Good day, everyone. Welcome to this Exxon Mobil Corporation Fourth Quarter 2018 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the call over to the Vice President of Investor Relations and Secretary, Mr. Neil Hansen. Please go ahead, sir..

Thank you. Good morning, everyone. Welcome to our fourth quarter earnings call. We appreciate your participation on the call and continued interest in ExxonMobil. This is Neil Hansen, Vice President of Investor Relations. Joining me on the call today is our Chairman and CEO, Darren Woods.

As we’ll discuss on the call today, we are very pleased with our performance in the fourth quarter and with our full year results. This was a quarter highlighted by continued value generation from our integrated business model, additional growth in liquids production and successful highgrading of our downstream portfolio.

In addition, we made significant progress on investments that will generate long-term accretive value for our shareholders. After I review the quarterly financial and operating performance, Darren will provide his perspectives on our business reflecting on 2018 and the year ahead. Following this, Darren and I will be happy to take your questions.

Our comments this morning will reference the slides available on the Investors section of our Web site.

I’d also like to draw your attention to the cautionary statement on Slide 2 and the supplemental information at the end of this presentation, which starting this quarter you’ll notice includes a listing of significant non-operational events that impacted quarterly earnings.

Moving to Slide 3, I’ll now highlight the developments that influenced fourth quarter performance. Crude oil prices decreased during the quarter with Brent down $7.51 and WTI down $10.62. Conversely, gas realizations were up in the fourth quarter supported by strong LNG prices and seasonal demand. Henry Hub was also up $0.74.

Production in the Permian increased another 12% relative to the third quarter and was up 93% from the fourth quarter of last year. Exploration success continued offshore Guyana with the Pluma discovery, our 10th find so far on the Stabroek block. The resource estimate in Guyana is now greater than 5 billion oil equivalent barrels.

In Mozambique, we secured offtake agreements for the Rovuma LNG project as we progress toward a final investment decision which remains on track. Industry refining margins weakened across the globe with lower seasonal gasoline demand and higher inventories. This was partly offset by stronger distillate margins.

In North America, we successfully leveraged our logistics capacity to capture significant value by moving advantaged crudes from the Permian and Western Canada to our manufacturing facilities. We also started up the third of our six key refinery projects, advanced hydrocracker at our Rotterdam refinery.

This advantaged investment increases our capacity to produce higher value products, including ultra-low sulfur fuels and Group II premium lubricant base stocks. We continue to highgrade our downstream portfolio with the divestment of our Augusta refinery and related terminals in Italy and our Germany retail assets.

Our long-term fundamentals remained strong in the chemical business, margins weakened during the quarter. The supply length from recent capacity additions pressured realizations. We safely completed a turnaround at our Singapore facility and progressed integration of our Jurong acquisition with our nearby petrochemical complex.

I’ll now go through a more detailed review of fourth quarter results, starting first with the upstream on Slide 4. Fourth quarter upstream earnings were $3.3 billion, a $900 million decrease relative to the third quarter of 2018. The absence of favorable U.S.

tax reform impacts and current quarter asset impairments negatively impacted earnings by $670 million. Crude realizations decreased by 18% during the quarter with a decline in industry markers and wider North American differentials.

The estimated unfavorable impact of those wider differentials on upstream earnings relative to the third quarter was $350 million. However, integration with logistics and manufacturing resulted in more than that value being realized in the downstream.

Having takeaway capacity that exceeds our upstream production allowed us to realize a corresponding estimated benefit again relative to the third quarter of approximately $600 million in the downstream. Gas realizations increased 18% in the fourth quarter on stronger LNG pricing and seasonal gas demand.

An increase in production driven by a continued volume growth in the Permian and seasonal gas demand in Europe contributed $660 million to fourth quarter earnings. Favorable foreign exchange effects and other items each positively impacted earnings by $100 million.

Moving to Slide 5 and a comparison of fourth quarter upstream production to the third quarter of this year. Production in the fourth quarter was 4 million oil equivalent barrels per day, an increase of more than 200,000 oil equivalent barrels per day.

If you exclude the impact of entitlements and divestments, volumes were up 5% as a result of seasonal gas demand and continued liquids growth. The absence of impacts from the downtime event that occurred earlier this year at Syncrude and volume growth in the Permian resulted in a 3% increase in liquids production in the fourth quarter.

Natural gas production was up 11% primarily due to seasonal gas demand in the Netherlands. Moving to Slide 6 and a comparison of fourth quarter upstream earnings with the fourth quarter of 2017. If you exclude the effects of U.S. tax reform and impairments, earnings increased $1.2 billion.

Higher prices increased earnings by $660 million driven by a $2 increase in natural gas realizations, partly offset by a decline in crude realizations and again that resulted primarily from wider North American differentials.

We estimate the unfavorable impact of those wider differentials on the upstream again relative to the fourth quarter of last year to be approximately $750 million. The estimated corresponding margin benefit that we captured in the downstream from our fully integrated value chain was $1.2 billion, again compared to the fourth quarter of last year.

Liquids growth, driven by Permian and Hebron, increased earnings by $180 million. Favorable foreign exchange effects contributed approximately $80 million while all other impacts increased earnings by $270 million. Those other items included favorable non-U.S.

impacts and the absence of unfavorable one-time items from last year and that was partly offset by some higher operating and exploration expenses. Slide 7 provides a comparison of fourth quarter volumes relative to the same period as last year. Liquids production increased 7%, excluding the impact from entitlements and divestments.

That growth included a 93% increase in Permian production and additional volumes from Hebron. Now while not shown on the page, I also wanted to highlight that full year production was 3.8 million barrels per day.

And if you exclude the effect of entitlements and divestments of approximately 130,000 oil equivalent barrels per day, volumes finished the year essentially in line with 2017 levels and the guidance we provided at the March 2018 Investor Day.

Now moving to Slide 8, I’ll review downstream fourth quarter financial and operating results starting first with a comparison to the third quarter of this year. Downstream earnings of $2.7 billion increased by $1 billion with a capture of significant value from our North American integrated operations and portfolio highgrading.

Downstream refining margins weakened during the quarter; however, this was more than offset by the value we captured from North American crude differentials with our integrated logistics network.

This allowed us to connect barrels to our manufacturing facilities and contributed to a favorable margin impact in the downstream of approximately $500 million. We had higher scheduled maintenance in the quarter, which decreased earnings by $460 million.

Proceeds from the divestment of Germany retail assets and the Augusta refinery and fuels terminals contributed $870 million to earnings. Improvements in refining yield and sales mix, supported by the startups of the Beaumont hydrofiner and the Antwerp coker partly offset by some related expenses, contributed $70 million to earnings.

All other items included favorable inventory impacts and tax items. Turning now to Slide 9 and a review of current quarter downstream earnings relative to the fourth quarter of last year. And if you exclude the effects of U.S. tax reform and impairments, downstream earnings were up almost $1.8 billion.

Margins had a $550 million positive impact on earnings with significant value from wider crude differentials in North America. And in fact we estimate a benefit across the integrated downstream value chain of approximately $1.2 billion relative to the same quarter as last year.

This was partly offset by lower lubricants margins and lower refining margins in some regions. Significant reliability improvement was partly offset by higher scheduled maintenance resulting in a positive contribution of $130 million.

The divestment of the Germany retail assets and the Augusta refinery and fuels terminals, which was partly offset by the absence of a Norway retail divestment that occurred in 2017, contributed $680 million in the fourth quarter.

Improvements in refining yield and sales mix, with the startup of new refinery investments and a growing retail network in markets like Mexico, partly offset by some related expenses resulted in a positive contribution of $200 million. All other items reflect favorable inventory impacts and tax.

Turning now to Slide 10 and a review of current quarter chemical earnings relative to the third quarter of this year. Fourth quarter chemical earnings were $737 million. Lower margins negatively impacted earnings by $110 million as polyolefin margins declined as lengthening supply from new industry capacity additions. We had a one-time non-U.S.

tax impact that resulted in a positive contribution of $210 million. Other items included higher expenses from new assets and growth initiatives. Turning now to Slide 11 and a review of current quarter chemical earnings relative to the fourth quarter of last year. Excluding the effects of U.S.

tax reform and impairments, chemical earnings decreased $190 million from the prior year quarter. Lower margins resulted in a $350 million decrease, again driven by lengthening polyolefin supply with new industry capacity. An increase in polyethylene sales from new assets had a positive contribution to earnings of $100 million.

Scheduled turnaround activities in Singapore, which we completed in the fourth quarter, had a negative impact of $90 million. The same one-time non-U.S. tax impact resulted in a positive contribution of $210 million, while all other items included higher expenses from new assets and growth initiatives.

Slide 12 provides a review of sources and uses of cash. Fourth quarter earnings adjusted for depreciation expense, changes in working capital and asset sales gains yielded $8.6 billion in cash flow from operating activities.

And it’s important to note that depreciation in the quarter was higher than the normal trend line due to the previously mentioned current quarter asset impairment of approximately $700 million on a before tax basis. We experienced a $1.3 billion negative working capital impact in the quarter.

This was driven by an inventory build for planned maintenance in the downstream and some seasonal tax payments, mostly in Europe. Other non-cash items of approximately $1 billion included adjustments for gains on the fourth quarter divestment in Germany and Italy.

As a reminder, although both the Germany and Augusta divestments occurred in the fourth quarter, we actually received the cash proceeds from the Germany divestment in the third quarter. Had those proceeds been received this quarter, our cash from operations and asset sales would have fully covered investments and distributions.

Fourth quarter PP&E additions were $6.5 billion driven primarily by increased activity in the Permian Basin. We also reduced debt in the quarter by $2.3 billion. I’ll now move to Slide 13, which summarizes full year 2018 financial results. 2018 earnings, excluding the impacts from U.S.

tax reform and impairments, were $21 billion, up 40% from the prior year driven by higher prices, liquids growth and a value from North American integration. Cash flow from operations and asset sales was $40 billion, including $4 billion in proceeds from asset sales.

Now that $4 billion in asset sales was slightly above the previous five-year average that we have of asset sales of about $3.3 billion.

2018 CapEx was $26 billion, $2 billion above the guidance provided at last year’s Investor Day, largely driven by incremental acquisitions during the year and notably related to Brazilian acreage in the upstream and the Indonesian lubricants company that we acquired in the downstream.

Free cash flow after investments was $20 billion, more than enough to cover the $14 billion in dividends paid during the year. Debt ended the year at $38 billion, a $4.5 billion decrease compared to the end of 2017. Now let me provide a few observations regarding the first quarter before I hand it over to Darren.

Upstream volumes should be largely consistent with fourth quarter levels. In the downstream, we are seeing significantly weaker industry refining margins with lower seasonal gasoline demand and excess production.

In addition, the curtailments in Canada coupled with additional logistics capacity coming on line in the Permian have led to much narrower crude differentials to start the year.

While these changes will impact results versus the fourth quarter, they again demonstrate the advantage of integration as opportunities open and close across the markets along the value chain we are positioned to capture them.

Scheduled maintenance this year will be like what we experienced in 2018 with the level of activity in the first quarter similar to what we saw in the fourth quarter of 2018. Chemical margins are expected to remain under pressure as the market continues to work through supply length from recent capacity additions.

We expect quarterly corporate and financing charges to be somewhere between $700 million and $900 million. And finally, we do expect any significant asset sales in the first quarter. At this time, I would like to hand it over to Darren..

Thank you, Neil, and good morning, everyone. Great to be on the call today. Let me just start by providing my perspective on the past year.

I think as you all know and will recall in March of last year, we laid out an investment plan to structurally improve the earnings and cash flow potential of our business, while improving our returns across the wide range of price environments. As I reflect on 2018, I am extremely pleased with the progress we have made on those plans.

We not only delivered on our commitments for the year, we identified additional upside. The price environment in 2018 was unpredictable which once again demonstrated the value of our integrated business model. We saw significant swings in commodity prices compounded by the transportation constraints in the Permian Basin in Western Canada.

Our upstream integrated logistics and manufacturing position allowed us to avoid the impact of market dislocations and thus capture the full value of our barrels. This reflects a deliberate strategy to leverage the scale and breadth of our integrated business model, which certainly paid off in 2018.

Against a backdrop of a fairly volatile margin and price environment, we met earnings expectations for the year and generated $40 billion in cash flow from operations and asset sales, the highest level since 2014.

This in turn enabled us to fund our ongoing investment program, reduce the debt and consistent with one of our longstanding priorities increase the dividend. In 2018, we increased our dividend by 6% marking the 36th consecutive year of increases. Essential to our plans for growing value is the advancement of a portfolio of advantaged investments.

Throughout the year we continued to develop and rigorously test our investments to make sure that our company’s competitive advantages were translating directly into project advantages giving us some of industry’s lowest cost of supply.

Developments over the past year have reaffirmed our belief in the strength of our investment portfolio, which is the best we have seen since the merger of Exxon and Mobil.

In fact, as we worked through the year, we identified significant upside to our plans, which brings me to a critical focus area of 2018 delivering on the project milestones for the plans that we laid out back in March.

We remain extremely confident in our ability to deliver on our plans and let me give you a brief overview of the advances that we made in 2018. I’ll start with the upstream. Each of the five growth opportunities we outlined back in March saw significant progress over the year.

In Guyana, our track record of exploration success continued with five additional discoveries during the year resulting in an updated resource estimate of more than 5 billion oil equivalent barrels. With our success, we added another drillship to accelerate the pace of exploration and appraisal drilling.

We now see the potential for at least five FPSOs producing more than 750,000 barrels per day by 2025. Another key focus for deepwater development is Brazil where we have quickly built an industry leading acreage position. Since the Investor Day last year, we increased our acreage position to 2.3 million net acres.

In the Permian, we continue to expand and accelerate activities. We believe we have a unique opportunity here to bring the full strength of ExxonMobil to the development of unconventional resources, to bring scale, bring fundamental science and technology, bring large scale efficient development and bring an integrated well to market approach.

It’s one of the reasons we moved XTO to Houston, to integrate their work and skills into the broader capabilities of ExxonMobil. It’s why we believe our approach will deliver the lowest cost supply and give us a significant advantage over the rest of industry.

As we have optimized our development with further drilling and delineation, we see additional upside well beyond the growth trajectory that we shared previously. We’ll discuss this in more detail in March when we meet at our Investor Day. We continue to make good progress on projects in our LNG portfolio.

PNG and Mozambique remain on track for a final investment decision. We’ve also been working very closely with QP, our partner in Golden Pass to advance that investment and looking forward to announcing something here in the very near term.

In the downstream, the widening crude differentials in North America are a good reminder for why it’s important to keep our growth plans for the Permian integrated with our logistics and manufacturing footprint in the Gulf Coast.

We’ve been very active in securing additional takeaway capacity for our production in the Permian as well as putting plans in place to ensure that our logistics capacity grows in tandem with our production and refining expansions.

To meet growing demand for higher value fuels and lubricants, we are progressing six major refining investments, all advantage versus industry. Over the past year, three of those facilities started up, namely the Beaumont hydrofiner, Antwerp delayed coker and the Rotterdam advanced hydrocracker.

These projects significantly enhance the earnings and cash flow capacity of our downstream business and position us well for the upcoming IMO spec changes next year. The remaining three projects are progressing in line with the plans that we shared in March.

In our chemical business, we outlined plans for 13 new facilities to meet growing demand; seven have been brought on line, the remaining six are on schedule. We expect these investments to support a 30% growth in sales by 2025, driven by our proprietary technologies that provide advantage products and applications.

We made excellent progress towards this objective in 2018 with sales growth of 6%. As we said last March, all of our investments leverage some combination of our competitive advantages to deliver industry leading returns. Technology almost always plays a critical role. A great example is our advanced hydrocracker project in Rotterdam.

The project uses a first-in-the-world combination of proprietary process and catalyst technology to convert heavy intermediate streams into Group II base stocks, a significant upgrade. With this investment, Rotterdam becomes the only world-scale Group II base stock producer in Europe and it supplements our Group II production in the U.S.

and Asia allowing us to more effectively serve our global customer base. We expect this one product alone to double earnings for the Rotterdam site making it one of the most competitive refineries in Europe. As we speak today, the hydrocracker is up and running and producing on-spec product in line with our expectations.

We shift now to 2019 and some key themes for the year ahead. Starting in the upstream, we expect to sanction a number of key projects, including the next two phases of Guyana, Liza 2 and Payara as well as two significant LNG projects, Mozambique and Golden Pass.

Let me just add here too that we advance the FID at Payara in the middle of 2020 to late 2019, again reflecting the development plans and the progress that we’re making beyond the plans we laid out last year. Later this year we plan to mobilize the FPSO for the first development of phase in Guyana putting us on track for an early 2020 startup.

With the advances we made in our Permian development plans, we expect to accelerate the pace of our investments and increase our production profile. Consistent with this, this week we announced a final investment decision for the Beaumont refinery expansion which will further add to our integrated Permian advantage.

We also announced the formation of the Wink to Webster JV to progress the Permian long haul pipeline that will give both Baytown and Beaumont the industry’s most efficient transportation link to the Permian. We brought three important refinery projects on in the back end of last year. In 2019, our focus will be on fully leveraging their advantages.

In addition, we’re going to continue our push into new growth markets like Mexico and Indonesia ensuring that we capitalize fully on our brands. In the chemical business, we’re on track for a midyear startup of our Beaumont polyethylene expansion further strengthening our position in the Gulf Coast.

We also plan to FID two projects at Baytown that will produce Vistamaxx which is a high growth, high performance propylene plastomer and linear alpha olefins used in packaging oils, waxes and other specialty chemicals.

These projects, along with the others we’ve discussed, will allow us to continue to grow sales of high value, high performance products. As I step back and reflect on the opportunities we have across all three of our business sectors, I remain very excited by the potential to generate significant value for our shareholders.

As you may have seen yesterday, we announced the formation of new upstream and project organizations. These new organizations will help to facilitate the successful delivery of our investment opportunities. The upstream is reorganizing into three companies, down from seven. The upstream oil and gas company will have five distinct global businesses.

Each business will have full accountability for end-to-end results from resource development to production to marketing over the entire life of the resource, from discovery to abandonment.

The upstream integrated solutions company will provide functional expertise to bring the full advantage of the company’s scale, our technology and experience to each global business.

Third company, upstream business development, will receive the upstream strategy and activities to upgrade the asset portfolio through explorations, acquisitions and divestments. This will increase the focus on portfolio optimization and ensure that we continue to aggressively pursue all available value-added opportunities, including divestments.

We’re also combining project organizations from the upstream, downstream and chemical into one global projects company which will allow us to more effectively leverage the company’s proven project capabilities… [Technical Difficulty].

Please stand by while we reestablish our audio speaker line. Ladies and gentlemen, please stand by. We’re about to reconnect the main speaker line. Please stand by..

We understand the webcast dropped. We apologize for that. So we’re going to turn it back to Darren and let him finish and then we’ll take Q&A..

I’ll try to pick up where I understand we dropped off which was turning to 2019 perspectives in the chemical business. I was saying that we’re on track for a midyear startup of our Beaumont polyethylene expansion which is going to further strengthen our position in the Gulf Coast.

We’re also planning to FID two projects at Baytown that will produce Vistamaxx which is a high growth, high performance propylene plastomer and linear alpha olefins used in packaging oils, waxes and some other specialty chemicals.

These projects, along with the others we’ve discussed, will allow us to continue to grow sales of high value, high performance products. As I step back and reflect on the opportunities we have across all three of our business sectors, I’m very excited by the potential to generate significant value for our shareholders.

You may have seen yesterday that we announced the formation of new upstream and project organizations. These new organizations will help to facilitate the successful delivery of our investment opportunities. The upstream is reorganizing into three companies, down from seven. The upstream oil and gas company will have five distinct global businesses.

Each business will have full accountability for end-to-end results from resource development to production to marketing over the life of the resource, from discovery to abandonment.

The upstream integrated solutions company will provide functional expertise to bring the full advantage of the company’s scale, our technology and experience to each global business.

The third company, upstream business development, will oversee the upstream strategy and activities to upgrade the asset portfolio through explorations, acquisitions and divestments. This will increase the focus on portfolio optimization and ensure that we continue to aggressively pursue all available value-added opportunities, including divestments.

We’re also combining the project organizations from the upstream, downstream and chemical into one global projects company which will allow us to more effectively leverage the company’s proven project capabilities across our entire investment portfolio.

Now we had already implemented many of the concepts behind a new design about a year to 18 months ago, the Permian development and the chemical cracker in Corpus are two great examples of what came from that.

Rewiring the organization will allow us to sustain the new way of working to make it easier to leverage across all of our businesses and opportunities. In addition, it will improve the upstream integration with our downstream and chemical businesses. This is particularly important given the growth and value of opportunities we are capturing.

With the increased upside, particularly in the Permian and Guyana, we expect CapEx to be $3 billion in 2019, an increase of about $2 billion from the guidance we gave in March. Before I hand it back to Neil, let me just offer a few closing thoughts. We remain fully committed to growing shareholder value.

That commitment is the driving force behind the growth plans that we’ve shared with you. We feel good about the progress we made in 2018 and the delivery on our commitments. We remain very confident in our ability to execute our forward plans and are very excited about the additional upsides.

The management team and I are looking forward to reaffirming the plans we laid out last year and sharing additional detail on the upside when we meet next month at our Investor Day. With that, let me hand it back to Neil..

Thank you for your comments, Darren. We’ll try again on Q&A – we’ll turn it over now for any questions you might have..

Thank you, Mr. Woods and Mr. Hansen. The question-and-answer session will be conducted electronically. [Operator Instructions]. We’ll take our first question from Doug Terreson with Evercore ISI..

Good morning, guys, and congratulations on your results and your progress..

Thank you, Doug. Good morning..

So, Darren, while the returns profile of your investment portfolio looks to be pretty strong, I think you highlighted that as the super majors refocused on areas of competitive advantage during the past decade or so that you use divestitures as a fairly productive capital management tool.

And on this point, while you guys have had divestitures too, your activity levels have been below peers whether including BP which obviously had an event or not. And so you talked about this a minute ago.

I just want to see if you will elaborate on your comments about divestitures as a portfolio management tool or portfolio optimization tool I think is the way you termed it, whether there’s a philosophical reason why ExxonMobil hasn’t been as active as some of the peers and whether divestitures might be more prominent for you guys in the future given the restructuring that you highlighted?.

Sure. Thanks, Doug. Thanks for the question. Happy to spend some time talking about that. I think we made reference to it last March.

One of the advantages that we have today is as the prices came off in the backend of 2014 and we leaned into the markets and as we’ve talked about loaded up our pipeline of investment opportunity with some very attractive projects, that has allowed us to re-optimize and look at the total value of portfolio.

If you go back in time, we’ve had a pretty regular divestment program investing about $50 billion worth of assets since 2008. What we can now in the upstream with this additional project and these investment opportunities we have is increase the focus there. So I would expect to see more activity in divestments in the upstream side of the portfolio.

That’s going to be driven really by the opportunities that the market brings. We’ve got I think a pipeline of assets that we think would make sense to market. We’re actively doing that and we’ll see as we go through the year what opportunities kind of come to fruition. I would add though, Doug, that this is a value play.

We’re not trying to hit some schedule associated with it. We’re really trying to make sure that we can realize the maximum value out of the assets that we have in our portfolio. As I mentioned, the new organization is going to help us with that..

No, I’m sure. Thanks a lot, Darren..

Thank you, Doug..

Thanks, Doug..

Next, we’ll go to Phil Gresh with JPMorgan..

Hi. Good morning, Darren, and thanks for being on the call today. I guess the first question would be around you talked about some areas where capital spending is moving higher and your Permian rig count has certainly accelerated versus what you talked about in March.

So without getting too far ahead what you want to talk about at the Analyst Day, maybe you could talk about at least how you’re thinking about 2019? Are you comfortable with the level that you’re running at now or do you see further opportunity?.

Yes. Hi, Phil, thanks. What I will say if you look at 2018 and as Neil mentioned the additional CapEx we spent there was really the acquisition of a couple – in a couple areas Brazilian acreage and then we had I think a real nice opportunity in Indonesia to supplement our lubricants business.

And so I think ex the acquisitions that weren’t built into the plan, we were pretty much in line with where we expected to be on CapEx. As I just said, going into 2019 we expect to be around 30 billion and that does reflect the progress and the opportunities that we’re seeing in Guyana, the upside that we’ve seen there as well as the Permian.

We just talked a little bit about the Permian because I think one of the things we’ve challenged ourselves with and looking at the unconventional resources is what value, what unique value can ExxonMobil bring to this resource play? And so we have spent the year really making sure that we understand the play that we’ve got, doing some delineation but at the same time leveraging the full capability of ExxonMobil to bring scale and scale development along with technology – additional technology and research into the Permian.

So I think what you’ll hear in March is a good overview around how ExxonMobil is uniquely coming into unconventional resources to make this a low cost, long-term successful development play..

Okay. And I guess just my second question would be on chemicals. That would be if you think about 2018, that was an area I think you expected to see some earnings growth in '18 and that was bit more challenging.

So maybe you could just talk a little bit more about what you’re seeing both from macro factors but whether maybe there are any company specific factors there as well, or if it’s all just kind of a macro situation?.

Yes. I think in the chemical business and across all of them frankly, one of the points we try to make at the analyst meeting is we don’t try to take a position on price for margins and where things are going to be.

We try to make sure that the investments we’re making are robust to the cycles that we see in these businesses and are aligned with, one, our advantages but, two, the long-term potential for these businesses.

So if I look at chemical, the growth that we see in chemical remained – and the foundational elements of that business in industry remained very strong, continue to see demand growth above GDP going out into the future. Saw that in 2018, 4% demand growth, so very comfortable with what we see as the macro trends from a demand standpoint in chemicals.

The challenge that we saw in 2018 I think will carry some into 2019 is the amount of supply that’s come on. If you look at the demand growth and focus on stream crackers for a minute, you probably need about three to four world-scale steam crackers every year to keep up with demand. In 2018, I think six came on.

So a lot more supply than what the annual growth would be, but the industry will grow out of that. And we positioned ourselves to make sure that we capture that long-term growth. We don’t get overly focused on the timing of every project and when they’re going to show up. Those things shift around a bit.

We’ve got more projects – industry projects coming on in 2019. That timing will move around and I think we’ll see margins move with the timing of that new supply coming on. But again, I think the current environment is not a concern for us.

We’ve leveraged – all those projects we’ve put in place have leveraged our advantages and made sure that we’re on the low cost of supply. So irrespective of where we’re at in the cycle, we’re going to be advantaged versus the rest of the industry..

Okay. Thank you..

Thanks, Phil..

We’ll take our next question from Sam Margolin with Wolfe Research..

Good morning..

Good morning..

You touched on this a little bit, Darren, in your perspective section and Neil quantified it too with the integration benefit of $1.2 billion. But I was hoping to ask you to elaborate a little bit in the context of the pipeline and the refinery FIDs in the U.S. that were announced this week.

You’ve got a lot of crude coming on stream in other places and so is the fact that there’s a lot of U.S. kind of value chain investment a function of trying to balance the portfolio and the U.S. is the easiest place for you to do that given your existing footprint or is there something commercially about the U.S.

and where these supply chains go through that kind of makes you feel like the U.S. is a place where you really want to be an exporter of finished products and not necessarily incremental crude. Just a little bit of background on the molecules you specifically want to target in the U.S. versus internationally..

We’re happy to do that, Sam. Thank you and good morning. I think as we look at that and the value of integration, it is really a function of the markets that you’re in and the structure of those markets. So let me just give you an example of why we think there’s a big opportunity here in the Permian. It’s a very fast growing area.

It’s inland and so you’ve got key – you need key logistics to move in and out of that. And so as we’re rapidly growing production in the Permian – as the industry is rapidly growing production in the Permian, there are going to be periods of disconnect as the pipeline and logistic systems try to keep up with that rapid production growth.

Our view is we don’t want to be exposed to those disconnects and so we have been looking across our integrated chain. And one of the advantages that ExxonMobil has is we can see across that whole value chain because we participate along the whole value chain.

And so making sure that as we are developing our plans in the Permian, at the same time we’re developing our plans and our logistic system’s developing the plans in the refineries so that we make sure that that stays connected. The refinery investments that we’re making stands somewhat alone.

They accommodate our production but they’re somewhat alone and disconnected from our physical molecules. The opportunity there is just take advantage of the transportation differential between bringing crude in from West Texas in the Permian versus importing it in from some of the locations.

So the margins and what we expect to get out of the refinery expansion is just really a transportation differential in play. And that combined with our advantages make those attractive.

So when you look at us and hear us talking a lot about the integration, it is really with Western Canada crude and in Permian because of the specific nature of those markets. And some of the other markets we’re in, we are close to Tidewater, we don’t have the same kind of market dynamics. That value doesn’t manifest itself as explicitly..

Okay. Thanks so much. And then just a quick follow up. You mentioned the small step up in CapEx in 2018 versus your Analyst Day guidance was a function of some acquisitions, some opportunistic acquisitions you had specifically in Brazil.

Going forward, are you going to try to pair asset sales with opportunistic acquisitions like that or are these adds just a function of returns and there’s no sort of cash balancing consideration at work here as well?.

Yes, I would tell you we’re not – we don’t have a formula where we’re trying to balance ins and outs. It really comes back to maximizing value. So if we see an acquisition, an opportunity there that we think has some high potential and is accretive to value, we’re going to pursue that.

I’d also say at the same time we recognize as we bring more attractive opportunities into our portfolio. That gives us an opportunity to trade out some of the existing assets. And the more we bring in and frontend load the pipeline and we prioritize across the highest value investment opportunities, by definition some will get moved out.

As we move those assets and those projects back, we have the opportunity to trade on that. Others than don’t have the same pipeline of opportunities that we do, we’ll see a higher value sooner and gives us a chance to trade. So I would expect to see that ramp up and I don’t think we’re going to constrain ourselves to try to balance those things out.

But I’d expect to see more divestments coming out upstream. And I know Neil Chapman and his team are very focused on that..

Okay. Thank you so much..

You’re welcome..

Thanks, Sam..

Next, we’ll go to Neil Mehta with Goldman Sachs..

Good morning and thanks Darren for being on the call today. The first question I had was just on the base business.

And can you just talk about outside of the major capital projects when you think about the balance of the existing portfolio how you see declines playing out from here? What are you doing to mitigate those declines and talk about some of the larger legacy assets like Groningen where we have seen some volume declines and how do you intend to either offset that or do you look to allow that to continue to happen as you try to maximize returns and cash flow?.

Sure. Hi, Neil. It’s good to hear from you again. Let me just say too I’m happy to be on the call and spend some time talking about our business. I’m real happy and pleased with how the organization has kind of come together and we’ve challenged them to make sure that we’re maximizing and leveraging the full capability of the corporation.

One of the changes driving our upstream reorganization is to make sure that the upstream businesses have the accountability and the ownership to maximize profitability and value for their assets and for their value chain. And that philosophy, as I mentioned in my comments, have already been pushed out into the organization.

And so what we’re seeing in terms of short-term day-to-day operations is I think real aggressiveness looking for opportunities to grow value. I mentioned to you that we’ve identified a number of upsides as we went through the year.

Those were bottom up upsides as the organization really focused on where they could find and extract additional value, not just from the new projects but also from the base business. So I feel good about that.

And they will make decisions day-to-day around what’s economic in terms of offsetting decline and making sure that we’re getting a good return for every dollar that we spend to bring that production back. With respect to Groningen, that’s a slightly different dynamic as you know.

Some of the tremors and the concerns, legitimate concerns expressed by the community there, we worked fairly closely with the government and made sure that we had a mechanism to kind of address those concerns in a responsible way.

That agreement that we reached with the government entailed a change in the fiscals, take the fiscals for the Groningen resource back in line with the rest of the gas business and the Netherlands.

And so I think all of that has been reflected in our go-forward plans and very comfortable that what we’re doing and the growth that we’ve got will more than offset any reduction that we see there..

I appreciate it. And the follow-up question is just on Liza. As we talked about in Miami, it sounds like you guys are full steam ahead towards that 750,000 barrel a day long-term target.

Do you see potential upside to that base case number? And then curious how you’re thinking about the timing of phase 2 especially given some of the uncertainty from a political perspective down in Guyana?.

Yes, we still feel really confident about what we’re doing there and advancing Liza. I think as we’ve talked about already with the discoveries that we’ve announced, we see additional FPSOs there. And that resource – we’re still a long way, as I mentioned in Miami, from fully exploring the opportunities out there.

So as we continue to advance that exploration we’ll see how it plays out. And we’re optimistic that we’ll find some additional opportunities there and that will continue to grow that resource. With respect to phase 2, Liza 2, that continues to be on track with the schedule that we’ve put in place.

And let me just address this – the comment that you made around the government and some of the things happening there. I think it’s important to keep in mind when we go into countries, we go in with a mindset that we’re going to be there for a lifetime, 30 to 40 years.

You can’t have a successful development if you’re only talking to a subset or a narrow section of your stakeholder group. So we have been engaged with the sitting government, with the opposition, with communities making sure that the development and what we’re doing is understood and the people are aligned on that.

So the opposition understands the contracts that we have in place. I think they understand the value that that development will bring to Guyana and the people of Guyana. So I think it’s very consistent with how we think about a long-term approach to engaging with companies and countries..

Thanks, Darren. We appreciate the increased transparency..

Sure..

Thanks, Neil..

Next, we’ll go to Alastair Syme with Citi..

Hi. Thanks for taking my questions. My first question just as you look at the LNG market, you’re clearly trying to sanction a lot of projects over the next couple of years. So historically ExxonMobil have sought to secure most of the offtake before a sanction.

Is that still the way you look at the market and do you have interesting [ph] observations about the changing market dynamics?.

Thanks, Alastair. You’re right. That has been the historical model. I think as you kind of make reference implicitly in your question is that market is evolving. I’m not sure it’s going to evolve as quickly as some people are predicting it, but we certainly see a change.

And I would anticipate as we make those investments and bring LNG on that we’ll evolve along with the market and make sure that we’re positioned to maximize the value of those investments. And that may mean more portfolio activity in the future. But again, we’re going to pace that in that development consistent with how that market develops..

Okay. Thank you. A quick follow-up question just a point of clarification on the CapEx. I think in 2018 you had around about $3 billion of acquisition capital.

Does your 2019 budget incorporate something around a similar level? Is that how you think about the budget?.

No. Typically, when we’re putting together our plans, if we’ve got something – a line of sight on something that we think has got a high chance of closing, we’ll try to reflect some of that. If we don’t have any of those, then it won’t show up in the plans.

So it tends to kind of vary depending on where we’re at and the line of sight that we have on the opportunities..

Great. Thank you for taking my questions..

You’re welcome. Thank you..

Next question comes from the line of John Herrlin with Société Générale..

Hi, Darren, with respect to the upstream reorg, are all these new entities or groups going to report still to Neil or do they report to the committee?.

So the new streamlined organization, one of the big benefits that we have there is moving from seven upstream companies down to three. Those three companies and presidents will report to Neil Chapman..

Okay, great. Then a next one for me is I guess for Neil. Could you address what the impairments were in the U.S.

and internationally upstream?.

Yes. So, John, as I mentioned, there were – and you can see the detail in the supplemental information as well. We had about $400 million after tax in impairments in 2018, about half of that related to a U.S. Gulf of Mexico asset and then the other half related to unconventional activity in North America..

Okay, I missed that. Thank you..

You’re welcome..

We’ll next move to Biraj Borkhataria with RBC..

Hi. Thanks for taking my question. It was on LNG again. Could you just talk a little bit about the rationale to move forward with the Golden Pass project? And then also how that competes with some of the other options you have, particularly Mozambique, and then a potential Qatar expansion if you were to participate there? Thank you..

Sure. Thanks, Biraj. Let me just maybe start with the philosophy of how we look at competing investments, if you will, or the opportunities within our portfolio.

I’ve said this before in different audiences but our strategy here and the way we make decisions on investment is those investments have to compete versus the whole of industry, not just what we have in our portfolio.

So the emphasis that we put on our different projects is how do they fit in with the industry’s projects and the additional capacity that they’re going to bring on and make sure that those projects have the advantages needed to be on the lower end of the cost of supply curve so that they will be very competitive versus any other industry projects that come on.

That’s very important because as we just talked about with the chemical business in a high growth – while we see a lot of high growth opportunities in LNG, capacity will come on in big chunks. It won’t be necessarily coordinated. So we’ll see I suspect periods of oversupply.

And so when we see that period, we’re going to have to make sure that our investments are robust to lower market prices. And then as the growth continues and the market tightens up, we’ll see advantages there as well. So the focus is really on making sure our projects are competitive in the landscape of the industry.

With respect to Golden Pass, I think it’s got a lot of strategic value. If you think about the gas business in the U.S., the quantity of gas available to the marketplace, the associated gas that comes on with some of the crude development, we continue to see from a supply standpoint a very attractive supply gas market in the U.S.

For us then we’ve got an opportunity to leverage our existing terminal facilities which gives us an advantage. And then it also allows us with a supply point here in the Atlantic basin in North America for a lot of optimization as we look to supply the global markets. And so I think we got some unique advantages with the existing facilities.

We’ve got advantages with the industry supply source here in the U.S. And then we’ve got advantages in terms of a global LNG business and the ability to optimize across that whole portfolio, and including the work that we do with QP and optimization with that integrated portfolio..

Can I just ask a very quick follow-up? In terms of timing, you’ve got Mozambique, which maybe FID 2019 and 2020, and then Golden Pass moving forward.

Would you expect to – you’re going to do both the developments concurrently or should we expect one to be pushed back a little bit?.

Yes, each of them will be a function of kind of the contract availability and how that plays itself out. I’ll tell you with the strong growth that we’re seeing in the LNG market, lots of demand that supply is going to chase here.

And so I think we’ll make sure – we’re going to make sure that those developments occur on a very efficient cost effective way. And as I said before with the advantages that we are building into these projects, it’ll be low cost to the supply.

And so less worried about what others are doing and making sure that we bring those on in a cost effective manner..

Great. That’s helpful. Thank you..

You’re welcome..

Next question comes from the line of Doug Leggate with Bank of America Merrill Lynch..

Thank you. Apologies, folks, I don’t know if there was a technical issue on your end as well, but I had to dial back in again, so sorry about that. First of all, Darren, let me also reiterate my thanks for you getting on the call today. But I wonder if I could get preempt you a little bit on the upcoming Analyst Day.

Your rig count in the Permian is about 50% above what you guided last year or at least the target for the end of the year and clearly there is multiple additional growth potential in Guyana.

Is your intention at a high level to – would that notionally increase the targeted growth or would you intend to do more with less or perhaps accelerate disposals to keep the overall kind of scale of your expectations through 2025?.

Yes. Thanks, Doug. In March we’re going to have a really comprehensive conversation about how all this pulls together. I’ll tell you with what we laid out for the Permian last March that was very early into the development of that resource.

And what I talked about earlier with respect to trying to leverage the capacity and the scales for not only XTO but the full ExxonMobil advantages has led us to I think a very unique concept for developing the Permian resource.

And so I think – and we’ll lay that out in March, talk about how we’re approaching that and the investments that we’re making there. So that will be kind of a story onto itself.

With Guyana as we continue to see opportunities and leverage what we’re already doing, there’s a lot of efficiencies continuing to roll into production as we have more discoveries and find resources that we can bring on. So I think again we’re going to – we’ll update you with that.

But if we continue to have success in exploration, continue to build on that momentum, take advantage of the efficiencies and bring on very attractive, very low cost of supply. As all that kind of comes to fruition, our expectation is we’d see more earnings and more cash and bring in more returns.

And at the same time we’ve got the opportunity now to kind of flex that portfolio and we’ll optimize to make sure that we’re not leaving any value on the table. We want to bring in NPV forward as much as possible but do it in a way that keeps cost in control and stays within the capability of our organization.

So that’s kind of a constant evaluation and testing that we’re doing. I think the new organization that we’re putting in place is going to help us more effectively advance some of these investment opportunities. So we’ll kind of roll all that together and layout what the implications are going forward in March..

I appreciate that. My follow-up, hopefully a quick one, is just on the reorganization. I realize your disposals this year run I think above the kind of guidance or the list guidance you’ve typically given in the past about what you’d expect that scale to be.

Should we read the reorganization in somehow accelerate or brings forward the focus a little bit more? In other words, would you anticipate your disposal program to get even larger as you move forward? I’ll leave it there. Thanks..

Thanks, Doug. I think as we mentioned, we’ve got the upstream business development group which is really – their focus is on what I’ll call as the frontend of the pipeline, the project’s portfolio and optimizing that portfolio.

That I think is going to bring an additional degree of focus into that space not only from an exploration standpoint but from an acquisition as well as divestment. So I would anticipate from an upstream standpoint we will see the pace of divestments accelerate.

If you step back and look at it in the context of the corporation and you go back in time, a lot of the divestments we’ve seen came out of the downstream. And so the mix will change as we go forward. And then the level maybe slightly up or consistent with what we’ve done in the past..

I appreciate you taking my questions, guys. Thank you..

You bet. Thank you, Doug..

Next question comes from the line of Roger Read with Wells Fargo..

Good morning and like everyone else welcome to the call, Darren..

Thanks, Roger..

I guess we could maybe just talk about CapEx plan this year, the 30 billion, and you’re able to pay off some debt last year but I think if we were to take the CapEx back to the 30 billion level, we’d be more of a neutral level in '19. And then if you adjust crude prices to the strip, we’d probably be looking a little bit of a debt add in '19.

I was just curious not so much whether or not you need to borrow a couple billion or pay back a couple of billion, but just understanding how you’re thinking about CapEx within the overall cash flow environment and then what that could mean for increased shareholder distributions presumably at this point just on the dividend front?.

Sure. Let me kind of maybe just remind – reemphasize the priorities that we’ve got about capital allocation and how we’re approaching that.

First and foremost, if you’re looking at the long-term value of our corporation particularly on the upstream side which is a depletion business, you’ve got to have a healthy pipeline of attractive investment opportunities.

And that has been one of the things that I know over the last several years the management team here has really been challenging themselves with around reloading that pipeline and making sure that we got projects and project opportunities that go way up to the future to bring value in.

And our intention would be to bring those projects on, consistent with our plans, irrespective of the price environment. And the reason for that is we built those projects and tested those projects to make sure they’re robust to a low price environment.

So if we were to find ourselves in an environment where prices were low, that would actually I think benefit those projects in terms of as – as activity falls away in the industry, you tend to get lower cost construction. So that might play in our favor. But we would continue on that path.

And then consistent with that and one of the reasons why we keep a balance sheet the way we do is to allow that to happen and not have to adjust the business up and down with the cycles. That makes for a very inefficient capital development.

It also prevents you from taking advantage of the down cycle and a lot of the things that come positive from a down cycle.

And so our strategy has always been to make sure that we’ve got robust capital structure to support continued investment at CapEx through the cycle, making sure we’ve got enough dry powder to take advantage of the down cycle if an opportunity presents itself, an acquisition opportunity potentially and at the same time make sure that our cost of leverage remains very competitive.

And to do all that with investments, with our balance sheet, continue to fund reliable and growing dividend, we feel like that’s an important priority for a lot of our shareholders. So that’s kind of the equation.

Then we get into buybacks and I’ll tell you – we’ve challenged ourselves on the investment front, we’ve challenged ourselves on our organization and our ability to effectively deliver the advantages that we have as a corporation and to bottom line results. I think you’ve seen changes there.

And we’re also challenging ourselves around the optimum capital structure and what we want to – make sure that we’re leveraging the full advantage of that capital structure.

That’s what’s going on and I’m very optimistic that we’ve got a very strong portfolio of investments that are backed up by very strong capacity and capability of the corporation..

Okay. Thanks for that.

And maybe just as the follow up, as we think about maybe more dispositions coming from the upstream sector, how should we think about the cash flow that comes from that? Is that to reinvest in the upstream or do you think as you move forward, obviously nothing in Q1 probably, but as we think about the latter part of '19 and into '20, does the cash flow go to the balance sheet or is it CapEx supporting or is that maybe what you’re thinking about in terms of getting back to more of the historical shareholder returns?.

I would say as we progress that divestment program and to the extent we have success finding buyers out there that put a value on it that we think is attractive for a transaction, we’re not waiting for that in order to fund our CapEx. Our investment program is not a function of waiting for cash to come.

So I would not expect to see, as divestments progress, see that translate into additional projects in capital investment.

That is an independent decision again related to some of the things I talked about in terms of the strength of the opportunities we’re looking for, which then says any addition cash would come in would came to the point I just made around the optimal capital structure and whether we pay that down in debt or whether we move it out as a buyback.

And as I said we’re taking a real hard look at that and making sure that we’re striking the right balance there..

Your next question comes from the line of Jason Gabelman with Cowen..

Yes. Hi, guys. Just a couple of questions. Firstly on Guyana, what’s going on with the government there? I appreciate that you’ve already addressed this question a bit, but if I could push a little deeper.

If there is kind of a pause in who’s running the government, are you, one, concerned that you may have to ramp down investments there; and two, is there somewhere else where you would put that money to work in if there is a potential pause or slowdown in the pace that your developing that asset?.

Frankly, given the discussions that we’ve had since really coming to Guyana with the stakeholders that we’ve got across the political spectrum there, given the discussions about the advantages this development brings and the recognition of those advantages by a very wide constituency in Guyana, we really don’t have any concerns about the political dynamics that are happening there.

We understand that that’s the nature of governments and countries around the world. We basically expect governments to change over time. Again, when you’re coming into a country for 30 plus years I think it would be extremely naïve to think that you’re only going to have one constituency there for the timeframe.

So again, we take a very broad-based approach. I think all the feedback we’ve got, the alignment that we have in the country supports what we’re doing here because they recognize the value that it’s going to bring to Guyana. So real happy about that. And as I said, I think the phase 2 is on track, remains on track.

We don’t see that coming off at this point. And obviously we’ll see how things develop there. But we’re not particularly worried about it given the value and the strength of that investment..

That’s very clear. Thanks. Secondly, just on capital spend and I appreciate the 2018 guidance that you provided.

Do you have a view on 2020 and beyond is going to look like relative to the guidance you gave at your last Analyst Day?.

Yes, Jason, I think I’m going to stick with the guidance we gave for 2019. I think in a month’s time we’re going to kind of layout the longer-term plan again consistent with the 2025 timeframe, talk about the upgrades that we’re seeing and the opportunities that we’re seeing and how we’re factoring that into the plan.

And we’ll provide a better prospective at that time..

All right. Thanks a lot..

You’re welcome..

Next, we’ll go to Jason Gammel with Jefferies..

Thank you very much, gentlemen. My first question relates to the technology that you have deployed at the hydrocracker in Rotterdam. It seems to be a pretty significant uplift on margins relative to the old technology.

I was just curious whether this is something that you will be able to deploy on a wider scale, or is there something unique about Rotterdam that really kind of restricts it to that location for now?.

Thanks for the question. So what that development or that project in Rotterdam leverages is the catalysis and the technology we have, the advantages that we have in catalysis. And so that’s a unique application based on our understanding and our ability to develop unique value-added catalysts. Opportunities like that exist across the portfolio.

Obviously it may involve different catalysts but we’ve talked about our Singapore project where we’re looking at upgrading heavy residue molecules.

That would also look to leverage some of this technology and use some of this proprietary catalyst to make that conversion from a very low heavy, low value residue into higher value products, diesel and loose base stocks. So there is broader application. Obviously, it depends on the nature of the molecules that you’re trying to upgrade.

But we feel – and that’s one of the reasons why we’ve challenged ourselves. For a long time we weren’t investing in the downstream because – and I can say this with a lot of intimacy because I was involved it in at the time, we weren’t going to put in kind of a bog standard industry technology and get industry returns.

We were going to force ourselves to find technology that allowed us to get above industry returns. Rotterdam is a great example of that. I think Singapore will be another great example of that. And hopefully we’ll be able to share some additional examples as we move forward and find additional applications. I’m pretty optimistic..

Look forward to that. My second question also relates to the LNG portfolio.

Can you discuss whether you were interested in participating in the expansion at Qatar LNG? And if so, how would that rank relative to the three other LNG opportunities that you have in the portfolio currently?.

Yes, we got a very long-term presence and partnership in Qatar. I think we value that. It’s a good partnership. We’ve had a lot of success working with QP. I would certainly look to continue to extend that. I think we’re aligned to how we think about the business and the opportunity and value each other’s partnership.

So yes absolutely interested in continuing to partner with that and to develop resources and opportunities in Qatar. It is a very low cost supply gas, which as you’ve heard me talk about is an important element and the LNG projects that we’re advancing. With respect to how that would fit into our portfolio, I’d come back to the discussion we’ve had.

We are looking at these opportunities not on the basis of what we have in our portfolio but on the basis of what industry has in its portfolio. And we’re going to advance the opportunities that we think are advantage versus the rest of industry.

If we can’t find an investment that does that even if it looks good in our portfolio, we won’t pursue it because frankly it’s going to have to compete on an industry wide basis and that is the hurdle that we’re using. We don’t want to make decisions based on what we have.

We want to make decisions based on how competitive it will be in the industry and that applies not only to LNG but every other thing that we’re doing in this company from an investment standpoint..

I appreciate your thoughts, Darren. Thank you..

You’re welcome..

We’ll next go to Paul Cheng with Barclays..

Hi, guys. Good morning..

Hi, Paul..

Good morning, Paul..

First, I’d just want to say thank you to Neil Hansen to put in the page identified the large earning item impacting on the quarter that – we really appreciate on that. For Darren, a couple of questions. First, with your reorganization you talk about how that it may accelerate your asset sales effort.

How about on the other side of the ledger on the acquisitions side? Is that going to have any meaningful impact? And also if you can comment on what you believe today in the market if the bid-ask environment is still too wide apart or you actually think that there’s a reasonable expectation on the environment at this point?.

Okay. Thanks, Paul. I think it’s hard to – what I would tell you is the reorganization is definitely going to improve the focus that we have on both sides; divestments and acquisitions. So I would expect to see additional thinking and focus on opportunities on both sides of the ledger there.

Whether that results in anything or any acceleration on the acquisition side is really difficult to tell, because frankly it comes to your second question which is the bid-ask spread. For us to pursue an acquisition it has got to have to bring some unique value to our shareholders. We’re not going to do a me too deal out there.

And so I think what we have to look for is something that fits in the portfolio and allows us to leverage something unique to ExxonMobil which brings more value than on a standalone basis. And I think that’s going to be the key driver. I don’t think anybody’s out there looking to discount their business.

And so it’s really got to find a way to bring some value there that doesn’t exist otherwise. And I think those opportunities are there. It’s just a function of finding them and seeing where the market goes and how willing sellers are and what their expectations are.

So I’d just say we’re going to stay very focused on that and see what opportunities bring us..

Second question that I think digitalization seems to be the best word amongst some of your peers and some people may even try to quantify that how big is the potential impact of the saving to the business. But Exxon, given your technology that we were actually a little bit surprised that you guys haven’t really talked too much about that.

And then when are you coming up with any quantification that how much it may mean to your business. Is that something that you can share on that? I’m sure that you guys all have the expert looking at that..

Yes, you’re right. We do. I think it is – some of our peers may have talked about a very high potential area, a lot of opportunity to bring additional value. We’ve got an organization dedicated at looking at that. I think one of the advantages that we have, that organization is looking across the entire portfolio.

There are a lot of synergies when it comes to digital across our manufacturing and production platforms, across our operations and chemicals, downstream and the upstream. And so we think given our size, given the fact that we participate all along the value chain, the data that we have probably is the best in industry.

And then our ability to mine and leverage that data to improve operations I would say our capacity continues to grow.

We’re taking what I would say is a thoughtful methodical approach to it to make sure that we’re building structures and data structures and digital tools to allow us to do that in a comprehensive way across the globe and to leverage that value. And so it’s a very important area. I would not expect us to start putting numbers on that and sharing it.

I think for us it’s an advantage. It’s going to be a competitive advantage. It’s one we’ll keep in-house..

I see. All right, very good. Thank you..

You’re welcome..

I think we have time for one more question..

We’ll take our last question from Pavel Molchanov with Raymond James..

Thanks for squeezing me in, guys. Just one question for me. You’ve alluded to the well-known regulatory issues at the Groningen field, but when we look at your total European gas volumes down 12% versus a year ago, even if we exclude Groningen there would be close to a double-digit decline.

So what explains the continual declines in your North Sea gas outside of Groningen?.

Well, we divested our Norway business last year and so that’s going to have a material impact and that’s probably what you’re seeing there. And then on top of that, obviously gas demand and gas production is very seasonal depending on weather and temperatures and that’s going to play into it as well..

Okay.

Wasn’t this kind of a cold winter though in Europe?.

Not if you look – it’s not if you look at compared to previous, no..

Okay. Thank you, guys..

You’re welcome. Thank you, Pavel..

Great. Thank you for your time and thoughtful questions this morning. We appreciate you allowing us the opportunity today to highlight our fourth quarter and full year that included strong earnings and cash flow performance supported by continued liquids growth and value capture from our integrated business model.

We look forward to seeing everyone on March 6th at our Investor Day in New York. Again, we appreciate your interest and hope you enjoy the rest of your day. Thank you..

That does conclude today’s conference. We thank everyone again for their participation..