Good morning, everyone. Welcome to our 2022 corporate plan update. We appreciate your continued interest in ExxonMobil. I'm Jennifer Driscoll, Vice President of Investor Relations. Joining me today are Darren Woods, Chairman and Chief Executive Officer, and Kathy Mikells, Senior Vice President and Chief Financial Officer. This live presentation, the slides, our prerecorded remarks, and the news release are available on the Investor Relations section of our website. As a reminder, today's call is being recorded. Shortly, Darren will provide brief opening comments and reference a few slides from the prerecorded presentation. This allows us more time for questions before we conclude at 9:30 A.M. Central Time. Let me remind you that during the presentation, we'll make forward-looking statements which are subject to risks and uncertainties. We encourage you to read our cautionary statement on slide two.
For additional information on the risks and uncertainties that apply to these comments, please refer to our most recent Form 10-Ks and Form 10-Qs. Please note we also provided supplemental information in the appendix of our slides. Now please turn to slide three, and I'll turn it over to Darren.
Thank you, Jennifer. For too long, the conventional wisdom about ExxonMobil was that we had to make a choice between meeting the world's energy needs or playing a leading role in the energy transition. That view has always been flawed. The fact is it is an and equation, one in which we produce the products societies need and lead the world in reducing greenhouse gas emissions, our own and others. To see how this can be achieved, you only need to look at our strategic priorities and the progress we are making. It starts with leading the industry in areas that form the foundation to success, safety, reliability, sustainability, earnings and cash flow growth, new products and innovative solutions that meet the changing needs of society and ultimately shareholder returns.
We do this by focusing on and fully leveraging our key competitive strengths, investing only where these strengths are translated into uniquely advantaged projects. This level of discipline enables us to ride through cycles, confident that our capital and resources are placed in areas that will outperform competition. This requires all of our competitive advantages, the most important of which is, of course, our people. Continually developing our teams and maintaining a strong culture is a core strategic priority and essential to achieving our long-term objectives. We remain focused on building a diverse workforce where every employee contributes to our success and has the opportunity for personal and professional development. In 2022, the results of our strategy have been exceptional. While it's easy to attribute our success to higher commodity prices, the fact is the degree to which we have grown value cannot be explained solely by prices.
Our success was earned on the back of the right strategy and extraordinary execution by tens of thousands of employees all around the world. Our strategic priorities differentiate us in today's higher price environment. They're the foundation of our industry-leading performance and are robust to a wide range of potential future scenarios. The corporate plan we're laying out today is a continuation of that strategy and execution. It reflects the fact we're on the right course, and the results we're seeing demonstrate this. Next, allow me to share what I believe is the investment thesis for ExxonMobil. First, we have accretive growth opportunities through investments in a leading portfolio of high-quality, low cost of supply developments, including Guyana, the Permian, Brazil, and LNG. We are upgrading our product solutions portfolio with high-value, low-emissions fuels, lubricants, and performance chemicals.
We've demonstrated that we have superior execution capabilities supported by global projects in our operating organizations. Second, with our fortress balance sheet, we have financial flexibility to manage through the commodity cycles. We have a diversified business portfolio demonstrated over the past two years as we delivered record chemical earnings in 2021 and are on pace for record product solutions earnings in 2022. Third, we deliver industry-leading returns enhanced by investments we've made the past 10 years. We have demonstrated the commitment and capacity to growing shareholder distributions. Last quarter, we increased our dividend by more than 3%. Our 12-month Return on Capital Employed rose to approximately 24%. Fourth, we are leading the industry in the energy transition through a unique combination of differentiated advantages, providing lower emission solutions with accretive returns.
This quarter, we announced the largest of its kind customer contract to capture and store up to 2 million metric tons of CO2 per year, which is a good example of how we're supporting other companies in reducing their greenhouse gas emissions. More importantly, our strategy gives us the flexibility to pace investments based on developments we see over time, effectively allocating resources as the markets and policies evolve. Our commitment and capability to meet society's energy needs and lead in the energy transition is unique in the industry, as is our long-term view, willingness to invest counter-cyclically and buck conventional wisdom on how ExxonMobil can help society achieve its aspirations. Over the past few years, we've demonstrated our courage of conviction and made tough decisions to fundamentally change and profitably grow our business. You can continue to count on this. Let me conclude with a few key takeaways.
Our five-year plan is expected to drive leading business outcomes. By 2027, we expect to deliver earnings and cash flow results twice as high as our 2019 levels. Structural Savings of $9 billion by 2023 versus 2019 will contribute to that, as will additional savings from our transformation work in Supply Chain, Procurement, and Finance. We anticipate capital expenditures of $20 billion-$25 billion annually, with spending in 2023 at the upper end of the range between $23 billion-$25 billion. Given the returns we expect on these investments, we see a potential for approximately $100 billion in surplus cash by 2027, assuming a Brent price of $60 per barrel.
The strength of our business and balance sheet will allow for up to $35 billion in share repurchases over the next two years on top of the $15 billion in share repurchases in 2022. We're on track to complete detailed greenhouse gas roadmaps for our major operated assets this year. Based on this work, we have a clear line of sight to aggressive reductions in our greenhouse gas emissions intensity by 2030 versus 2016. That includes a 40%-50% reduction upstream intensity and a 20%-30% reduction in corporate intensity, including product solutions. You will see a more comprehensive update on our progress in the Advancing Climate Solutions report, which we will publish later this month. These outcomes demonstrate the balance in our approach. It's the ExxonMobil and equation, working to meet the world's energy needs and reduce emissions.
It is an incredibly exciting time to be at our company. With that, let me turn it back to Jennifer to kick off our Q&A session.
Thank you, Darren. We'll now begin our Q&A session. This session will be video for the sell side as well as for management. Please note we'll continue to ask our analysts on the call to limit themselves to a single question as a courtesy to the others and so that we can take questions from more people. However, do stay on the line in case we need to ask for any clarification. Please use the Zoom's Raise Your Hand feature to indicate if you have a question. Okay. With that, we'll take our first question. It'll be coming from Neil Mehta at Goldman Sachs. Neil?
Yeah. Thanks, Jennifer, and thanks for the opportunity. The question I had was really on the Permian production growth profile. Embedded in the 3.7 million barrels a day guide, can you help us understand how much growth is there in the Permian? As we get out to 2027, it sounds like we're at 800,000 barrels a day in the Permian. Darren, do you view that as the plateau, and do you believe you can hold that level? Thank you.
Good morning, Neil, and thank you for the question. Well, let me just maybe give some context. You know, we've increased our Permian production into 2021 at 25% this year. We expect to finish out at around 20%. As we go forward, I would expect that to come down as we work through the DUC inventory that we generated during the pandemic and have been working off in 2021 and 2022. Going forward, I'd say more ratable growth of about 10% per year, roughly. That's gonna kinda move up and down as we go through the years. My expectation as you get out to 2027, we're gonna see consistent with what we talked about in 2018, where we committed to 1 million barrels a day of production by 2025.
The pandemic hit, we said we're gonna slip that by a couple years. My expectation is 2027, we'll be between 900,000 barrels a day to about 1 million barrels a day in 2027. As we go forward each year, I would expect kind of at 10%. As you look at 2023, I think 9%-11% increase in production.
Okay. Thanks. Our next question comes from Doug Leggate of Bank of America. Doug?
Well, thank you. I was just trying to navigate the mute button. Good morning, everyone. Thanks for taking my question. I guess, Darren or Kathy, my question's about the break even and the implications for the dividend. You show again the slide of that excess capacity, which most people will probably assume goes to buybacks over time. I guess my question is that if you think about value recognition as a function of the confidence in the sustainability of a growing dividend, how much of that $10 reduction in break even are you prepared to give back for an increase in the absolute dividend burden as opposed to per share growth, which obviously comes from the buyback?
Sure. I'm happy to take that, Doug. We're trying to get the balance right. You know, as we've talked about before, we're interested in ensuring that we've got a sustainable, competitive, growing dividend and that we're efficiently returning cash to shareholders as we look to share the success of the company with shareholders. If you look at what we've done more recently on the dividend, we just raised the dividend in the fourth quarter by about three and a half %, $0.03 to the quarterly dividend raise. Obviously, we announced today that we're increasing and extending the share buyback program with up to $35 billion of share buybacks in 2023 and 2024. We're trying to get that balance right.
If you look at where we're gonna be for 2022. We'll end up returning about $30 billion to shareholders, with about half of that given through dividends and the other half given through share repurchases. The other comment that I would give is we've been very focused on some of the lessons that we learned from the past and looking to more sustainably maintain a share repurchase program as part of our overall program to return capital to shareholders, and that's really supported by the extension of the program now into 2024.
I might add, Doug, you know, the capital allocation priorities that we've been talking about for a number of years hasn't changed, where, you know, first and foremost, we're very focused on finding advantaged projects that continue to grow the value of the business, make sure that we maintain this fortress balance sheet, which obviously we're gonna draw on during the down cycles, and then ultimately then share the success that we've developed with shareholders, either through dividends, and we've had a pretty strong commitment to reliably growing that dividend over time and then buybacks in addition to that. That, that capital allocation framework remains in place, and we still believe is the right allocation strategy for the long-term success of the business.
Nick, can I ask a clarification point very quickly? The 3% dividend growth is lower than your share buyback pace, it suggests the breakeven is dropping $10, the burden is actually going down. To reiterate my question, should we think about $35 breakeven or a $40 breakeven? You know, what is the how much of that are you prepared to give back to the absolute dividend burden, or should we just wait and see how that plays out?
I think we'll look over time. I mean, obviously, our board reviews the dividend every quarter as we go to declare a dividend every quarter, Doug. We've been looking to be balanced in terms of growing dividends and sustaining a share repurchase program, right? Obviously, the fortress balance sheet is what we've been building during this period of time, where we're seeing a more buoyant market, and that helps us to ensure that we can continue to grow dividends and continue a more consistent share buyback program kind of through the cycle. That's what we're really focused on, and we know how important the dividend is. We know it's important for that dividend to be competitive, to be growing, and to be sustainable.
We obviously get a secondary benefit through the share buyback program of, I'll call it, reducing the nominal dividend and that helps us to further grow the dividend as we look forward. You're very much on point in terms of from a capital allocation perspective. We get more resilience as we bring that breakeven Brent price down through the benefits that we're driving in improving the business and improving the business mix and driving down our costs and ultimately, improving volumes kind of over time. That does make the business more resilient, which can enable the company to kind of carry a higher dividend, all else held equal as we go forward.
We're very focused on our capital priorities, making sure that we're investing in really accretive projects in the business, making sure we're retaining that fortress balance sheet, and then sharing the rewards of the business with our shareholders.
Thanks for the clarification, Kathy.
Okay. Our next question comes from Devin McDermott of Morgan Stanley.
Hey, good morning. Thanks for the time today. I wanted to dive into the structural cost reductions in a little bit more detail. You've done a great job realizing the $9 billion target by the end of next year or moving toward realizing that despite some of the inflationary pressure that we're seeing across the industry right now. If I look at the longer-term goals that you lay out on slide eight and the earnings growth contributors by 2027, it looks like there's further efficiency reductions as we look out both post 2023-2025 and then beyond 2025 as well. I was wondering if you could talk in a little bit more detail about some of the additional opportunities that you see there. Then also, have you quantified the total structural cost reductions through 2027?
If you look overall, I'd say we've been really pleased with how the structural cost reductions have evolved over time. We feel very good about hitting the target of $9 billion by the end of 2023 relative to 2026, and we've been reporting on that regularly. I think you see the progress that we're making. We've talked about as we look beyond 2023, the fact that we expect these cost savings can help us to offset inflation. Obviously, inflationary pressure, kinda ebbs and flows from year to year. Some of the incremental areas that we're focused on that we've talked about is really further centralizing some of our capabilities. You would've seen this year, you know, when we made organizational changes, that we centralized our capability in terms of research and engineering.
Overall, we also pulled a central maintenance organization into our Global Operations and Sustainability group. We've talked about the benefits in the past that we've gotten from centralizing our global projects group. As we look forward, we're looking to really better leverage the scale and our integrated approach across supply chain. That's a particular area of focus and how we can get more benefit by looking at supply chain across ExxonMobil. We've also talked about a number of different big processes that we run that are very disparate today. If you think about how we basically contract with people, pay people, how we do our accounting across the company, we have this done in disparate different businesses.
Again, how can we pull some of those things together, start to standardize them, start to get a better grasp on the different datasets that we have across the company so that we can ultimately apply more technology and automation to these things. I'd say at one level up, much better improve the experience for our customers, our vendors, and importantly, our employees, who today, I would say, do a lot of different processes in different ways across the different areas of our business and end up doing a lot of things in a manually intensive way, because we're not standardized and therefore it's tougher for us to apply technology to those processes.
Those are some of the areas that we're particularly focused on, as we move forward, and that's gonna help us to offset inflation when we get beyond 2023.
Yeah. I would add, Devin, as you pointed out in the slide, we do see a material opportunity to further become more efficient and reduce our cost, and that's built into the plans that our organizations have developed. I would quickly add, though, what we found with the changes that we've made to date is you have an idea of where those opportunities are gonna come from and how quickly we'll be able to manifest them. When we get the organization in place and up and running, we continue to surprise ourselves with the ability to bring those savings faster and to quantify bigger opportunities.
My expectation as we go into next year and begin to implement the next stages of transformation that Kathy talked about, that we'll get a much clearer line of sight to those and be able to expand in more detail on those savings as we go forward. Right now, we've got a, I think, a very good estimate. My guess would be it's probably on the low side versus the high side, but we need to do some work to get clarity on that as that organization gets in place and starts working on the opportunities to improve.
Have you said how much you've baked it in through 2027, the total number?
Only in the chart that we've shown.
Yeah.
I think it's in the slide that you referenced.
All right. Thank you.
You bet.
Our next question comes from Jeanine Wai at Barclays Capital. Jeanine, good morning.
Hi, good morning, everyone. Thanks for taking our question.
Morning.
Morning, Jeanine.
Good morning. I guess your question maybe is just reverting back to the medium-term CapEx budget. You reiterated the $20 billion-$25 billion, which is great. You've got some lower emission investments ramping up a little bit versus what you thought before of the $2 billion spread out over a number of years. You know, a lot has happened in the past year externally, we also know that Exxon approaches the business from a long-term planning perspective. Our question really is, has anything changed on your go-forward outlook on where you'll actually sit within that $20 billion-$25 billion range over the next five years, even if it's on the margin, and whether it's related to the macro or maybe Exxon's opportunity set within the traditional oil and gas business or lower emission side or anything from the regulatory side? Thank you.
Yeah. Maybe I'll start and then let Kathy fill in some of the gaps. I think important context when we come back as we've developed the plan every year, we start with a fairly, I'm gonna call it a clean sheet of paper. Obviously, we have a pipeline of projects that we're developing, but we don't begin by saying, "This is all we're gonna spend." We begin by saying, "Let's make sure we're finding and looking at a path to develop all the advantaged opportunities that we can find and that and continue to look for more advantaged opportunities." Then we build that back up grassroots and then look at it in terms of the context of the overall budget that we've laid out.
We did that again this year, and the plans that you see, and they will change and vary year to year. That's one of the reasons why we've given a range is, you can think about the opportunities that are five years in front of us. It's a dynamic process, and opportunities will kind of move up, the prioritization as we find opportunities to realize more advantage and others may move down. There is some movement in that space which we anticipate, and I think it's part of a healthy, process of really testing hard whether these projects are gonna deliver the advantage that we expect them to, that we require them to. I'd say that dynamic process you're seeing play out, we did that this year.
In the context of that broader $20 billion-$25 billion range, felt very comfortable that that range continued to support all the opportunities that we wanted to advance. As we go forward, if we find, you know, greater step-out, new opportunities that begin to challenge that, we'll relook at that and be out talking to all of you if we see something like that. You know, to date, that horizon that we see is still we're very comfortable with the ranges that we've laid out. One comment I'll make on the regulatory question that you asked, which is, you know, maybe in reference to the IRA and some of the incentives that are being developed to try to catalyze additional investment in emissions reductions. We do see an opportunity there.
Obviously, we're in the process of translating that, as is the government in terms of exactly what that looks like, how it will manifest itself in the economy. We do see opportunities there. Of course, we've got Dan and his team in the Low Carbon Solutions business aggressively looking at opportunities to bring the same type of advantages that we've realized in our base businesses to our Low Carbon Solutions business. I would just end by saying very pleased with what we've seen there and consistent with what we believe would be the case, the advantages that we've realized for decades in our base businesses, we are also seeing those manifest themselves in these new businesses. We've got a lot of confidence that that business will grow as we find accretive opportunities.
We will again, continue to bring it into the portfolio and talk to all of you about that in the years ahead as we find those opportunities. Kathy, anything to add?
Yeah, I would just add on the low carbon emissions spend, we've obviously increased it from, I'll call it roughly $15 billion-$17 billion. That's just a straight add. You know, as Darren mentioned, as you think about the other big projects that we have, they're very consistent with the prior plan that we talked about. Some of the projects do move a little bit, right? We have a pretty big incentive to try and pull projects forward when we can. Payara in Guyana, I think, is a terrific example of that and is part of the reason that we're at the higher end you know, of that $20 billion-$25 billion dollar range coming up in 2023. We had previously said that we thought Payara was gonna start up in 2024.
We've kind of pulled that forward towards the end of 2023. Unsurprisingly, that means that we're spending a bit more CapEx a bit sooner. If we have a change in terms of the project slate, we would clearly come forward and talk about that specifically. All else held equal, that low emission spend is just adding $2 billion to, you know, kind of the overall slate of capital projects that we have between 2023 and 2027. Most of that is coming in the later period. Again, it takes a while for these projects to spool up.
The final thing I'd add, Jeanine, which I think is important with respect to the broader CapEx portfolio. It comes back to the definition that we use internally about disciplined investment versus what I think the nomenclature outside the company is. For us, the discipline in investing is making sure that every $1 we invest is a $1 invested in a project which is advantaged and will generate returns in excess of what the other players in the industry are capable of doing. That disciplined investor is making sure we only invest where we assured ourselves of a competitively positioned advantage project. It is not a meet some, you know, cap number and compromise what I think it could be value creation to hit an artificial number that we put out at some point in time.
While that hasn't manifested itself this year, that is fundamentally how we think about investing. Disciplined investing is making sure we're finding those right opportunities. When they come along, 'cause they're often, hard to find, we're gonna make sure we take advantage of them. Thank you. Bye-bye.
You're welcome. Our next question comes from Roger Read at Wells Fargo. Roger?
Yeah, good morning. Hopefully, I've managed to take the mute off and everything.
Yeah.
You're good.
I'd like to maybe tag on with Jeanine's question there and then, also understand as you think about CapEx and a portion of the $24 billion being dedicated, you know, roughly 7% here, to, you know, non-oil and gas production. The two parts of it are, could you give us a little more clarity on exactly how the returns of these projects compare to traditional oil and gas? If you think about, you know, the spending level, does that imply that your actual spending on oil and gas production remains kind of in that lower $20 billion range, and that's the right way to think about, you know, kind of longer term production growth? You know, you gave specifics about Permian, but I'm just thinking about the broader corporate entity here.
Yeah, thanks. I'll again, kick it off and then let Kathy fill in some of the gaps. I'm gonna go back and anchor to the points I made with Jeanine, which is, it's gonna be opportunity driven, Roger, in terms of how we see, say, spend in the oil and gas business. Again, it'll be a function of if we've got resources, find an opportunity that we're trying to advance, that will dictate the level of spend. Obviously we're very committed to making sure that we bring the advantages that we have to bear, particularly given our long-term view of the role that oil and gas will continue to play, even as we reduce emissions and society moves down this path of a lower emissions future.
On the Low Carbon Solutions, the returns for those are competitive in the portfolio. I think I've said from the very beginning that we ought to be able to translate the advantages that we bring to the industry as a whole and to opportunities in this space and generate a return that is in excess of what the marginal investment required to reduce emissions is. My view is our advantage positions us differently than many others who are participating in this space, and that different position oughta manifest itself in higher value that we can then bring to the shareholders, which is built on the decades of work that we've done to build these core competencies. That proposition remains more true today than it ever has been.
If you think about the areas that we're pursuing in carbon capture and storage and biofuels and hydrogen, those are all opportunities which have huge market potential, have been recognized by third parties, credible third parties, are gonna be a critical part of the energy transition, and all play to our strengths. We're taking those and with Dan's team, finding opportunities to invest in those areas and generate returns which are very competitive. Those returns will vary depending on because the markets haven't all evolved at the same pace and policy is different around the world, the returns will vary. What I'll say to you is that the ones which are mature have very accretive returns, are very competitive in the portfolio.
There are some that we're making investments in anticipation of policy. I would tell you the Baytown project that we've talked about, the blue hydrogen project, you may recall we started work on that before the IRA, before there was really policy in place to support it. In anticipation of evolving policy, we wanted to make sure that we had something on the shelf that we could, we could reach for if that policy eventually manifests itself, which it did. We're very well-positioned on that project. We are doing other projects like that, kind of seed work to make sure that as that policy and market develops, we've got a really healthy pipeline of development opportunities that we can continue to push. Kathy, anything?
The only other thing I'd add is we've talked previously about the pace of some of these projects had been a bit in line with where we've seen policy develop, right? Biofuel projects would be a great example of that. You know, if you think about our project up in Strathcona, we've invested over in Europe, you know, we've invested in California. These are all places that have supportive policy, which we expect are gonna drive a high return. When we look at the overall portfolio of emission reduction CapEx, you know, we've said the overall portfolio will yield in excess of 10% return, right? There's projects that are already supported by near policy that already exists, that I would say are going to deliver strong double-digit returns.
Ultimately, these projects have to compete within our portfolio.
No, that's great. Just one point of clarification, if I could then. Is something like carbon capture and storage that's a lower emissions spending component as opposed to a growth expansion? I'm just trying to understand, like, where the dollars are going and the right way to think about the return proposition here.
Yeah, that's a great question, Roger. We try and give you all of the spending, you know, both internally to reduce the emissions of the footprint that we already have today, spending that's gonna be required as new projects come online to reduce the emissions associated with those new projects, right? Those are all within ExxonMobil's four walls. What we're doing kind of externally to help society overall and our customers kind of focus on reducing their emissions. We talk about kind of biofuels, carbon capture and sequestration and hydrogen, you know, as the areas that we're focused on.
When we overall give the number of what, you know, we expect to spend $17 billion kind of over this plan, period of time from 2022 to 2027, that's really meant to capture everything within our own four walls and what we're doing externally.
Great. Thank you.
All right.
Our next question comes from Biraj Borkhataria at RBC.
Hi there. Thanks for taking my question, and thanks for the good presentation, the new format today. Very concise and much appreciated. I just want to ask a couple of quick ones on the financial guidance. The assumptions on the deck are $60 Brent and $3 Henry Hub. I was wondering if you could just comment on your assumptions for international gas and LNG in particular, 'cause obviously next few years, it's likely to be materially higher than Henry Hub. Just secondly, another quick one. For the 2023 CapEx budget, what proportion of that is cash CapEx and what proportion is affiliates? Thank you.
Okay. Overall, one other thing that I would just mention is, compared to Investor Day, we've now kind of rebased pricing to 2022 versus in the Investor Day, we would've started in 2021 in terms of the $6 and $3 Henry Hub. Then LNG, I believe we're using $6 for LNG. Then you asked about, overall affiliates kind of relative to our overall footprint. I don't have that number off the top of my head in terms of overall affiliates, but it is typically, a couple billion dollars relative to our total.
Yeah. With respect to, you know, projections and what we build our plans on, we try to look past the current market environment. Obviously, we're sensitive to it, but we think more longer term. If you think about LNG, what's the marginal capacity that comes on, that's the price setter in the world, that will be the basis on which we forecast long-term LNG projects. We kind of think about it as a cost of supply in normal times. What is the marginal production step required to meet the demand projections? That marginal production step has to generate a return for new investments or if we're markets long, it's the, you know, the cash cost re-returns. That's how we think about it, set price. That's the long term.
It's not our view. We're not projecting that that will be the price. What we're saying is we're building plans based on those fundamentals, the projects that we're developing have to be successful and generate the returns that we expect on those long-term fundamentals. Wherever you find yourself in the cycle, wherever the current price environment is, if it's a lot higher than what we had built the plans on, that's icing on the cake. If it's lower, we know that we'll be well-positioned within the seriatim of production steps, and therefore advantage versus the rest of the industry. That's tends to be how do we think about it. We don't try to build a plan based on what I would say is the short-term market dynamics.
Obviously, we're very sensitive to that, and we adjust on the margin things that we're doing that have a payout or a consequence within that short-term price environment.
Then just the last thing that I would add, Biraj, is, you know, you're asking about LNG, and typically for us, LNG is 80% long-term contracts, and those long-term contracts are actually linked to oil prices. That is more of how we see, you know, our LNG kind of pricing move over time, is that link directly to oil price. Okay.
Good. Thank you. Thank you.
Our next question will come from Paul Cheng at Scotiabank.
Morning, Paul. I can't hear you yet. You might be on mute.
Can you hear me now?
Yes.
Okay. Thank you. I think that this may be for, both, Kathy and, Darren. A lot of your peers that have, tried to jump-start and accelerate the energy transition through, you know, inorganic mean, making some acquisition. Also particularly, there are several of them that have been looking at the LNG, the renewable natural gas area. Just want to see, how LNG fit into, your ambition in the, carbon neutral, as well as to build up the, new carbon business. Whether, you're going to look at, acquisition is a reasonable mean, to accelerate the energy transition there.
Sure. I'll start with that, Paul. I think, again, I would emphasize that the approach that we're taking in Low Carbon Solutions with respect to investment and looking at growing that business is very aligned with extremely consistent with the approach that we've taken in the base business. Which is, you'll know this too, for, you know, if you go back many, many years now, where there was this big push initially to go into wind and solar. We looked at that in the context of our strengths, our capabilities, and concluded we don't bring a lot of unique advantage there, and therefore, focused on the areas where we felt like we could bring our competitive advantages, our strengths, our technology to bear to grow shareholder value. We've stuck to that.
That's what you see now, manifesting itself in the projects that are coming forward in our Low Carbon Solutions. The other areas that you mentioned, we're looking at, I would tell you, the full breadth of opportunities in this space. Dan and his team are focused on where are the opportunities that, first of all, have scale, that are gonna be a meaningful role in reducing global emissions. 'Cause we think that's the strength that we can bring to bear in this space. We wanna make sure that the areas that we focus on have a big enough lever to actually, impact, global emissions. That's, that's a really important criteria.
The other is where we can bring to bear our unique combination of skills and advantages to do more than others. Frankly, there's a lot in that space to look at beyond just the things we've talked about. The ones we're talking about now, carbon capture and storage, hydrogen biofuels, are probably the most relevant and closer to us, but there are other opportunities that we're looking at that with time, we think, what we've been working on in the technology space, we can bring to bear and potentially grow. I would say we've got a very wide aperture, but anchored in our strengths and competitive advantages.
If we find an acquisition opportunity that complements those strengths and we will not hesitate to execute on that, but it's gonna come back to we're not looking to grow the business on a me-too basis or on industry average returns. We gotta generate higher than industry average returns, which means we have to be differentiated, and that's the focus that Dan has. I think the really good news is, there's lots of opportunities to differentiate ourselves, and that's what we're focused on executing.
Darren, can I just clarify one thing? If you do make any acquisition, would that be included in the $20 billion-$25 billion CapEx, or that would be in addition? Thank you.
I come back to, we don't have an acquisition built into our plan going forward. As we do this every year, look at opportunities where we see, value opportunity, we'll bring it into the portfolio. Whenever that decision gets made, we'll have to look at it in the context of the other investments. If it's outside that range, then we would be out talking to you about that. If it's what's inside the range, then it would just be part of that. I think it really depends on when that opportunity presents itself and what's the rest of the portfolio looking like.
Thank you.
You bet.
All right. Alastair Syme from Citi will give us our next question. Alastair. Good morning. We can hear you.
Yeah, okay. Right. I wasn't controlling the mute. Darren, you don't publish your energy outlook, anymore, which you usually did about this time of year, and I understand the reasons why not. It's a shame 'cause it was an excellent document. You know, as you've gone through the planning cycle, you know, have you taken any different view on either the shape of the oil or gas markets as you look out over the next decade?
We are gonna publish an energy outlook. I think we took a pause during the pandemic because it was such a challenging space to predict exactly what that, you know, recovery was gonna look like. We do an energy outlook, and we'll continue to kinda talk about that going forward. I would tell you, as you look at, we do it as you know, grassroots and build it up, you know, based on our own understanding and look at the technology, the policies that are out there, the demand growth, economic development, kind of all that together. Build up our case, and we compare that with third parties. I would say the IEA steps, projections usually pretty much in line with where our energy outlook is.
That continues to be the case as we look going forward. There are a number of third parties out there that we're very aligned with. It's just a question of, I think where the biggest variation comes is what transition path do you assume that we're on and how quickly society is willing to accept the policies are going to be required to kind of drive that, and how quickly does the technology develop? How quickly do the markets? That tends to be obviously a lot more uncertain and therefore a lot broader variation in the future outlooks. The way we mitigate that uncertainty is test our scenarios and our plans against the third-party ranges and try to go to the extremes.
As you know, we test against the IEA Net Zero scenario, which is a pretty aggressive scenario. We're continuing to do that, along with looking at IPCC projections, try to make sure that we've got a really robust process for testing the limits and the impacts on our portfolio and the strategy that we have in place. The final point I'll make is we do have a fairly rigorous process where we have established a number of signposts, given the uncertainty, looking at what are our critical development milestones, are we seeing developments in that space that would suggest we're on a particular path.
That's a very active process that we have in our organization to try to make sure that we are kinda looking well into the future and anticipating which path we'll end up on, given the range of uncertainty that exists today. Because you're gonna see that we got lots of time to respond to that. In fact, I think the energy outlook is actually We've got that online now. That's probably something that you can, you can reference today.
Is there any view on how sort of Europe gets out of its gas situation and how, you know, how you frame the global gas market around that?
I would say the path that they're on is how that's going to resolve itself in terms of building regasification capability and bringing more LNG into that marketplace. Obviously, the conservation work that they're doing, which is I know a challenge for many there. I have to tell you, I've been very impressed with the resolve that we've seen out of all the people of Europe to respond to the invasion and to really make the sacrifices required to get through this. I think it's remarkable where we see Europe today and their ability, I think, hopefully, to get through this winter. I think building for next winter will continue to be a challenge. They're doing the right things in terms of bringing in additional LNG and building the capacity to do that.
The big challenge here, as you know, is just the time it's gonna take to build those facilities, not only from the regasification standpoint to bring the LNG into the countries, but also in developing the additional LNG capacity outside of Russia. I think those things are gonna take some time. Our view is the market's gonna be pretty tight for the next several years, and hopefully, enough progress made, enough conservation made that Europe will continue to kind of squeak through there, although they will obviously be paying a price for that, unfortunately.
Great. Thanks for the insights.
You bet.
Our next question comes from Ryan Todd with Piper Sandler. Good morning, Ryan.
Thanks. Good morning.
Good morning.
Maybe if I could ask a question on slide number 12, where you talk about product solutions, earnings tripling, you know, really tripling from 2019 to 2027. Can you talk about what drives the significant increase? I mean, it's effectively a doubling in income there on the gray bars. I understand the strategic projects in the blue column there, they're gonna drive some of that. What drives the significant, you know, the near doubling in earnings from 2019 to 2027 outside of strategic projects? Again, on the upstream side, it's a little easier to wrap your head around because of the significant mix shift associated with the high margin barrels coming on stream. How much of that is cost savings? How much of it, is there any margin impact there?
How much of it is a mix shift that may not be associated with strategic projects going on with the business?
Yeah.
Any clarity there would be helpful.
Sure. I'm happy to talk about that. We specifically highlight the strategic projects 'cause as you can imagine, that's directly tied to the mix shift, right? We show you the expectation that we're gonna double volume of what we call high-value products, right? Those are our higher margin products, be it performance chemicals or high-value lubricants or low-emission fuels that we'll see those volumes grow over time. If we just try then and take that and dissect it into kind of the different pieces of what drives earnings growth, about 50% of the growth overall kind of comes from that mix shift over time. We've talked about when we get out to 2027, about 40% of our earnings will actually be derived from those high-value products. You then look at cost savings.
Cost savings are driving about 20% of the overall pickup that we have. We get a volume increase. Obviously, we're making a number of investments in advantage products that are bringing on volumes over time. You know, we're gonna see a refinery expansion bring on volume in the first quarter of 2023. We've got the projects that we mentioned overall, you know, coming on that increased volume of Vistamaxx, that increased kind of PE and PP volume over time. That's what the breakdown of the composition is. I think the overall storyline here is pretty aligned to how we talk about and think about the upstream business.
I mean, ultimately, we're improving the earnings capacity and cash flow capacity of this business by fundamentally kind of changing the mix of products over time. By continuing to drive down, the costs overall through structural cost reductions. And then the projects are also giving us, over time, a little bit of a pickup in volume. This is a market, especially on the chemical side and certainly on the lubricant side, you know, that you see, GDP overall driving volume growth. Those performance products, you know, and lubricants, low emission fuels and chemicals, driving growth overall from a market perspective at higher than GDP.
When we think about our refinery footprint, you also have to remember that we can change the product slate and, over time, produce more chemical based stocks if we see the market shift associated with the energy transition.
Yeah. I would just add, Ryan, one of the things we try to do to demonstrate the base improvement is normalize the pricing. We don't try to, you know, forecast price margin swings and build that into the outlook, but instead normalize that, so you can see what I would say is the improvement in the fundamental business.
Okay. Thank you very much.
You bet.
Our next question comes from Jason Gabelman at Cowen. Morning, Jason.
Morning. Thanks for taking my question. I just was hoping you could provide a breakout of the aggregate free cash flow that you're forecasting over this period, between cash flow from operations and CapEx. Then what you're including, if anything, from a windfall tax perspective, the impact of that, from the EU and the United Kingdom windfall taxes. Thanks.
Sure. I'll start overall with the last question about windfall taxes. We actually disclosed in our last question that the windfall taxes in Europe were gonna cost us upwards of $2 billion. Obviously, ultimately, where that's gonna land depends on a country-by-country implementation of specific legislation. We'll have more to say when we get to the fourth quarter call 'cause, obviously, at that point in time, we're gonna see legislation land. I'd say if you look overall at where we land in terms of surplus cash flow over time, we said at $60 kind of real Brent, we expect to have $100 billion in surplus cash flow kind of through this plan period. That's including $20 billion of, I'll call it, excess cash that we already have sitting on our balance sheet.
At the end of the third quarter of this year, we had $30 billion of cash sitting on our balance sheet. If you look at it over the 2023-2025 period, that's producing then a kinda cash flow from operations, less CapEx and less the dividends of basically $80 billion. We haven't broken out those individual components. We actually did that in Investor Day. I would tell you, the overall cash flow from operations continues to be pretty consistent. I mentioned earlier we have a little bit more CapEx that we're anticipating, largely driven by the $2 billion increase that you saw coming from the low emissions CapEx spend. Then I'd also say there's a bit of inflation that we're assuming in CapEx.
In the next breath, I would tell you, Jason, that some of those projects that we haven't let yet FID'd, the team will be working very hard to drive the efficiency in design of those projects down. I'd say we'll update you over time in terms of where we see the kinda CapEx on a year-by-year basis coming in.
Great. Thanks.
You're welcome. Now, by telephone, we will have John de los Santos from Redburn.
Oh, hello, can you hear me?
We can, John.
Yeah. sorry, I didn't actually raise my hand to ask you a question. I'm not sure why I got included here, but, yeah.
That's fine. I guess we'll move then to Neal Dingman at Truist. Sorry about that, John.
Morning. Thanks for squeezing me in. My question's on traditional energy growth, specifically the external growth. I've heard kind of what you all have said on the, you know, other energy business today. I guess, given your large upstream inventory position, including, you know, a lot of the major projects you all talked about, and then I'm just wondering, you know, given your future commodity forecast, do you all anticipate a more active traditional energy program than we've seen in recent years? I guess, you know, really, Darren, what I'm trying to get a sense of, what it would take for you to think about doing a deal, you know, at least the size of Noble, like in 2020 or something like that.
I would tell you, Neal, we're always open to a deal. We look for deals all the time to make sure that, but again, it has to meet the criteria of, bringing a unique value proposition, one that, you know, leverages our strengths, where we see some synergy above and beyond what each of the entities could do independent of one another. That tends to be the criteria that we look for. Then obviously it needs to be, based on a value proposition that doesn't take or recognize what I would say is the prices in the moment, but more, the prices in the long term and the fundamentals. I think, you know, that tends to be how we think about and look at, acquisition opportunities.
Our view is, again, the uncertainty around the transition and exactly where oil demand goes, everyone can debate that. Our strategy is to make sure that the developments that we bring online are advantaged and therefore cost advantaged, and therefore on the left-hand side of the cost of supply curve. We don't worry about ultimately what that end demand's gonna be. When you factor in the fact that depletion continues to take out roughly 7% of the production every year, we know there's gonna need to be a continued level of investment. Our job is to make sure that our investments are on that far left-hand side of the curve.
If we find an acquisition opportunity that allows us to bring that acquisition into the left-hand side of the cost of supply curve, that would definitely be an opportunity that we would pursue.
Just that clarification you mentioned on future prices. Does your future price forecast, does that have a big driver on that? Maybe I could ask another. What... You know, can you talk about what is your sort of how do you think about long-term prices?
I would tell you, again, because I think we've all demonstrated the inability to effectively project prices.
Okay.
It tends to be more on a cost of supply. One of the great advantages of our industry is there's, and as you all know this, a lot of transparency in terms of the production capacity, the capacity that's out there, and the projects that are being brought on. We've got a, I think, a fairly good ability to project cost of supply across all of our businesses. We have a cost to supply curve for production and new projects that come on for the industry as a whole. We do that for our product solutions business, both for the chemical facilities that we're building as well as the refining investments that we make. We've got it when we're thinking about our Low Carbon Solutions business.
We're looking at the cost of supply or the cost of reductions, if you wanna think about it in those terms, and where we sit on that curve, and we have it in gas, and we have it in oil. As we're looking at opportunities and investments, doesn't require us to say, "This is the price on which, you know, we need to make sure we can be competitive." We look at it in the slate of the production that exists and the production that's coming on and say, "Where is it positioned in that seriatim? Are we to the far left-hand side?" Wherever demand goes and whatever the we'll know where the price setter we can see, and we just need to be on the left of that to make sure that we're generating a margin.
That's how we think about it. It's much less about the projected price and much more about the competitiveness of the opportunity.
Very clear. Thank you.
All right. Thank you, Neal.
Thanks, everybody, for your questions today. We have cleared out the queue. We will post the transcript of the Q&A session on our investor website early next week. To find it, go to exxonmobil.com and click on Investors and then Corporate Plan Update. That concludes our call. On behalf of all of us at ExxonMobil, have a nice holiday season, everybody.