David Rosenthal – VP, IR and Secretary.

Doug Terreson – ISI Group Doug Leggate – Bank of America-Merrill Lynch Asit Sen – Cowen & Company Roger Read – Wells Fargo Faisal Khan – Citi Paul Cheng – Barclays Edward Westlake – Credit Suisse Evan Calio – Morgan Stanley Pavel Molchanov – Raymond James.

Good day everyone and welcome to this Exxon Mobil Corporation First Quarter 2014 Earnings Conference Call. Today’s call is being recorded. At this time for opening remarks I would like to turn the call over to the Vice President of Investor Relations and Secretary, Mr. David Rosenthal. Please go ahead, sir..

Good morning and welcome to Exxon Mobil’s first quarter earnings call and webcast. The focus of this call is Exxon Mobil’s financial and operating results for the first quarter. I will refer to the slides that are available through the Investors section of our website.

Before we go further I would like to draw your attention to our cautionary statement shown on slide two. Moving to slide 3, we provide an overview of some of the external factors impacting our results. Global economic growth continued at a modest pace in the fourth quarter, with mixed performance across the regions. The U.S.

economy grew moderately despite the adverse effects of severe winter weather conditions. China’s growth rate has flattened while the economies of Europe and Japan improved modestly. Energy markets delivered mixed results. WTI prices increased narrowing the discount to Brent as the global marker decreased in the quarter.

Western Canadian select prices increased significantly. North America natural gas prices were also significantly higher. Global industry refining margins were essentially flat while chemical commodity product margins were stronger during the quarter.

Turning now to the financial results as shown on slide 4, ExxonMobil’s first quarter earnings were $9.1 billion or $2.10 per share. The corporation distributed $5.7 billion to shareholders in the quarter through dividends and our share repurchase program. Share purchases to reduce shares outstanding were $3 billion in the quarter.

CapEx was $8.4 billion. Cash flow from operation and asset sale was $16.2 billion including proceeds associated with asset sales of $1.1 billion. At the end of the quarter, cash totaled $5.8 billion and debt was $21.4 billion. The next slide provides additional detail on first quarter sources and uses of funds.

Over the quarter cash increased by $900 million from $4.9 billion to $5.8 billion. Earnings, depreciation expense, changes in working capital and other items and our ongoing asset management program yielded $16.2 billion of cash flow from operations and asset sales.

Uses included additions to property, plant and equipment of $7.3 billion and shareholder distributions of $5.7 billion. Additional financing and investing activities decreased cash by $2.3 billion including a reduction in debt of just over $1 billion.

Yesterday the Board of Directors declared a cash dividend of $0.69 per share a 9.5% increase from last quarter. Share purchases to reduce shares outstanding are expected to be $3 billion in the second quarter of 2014. Moving on to slide 6 and a review of our segmented results.

ExxonMobil’s first quarter earnings of $9.1 billion decreased by $400 million from the first quarter of 2013. Lower downstream chemical earnings as well as higher corporate and financing expenses were partly offset by higher upstream earnings.

In the sequential quarter comparison shown on slide 7 earnings increased by $750 million as higher upstream and chemical earnings were partly offset by lower downstream earnings and higher corporate and financing expenses. Guidance for corporate and financing expenses remains at $500 million to $700 million per quarter.

Turning now to the upstream financial and operating results and starting on slide 8. Upstream earnings in the first quarter were $7.8 billion, an increase of $746 million versus the first quarter of 2013. Realizations increased earnings by $410 million primarily driven by higher U.S natural gas realizations.

On a worldwide basis natural gas realizations increased $0.31 per 1,000 cubic feet while crude oil realizations decreased by $4.09 per barrel. Volume and mix effects increased earnings by a net $20 million.

This included a favorable liquids mix effect of about $300 million reflecting increased volumes in Canada, Russia and West Africa as well as the minimal financial impact related to the Abu Dhabi onshore concession expiry. A positive liquids effect was mostly offset by a lower natural gas volume primarily due to warmer weather in Europe.

All other items increased earnings by $320 million mainly due to gains related asset sales. Moving to slide 9. Excluding the impact of the Abu Dhabi onshore concession expiry oil equivalent production decreased by 2.9% compared to the first quarter of last year. Liquids production was up 73,000 barrels per day, or 3.3%.

As the ramp-up at Kearl and lower downtime in several countries more than offset price and spend impacts, divestments and decline. Natural gas production was down 1.2 billion cubic feet per day primarily due to lower weather related demand in Europe. Turning now to the sequential comparison starting on slide 10.

Upstream earnings increased to $1 billion versus the fourth quarter. Realizations had a positive impact of $540 million as worldwide natural gas realizations increased $0.84 per thousand cubic feet and crude realizations were essentially flat.

Volume and mix effects increased earnings by $650 million, this included a substantial positive liquids mix effect associated with increased volumes in Qatar, Kearl and West Africa as well as a net over lift and including the minimal financial impact related to the Abu Dhabi onshore concession expiry.

The positive volume earnings factor also reflects higher natural gas volumes in Qatar. All other items had a negative impact of $190 million. Lower gains related to asset management activities were partially offset by lower operating cost. Upstream after-tax earnings per barrel were $21.35 excluding the impact of non-controlling interest volumes.

Unit profitability increased to $3.40 from the fourth quarter reflecting the benefits of our broad diverse portfolio including leverage to North American natural gas, our strong LNG portfolio and the strategic choices we have made on production volumes to improve unit profitability.

Moving to slide 11, excluding the impact of Abu Dhabi onshore concession expiry volumes were up 45,000 oil equivalent barrels per day or about 1% sequentially. Liquids production was up 23,000 barrels per day, or 1%.

Lower downtime increased production from West Africa projects higher liquids volumes in Qatar and ramp-up at Kearl more than offset price and spend impacts, divestments and decline. Natural gas volumes were up 129 million cubic feet per day reflecting higher volumes in Qatar partly offset by lower production in the United States and Europe.

Moving now to the downstream financial and operating results and starting on slide 12. Downstream earnings for the quarter were $813 million, down $732 million from the first quarter of 2013 mainly due to lower refining margins across all regions. Volume and mix effects increased earnings by $80 million offset by other items for a net $70 million.

Turning to slide 13, sequentially first quarter downstream earnings decreased by $103 million primarily due to unfavorable volume and mix effects reflecting higher U.S. refining maintenance activities. Moving now to the chemical financial and operating results starting on slide 14.

First quarter chemical earnings were just over a $1 billion, down $90 million versus the prior year quarter mainly due to lower margins. Positive volume and mix effects were offset by other items. Moving to slide 15, sequentially chemical earnings increased by a $137 million, primarily due to higher commodity product margins and lower expenses.

Moving next to the first quarter business highlights beginning on slide 16. As we discussed in our March Analyst Meeting we are starting up a number of major projects that will deliver profitable volume growth. Our world-class project execution capabilities are enabling significant progress on several of these projects.

At PNG we continue to achieve milestones that will results in the first LNG cargo [to be unloaded] ahead of schedule. We have completed the onshore and offshore sections of the pipeline which transports natural gas from the Hides gas conditioning plant up in the mountains to the LNG plant near Port Moresby.

The first LNG train is now operational and the second train is mechanically complete with final commissioning underway. Over recent weeks we started holding the first gas from Hides and in the past few days initiated LNG production. And we produced the first condensate and liquid recovered through the liquefaction process.

We expect the first LNG cargo deliver in the coming weeks. These are exciting milestones for the PNG LNG project and a great achievement for our project partners, contractors and the people of Papua New Guinea.

As we mentioned in our Analyst Meeting we had overcome a number of challenges during the construction phase such as very steep slopes, flooding and lack of infrastructure.

Despite these challenges we are starting up several miles ahead of plan and delivering a project with one of the lowest cost per MTA relative to other LNG projects being built and in close proximity to the growing Asian market. This is also an excellent example of how ExxonMobil creates value through our leading project execution capabilities.

In Malaysia we have started our production into the Damar gas field from the first two of a total 16 wells. The Damar field has a projected capacity of 200 million cubic feet of gas per day and follows the Telok gas development which began production in 2013.

These projects provide additional gas supplies to help meet Malaysia’s power and industrial needs, promote growth of the country’s natural gas industry and drive profitable volume growth for Exxon Mobil.

The Hibernia Southern expansion in Canada a project that will deliver a 170 million barrels of oil is progressing per plan and is now nearing completion. Installation of subsea infrastructure for the water injection facility has now been completed.

Three of five platform production wells have been drilled and top side modifications to the Hibernia gravity based structure platform are 97% completed. Start-up is expected later this quarter. At our Arkutun-Dagi in Russia we are commissioning the last few top side system at the fabrication yard.

The platform drilling rig will be tested over the coming weeks. Before the 42,000 tonne topside structure is loaded out later this summer. The topside will then be floated over the gravity based structure already installed offshore Sakhalin Island. Drilling will then start and first production is expected later this year.

The Banyu Urip project in Indonesia is now 87% complete. The project will deliver 450 million barrels of oil through an onshore central processing facility with a 165,000 barrels per day of production capacity.

Pipe rack construction is complete, equipment installation at the central processing facility is progressing and the onshore and offshore pipelines are installed. Conversion of the floating storage and offloading vessel is nearing completion with major equipment installed and commissioning ongoing.

Two rigs are operational and the first 20 wells have been drilled. Start-up is expected around year end. The Kearl expansion project in Canada remains slightly ahead of plan and is now more than 80% complete.

We continue to ramp-up production from the Kearl initial development with 66,000 barrels per day produced during the first quarter up from 47,000 barrels per day in the fourth quarter of last year. Facility uptime performance is improving and we are achieving many days with production above 100,000 barrels per day.

Turning now to slide 17, for an update on our North American activities. We continue our commitment to deliver profitable volume growth as underscored by our efforts to increase high margins liquids production in the Permian.

We had eight operated rigs running in the Permian in the first quarter and recently picked up two more in early April to continue to ramp-up drilling activity. Our current net production in the Permian is over 90,000 oil equivalent barrels per day.

Through an agreement with Endeavor Energy Resources, XTO will gain substantial operating equity in approximately 34,000 gross acres in the prolific liquids rich Wolfcamp formation.

The presence of multiple stacked pay zones creates a potential for capital efficient horizontal development and the proximity to XTO’s ongoing Wolfcamp operations will offer operating cost efficiencies.

The agreement increases XTO’s holdings in the Permian basin to just over 1.5 million net acres, enhancing the company’s significant presence in one of the major growth areas for onshore liquids production in the United States.

Also during the quarter we signed an agreement with American Energy-Utica or AEU that will enable XTO to optimize funding of development cost in the Utica. As part of the agreement XTO will continue to operate in a core area of approximately 55,000 net acres in this emerging play and AEU will fund near-term development cost to earn acreage.

This transaction is an example of an innovative solution to develop our extensive natural gas resources in United States in a capital efficient manner.

Turning now to slide 18 for an update on our exploration activities, we are currently drilling a number of wildcat prospects from our deep and diverse opportunity portfolio, primarily concentrated in established areas. Some of this activity, includes the deepwater prospects Mica Deep in the Gulf of Mexico and the Cominhos prospect in Angola Block 32.

We also continue exploration drilling in the prolific Block 2 offshore Tanzania were somewhere between 17 and 20 TCF of gas in place has already been discovered. And a recent drill stem test on the Zafrani 2 well confirmed good reservoir quality and good connectivity in both of the reservoirs tested.

Drilling operations are also currently underway on two blocks in the Kurdistan region of Iraq.

Also preparations are underway for near-term drilling that includes the [Inaudible]prospect in the Kara Sea, the broad gaining prospect in the Faroe Islands, follow up drilling to the successful Domino well in the Romanian Black Sea, the [Inaudible]well in Gabon and additional drilling prospects in Tanzania.

Turning now to slide 19 and an update on our chemical business. During the quarter we achieved notable investment milestones to grow high value product sales. For example we processed synthetic base stock investments to meet global demand growth for high performance lubricant applications.

We commissioned a new 50,000 tons per year manufacturing facility in our Baytown, Texas complex and construction of our expansion project in Baton Rouge, Louisiana continued during the quarter with start-up anticipated late this year.

Both projects leverage Exxon Mobil’s technology leadership to meet the industry’s growing demand for advanced synthetic basestocks and improved finished lubricant performance. We also recently improved a world scale grassroots specialty polymers project in Singapore to produce halobutyl rubber to support the growing tire market in the region.

In premium resins for adhesive applications such as packaging, wood working and non-molding fabrics. The project builds on the feedstock advantage and integration benefits of the recent steam cracking expansion and will allow us to meet rapidly growing demand in Asia. Construction will begin this year and start-up is planned for 2017.

In conclusion in the first quarter we earned $9.1 billion, increased upstream unit profitability to $21.35 per barrel, generated $16.2 billion in cash flow from operations and assets sales, invested $8.4 billion in the business and distributed $5.7 billion to our shareholders.

ExxonMobil’s strong financial and operating performance demonstrates progress in delivering profitable growth and achieving our business objectives outlined during our Analyst Meeting in March. We improved our production mix and increased upstream unit profitability.

We are committed to maintaining our capital spending discipline and generating strong operating cash flow to deliver robust shareholder distributions and create long-term shareholder value. That concludes my prepared remarks and I would now be happy to take your questions..

Thank you Mr. Rosenthal. The question and answer session will be conducted electronically. (Operator Instructions). We request that you limit your number of questions to two so that as many may have the opportunity to participate as possible. (Operator Instructions). And your first question will come from Doug Terreson with ISI Group..

Good morning David..

Good morning Doug..

I have a couple of questions on international E&P. First both profitability end margins were very strong and pretty much it has been in several quarters even if you normalized for the exploration in Abu Dhabi.

So my question is whether there is any additional color on the positive liquid mix effects that you talked about a minute ago and whether or not there were any positive effects on the gas side that might have contributed to that result?.

Yeah sure, let me take a look at the upstream earnings, we can look quarter versus quarter where I mentioned although we had a net impact of only $20 million we did have a significant impact on liquids that was about $290 million and gas was a negative $270 million on that.

When you look at the production in the first quarter we saw some nice increases in Canada, Southern Russia, West Africa much lower downtime little more in the North Sea and those were benefits to us. And the biggest decline in production was the Abu Dhabi onshore concession expiry which carried a little earnings effect.

If you would look at that same effect sequentially where we noted we had $650 million volume mix impact, liquids was about $400 million of that and gas was about $250 million..

Okay..

So as we look at going from the fourth quarter to the first quarter similar on the liquid side we saw some increases in Qatar, increases in West Africa as well Canada with a ramp up of Kearl and then it offset with the decline in Abu Dhabi.

On the gas side we also saw a nice positive mix effect volumes for example in Qatar were up and volumes in Europe which was mainly the lower margin volumes out of the Netherlands were down because of the lower demand due to the normal weather.

So in both liquids and in gas sequentially we did see a nice uplift in earnings from the positive mix effect..

Okay.

And so on your last comment about European natural gas most of that or all of that decline was related to weather is that the way to think about it?.

Yeah. The way to think about is it was all demand driven due to weather with the bulk of it again coming out of the Netherlands where the margins are a little lower than they are than on the rest of our European sales..

Great. Thanks a lot David..

Thank you..

And from [Singular] Research we’ll hear from Paul (Inaudible)..

Hi David..

Hey good morning Paul how are you?.

Great. Thank you. David can I just ask you about your CapEx and your volumes in the former case there is an enormous step down in your CapEx almost 30% which takes you well below the run rate for the year that you indicated at the Analyst Meeting is around $40 billion.

Is there a reason to believe that we’re coming in lower on CapEx for the year or is this – Q1 with your catch up later and therefore you would stick with the 40 or could we see some downside to that? And if I could follow up on the volumes David the guidance at the Meeting has been flat to ‘14 over ‘13 aligned for all the adjustments that needed to be made, again your Q1 numbers are actually tracking below that.

Can we expect a catch up back to flat later in the year. And final – final part if you could just address the cash account and where that sat within your volume forecast both for this year and longer-term? Thanks..

Okay, sure Paul. Let me hit CapEx first. Yeah we did come in at $8.4 billion that was down little over $3 billion from the first quarter last year. That was mainly due to the absence of the Celtic acquisition in Canada, so if you take that out from last year’s results we’d be pretty much flat maybe down just a little bit.

As we look out across the year the first quarter is usually lower than the rest of the quarters, we tend to ramp up across the year with a little extra in the back half. So I would say as we look at where we are today and looking out over the rest of the year the number we gave you in the Analyst Meeting is probably still a good one.

I don’t have an update, you know what I will say though is when we look at the first quarter CapEx it came in just about right on what we had expected. So, so far this year things are going according to plan on CapEx.

On the volumes guidance we said overall we will be flat at about 4.0 million oil equivalent barrels per day year-to-year ex-Abu Dhabi about a 2% increase in liquids, about a 2% decrease in gas. As we look at the first quarter and then across the rest of the year those numbers still look good to us.

We have got some additional ramp up expected at Kearl across the year. We do expect some of these other projects I mentioned come on Papua New Guinea being one of those.

So we look at the first quarter it looks real strong and certainly increases our – maintains our confidence in meeting that full year projection we shared with you in the Analyst Meeting.

I think the other thing that’s noteworthy when I talked about a little bit on the last question is we are seeing the impacts we are expecting on the volume mix as we reduced our exposure to some lower margin barrels and we are able to increase production in some of our higher margin areas both on the liquids and gas side.

And so that’s kind of coming in as we are expecting and we talked about a little bit at the Analyst Meeting. In terms of Kashagan in the forecast for ‘14 we did not have any volumes in our outlook that we showed you in March for Kashagan for 2014..

That’s very helpful, David and then a quick follow-up. Your product sales were up 11% year-over-year quarter-to-quarter in the past – recent past there has been a number heavily affected by asset mix.

Could you just address the scale of that jump I mean 11% growth obviously on a company of your size looks like enormously strong oil demand globally, any thoughts? Thanks.

Well.

Let me just clarify the question are you saying product sales or are you talking about our downstream sales or?.

Yeah, I should say to use your language exactly the petroleum product sales, if I look worldwide they are up 5.8 million barrels a day up from a year ago level of 5.7?.

Yeah, we are up a little bit we have seen worldwide, we actually had some higher demand in the US actually some pretty good demand growth there. We have seen some growth in diesel as well with exports and actually some growth in Europe. So those are the two main areas but a nice quarter for us operationally as well..

Well I guess my question was just – which is a comparable number year-over-year or whether there was any asset mix in that so whether we could just look?.

No, that’s pretty comparable..

Great. Okay, thanks very much..

Yeah. I am Sorry I didn’t understand the question. All right. Thank you..

And next we will hear from Doug Leggate with Bank of America-Merrill Lynch..

Thanks. Good morning, David..

Good morning, Doug..

David I wonder if I could follow-up on the other Doug’s question on margins, your unit margin captures something you have told about periodically in this quarter they had a fairly nice rebound. I am just wondering if you can walk us through any particular reasons behind that and was it just a great operating quarter, how sustainable could this be.

And as I can follow-on to that you are going to have about a 1 million barrels a day of new production by your forecast between – obviously that’s a fairly good churn in the portfolio.

I am wondering if you could kind of just qualitatively or quantitatively whichever you can do walk through the delta you see in cash margins for the newer projects relative to the existing portfolio, please?.

Sure. Let’s start up with the margin and the margin capture. In addition to some of the volume mix items I mentioned. You actually have some fairly significant mix impacts on the realization side which kind of get massed by some of the markers.

So for example if you look this quarter versus the same quarter last year WTI is up over 4 bucks, rents down over $4 but Western Canada Select it was up $9 a barrel as a marker for the Canadian crude. So if you think about where we are exposed to Brent overseas a number of production, but including the Abu Dhabi barrels would have some tie to that.

Whereas in the US a lot of our production particularly in the Permian would be closer to a WTI spot price and then of course all of our volumes in Canada. So it’s not just Kearl you are talking about Cold Lake and our other production up there.

So, think about it as the volumes that went up were attracting the higher margin or the higher price marker crudes. The volumes that declined happened to be the ones that were Brent based and again a big change in those prices did not have much of an earnings impact. So you see a nice change on both the volume mix side as well as on the price side.

So if kind of back to again and we have been talking about in the last couple of Analyst Meeting’s, growing the liquids and liquids linked volumes, LNG prices were also very attractive in the quarter and we were able to capture those by having some increased volumes in Qatar.

So I’d say kind of on a go-forward basis this is probably more typical than what we have seen in the past again given from the mix changes I mentioned.

If we look at the barrels that we are going to be adding on equivalent basis going forward I wouldn’t give any specific cash margins on those barrels but if you recall back at the Analyst Meeting some of the discussion I think Mark Albers provided in his comments we did talk about that the volumes coming online were going to be generally accretive to our average unit margin and given the fiscal regimes we would be in those projects also accretive to earnings.

So I think again as we go forward over the next year or two when we start up these projects we expect to deliver the profitable growth that we talked about in the analyst meeting and we certainly look forward to these projects coming online over the next three years..

Thanks.

A very quick follow-up, could you give the absolute asset sale gain in the quarter versus the housekeeping point and I will leave it there?.

Yeah, sure if you look at on an earnings basis the absolute gain on asset sales in total was just over $400 million and that was all in the upstream.

So the absolute, I just gave you the numbers here for that I know there is going to be interest in the upstream the absolute value of the asset sales on earnings was about $400 million in the first quarter of this year, that compared was lower than and compared to about $800 million in the fourth quarter of last year and we didn’t have any asset sales in the first quarter.

So you got about a 400 positive delta quarter-over-quarter and almost 400 delta sequentially on the negative side. The other thing I will mention to kind of put the first quarter asset sales into perspective on an absolute basis I mentioned we have 400 million in positive. We had about 200 million of negative tax items and other reserves.

So if you kind of think about outside the normal operations of the business we probably had a net absolute value in the upstream of about $200 million..

That’s really helpful. Thanks a lot David..

And from Jefferies we will hear from Jason (Inaudible)..

Hi, thank you. Hello David..

Hey, hello Jason..

David I wanted to ask about the PNG LNG projects and congratulations to Exxon for bringing the project on ahead of schedule that something that hasn’t been achieved in that business in quite a while..

Thank you..

Wanted to ask about the pace of ramp up David, you have made reference to first commercial cargos by the end of the quarter from the first train and start-up production from the second train in several weeks.

Would you expect that you could potentially be achieving full production by year-end from both trains from that project?.

It’s first of all thanks for the comments on the project start-up, the team is very proud of. As I mentioned bringing that in early and it looks like certainly within the budget that we had talked about and so we do look for ahead of planned production and cargo deliveries.

If we look out towards the end of the year we will certainly be ramping up both the first train and the second train and assuming all that continues to go well, we would expect to see these things ramp up pretty good across the coming months. So it’s a little early for me to give you a definitive answer.

But I would say it’s likely that by the time we get to the end of the year we are going to be running at some pretty good operating rates..

Okay great. And if I could ask you second one David, it’s obviously pretty early days just in terms of sanctions on Russia.

But have you had any effects on your ability to invest in the multiple areas where you participate with Rosneft as a partner in Russia?.

With regards to Russia off-course we will comply with all sanctions, but I can tell you on the latter part of your question all of the activities that we had originally planned for this year are underway and proceeding as planned..

Great. Thank you David..

Thank you..

And next we’ll here from Asit Sen with Cowen & Company..

Thanks, good morning David..

Good morning, Asit.

How are you?.

Good, thanks.

So on PNG LNG as we get closer to the start I was wondering if you could provide some early thoughts on some incremental operational items? First wondering if you could talk about the condensate ratio, second any thoughts on train three expansion potential and finally any thoughts on LNG contract and strategy related to the pricing slope and or your spot exposure?.

Sure. On the condensate ratio I really couldn’t give you a specific number for the expectation there, obviously it’s a very attractive stream.

When we look at Train3 we are still evaluating a number of opportunities to expand the plant some of those relate to our own exploration success and other opportunities that we have on our own operated acreage as well as potential other sources of additional gas.

So that planning and looking and analyzing and discussing that process is ongoing don’t have a definitive outcome for you.

But as I mentioned in my prepared remarks if you look at the plan as it sits today the cost per MTA in today’s market is very competitive and off-course any additional capacity we take advantage of the existing infrastructure and even be more attractive so we are certainly looking at that.

If you look at our contracting strategy we entered into long-term oil index price contracts about 95% of the production is already sold under those contracts, customers being in Japan, China and Taiwan. So those contracts are locked up and then you’ll have of course a little bit left over for some spot sales..

Thanks very helpful..

Okay. Thank you..

And from Wells Fargo we got Roger Read..

Yeah, thanks. Good morning..

Hey, Roger..

Just to come back to the margin discussion and maybe as a better way to understand some of the moving parts going forward. I gather the expansion of liquids or shrinking of the gas and what that should mean from margins as well as the edition of the LNG barrels but I was wondering underlying cost.

Can you give us any kind of view of what’s going on there? I mean are we dealing with cost are going to go up but your margins go up faster, cost should hold flat while margins should improve from mix in price maybe a little more detail on that if you could?.

You know as we look at the overall profitability as you mentioned margins are doing better with the mix that we talked about on both the oil and the gas side. In terms of OpEx we are not seeing any significant upward pressure across the portfolio.

If you look at that on an absolute basis off-course OpEx is up with startup of some of our big projects Kearl would be a good example on that as we progress from the startup phase last year and to lining up production and ramping up this year you get some benefit of that.

We did see some lower exploration expense in the first quarter this year as you recall in last year in the second half we booked some fairly heavy exploration expense mainly attributed to our business in Russia and that was a little lower this quarter but as expected.

So I’d say overall when you think about the margin capture and the profit capture again it’s the mix that we’ve talked about in particular as we ramp up these projects across the quarter.

I think the other thing I might add is on the unconventional side we continue to make good progress driving cost down in the areas that we are operating as we’ve talked about before the combination of ExxonMobil’s technology and XTO’s operating experience.

We are really starting to see the leverage we get by combining those particularly as we continue to acquire attractive acreage as I mentioned in the Permian would be a good example of that. So across that portfolio that trend continues to be positive in terms of reducing cost and improving capital efficiency.

So that part of the business is also doing well..

Okay, great, thanks. And then a follow-up question. Recent headlines indicated Argentina is going to actually be importing some crude obviously you are a major mover and shaker in Vaca Muerta shale.

I was wondering have you seen any indications from the Argentinean government that they are willing to be I don’t know a good term flexible in terms of helping to accelerate activity down there?.

I’ll take the last part of your question first. We continue to have ongoing discussions with the government about fiscal terms and stability and I don’t have anything definitive to report on that but those discussions are ongoing.

We have seen some positive signals out of the government recently in terms of improving export and import conditions and what we are doing there. These are certainly positive steps that could lead to an attractive business environment. But it’s all part of progressing the programs and determining commerciality.

Obviously there is a huge potential resource in Argentina called the Vaca Muerta. We continue to have an active program there I think we’ve got a total of six wells down. We’ve been drilling vertical wells in prior to this year, we are starting to drill our first operated horizontal wells.

First one is down and second one is drilling and we’ll be getting the third one down shortly. Again without being specific, I can tell you that the data so far from our drilling and delineation is encouraging but it’s still early days to determine actual commerciality.

But if you get the combination of good fiscal terms of stability and good resource development that generally leads to a commercial resource development for you. So we continue to actively pursue that but again for us it’s a very large resource, we got in at a very low entry cost and very low commitment.

And so that allows us to really go about this in a disciplined manner and really utilize some of the expertise XTO has to help us explore and delineate the resource without having to spend a whole lot of money upfront. So again we are encouraged and that piece of the business is moving along very well..

Great, thank you..

And next we’ll go to Faisal Khan with Citi..

Hey, good morning it’s Faizal from Citi..

Good morning, Faizal..

Thanks, David. If you could – you talked a little bit about sort of the increase in profitability in the upstream business, you also discussed LNG sort of prices.

Can you remind us how much of your total LNG volumes are exposed to the spot market?.

You know I don’t have a total global number on that. I think probably what would be more indicative is if you look at – if you take the U.S. aside of course and you look at our total LNG volumes. Most of those are going at oil index prices but the rest of them by and large are going into the Asia Pacific rim.

And so the spot prices there are fairly close to the oil index prices and so you are getting a nice benefit there. As well the occasional cargo that goes into Europe goes into the spot price but those are attractive as well.

So regardless of how the cargo is going either directly or indirectly – most of them or probably all of it about 5% are either oil indexed or getting the equivalent type prices..

Okay. I guess I was just trying to understand the commentary given that oil prices haven’t moved all that much sequentially quarter to quarter but it sounded like that was a typically strong point for you in the quarter..

Thank you. It was and a lot of it is the mix on where these cargo’s get delivered and whether they are going to Europe or they are going to the Asia Pacific rim or whether you have a little higher proportion going into your fixed contracts versus your spot.

So we did see a little uplift on those prices as you know not all those contracts are the same in terms of how they look back and what the formula is. But if we look across for example our LNG realizations out of Qatar and you are just looking quarter-on-quarter this year to last year we were up a little over a $1 a KCF..

Okay..

So, again a nice piece of business..

Yeah. And thanks I appreciate that detail. And then just back to Russia for a second I believe you guys have some sort of asset swap sort of arrangement with Rosneft that sort of protects you in case some of the investments get stranded in Russia.

Can you just walk us through a little bit of that in case there are sanctions as there are [Inaudible]here in the U.S with the sort of assets that Rosneft has swapped into with you and that sort [Inaudible]you guys put together?.

Yeah. I really can’t comment on the terms and conditions of those pieces of business other than yeah we have the projects that we have in Russia and they farmed into some of our properties on a normal farming basis just like anybody else would. But any discussion of contractual details or commercial arrangements really couldn’t comment on..

Okay. Got it. Thanks David. I appreciate the time..

Thank you..

And from Barclays we’ll hear from Paul Cheng..

Hey guys. Good morning..

Hi Paul.

How are you doing?.

Hi, very good. Dave, two quick questions. One you told about the over – benefit in the first quarter.

Can you give us or quantify what’s the volume and also the dollar value and also at the end of the first quarter whether from an inventory standpoint you are roughly [Inaudible] or underneath?.

Sure. If you are looking in the first quarter relative to the first quarter last year..

Can we look at relative to the – to your production actually?.

Sure. I mean we are about 15 kbd over lifted in the quarter, yeah on an absolute basis were about 15 kbd over lifted and I would estimate that to be about worth about a $100 million..

Okay.

And that at the end of the first quarter are you [Inaudible] balance at this point?.

Yeah. If we look at where we are just at the end of the first quarter I think we are over lifted just a little bit so we are not completely in balance but we are fairly close..

Okay. Second question on Permian right now you are running at 10 rigs. Is there any color or insight you can provide on what this [Inaudible]going to [Inaudible]look like over the next two or three years. You just add two should we assume that you will continue to ramp up the program there.

And also whether you can tell us the $90,000 barrel per day production, what’s the mix between light oil, condensate, NGL and natural gas?.

Yeah. Let me start with the first part. We are of course ramping up activity in the Permian. We are doing it like we always do in a very disciplined approach you don’t want to get too far out in front your headlight.

So we have been building that rig count over the first last few quarters I did mention the additional acreage that we picked up in a very attractive area in the Wolfcamp. So as we move on I would expect the trajectory to be the same but I don’t have any specific count for you.

Again in a lot of these areas we are still delineating, we are still appraising, we are still experimenting with how we go about drilling and completing wells and that sort of thing.

But I think directionally given the quality of the acreage that we have and the results we have had to date I think it would be a reasonable expectation that we would likely grow that rig count over the course of the year I think that will be logical.

But again always in a manner that keeps in mind the long term development of these resources and not getting out too far in front and doing something that you regret later.

So it’s all about assessing what we’ve got, we are very, very pleased with our acreage and then ramping up that production as is appropriate and leading towards that outlook we gave you in the Analyst Meeting that showed a nice way up between now and 2017 in total North American’s liquid production but the Permian seems to be a big part of that.

In terms of the on split on the liquids versus NGLs versus condensates I don’t have that split for you, Paul..

Okay. Thank you..

Thank you..

And from Credit Suisse we’ll hear from Edward Westlake..

Hey yes. Good morning, David. Three very quick tail end questions. People have said and thanks by the way for the helpful color on Asia LNG and well done on the execution of some of the key projects.

Some of the people have shouted out a gas marketing benefit in given the cold winter in the U.S, did you guys have any something there that we should think about?.

Well I mean we benefited from the higher gas prices but other than that we certainly don’t do any trading if that’s what you are looking at. So let me if that was the question let me be clear all of our earnings uplift comes from the production and sale of our gas we don’t do any trading..

Okay. Good. And then switching to the international chemicals I mean obviously 4Q was weak and you’ve seen a bit of a comeback in Q1. Maybe just talk a little bit about you shouted out lower other expenses maybe just a bit of shout on what’s happening there..

Sure. If we just as so we weren’t from the fourth quarter into the first quarter this year we didn’t have some significantly lower maintenance expense you might recall in the fourth quarter. It was pretty high, we had some turnaround activity going on in Singapore and that’s all behind us and that’s the biggest driver in that other bucket..

So it’s not a sort of fee change in demand that you see in the chemical chain?.

I wouldn’t say a fee change but I would say that we are seeing some encouraging signs the integrated chemical chain or seeing some pickup in demand polyethylene sales have been good and we continue to see some nice demand pickup there.

We did also see some pickup which was seasonal between the fourth quarter and the first quarter in our specialties business. But on the other hand aromatics demand is weak strictly in this, so there are some offsets.

But I think generally speaking we have seen a little better demand, we have been able to sell the increased production out of Singapore so that part of the business is going well.

So I think as you kind of go from fourth quarter to first quarter in the chemical business, lower maintenance as we move into the – from the first quarter to the second quarter as you are probably aware we are heading under a higher maintenance period.

The chem plant for example came down in early April and is down for a couple of months’ turnaround, so we will see that impact.

But a really nice first quarter operations on the chemical side I think our capacity utilization particularly in North America where of course we get a nice margin benefit I think we were running about 2% or 3% on a capacity utilization better than industry.

So that’s not only good in total but on the margin those couple percent really, really ring the cash register for you on those sales. So good quarter for us in the chemical business..

And just on the cash flow statement working capital contribution in the quarter?.

Our working capital contributions I recall just under $2 billion about $1.8 billion and that was just a change in payables..

Right..

I think not a real big effect if you think about total cash flows a number less than $2 billion in the quarter but it was payables driven..

And then one bigger picture question. They always talk about Shell but I mean obviously you’ve been doing a lot of offshore exploration as well.

When do you think you will get to the point where you can sort of update us in terms of actually getting after to sort of developing some of these deep water fields that you’ve got in the portfolio?.

Yeah. I think as-soon-as we have a little better indication exactly on what we’ve got in some of these areas, one that I can mention is Tanzania where we have had significant success and our planning is underway as we speak not only with our partner in Block 2 Statoil but also with BG and Ophir broadly across Tanzania.

So we are working at evaluating potential sites for an LNG facility and we have made a recommendation to the government and studies are progressing you know to really determine what would be the optimum development plan for our block and across that area. So I would say all of that is progressing as you would expect for a resource of that size.

But I can’t give you a definitive development plan or timing yet. Julie is another deepwater project that’s well underway and we’ll start drilling there this year. We’ve got more drilling to do in Romania where we had a very nice successful initial well there.

So a lot going in some very attractive areas, but probably still just a little early to be talking definitive development plans or startups or FIDs or that sort of things..

Thank you..

And next from Morgan Stanley we’ll hear from Evan Calio..

Yes, good afternoon David. More housekeeping from me, exploration expenses much lower in the quarter like 338 versus normal. Is that just timing event or is there any exploration spend trending over there..

I wouldn’t say there is any lower trend, it’s really particularly if you look quarter-on-quarter it was really just timing of expenditure, particularly in Russia and some other areas, but the program remains on track, on schedule. And I think you’ll probably see a little more normalized kind a trend as we go out into the year..

Great. On the asset again and you gave just color earlier, the included income.

Was that in international upstream gaining more?.

That was in international upstream..

Got it. And maybe just lastly from me with cash builds equaling asset sales for you in the quarter, what was the consideration to for holding the buyback flat sequentially. And then how do you what do you need to see you think to raise it. Thank you..

Yes I wouldn’t. No change in our strategy with regard to shareholder distributions in general. You saw we got a nice 9.5% bump in the dividend this quarter continuing a nice trend that you’ve seen the last few years.

So growing that dividend and making sure it’s reliable and consistent continues to be at the top of the list for shareholder distribution. The buyback continues to be [out]. But the cash we have and although we do look at it on a quarter-by-quarter basis, we are always thinking into account cash flow projections and business and that’s sort of thing.

So again on a company our size, plus or minus the $1 billion not a big number.

I do think that it’s noteworthy if you look at the free cash flow for example in the quarter particularly relative to the last few quarters, we did generate a total of $16 billion, put a bunch of that into the business funded the both the dividend and the buyback, and still had $2 billion over half we paid down debt and half we increased cash.

So again if you’re looking kind a sequentially across the last few quarters, very strong quarter in cash flow consistent with the strong quarter in earnings..

Got it. Thank you..

Thank you..

And from Raymond James we’ll go Pavel Molchanov..

Thanks for taking the question. One more on the cash allocation, by my math this will the first quarter that your dividend payout $[40] billion equals your share buyback.

Is that deliberate and do you see the Q lines kind a continuing to cross that line?.

I would say that was a coincidence. It’s not a there is not deliberate effort to match those out or more change any ratios to that’s sort..

Okay.

And this maybe most relevant for your German acreage, but in the context of the Ukrainian crisis and lot of rhetoric in Europe about ramping up shale development, any sense that permitting in Germany or elsewhere in Europe is starting to open up?.

No, I don’t have any indication of that. There is a lot of discussion going on as you’re all aware but nothing definitive nothing different than what’s been going on.

As you know we have a very attractive acreage position in Germany and we’ve been in discussions with the regulators for a while on the potential of that resource and those in fact the discussions are going but nothing is specific to report on today..

Okay, thank you guys..

Thank you..

We have one question left in the queue and that will come from Peter [Hudson] with RBC..

Good afternoon. Just two quick follow ups. Kashagan you said no volumes is expect, kind of expected anyway in 2014. But I wonder whether you could say what do you had in your plans for 2016 and what those still are? And also on the upside you are talking about Tanzania.

Is taken quite some time since the recommendation has gone in about the location of the plant facility. But still nothing is come out.

Do we have a timing of when we might get that as the next catalyst in that area? And then finally, the downstream, you stress the words on the international downstream that was a least quite a lower than the number of people had expected, profitability levels back to the sort of early 2009.

One of your competitors took a big impairment on the refining assets in Asia and are being very clear about the weakness, structural weakness in that market. Is there something that you’re seeing such as that and expect to continue out into the medium and long-term as well. Thank you..

Let me take those in order here. In Kashagan as I mentioned in the outlook, we showed in March we did not a value for 2014. We did have some volumes in 2015. I don’t want to give a specific number here today, but we did have assumed some production volume in 2015.

In Tanzania, we don’t have any final determination on the site, but I will tell you the discussions are ongoing and going well. Nothing out of the ordinary and the plans for that are progressing at an appropriate pace. So I think I will stop there. So we look at the downstream on the international side, yes you did see some weak earnings there overall.

We had a positive impact in Canada, if you saw the IOL results out this morning, very nice business there. We’re running obviously vantage crews into this refinery. And that keeps the business just going well. Outside of Canada, the rest, particularly in Europe and Asia-Pac were weak. The biggest driver there is the margin.

You had some surplus refining capacity come online in that area of the world last couple of years. And the advance are a little weak so you got some capacity expansion and excess of demand growth. We do see some weakness there. We are doing a number of things to improve our profitability there and improve our competitiveness.

We’ve been spending sometime on logistics and expanding feedstock flexibility, working to increase exposure to high value product yields and less exposure to lower margin products, continuing to work on operating expense and maximizing the logistics benefits we get both from the location of our refineries particularly in Europe, but also that integration, full integration with the chemical business and the lose business which is doing quite well.

So I think if you look at that business it’s weak it’s been weak for a little while. These are always cyclical business both in Europe and in the US and in the Asia-Pacific rim. So you wouldn’t want to take current results and draw a long-term trend. We’re doing what we can, controlling what we can control.

And really it’s about making sure your refineries and your plans for that matter in any region are the most competitive in that region. And that’s what benefits you over the long term.

When you talk about a potential impairment, we follow US GAAP with regard to impairment, and we look at that as appropriate, but from our perspective and this preference from company to follow IFRS accounting rules when we look at the US GAAP accounting we don’t see any exposure to that in that part of the world..

Great, thank you..

Yes one of the things you might recall just quickly when you look across both the downstream and the chemical segment bear in mind the significant advantage we have on an ROCE basis to the rest of the industry.

So when you look at the denominator when you look at the capital employed in our business both on the chemical side and on the downstream side, our capital employed tends to be in order of magnitude lower than the others. So that helps generate the ROCEs but also gives you feel for how much capital is on the book.

And then the other thing of course we benefit from is the level integration we have. So we even as refining cycle is one way and chemical is on other one you get some offsets and when they’re both on an upswing that’s where you see the benefit of that integration, so.

Across the business we continue to do well to generate the highest returns in the business and just don’t have any long-term concerns..

Okay, thanks very much..

All right. Thank you very much..

And Mr. Rosenthal there are no other questions at this time..

Thank you..

And ladies and gentlemen that does concludes today’s presentation. We do thank everyone for your participation..