getting the contracting in place, making sure we know where the molecules are going to be burned and have the confidence that that's going to underpin the project, we'll exert some control over the FID decisions. But it's also about taking the time to do all the work to get in the best possible position, including costs and regulatory approvals, coupling over that contracting to ultimately make the decision long when we pull the trigger on those. Let's go back over here in the back on this side. Rex, just to follow-up on two points you made. On the M and A, focusing on the assets at this time, and given that the E and P space is so different than when you do the mega mobile deal. Could you envision Exxon painstakingly over the next few years just going through Chapter 11 reorgs and buying assets and incrementally doing that for several years? Well, I think that's we're going to have to wait. I guess, it's kind of the answer to the earlier question about why nothing's happened and my comments about what's happened with valuations is I think that's that may be the situation we're in where we're just going to have to wait for some of these assets to come out of either reorganization or some other decision that companies finally take around what they want to do with the value they have, how do they want to convert that to serve their shareholders' best interest. So and we're patient. I mean, we're not there's no rush here. With 91,000,000,000 barrels, we have plenty of things to work on. With the acreage holdings and the resource base we have in North America, It's large. We've got plenty of quality things to for our people to continue to work on. So we'll be patient and we'll wait. And when it looks like there's good value opportunities, then we will certainly you can expect to see us expressing interest in those and whether we get something done or not is the nature of the deal. But we're not we don't feel compelled to be in a big rush. Even if the environment changes, for some of these companies, it doesn't necessarily change the value proposition because of the shape they put themselves in. And so it's I think it will be very, very company specific as to how that opportunity might present itself. Thank you for that. And just secondly, on near term oil price outlook, you mentioned it's not just North America, which was a trigger. Just curious your thoughts on or anyone else on the panel for that matter, thoughts on OPEC, Russia, Iran, that kind of stuff versus perhaps lower demand from China and other emerging markets? Well, it's all of the above. I mean, all of the factors are at play here. As all of you know, the history of how the correction came about. We're still overproducing, oversupplying a market that doesn't need it, doesn't want it right now. We've got global economic conditions that are not particularly inspiring. U. S. GDP likely to be less than 2% this year. Europe is going to be struggling to slide sideways again. And China is on a bit of a transitional period themselves. And so I think we I don't think we can look to the market demand side to necessarily solve this quickly for us. Ultimately, that is an important element of how this gets solved as demand does have to continue to grow. And we do anticipate demand growth this year. So that's why I've said this thing I said last year, everybody needs to just settle in for this to be with us a while. My view has not changed a lot in that regard, other than there are suppliers around the world who are certainly in a lot more duress today than they were a year ago. How that how they react to that then can either extend this or bring it to a conclusion. And I don't pretend to know what they'll decide to do and it's all for different reasons. Within OPEC countries themselves, there are member countries that are under great duress, as you well know. And so they may not have the high cost marginal barrel. They may have some of the lowest cost marginal barrels, but if they don't maintain some level of reinvestment activity, decline rate is going to take over for them. And they may have some of the most competitive barrels, but those barrels are declining, which means they're coming off they're coming out of the market. And that's happening because governments have gotten themselves in difficult financial situation and are not willing to make the money available to maintain their volumes. So there's a lot of moving parts to this going on as we sit here and speak today. And how and when these things come back into balance is hard to it's really hard to predict. So we just say, look, this is the world we're in. Let's go work on the things that we can do something about and let's take advantage of whatever this environment is creating. Let's don't miss something, whether it's a cost opportunity or an opportunity to add something of value, let's don't miss that. Let's be alert to that. Let's go back over here to the front. It's Tietan Joffalingam from Numira. You talked about opportunities and you've highlighted your investment profile. I was just wondering if you could talk about the cost opportunity in terms of OpEx. You talked about a 9% decrease last year in the Upstream, But you haven't sort of quantified what we may see going forward and sort of where we should think about that in a cycle from a backward looking perspective as well? Well, we highlight the 9% that we captured last year in what was a fairly pretty dynamic marketplace, still in a lot of transition and a lot of movement. My we've not put a number out and I'm not going to give you one today either. We have internal targets. But what I would tell you is I think the organ is there's much more to be captured yet because the market is beginning to settle out, which is which then allows you to do more than just chase price, the price being the price of the supplier, the price of the service provider. Now you can get down to a point where we can talk about programs that we want to execute and we can have a conversation with the supplier, the service provider, whoever it is, let's put something in place now that locks in something. So we're kind of approaching some level, I think, of stability out there where you can begin to engage in those. On the capital efficiency side, I talked about what we're doing there with major expenditures. Organizationally, as we showed you, we are constantly looking at our productivity. Throughout the high price cycle, we were bringing Manning down. So that's just an ongoing part of what we do. And we, with the move to the campus, finally completed that this last year, the last of the business lines got settled in. We see a lot of opportunities with that new infrastructure and that putting the organizations all on-site together where there we think there's more productivity, more efficiencies. We're just now scratching the surface on a lot of that. So what I would tell you is there's more. We're not going to put a guidance number out because we just don't do that. But the internal organization has some targets that we expect them to meet. And in fact, my expectation is they'll probably beat them. So very focused on it, very opportunistic on all elements at all elements, externally as well as internally. Let's go back over here. Yes, right down front here. I'll get back to you. Sorry. Thank you. Ed West, Credit Suisse. Again, a cost curve question. You've done some great work on the Permian and the Bakken to get your development costs down into that $10, $11 range. The working assumption of the industry is that shale costs are still coming down and this is the low end. But as a holder of large resources across the whole portfolio, you've got standardization. You've got local content rules maybe changing. You mentioned technology in deepwater. How do you assess the risk that just the whole cost curve has come down and some of these other large resources are going to ultimately be competitive with the low cost shale that we see today? That's a general question. And then a specific question on Canada, solvent assisted sorry, solvent steam assisted gravity drains, you'll get the name of the word right. How much do you think that could shave off the cost curve for the oil sands and make it more competitive? Let me let Mark talk about that a little bit because that's what you're really talking about is the mix, the portfolio mix of our future investment opportunities. And you comment about, do I have concerns about the cost unit cost of some of the larger developments, deepwater, whatever coming down and challenging the shale, I hope they do because we own a lot of that. And that's certainly what we've told them they need to do as they need to get down here and compete at this level. But let me let Mark just give you a little more color. Yes. So as Rex said, we've got 100 projects that are sort of pre sanctioned. Some of them are in pre FEED, some of them are in FEED, some of them are in FEED, some in design. But there's a significant number that, quite frankly, when you look at the cost curve, you saw onshore rig and service costs come down very quickly. Offshore rig costs are following. But the area that we're still working on in addition to concept selections and technologies like Solvencysts and SADB is the backlogs for some of these major EPC contractors are anywhere from 6 to 18 months before those are depleted enough where I think we'll get back to where we've got the same kind of resources we developed back in this price environment before at very good returns. So it's crazy to rush into that now, but we are seeing those backlogs coming down, then we're going to be positioned to go in at the right time and opportunistically advance those developments. And we expect deepwater, all of these types that we've looked at to be attractive. They have been in the past. It will be again at this price basis. And on the SAG, SAS, solvent assisted SAG D, from a capital efficiency standpoint, it's 20% to 30%. That's material. Okay. Right down here in front. Thanks. Good morning. It's Sam Margolin at Cowen and Company. There's a wave of natural gas and NGL consuming projects coming into the U. S. Over the next 2 years. Not to ask for too specific of a commodity outlook, but in your assessment, does this stack of projects which you're participating in come to some kind of inflection in the U. S. Natural gas market? And I ask in the context of your most recent reserve report where it looked like a lot of the reductions were concentrated in U. S. Gas. Andy, you want to talk about that a little bit and then Jack can comment on the reserves? Well, there certainly is more demand being created in the U. S. There's a lot of supply. We all know that. There's a lot of demand outside of the U. S, and we're seeing some of those LPG components, potentially even the ethane capable of being exported, all the way to do a lot of the LPG and so forth. And natural gas exports are starting now with some of the LNG projects and so forth. It becomes a global supply and demand balance when you start to get those linkages there. Hard to take a view on that. We're just going to keep progressing for very good projects we have and make them as good as possible, see how they compete and execute when the time is appropriate for those sort of things. But it's very hard to put all these moving pieces together and say we've got a solution in 1 or 2 years. Jack, reserve? I think we'll just be very patient with our gas inventory. Like I said, we have a very robust liquids inventory that is attractive today. We are drilling some natural gas today. We're drilling in the Utica, we're drilling in the Haynesville, and those are attractive at $2 Henry Hub. So we are kind of cherry picking some locations today and we're going to be very patient in terms of when we ramp that program up. We have a very nice position in a lot for most of the U. S. Gas plays and we'll bring those on when the market conditions warrant. In the meantime, we'll continue with a pretty attractive liquids program. The to your point about the magnitude of target divestitures out there, it's a very high number. It's something in the high double digit billions, I think. Adding on your point in the slide deck about the level of impairments that have taken place over the past 2 years, how do those two trends square? How do these sales not go off at some fraction of what's being targeted? And what does that mean for you as a potential acquirer sort of waiting for your opportunity? Well, I think you'd have to ask the sellers that question. I mean, that's kind of what I was saying earlier, I think there's still just a little bit of a mismatch between buyer and seller expectations on some of those. And if you're talking about at the asset level, it's one thing. If you're talking about at the company level, it's another. So that's why I said earlier, what's working right now for us is to talk about assets because we just we can look at the fundamental resource, if there's facilities that go with it, and we can put a value on that and then come to some agreement on that as opposed to then having to value the entire rest of the balance sheet. And that's where we're that's what becomes difficult in those conversations. Back here in the middle. Great. Evan Kalia, Morgan Stanley. Rex, you discussed this cycle. How do you think that the nature of energy cycles is changing? Given your asset acquisitions, your comments on potential attractiveness of those markets, your guidance of up to 1,000,000 barrel a day of production out of the U. S. Like post 2018, did you expect Exxon's mix to change materially in the future and tilted towards short term versus mid or longer term cycle? Well, we've never been any good at predicting these cycles, neither when they occur nor their duration. And so we don't spend a lot of time even trying. Rather what we've built and hopefully what we've demonstrated to you today is a highly diversified mix and our opportunity is set, which because some of these things, the day you decide to react, it's 5 years before you see the first dollar of cash flow out of them. And then we have things in the set that the day we can decide, we could get some cash flow out of them next year. So that's been put together by intention as part of our whole risk management approach to the fact that we live in a highly volatile commodity world. And we know this. We've been through it in the past. And so in terms of how that changes our future, I think it's more we almost have to look back and what did we do to get ready. And then what the future will present will be whatever the business environment conditions allow us to put into that. But to make sure that we have lots of optionality and we have a lot of optionality as to how we want to deal with this cycle. It's how long it stays around, if it goes deeper, if it returns quickly and how do we want to react to that. And I think we're very well positioned with the mix of things we have and the various stages at which we can take them and we use the word readiness a lot internally. What is the stage of readiness? And what we mean by that is how quickly could we take a final investment decision and get it online and where are we in that gated process of readiness and always having a very, very clear understanding among all of us as to where are these things in their state of readiness, so that if something turns, we have a pretty good idea of what we want to do, assuming we can get partners if they're in joint ventures, assuming we can get them to go with us in that decision making. So how the future is going to look, we take no don't take any particular view on it other than to recognize whatever it is today, it will be different sometime in the future. And after that, it will be different again. And that's in my nearly 41 years, that's been my experience. And what did I I didn't learn anything about my ability to foresee that. I learned a lot about how you deal with it over that period of time. Maybe I'll try one more outlook type question to the downstream, right? Antwerp Refinery is on your cover, more slides than usual. It's been a huge benefit to Exxon over the last several years. Any outlook there in the shorter to medium term since you touched more barrels than anybody else? And any update on the Torrance sale process? Let me let Darren respond to that. Yes, I would echo the comments that Rex just made. I don't think we're any better in the downstream at predicting the cycles and when we're at the top and when the bottom is going to come. I think we're always very confident that we will have cycles and we will find ourselves in the bottom. I think Europe is a great example of that, where we have over the since 2000, we've seen some very high margin environments and some very low margin environments. And what we try to do is stay very focused on whether you're at the high or at the bottom, fundamentals remain the same. You got to be a low cost supplier. You got to be the lowest of the cost of supply curve. And so we stay very focused on that and we stay focused on that when we were in the golden age of refining and that paid dividends when we were in the bottom of the cycles. And those facilities that we're investing in Europe, our view of those is irrespective of where we're at in that cycle compared to our competition in that region, we're advantaged. And so we focus on is where is the future, what is our strategy for maintaining that advantage as economies evolve, as demand evolves, make sure that we are staying on the right end of that spectrum of cost and providing high value products. And the investments that you're seeing in Antwerp and Rotterdam leveraged those advantages that we've built through the refineries and leveraged the advantage that we have in technology to make sure that we're staying competitively positioned. Torrance? On Torrance, I think we're making good progress. A lot of work replacing the ESP, a lot of work on discussions with PFB and PBF and the authorities there. So I think we're in line with our plans to try to get something moving on that second half of this year or I'm sorry, Q2 this year. Okay. We'll go back over here. Thank you. Paul Chan, Baqiu. Rick, just curious, in the pass down cycle, at some point, the host government start to get better, but want to get new investment and changing the physical term to be more attractive. In your negotiation or Exxon's negotiation, have we reached that point yet? Or you think it's still because they also need to mean, their revenue is coming down, so they're trying to hold on to whatever they have. So where are we in that process? When that recognition from the government will come or that have we already arrived? That's the first question. Second question is that you're talking about you're just stretching the service on the cost structure. Just curious that, I guess, the equipment standardization or process standardization is a big piece of that lead to the future substantial cost reduction or that is not really related to those? Thank you. I'm going to handle the first one and then I'm going to ask Darren to handle the second. In terms of where governments find themselves in terms of greater flexibility to talk about fiscal regimes, it is very, very country specific, obviously. And I'm not going to it would be inappropriate for me to comment on any specific any particular country. What I would tell you is that governments, depending on what they view their need to be, are going to be more open to engaging in terms of relooking at existing terms if that's going to attract more investment, changing their past pattern of fiscal terms in order to attract investment and attract technology, attract capable operators. And that has really always been the case. I think what's different when you get into an environment like this is when they are when they look at the value proposition that's on hand in this environment, we are better able to make the case on the value uplift we will bring, because it becomes more evident than when you're in a very high price environment. And some of this I would lay at the feet of their consultants who I think do a disservice to them when they don't they don't pull that differentiation out even when you're in a higher price environment. So it varies government to government depending on their needs, what the opportunity set they're trying to advance is, But I think it would be fair to say as a generalization, it would be fair to say conversations are more open and flexible today, but I think a lot of it does have to do when you're down at this level, these little differentiated differences that you can demonstrate are they're quite evident and they appear more meaningful because they're working off a smaller base, value base. So to the extent that's a part of it or that helps you, I mean, that's about all I could say, Paul. But I mentioned in my remarks a couple of times that some of what we've been able to do is improve and enhance fiscal terms, and that's been in a very productive, cooperative way with governments who recognize, look at this level, we can't we have to have good quality opportunities to earn a profit, no guarantees, but you got to give us a chance if we're going to bring in all of the capital and the people and the technology. And they understand that and they appreciate it. And then that when that's what's on offer, they're willing to talk. And then you have to deliver. And that's then you have to come behind it and deliver. And our mantra has always been to not over promise the governments, because we know when we tell them something, they start planning on it. And if we don't deliver, we put them in a terrible position, and we're very mindful of that. So we always want to deliver on our commitments. On a lot of the cost question, Darren, do you want to comment? Sure. Your question around how the role of standardization is driving our cost down. The significance of that, I would tell you, it is a significant factor in where we've managed to take the business and the efficiencies that we brought in. Rex showed a chart that showed where the refining business was with respect to the average industry position. We had a 15% advantage on cost. And I personally feel a large part of that came from the decision we made after the merger to functionalize and get our refineries all working in 1 functional company and taking the best practices, the most efficient practices that we've got in 1 refinery and replicating that around the world. And I will tell you that something that you don't do one time. It is a continuous activity and you find year in and year out additional opportunities by looking across our portfolio of what are the good ideas we've got out there and how do we replicate those ideas across the whole of the portfolio. Rec mentioned coming to the campus. I think that has opened up a new and exciting opportunity that we've got the chance now to look across all of our functional companies and find synergistic activities happening across that portfolio and taking those best ideas and then transporting them to all parts of the company where it's relevant. And the only thing I'd add to that as well is when we talk about standardization, you've got to be a very take a very tailored approach to that. And what we tend to look to is what is the idea that is driving that value creation and how do we replicate across that diverse portfolio of businesses that we've got. And you can take a single idea that can manifest itself differently in the different businesses. But the essence of the ideas is what brings value to the businesses. The cookie cutter approach where you try to ram the same answer to every place around the world doesn't necessarily always work, but a very tailored one where you understand what's really driving that value and then apply it correctly, I think, wins a lot of value and I think we've got a lot more opportunity there. My clock is counted down to 0 on me. So I apologize that we didn't get to everyone's questions. Let me just close out by saying again, we appreciate that you take the time to be with us and take an interest in our corporation. We appreciate the questions. They're good questions. They're thoughtful questions. I understand why you ask them. I hope you understand why in some cases, we don't give you a complete answer. But nonetheless, hopefully, we've given you an understanding of how we run this thing. And it hasn't changed much over the years. So again, safe travel to all of you and we'll see you next year.

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