Earnings Call Transcript - XOM Q2 2024

Operator, Operator

Good day, everyone, and welcome to this ExxonMobil Corporation Second Quarter 2024 Earnings Call. Today's call is being recorded. At this time, I would like to turn the call over to the Vice President of Investor Relations, Mrs. Jennifer Driscoll. Please go ahead, ma'am.

Jim Chapman, Vice President, Treasurer and Investor Relations

Good morning everyone. Welcome to ExxonMobil's Second Quarter 2024 Earnings Call. We appreciate you joining us. I'm Jim Chapman, Vice President, Treasurer and Investor Relations. I'm joined by Darren Woods, Chairman and CEO, and Kathy Mikells, Senior Vice President and CFO. This presentation and pre-recorded remarks are available on the Investor section of our website. They are meant to accompany the second quarter earnings news release, which is posted in the same location. During today's presentation, we'll make forward-looking comments, including discussions of our long-term plans and integration efforts, which are still being developed and which are subject to risks and uncertainties. Please read our cautionary statement on Slide 2. You can find more information on the risks and uncertainties that apply to any forward-looking statements in our SEC filings on our website. Note that we also provided supplemental information at the end of our earnings slides, which are also posted on the website. And now I'll turn it over to Darren for opening remarks.

Darren Woods, Chairman and CEO

Good morning and thanks for joining us. ExxonMobil's performance remains strong. In the second quarter, we delivered earnings of $9.2 billion, our second best second quarter results in the last 10 years. Just as important, we continue to improve the fundamental earnings power of the company, as Kathy covers in her prepared remarks available on our website. Our overall market conditions were softer in the second quarter. Oil prices remained firm. As a reminder, at Brent between $60 and $80 a barrel and 10-year average refinery and chemical margins, we expect to generate between $80 billion and $140 billion in cumulative surplus cash from 2024 to 2027. The Pioneer acquisition increases that even further. In the quarter, we once again set production records from our advantage assets in Guyana and the Permian. Including Pioneer, our Permian production surged to 1.2 million barrels per day. In product solutions, our sales of high-return performance products rose 5% sequentially to a new record. Our strong performance in the quarter continues to support our capital allocation priorities, including the distribution of $9.5 billion to shareholders, of which $4.3 billion was in dividends. With the close of the Pioneer transaction, our shareholders now include the former owners of Pioneer stock who have begun to benefit from the strength of our combined companies. We welcome them to ExxonMobil, just as we do the talented people of Pioneer who bring a strong entrepreneurial mindset and deep expertise in unconventional resource development. I also want to recognize the combined transaction team for their excellence in execution. The average time to complete this type of merger over the last several years has been more than 11 months. We closed Pioneer in six months, once again demonstrating the strength of our organization and effectively executing large, complicated projects, including large acquisitions. It is challenging work, requiring deep thinking, a highly structured approach, and disciplined action, areas where we excel. Although it's still early days, the integration is exceeding our expectations, and I'm confident we'll deliver even more synergies than we've announced. The team looks forward to sharing these details and all the other work we're doing to significantly grow value at our corporate plan update and Upstream spotlight in December. As we look ahead, we see opportunities to grow value not only through our corporate plan period, but long into the future. Later this month, we'll publish our global outlook, which projects global energy demand 15% higher in 2050 than it is today. We see oil demand holding steady at around 100 million barrels per day in 2050, while demand for renewables and natural gas grows considerably. An energy abundant future, driven by economic growth and rising levels of prosperity, creates opportunity for ExxonMobil, no matter the speed or direction of the energy transition. Over time, as it becomes more and more obvious that heavy industry and commercial transportation will not be meaningfully powered by renewables, the world will come to rely more on technologies where we have an advantage, including hydrogen, biofuels, and carbon capture and storage. A serious approach to the transition should focus on moving the world from high carbon to low carbon energy, not simply from oil and gas to wind and solar. The data, science, and economics all support this as fundamentally necessary. Our strategy reflects this reality, and since it relies on the same corporate capabilities and advantages under any scenario, it is extremely flexible, delivering strong profitability irrespective of the path society takes. As a technology company that transforms molecules to meet society's needs, we're not defined by our existing product suite. We began as a maker of kerosene for lamps. Today, no one thinks of ExxonMobil as a kerosene company serving the lamp industry. In the future, ExxonMobil will be defined by the technologies and products it is producing to meet the world's future needs. As always, by drawing on our unique combination of competitive advantages. We shared with you a variety of technologies and products we're developing to more effectively meet existing needs while helping the world achieve a lower carbon future. Two examples where I see significant new market potential are Proxxima and carbon materials. With Proxxima, we transform lower-value gasoline molecules into a high-performance, high-value thermoset resin that can be used in coatings, lightweight construction materials, and advanced composites for cars and trucks, including battery boxes for electric vehicles. Materials made with Proxxima are lighter, stronger, more durable, and produced with significantly fewer greenhouse gas emissions than traditional alternatives. In March, we showcased the automotive uses of Proxxima at the world's leading international composites exhibition in Paris. We're progressing projects in Texas with startups planned in 2025 that will significantly expand the production of Proxxima. We see the total addressable market for Proxxima at 5 million tons and $30 billion by 2030, with demand growing faster than GDP and returns above 15%. That's an exciting new business opportunity with significant profit potential, for we have unique and hard-to-replicate advantages consistent with our strategy and core capabilities. We also see a sizable opportunity in carbon materials, transforming the molecular structure of low-value, carbon-rich feeds from our refining processes into high-value products for a range of applications. We are targeting market segments with margins of several thousand dollars per ton and growth rates outpacing GDP. These include carbon fiber, polymer additives, and battery materials. Our competitive advantages of scale, technology, and integration, combined with our North American manufacturing footprint, provide a foundation for building these compelling new high-margin businesses. I've challenged the product solutions team to lean into those opportunities and develop plans to accelerate the growth of both of these profitable new businesses. I hope we can ramp up investments to make them a meaningful part of our overall portfolio sooner, which will help further diversify earnings and significantly grow shareholder value for decades to come. ExxonMobil has a long history of successfully establishing new high-value and used products for established and growing markets. Consider Vistamaxx, which we launched to enhance the performance of everything from auto parts and construction materials to personal care products and packaging. We've grown our Vistamaxx performance polymer from five grades to 20, and total annual production capacity is 700,000 metric tons per annum, with highly attractive returns and significantly more growth potential. Of course, consistent with the track record we've established over the last seven years, the hurdle for investing will be high. Any investment will have to generate competitive returns, possess clear competitive advantages, and be resilient to the bottom of any commodity cycle. As we've demonstrated, our capital allocation decisions have generated robust earnings, cash flow, and shareholder returns. I look forward to sharing more about our growth opportunities in December. In closing, we have a lot to feel good about. Our performance is strong. Our merger with Pioneer is already creating tremendous value with more to come. And we continue to develop products and build businesses that will enable us to grow properly far into the future across a wide range of scenarios, including a rapid energy transition. With that, we'd be happy to take your questions.

Jim Chapman, Vice President, Treasurer and Investor Relations

Thank you, Darren. Now, let's move to our Q&A session. As a reminder, we ask each participant to keep it to just one question. And with that, operator, we'll ask you to please open the line for our first question.

Operator, Operator

Thank you. The question-and-answer session will be conducted electronically. The first question comes from Neil Mehta, Goldman Sachs. Your line is open. Please go ahead.

Neil Mehta, Analyst, Goldman Sachs

Good morning, Darren and team, and thanks for the update. I wanted to build on your comments on Pioneer. Now that it is under your umbrella, can you build on some of your comments around, one how is the asset performing from a volume and type curve perspective relative to expectations, and two you alluded to synergies tracking ahead of expectations. Can you help delineate what those buckets of outperformance are?

Darren Woods, Chairman and CEO

Yeah, good morning Neil. I'll start with a few comments and then let Kathy kind of add on top of that. I’d say early days yet two months in, but the work of the team prior to the change in control and then what we've seen since then is extremely encouraging. As we've stated, the Pioneer assets basically delivered a record performance in the second quarter. And if you think about the context of doing that with all the changes that were going on with respect to the merger, I think a real testament to the quality of the people there and the work that they've been doing. So I'd say vectors are all pointing up. I think probably better than what we had anticipated, but I would also say it's early in the process. The teams today are working very well together, which has led to frankly, identifying a lot more value opportunities than frankly, I think either of us could see when we were on opposite sides of the fence. And now that we're together working, we see essentially a lot of opportunities to transfer the best practices of ExxonMobil into Pioneer and likewise to transfer a number of best practices from Pioneer into the ExxonMobil base, which when you think about our size has some tremendous leverage associated with it. So that's all being worked through in detail. As you know, when we commit to some of our objectives, they're based on some very detailed plans that sit behind them. The organization today is working those plans, but we already see significant upside potential, not only in the magnitude, but in the pace at which we'll be able to deliver them. So I think a really positive story there. I'll let Kathy maybe add some additional details. Kathy?

Kathy Mikells, Senior Vice President and CFO

Sure, I think one of the things we've been really pleased by is the number of learnings that we've already had from Pioneer. And so not only will we bring our technology and cube development to them, but they are bringing a bunch of learnings to us. So we're already utilizing their remote logistics operations center in our own drilling and completions operations in order to improve supply chain. They've done some things on the procurement side, I'd say that we think can help us to kind of leverage up our expertise. They've been really good over the years of locking up their acreage. So we think that's another thing that ultimately we can benefit from. And then as I think everyone knows, they've got quite a large water infrastructure in the Midland Basin. And we'll be looking to also leverage that. So we've been really pleased with what they bring to the table and we're off to a really good start, as we look at building an integration development plan with them that fully utilizes the technology that we bring to the table. And so we're going to have a corporate plan update in December. We are going to do a spotlight on the Upstream, and we'll update where we're at with the synergies and how we are looking forward at that time.

Darren Woods, Chairman and CEO

Yeah, I guess to cap it off, Neil, with we said at the time we announced the acquisition that we were going to produce more barrels at a lower cost and in a more environmentally friendly way. That continues to be the case. That's obviously good for our company, but more importantly, as we said at the time, we continue to emphasize it's good for the US, it is good for the US economy, it's good for the people living in the US, it's good for US businesses, and critically it's good for US energy security. So I think this is, as I said at the time, going to be a win-win proposition for all.

Neil Mehta, Analyst, Goldman Sachs

All right. Thank you, Darren. Thank you, Kathy.

Operator, Operator

The next question is from Betty Jiang with Barclays.

Betty Jiang, Analyst, Barclays

Darren, Kathy, good morning. Since I just talked about Permian, we'll hit on the other region that's also hitting record production, so Guyana volumes continue to exceed expectations, and the FPSO just continues to produce while above capacity. We'd love to just get an understanding of, do you think this type of performance is likely to continue and is that translatable for what you would expect for the future projects that are yet to come?

Darren Woods, Chairman and CEO

Sure, I'll take that Betty. Thank you and good morning. Good to hear from you again. I would say, you know, what you're seeing is the collective effort of our organization focusing on what is a very high-value development and making sure that we are taking advantage of all the opportunities we can find to safely grow production. And as you commented, we are seeing some significant improvements with production rates well above what we had based the investment decision on, and that's continuing across all three of them. We try to take that into account as we develop the next, and so in theory, you would think we build that into the base and don't continue to see that. But frankly, our experience is telling us otherwise, which is this organization, complemented by the work that we're doing with our technology organization, our global operations and sustainability organization, every element of the organization that we have now created and functionalized is very focused on maximizing values. And so with these new organizations and that focus, they continue to find additional opportunities. So I would bet that we'll continue to see performance versus the basis on which we FID, but I would also tell you that every development is unique unto itself and obviously, we got to get it up and running and then let the teams get after it and find the opportunities to safely increase its capacity. But I would just tell you, I would bet on our people to find that. We've got a long history of doing it, and it's clearly demonstrating itself with this unique and valuable opportunity here.

Betty Jiang, Analyst, Barclays

Thank you.

Darren Woods, Chairman and CEO

You bet, thank you Betty.

Operator, Operator

The next question comes from Doug Leggate with Wolfe Research.

Doug Leggate, Analyst, Wolfe Research

Hey, good morning, thanks for taking my questions. Good morning Darren and Kathy.

Kathy Mikells, Senior Vice President and CFO

Good morning.

Doug Leggate, Analyst, Wolfe Research

I'm still getting used to the new moniker Darren, but thanks for having me on. So I wonder if I could ask a question about the portfolio now that you've got Pioneer in the door. You've got a lot of things that are perhaps you could characterize as maybe non-core, a lot of tails in the portfolio. And I'm just curious, we haven't really heard much on the asset disposal front in a while, and I'm curious if now that you've got two very significant concentrated assets to some extent, the Permian and Guyana, what it means for the portfolio in terms of high-grading opportunities going forward?

Darren Woods, Chairman and CEO

Yeah, I'll start with that, and then I'll let Kathy add anything that she wants to. But I would say, actually, we've been fairly aggressively going after the tail. You remember, I think back in 2019, we had announced that we were going to divest about $15 billion over time. Of course, we got into the pandemic and we said we're not going to, this is not a forced march. We're going to basically divest when the market conditions ensure that we can realize the value that we think the assets that we are marketing can realize. And frankly, that's what we've been doing. So as you look at where we're at today, in the second quarter this year, I think we've basically gotten to the $15 billion in the Upstream. And then if you look at what we've been doing in the downstream, there's another few billion dollars that we've added on top of that. So frankly, from a cleaning up the tail standpoint, we've made significant progress. Obviously, there are a few more things that we're working on, and we'll continue to assess every one of the assets in the portfolio, making sure that they are competitively advantaged. And, you know, frankly, as we look at new investments, we force those investments to compete on an industry-wide basis and make sure that they're advantaged versus the industry and therefore can be a supply product at low cost of supply. We also do that with all of our existing assets. And if they are not competitively positioned on an industry supply curve, then the organization has two options. Either we come up with an advantage investment that makes them more competitive and moves them to the left on the cost of supply curve, or we look to divest. And that process has been ongoing across all of our businesses. And then obviously, the timing of when we then take action is a function of realizing the value that we think those divestments should bring. And we're patient. We're not going to rush that process. But I would just say staying after it, being very steady, waiting for the market to meet, to be where it needs to be in order for us to reevaluate it has paid off significantly. And basically, we're delivering on what we said we were going to do, and we'll continue to look at it. But I don't see any big step changes here in the medium-term.

Kathy Mikells, Senior Vice President and CFO

And the only other thing I'd note, Neil, is you can see in our cash flow bridges every quarter.

Doug Leggate, Analyst, Wolfe Research

Doug.

Kathy Mikells, Senior Vice President and CFO

Sorry, I'm sorry, Doug. I'm sorry. But you can see in our cash flow bridges, we're pretty consistently every quarter bringing in more proceeds from the divestments that are occurring. You know, in the first half of the year that was $1.6 billion. And then I would just note we had a lot of activity in Upstream. And so that generated some positive earnings for us in the quarter. And so if you look at my prepared remarks, you know, that we published earlier this morning, I talk about sort of $380 million in the Upstream being kind of these other one-off items. And that was a lot of earnings coming in from divestments only partially offset by the one-off cost associated with Pioneer.

Doug Leggate, Analyst, Wolfe Research

Terrific, it would have been worse if you'd called me Jennifer Kathy, but thanks so much. I appreciate it.

Kathy Mikells, Senior Vice President and CFO

Yeah, good appreciate that. Sorry about that Doug.

Jim Chapman, Vice President, Treasurer and Investor Relations

Doug, congratulations on the new shop, the new platform.

Doug Leggate, Analyst, Wolfe Research

And to you, Jim. Thanks so much.

Operator, Operator

The next question is from Devin McDermott with Morgan Stanley.

Devin McDermott, Analyst, Morgan Stanley

Hey, good morning. Thanks for taking my question. So Darren, you had a lot of good updates in your prepared remarks on some of the low carbon initiatives. There's been a lot of progress there, it seems, over the past few months and quarters, which is great to see. And I think back to the corporate plan you laid out late last year, this is a growing wedge of your overall capital spending in each of the next few years. So I was wondering for some of these investment opportunities, and more about what milestones you're focused on to actually start allocating more capital to these areas. So what's needed to make final investment decisions on Exxon's low carbon solutions or move forward with carbon materials or build the scale you talked about in lithium production? Is it more commercialization offtake, technology development, regulatory clarity, something else?

Darren Woods, Chairman and CEO

Sure. You were a bit hard to hear there, Devin, but I believe I understand your question. If I'm off, please redirect me. Your inquiry pertains to what is necessary for us to continue our investments in low carbon solutions across our product portfolio. Fundamentally, we anticipate that our low carbon businesses, including new products, not only need to contribute to a lower carbon future but also must provide significant value in their current applications. They must compete effectively and offer advantages over existing solutions while generating solid returns through commodity cycles. This foundational philosophy applies to both our core and new businesses. Each of these endeavors, particularly Dan Ammann’s projects, must meet this initial standard. The specific challenges to achieve this expectation can vary. For example, Dan's team is starting a new business in carbon capture and storage, which requires developing technology, infrastructure, logistics, and market demand, along with advocating for initial policies to stimulate growth. Many in the industry may not fully grasp how complex this process is. However, we are leveraging decades of experience in other areas of the company, especially in Upstream, which is helping us make significant progress. Regarding the blue hydrogen project, as we've advanced through engineering, we have a clear understanding of what it can achieve. A key factor is the translation of the IRA legislation into final regulations, which is still in process. We are hopeful that the regulations will align with the legislative intent, allowing us to finalize our investment decisions once they are confirmed. I am optimistic in this area. Recently, we've added another 500,000 tons of carbon capture and storage to Dan's portfolio, and the team is actively pursuing more opportunities and growth with promising returns in carbon capture. In lithium, although it's a well-established market, it remains small compared to its full potential. We are introducing a new production method utilizing innovative technology, and we are carefully assessing necessary investments to secure a competitive advantage aligned with growing demand. We are not rushing these initiatives; our focus is on building a strong long-term foundation. None of our new projects are driven by urgency. I also want to briefly discuss Proxxima and Carbon Ventures, which aim to leverage our technical expertise to create new molecules for existing markets with unmet needs. We are seeing strong progress with Proxxima, where we face high barriers to entry and enjoy competitive advantages, and I am eager to advance this business rapidly due to its potential. Similarly, Carbon Ventures focuses on transforming molecules and enhancing performance, presenting significant opportunities. While it's still early in the technology cycle for Carbon Ventures, we've made sufficient progress to recognize its potential. The challenge I've set for the Product Solutions organization is to develop a realistic yet ambitious business plan along with the necessary investments to realize that plan. This approach not only adds value today but also positions us well for the future as traditional applications for these molecules decline. Overall, there are many variables at play, but we are comfortable managing them, and our progress reflects our capability to do so.

Devin McDermott, Analyst, Morgan Stanley

All right. Thanks Darren. I appreciate all the detail.

Darren Woods, Chairman and CEO

Thank you.

Operator, Operator

The next question is from John Royall with JPMorgan.

John Royall, Analyst, JPMorgan

Hi, good morning, thanks for taking my question. So my question is on the CapEx guidance update. We see that you moved the legacy CapEx up to the top end of the prior range, and then obviously, you layered in Pioneer as well. But can you talk about the drivers of the legacy CapEx bumping up to $25 billion for the year?

Darren Woods, Chairman and CEO

Yes, good morning John. I'll begin and then let Kathy add to it. The reason we provided a range for CapEx is that we develop these plans starting around this time of year and finalize them in October. There are many factors that evolve from the middle of last year to this year. This range is not intended for you to pinpoint a specific number. It indicates that we have flexibility. As circumstances change, we may cut back on spending or, if opportunities are materializing as anticipated, we might reach the higher end. The range reflects where we believe we will be based on how things progress and what opportunities arise. Our main focus is to invest in highly beneficial and profitable projects. As we transitioned from October of last year into this year, we identified numerous attractive opportunities to invest in, supporting the upper end of the range, in line with our understanding of potential opportunities during last year’s planning process. That is why we are targeting 2025. Additionally, we're incorporating the Pioneer figures into this. Kathy, would you like to add anything?

Kathy Mikells, Senior Vice President and CFO

No, I would just say, obviously we have a lot of projects coming online in 2025 and the exact pace of all of those. And therefore, making sure that we provided sort of enough room, I would say, in the initial guidance supporting all of those projects that are coming online in 2025. We can't pinpoint, predict all of that as we put our plans together for the year. And so just as an example, China 1 is a huge project. It is going to be coming online early next year as an example. So there is always a little bit of give and take, which is why we give the range to start with.

Operator, Operator

The next question is from Jason Gabelman with TD Cowen.

Jason Gabelman, Analyst, TD Cowen

Hi, good morning. Thanks for taking my questions. I actually wanted to follow up on the 2025 project startups that you just mentioned, and thanks for a little bit more detail on the China chemicals complex. But as I look to the other projects coming online, I think the largest earnings contributors include the Permian crude pipeline and then in the Upstream, Golden Pass and then the next Guyana boat. So I was just wondering if you could provide a little more color on those projects in terms of how they're progressing and kind of phasing through the year? Thanks.

Darren Woods, Chairman and CEO

I would say that, in line with our plans, all projects are progressing as expected, except for Golden Pass, adhering to the development timelines and the previously announced dates. We feel very positive about the work we're doing and the expected benefits, returns, and earnings from these projects. We prioritize ensuring that these projects can compete in various market conditions when they come online, rather than trying to predict the market cycle. Our investments since 2018 have shown strong aggregate returns, even during down cycles in the Chemical business. This reinforces our belief that the time invested in ensuring project advantages is worthwhile. Additionally, our global project organization continues to execute the portfolio effectively, maintaining costs within the planned basis and generally progressing faster to create value sooner. Kathy?

Kathy Mikells, Senior Vice President and CFO

Yes. And I would just note, especially a big year for our E&PS business. So I already noted China 1. You noted a couple of projects. I mean, the Singapore resid upgrade project is a pretty big project. We have an upgrade project at Fawley in order to bring on ultra-low sulfur diesel. We've got the Strathcona project for renewable diesel coming online in 2025. So a really big year for the E&PS business in terms of the number of projects we have coming online. And then we're going to continue to expand our advanced recycling. So we'll be adding more capacity as well next year. So we noted, again if you look at our IR slides, we talk about projects being a big driver of underlying earnings growth in the E&PS business, and you see that supported by everything coming on in 2025.

Operator, Operator

The next question is from Biraj Borkhataria with RBC. Your line is open. Please go ahead.

Biraj Borkhataria, Analyst, RBC

Hi, there. Thanks for taking my question. Just wanted to follow up on Jason's question, and more specifically on Golden Pass. So I guess, at this point, are you able to confirm, update the scheduled guidance for the start-up? And then the second question is just going to some of your prepared remarks. If I think about your Upstream portfolio, a lot of your growth is liquids or liquid prices linked to LNG. I think you say 80% of your Upstream is now linked to liquid business. So I was thinking, as you're building out your LNG portfolio and your trading function, is there any desire to diversify that sales mix a bit more? Or is this intentional on where you want to be? Thank you.

Darren Woods, Chairman and CEO

I'll start by addressing the last part of your question, which is that our focus on liquid prices is a deliberate decision. Looking at the LNG market, when initiating large LNG projects, we typically secure sales contracts before making significant investments, and currently, those contracts are linked to oil prices. We aim to lock in a substantial portion of those projects to ensure we have sales stability as we develop them. I expect we will continue to focus on this strategy, and we are comfortable with it. Since I took on this role, there has been a strong push, including bringing Neil into the Upstream, to adjust the portfolio to have a heavier emphasis on oil. As I discussed on CNBC this morning, we are producing more oil now than at any point since the merger of Exxon and Mobil, which indicates that our strategy is starting to show results. Regarding the Golden Pass project, we recently reached a settlement with Zachry, and the venture is in the process of restaffing and getting back on track. We are still in the early stages, so there is more work ahead. The teams are focused on resuming effective execution and delivering the project as quickly as possible and as close to the original schedule as they can. Currently, we estimate about a six-month delay. We had anticipated starting LNG production in the middle of next year, but we now expect it to be at the end of 2025. However, this timeline is subject to the team's efforts to get back up and running, and I believe they will work to achieve better results than what we project, but there is still work to do.

Biraj Borkhataria, Analyst, RBC

Yeah, understood. Thank you very much.

Darren Woods, Chairman and CEO

Thank you, Biraj.

Operator, Operator

The next question is from Stephen Richardson with Evercore.

Stephen Richardson, Analyst, Evercore

Hi, thank you. I was wondering if you could circle back. I appreciate all the conversations about the projects and projects execution and how you've got a number of really important and interesting projects coming on in the Downstream in short order. Just wondering, you've added seemingly quite a bit of length to your Upstream portfolio over the last number of years. And as you think out beyond '26, '27, Darren are the teams continuing to bring you new and interesting projects in E&PS? And do you think continuing that kind of pace of integration out in the plan horizon is still interesting? Maybe you could just talk about that in terms of the investment mix and the opportunities and maybe address E&PS and chemicals as well.

Darren Woods, Chairman and CEO

Sure, I appreciate the question, Steve, because you brought up an important point. One of the benefits of our restructuring is that we no longer associate our business solely with the products we produce. In the past, our functional organizations operated separately—one for refining products, another for fuels marketing, and one for chemicals. Now, we have unified these into a Product Solutions organization, supported by a technology team that focuses on core technical capabilities rather than our legacy products or businesses. This structural change has opened up many new opportunities. The challenge is to leverage our core strengths, including our existing infrastructure, to identify value and applications, while applying our technology to business challenges and opportunities. This approach is revealing new applications that weren't visible before due to the old organizational structure. Now, our scope is broader, and the opportunities are expanding, as seen with Proxxima and Carbon Ventures. Moving forward, we will continue to explore these markets and develop new applications. Our technology team is tasked with finding innovative ways to manipulate molecules, particularly hydrogen and carbon, to create products that meet societal needs while reducing emissions. I believe this team has the authority to pursue initiatives that will enhance our value and earnings. Beyond 2027, we expect to keep identifying new opportunities through both our Product Solutions and technology organizations, allowing us to build projects at scale and at lower costs than others. This combination positions us for success well into the future. Additionally, this strategy applies to our Product Solutions organization, which includes our chemical and specialty portfolios, as well as our energy portfolio that will serve as future feedstocks for our Carbon Ventures and Proxxima ventures. On the Upstream side, there is significant growth potential as we approach the latter part of the decade. Recognizing that this is a depleting business, our organization continues to plan beyond 2027 and 2030 to ensure we maintain a strong pipeline. I’m optimistic about our current direction, and I believe the way we’ve organized our businesses and centralized support will yield significant benefits in this space.

Operator, Operator

The next question is from Roger Read with Wells Fargo.

Roger Reed, Analyst, Wells Fargo

Yeah, thank you. Good morning. Since you all have probably the most geographically diverse set of operations of anyone we cover, I was just curious about the most recent news this morning, shows maybe a few cracks in the economy. If you could kind of give us an idea as you look across the products in the chemical side, thinking that's where we really see the demand parts, what you are seeing kind of, let's say, China back around to our side of the globe?

Darren Woods, Chairman and CEO

Good morning, Roger. The key takeaway I want to emphasize is that when considering pricing and margins, there are two main components to focus on: demand and supply. Starting with the chemicals sector, we are observing a return to growth levels that align with pre-pandemic figures, which is around 1% to 2% above GDP. This trend is evident in the first half of this year. The margin challenges in this business stem largely from the supply side, as there is a significant amount of capacity that is either coming online or expected to come online soon. Therefore, it's primarily a supply issue rather than a demand issue, with an influx of supply anticipated in the short term. Historically, the chemical industry faces hurdles when considerable capacity is added at once, requiring us to efficiently manage through that new capacity to restore margins. This focus on maintaining a low cost of supply, securing feed advantages, and developing high-performance products is crucial to gain an edge beyond the commodity cycle, which is reflected in our chemical business earnings that exceed expectations despite challenging market conditions. China's growth is steady, though not accelerating like it did in the past, yet it remains robust. In the US, we are experiencing reasonable economic growth as well. Europe seems to be the most strained region globally, and unfortunately, the policies being implemented there are likely to create further challenges for the economy, impacting the residents. Meanwhile, China is performing well, India is thriving, and the US is showing reasonable growth. Demand for petroleum products remains incredibly high internationally, setting records. The supply is also improving, bringing margins back to more typical levels after the elevated margins we saw last year and in the first quarter. While predicting the timing of these changes can be tricky, we were aware that the high refining margins we experienced would eventually normalize. Looking ahead, I expect to see historical volatility in margins, with periods of spikes and drops. However, we have designed our refining operations to withstand these fluctuations. Our efforts to refine our portfolio have led us to eliminate several low-margin refineries, allowing us to concentrate on integrated refineries that produce high-value products and benefit from scale and cost advantages. Regarding oil demand, it continues to reach record levels, with last year marking a high, and we predict this trend will continue into the next year. The main challenge will be managing the supply that accompanies this demand, particularly due to developments in the Americas. Similarly, gas demand is on the rise, again linked to the new capacity being introduced. The silver lining is that the industry is responding well to demand, which aligns perfectly with our strategic goal of maintaining low supply costs. Thank you, Roger.

Operator, Operator

The next question is from Josh Silverstein with UBS.

Josh Silverstein, Analyst, UBS

Thanks good morning, Darren and Kathy. You continue to make good progress on the cost savings front. It looks like there was an uptick of about $600 million sequentially. It looks like you've called out kind of a $200 million turnaround savings in energy products. Just wanted to see if you can provide some more examples of what's driving the improvement and how you take the current kind of $10.7 billion to the $15 billion over the next few years. Thanks.

Kathy Mikells, Senior Vice President and CFO

Great. Thanks very much for the question. And so, you're right. If we look on an after-tax basis, we had about $600 million overall on a pre basis for the year-to-date where our structural cost savings is about $1 billion. So making really good progress. Continuing to optimize maintenance is a big driver of overall savings. We gave a number of $200 million in energy products in terms of my prepared remarks. And that was just noting that, in the half we had a particularly heavy turnaround slate. And if we looked back at that same turnaround slate the last time we did it, we did it much more quickly and we did it at lower cost. Hence the $200 million savings number that you mentioned. We are also obviously driving savings in terms of supply chain and looking to get more efficient there. And all of our centralized organizations which we've kind of stood up over the last couple of years, are really responsible for driving savings into the business. So whether that's global business solutions or whether that's supply chain, or our global operating and sustainability group, who works on our maintenance activities, we are really starting to see the uptick from the benefit that those organizations can bring, by simplifying things and standardizing things, and bringing better data analytics to optimize our overall organization. So that's what you're going to continue to see on a go-forward basis. And then I’d say, longer-term, as those centralized organizations start to standardize processes for the company which are quite disparate, as we sit here today, we'll be able to apply more technology to get, I’d say, even more automated in the things that we do which will drive further efficiencies for us long term. So whether it is getting more efficient on logistics or getting more efficient because we're standardizing now between ourselves and Pioneer, standardizing all the materials and things that we're buying, those are the things that will continue to drive savings. And I think we have both the largest program, by far of anybody in the industry and now a very proven track record that we feel quite good about typically over delivering on the initial plans that we developed. So we are feeling good about the progress we're making, and that overall target to get to $15 billion in savings between 2019 and 2027.

Darren Woods, Chairman and CEO

Yes. I want to emphasize that for the first time in our company's history, we have organized ourselves to focus on every aspect of delivering our business, regardless of what that business entails. We are examining where the synergies exist and leveraging the collective experience and expertise across the corporation to concentrate on various opportunities. The size of our business provides us with a significant advantage. The improvements you are observing are a result of applying the best ideas from around the organization globally and utilizing them consistently wherever they are applicable. This process is occurring repeatedly, showcasing a unique capability that others cannot replicate. The benefits are evident in structural cost savings and also on the revenue side through enhanced marketing and sales strategies. Overall, the changes we are implementing are yielding substantial benefits.

Operator, Operator

We have time for one more question. Our final question will be from Bob Brackett with Bernstein Research.

Bob Brackett, Analyst, Bernstein Research

Good morning. I'd like to paraphrase a comment Darren made, that lithium complexity is misunderstood by the industry. And I'm intrigued, is that a comment around the marketing and the relative use of the Downstream side? Or is it a comment around maybe the Upstream and the complexity of processing?

Darren Woods, Chairman and CEO

Good morning, Bob. Yes, I meant to convey that my comment was about the broader low-carbon solutions business. Each segment has its own complexities. Specifically for lithium, it's a new technology that integrates established subsurface and above-surface methods, along with our processing experience in refining and chemicals. Combining these aspects to create a product does present complexities, but they're not beyond understanding. The main challenge lies in establishing completely new value chains. For instance, the carbon capture market currently lacks an established framework that pays for carbon removal, supported by government policy. While that policy is developing, we also need to build the necessary infrastructure, logistics, supply, and customer base. The complexity in low-carbon initiatives is significant due to these various moving parts, and we aim to create a sustainable business model that yields competitive returns. Fortunately, we are equipped to handle this work, as our experience is beneficial in this context. Dan and the team are leveraging our core capabilities and making substantial strides. On the hydrogen front, we still lack a robust market for low, nearly carbon-free hydrogen, which is currently relying on government incentives. Our goal is to cultivate a market-driven approach, moving away from dependence on subsidies. Despite these challenges, there’s considerable optimism surrounding low-carbon businesses overall. However, much of the progress so far has been within the well-established wind, solar, and electric vehicle markets. These sectors are entering established markets. In contrast, we're working to create entirely new markets with some of our initiatives.

Bob Brackett, Analyst, Bernstein Research

Thanks very clear. Thanks for that.

Darren Woods, Chairman and CEO

You bet Bob.

Jim Chapman, Vice President, Treasurer and Investor Relations

Thank you, Bob. And thanks, everybody, for joining the call and for your questions. We're going to post the transcript of this call to the Investors section of our website by early next week. But before we wrap, I want to draw your attention to a couple of topics. First, a reminder. Later this month, we will be issuing our Annual Global Outlook, which includes our latest views on energy demand and supply through 2050, and which forms the basis for our business planning. And second please mark your calendars for our Corporate Plan Update and Upstream Spotlight, which is going to be a Wednesday, December 11. And for more information on that, again please see the Investors section of our website. So with that, have a nice weekend, and I'll turn it back to the operator to conclude.

Operator, Operator

Thank you. This concludes today's call. We thank everyone again for their participation. You may disconnect at this time.