Good day, everyone, and welcome to this Exxon Mobil Corporation Fourth Quarter 2017 Earnings Call. Today's call is being recorded. At this time, I would like to turn the conference over to Vice President of Investor Relations and Secretary, Mr. Jeff Woodbury. Please go ahead.

Thank you. Ladies and gentlemen, good morning, and welcome to Exxon Mobil's fourth quarter earnings call. My comments this morning will refer to the slides that are available through the Investors section of our Web site. Before we go further, I'd like to draw your attention to our cautionary statement shown on Slide 2. Turning now to Slide 3, let me begin by summarizing the key headlines of our 2017 performance. Exxon Mobil earned $8.4 billion in the quarter, bringing year-to-date earnings to $19.7 billion. Our cash flow from operations and asset sales exceeded our dividends and investments for the year by more than $1 billion. We continue advancing attractive opportunities across all our business segments. In the Upstream, we closed the Mozambique Area 4 acquisition and we made our sixth discovery offshore Guyana. I’ll share for more detail about these items and others later in the discussion. Included in our results is a non-cash earnings gain of $5.9 billion resulting from U.S. tax reform. This reflects the magnitude of Exxon Mobil’s historic investments in the United States. These investments have created large deferred income tax liabilities which when revalued at the new tax rate results in a one-time non-cash benefit to earnings. The deemed repatriation tax on foreign earnings is not significant to Exxon Mobil as we have paid taxes on non-U.S. earnings at tax rates above 35% on average. Partly offsetting this earnings benefit is $1.3 billion of fourth quarter asset impairments in the Upstream. These impairments are primarily related to non-producing assets in Canada and dry gas production operations notably in the U.S. Gulf of Mexico. Moving to Slide 4, we provide an overview of some of the external factors affecting our results. Overall, the global economy experienced moderate growth in the quarter. Estimated GDP growth for…

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

Good morning, everybody.

Good morning, Doug.

Jeff, returns in Exxon Mobil’s Downstream business were sustained at really high levels in decades past and you guys still lead almost every global peer from what I can tell. Simultaneously in the Upstream, while the company is rightfully enthusiastic about its Permian business as indicated by your recent guidance in that area and some of your slides today, returns elsewhere in the Upstream declined fairly meaningfully in recent years and they appear to be in need of remediation. So while your peers have the same problem, several of them have provided plans for improvement and time periods of which they expect to improve their performance. So, my first is that with the Analyst Meeting coming up, why wouldn’t a company specify an improvement plan for Upstream since it’s around 80% of corporate capital employed and it’s probably the driver of Exxon Mobil stock which is obviously really important to you guys? And then second, do you think that Exxon Mobil’s emphasis on the industry-leading financial performance rather than an absolute return target better serve shareholders when considering that a lot of your peers had declining returns over kind of the last decade or so? So it’s two questions but it’s really on the same topic.

Doug, on the first topic, the real objective for the corporation as you know is to very clearly make the investment case that of our growth prospects and the fundamental mission of creating long-term shareholder value. We are going to detail out in the Analyst Meeting the value proposition that we see. As I said, we have an aggressive growth plan across all three business segments. We’ve got three world-class businesses that have very robust portfolios that we are going to fully leverage to go ahead and lay out that value proposition over the long term. So I certainly acknowledge the drop that we’ve seen in the Upstream business and the return on capital employed and I think we’re going to lay out a growth plan that’s going to demonstrate where we’re heading in not only to enhance the Upstream return but furthermore continue to build in the Downstream and Chemical businesses which I think you recognize are very important to the corporation as a whole given our independent business model.

Well, I think that would be great. Sorry, Jeff, go ahead.

Go ahead, Doug.

I was just going to say, well, I think that would be welcomed and rewarded in the market. More specifics, the better obviously but I didn’t mean to interrupt you.

Yes, and just following up on the last part about the return on capital employed, I think we’ve talked in the past that that remains a key objective for the corporation. I know there’s a lot of interest about our capital investment program. I think we’re going to demonstrate the quality of the portfolio and that our shareholders are best served for us to continue to invest to capture that value.

Okay. Thanks a lot, Jeff. We look forward to it.

All right. Thanks, Doug.

We will take our next question from Doug Leggate from Bank of America Merrill Lynch.

Thanks. Good morning, everybody. Jeff, I wonder if I could start by taking you back to the cash flow. I understand you tried to walk us through some of the moving parts, but oil up quite nicely in the quarter and your cash flow is flat it looks like on an underlying basis. Can you walk us through whether there’s any unusual situations going on in there whether it’d be hurricane related or cost or anything like that? It just is kind of hard to explain why the cash flow is as light as it was and maybe explain a little better on the working capital move?

On the cash flow, as I explained in the prepared comments, Doug, the big impact is obviously in the working capital and other and that was primarily driven by the U.S. tax reform. There were other less significant changes to the deferred tax balances that impacted cash flow. As I said, in that cash flow we had assets sales of about 1.5 billion largely associated with some of our Norwegian divestments in our operated Upstream and our retail sector.

Sure. So I’m thinking more of the ex-asset sales number, I don’t want to belabor the point, but just to be clear. So if it’s largely nonrecurring, you’re underlying cash flow then would have been closer to 13 billion, is that right or am I missing something?

Yes, I’m not sure how you’re coming up with that calculation, Doug, to be able to comment on it.

7.4 plus the 6.5 basically. Working capital draw 6 and change and your underlying was you reported 7.5 ex the asset sales. Am I wrong?

Yes, remember the earnings include the upwards associated with the U.S. tax reform. You got to back that – that’s what’s happening in the cash flow analyses. You’ve got $5.9 billion in U.S. tax reform benefits in the earnings and then in the working capital and other you’re backing that out to come out with the cash.

Okay. So that’s really the roots of my question and so if I look at ex all that out, you’re underlying cash flow was flat sequentially on a significant increase in oil price. What’s going on?

When you look at overall unit profitability, it remains strong on the assets. We had a number of one-time effects in our portfolio that I talked about in my prepared comments that lowered the overall – in fact in several of the segments that lowered the overall earnings in that quarter.

Okay. I’ll take it offline and maybe go in more detail. Let me try one final one if I may and it’s on the increase in the rig count. So the chart you’ve shown I think is the same chart you’ve shown multiple times before. But you have, if I’m not mistaken, taken the rig count up. So why are we not seeing any increase in the production guide?

Doug, you’re talking about the Permian and Bakken now?

Yes. So I think you talked about 30 rigs by the end of '18 previously and now you’re talking 36.

Yes. So as you can see from the display, you can see that we are tracking in the guidance that we provided. We did have a bit of downtime in the fourth quarter associated with weather notably in the Bakken and you can see that in the variation on the red line that’s tracking. We’re doing well in terms of working off the ducts [ph] that have built up. And I think we’re right on our plans in terms of ramping up.

All right. I’ll wait for the Analyst Day. Thanks.

We will take our next question from Paul Sankey with Wolfe Research.

Hi, Jeff. Jeff, can I just follow up on Doug’s question about working capital? Can we just have the working capital number alone?

Working capital number alone --

For the shift in the quarters. Sorry.

Yes, the working capital alone in the quarter is just $200 million.

And that’s the amount of working capital or the change – what we’re trying to get to is the sequential --

I’m sorry.

So basically – so to further what Doug Leggate said, the sequential cash flow is essentially flat.

That’s right.

Okay. Thanks. If we could go on just to your volumes, I can imagine that the 40s impact was significant on oil in Europe. I would assume that the African problem in terms of declining volumes was PSC effects in Nigeria maybe. We’re also seeing some weakness in Asia. These are all liquids questions, Jeff. Could you just run around the world and kind of give us the reasons for the issues in the liquids volumes? Thank you.

Yes, if you look at the quarter-on-quarter volumes, you’ll see that it’s really broken up into three key components, which is taken by thirds – about a third of it is associated with PSC effects driven by the higher prices. The second third is associated with asset sales. And on the liquids side that is all associated with our sale of our operated assets in Norway on Upstream. And then the last third is primarily associated with a base decline in our portfolio offset by project and work program build up.

That’s great. Thank you. My final question is, Jeff, there’s a lot of press around $50 billion of spending which you’re going to make in the U.S. It wasn’t quite what was written in downwards press release. I think it was a blog post that you guys put out. I wasn’t sure – and it was kind of not by Darren but by everyone else was kind of tied to the tax reform that we’ve seen here in the U.S. Can you just talk a little bit about how much incremental capital in the U.S. you’re going to spend as a result of the tax changes and sort of if you could annualize the number, it would be helpful just to get a small clarity on your spending over the coming years? Thank you.

There’s a couple of elements to what you’re talking about. One is the 50 billion that we had projected in the U.S. over the next five years, let me give you a little bit color on the 50 billion. About two-thirds of that is in the Upstream portfolio. As you would anticipate, a lot of that is in our unconventional activity. The rest is split fairly evenly between our Downstream and our Chemical portfolios. If you look at the quality of those investments, as you would expect they’re very robust in the Upstream unconventional business and the rest of the conventional work program generated greater than 10% return on investment at a $40 flat rail. The Downstream and Chemical investments are 15% to 20% plus. So that’s kind of the forward definition of the anticipated spend in the U.S. over the next five years. Think about the overall U.S. tax reform and the way I’d characterize is the following that we clearly believe that the reform will make the investment climate more attractive. It will lead to things like capital inflow, group profitability, new jobs, ultimately higher returns for savings plans. The same is true for Exxon Mobil and we believe the changes will help strengthen our investment plans. The 50 billion that we’ve talked about is a projection. We haven’t made a decision to move forward with those investments at this point, but certainly the U.S. tax reform is going to strengthen and build that investment confidence. So really what the message was just one of we’re encouraged by an improved competitive positioning within the U.S. for an investment climate. We’ve got 50 billion that we’ve got projected going forward. We’ve got some other projects that are on the table that are not in the 50 billion that we’re – in light of the current tax basis, we are going to step back and take a look at. So other than that, I don’t have any other specifics to break out specific dollars associated with incremental expenditures on the U.S. tax reform.

No, but that was helpful. Thank you, Jeff.

Thank you, Paul.

We will take our next question from Phil Gresh with JPMorgan.

Hi. Good morning, Jeff. My question is a follow up to Paul’s just around the production. I appreciate the color around the thirds breakout. If you look at the base plus projects piece, it’s about a third that looks like that would be about down 1% year-over-year. I’m wondering how you feel about that performance in 2017 and how we should think about 2018 specifically? Obviously there were projects coming out in '17 but there are also maybe some one-time factors in 2017. So is that something that you’d expect to grow in 2018, given that the other two pieces could be a little bit more nonrecurring?

Yes, good question, Phil. Let me take the prior discussion from a quarter-on-quarter dialogue to a year-on-year. And if you look at the year-on-year volumes, down 2% overall. Liquids is primarily driven by entitlement effects, price effects and divestments. Liquids is actually up in everything in the rest of the variables. So as we think going forward, a key driver for our volumes and we’ve detailed for you is the unconventional growth program. We’ve got some projects that we still expect to start up in 2018. But more specifically as we sit down in the Analyst Meeting next month, we’re going to lay out what that looks like in terms of volume growth.

Okay. The essence of the question was, you generally have expected 4.0 to 4.4 have long-term range and you came in below that. So I was trying to think through 2018 specifically realizing you’ll give more longer term color later.

Yes. Let me just clarify your comment. When we gave that range, it was ex asset sales and entitlements. So my point being is, is that if you look at 2017 to 2016 reconciliation, the deviation is primarily or is all in those areas.

Sure. Okay.

Simply put, higher prices drove the volumes down and we went ahead and monetized some assets that we thought we can get greater value from on the market as opposed to continuing operations. Again, as we go forward we’re going to go ahead and detail that out as to what our current views are in terms of our investment program and how that will impact our volumes.

Okay. My second question was just on the capital allocation. I think some investors were hoping that perhaps you would announce a buyback for 2018 given the strength of the balance sheet and the higher oil price environment? And I know Exxon generally views it as a flywheel. But given your capital spending number for 2018, it would seem like you would have some potential room to do that if oil prices hold where they are. So just if you can update us conceptually and how you think about that?

Yes. So, Phil not – we haven’t changed our view on how we manage our capital allocation. First and foremost is that we’re going to continue to invest in attractive opportunities that are accretive to our overall financial performance. As we’ve said many times and as I said today, we’re going to maintain our commitment to a reliable and growing dividend. And then with excess cash, we’ll decide whether there are more opportunities that we can invest in or do we go ahead and return that to the shareholder via buyback program. And we think about that on a quarterly basis. We look at a number of factors to assess whether we want to go ahead and buy shares or we want to pursue some additional opportunities. But I think the underlying message in what I’m trying to convey is that we have a very attractive investment opportunity and we really do believe that we can generate a better shareholder return by pursuing these investments if they’re ready to go ahead and be funded. But like I’ve said before in the past that we’re not going to hold large cash reserves and if we don’t have immediate use to put that to work, we will go ahead and purchase some shares back as a means for shareholder distributions.

Okay. Thanks, Jeff.

Thanks, Phil.

We will take our next question from Neil Mehta from Goldman Sachs.

Hi. Good morning, Jeff.

Good morning, Neil.

Jeff, can we talk about the $24 billion 2018 capital spending? The previous number was around 25, so it shaved lower. Is that just a function of deflation? And historically there’s been a couple billion dollars of M&A-related capital spending in there. So any color in terms of how we should think about what that organic CapEx level is? And then if you could just juxtapose that against whatever 2017 organic CapEx was ex-acquisition just to help us frame the bridge from '17 to '18 spending?

Yes, sure. So as you know there was a fair bit of inorganic CapEx in 2017. And if you look at the build from 2017 to 2018 just ballpark numbers, you’re talking about a $5 billion to $6 billion increase in organic – total CapEx in organic activity. Now I will highlight that there is some inorganic funds in that 2018 which is associated with the payments for the farm-in in Brazil for the North Carcara field. So what does that increase represent? It really represents – the lion share of it is in the Upstream business. Again, mostly it’s associated with the unconventional work program and some conventional work program across our global portfolio. As I indicated before when we were talking about the five-year projection of $50 billion, that is a very attractive investment. We’ve got – at a low price forecast we’ve got returns in excess of 10% with a $40 per barrel flat rail. I would tell you the investment plan is optimize to achieve attractive returns even in a low price environment. And the plan includes – it does include some investments to maintain our license to operate as well as investments that have attractive future potential. But the lion share of that increase year-on-year is associated with more short-cycle investment that is highly attractive even in a low price environment.

Got it, Jeff. And the follow up and you and I talked about this last month, but how you’re thinking about M&A in this environment, whether it is – when you think about where you see value as a company? Is it still in the private market or how do you think about the public market as well? Historically, the message has been that the value has been more on the private market.

Yes, really no fundamental change. We’re not going to filter out potential opportunities. We’re going to keep a wide brief and make sure that aperture is wide open. And if there is something that we can identify that could effectively compete with our existing inventory investment opportunities, well then obviously it makes a lot of sense for the corporation to go ahead and pursue it. But to-date, as you’ve seen, they’re probably much more focused on assets that we see synergistic benefits with our existing operations as well as where we bring a capability where we can get additional value for the assets and what the market maybe valuing it at. And I would highlight for the group that if you look at what we did over 2017, we did a nice job in taking full advantage of the market conditions and picked up some high quality, very competitive opportunities that has really positioned our portfolio even in a stronger state than it was historically. And that’s part of what we’re going to be talking about in the upcoming Analyst Meeting.

All right, Jeff. Thank you.

You’re welcome.

We will take our next question from Ryan Todd with Deutsche Bank.

Great. Thanks. Maybe a couple questions on LNG. You have a little bit in there in the presentation on Mozambique. The deal is closed. You suggest that it could be upwards of 40 megatons a year which is a big capacity. Can you talk a little bit about how you think about long-term development of the assets there, the timing of the development path there in Mozambique and maybe what – is the assumption that you would supply all of the relevant gas from Area 4 or would you look to bridge that with Area 1 as well in the region there?

Ryan, as I said, a very high quality. We believe it’s well on the left side of the cost of supply curve. So it’s going to compete very well in the market. A very substantial resource, over 85 trillion cubic feet in place. And there’s clearly synergies to be had between Area 1 and Area 4. We just closed the deal. We’ve got an engagement with all the partners to lay out the forward development schedule. So it’s really too early for us to convey specifics in terms of what program in the timeline, but I can tell you that this is going to take a central focus on our development planning efforts to make sure that we’re getting at it just like you’ve seen us do in other places like Guyana and Papua New Guinea. And then on top of that you’re probably aware that we have exploration acreage in the area that we’re also progressing concurrently that has some really high prospectively. So I’ll leave it there.

And maybe as a follow up on LNG, with – I don’t know if we’ve talked about this in the past, but with Mozambique not closed, you have additional appraisal success there in PNG. Golden Pass LNG was always kind of in the hopper at some point as well. How do you think about – and it feels like the environment is improving from a gas, sales and contracting point of view. I guess first is, is that true? And then how do you think about the timing of the relative priority of these LNG projects? And is it necessary to stagger them or would you actually see benefits in proceeding with multiple LNG projects simultaneously?

Let’s start with the fundamentals. If you look at the supply/demand projection, we’ve got gas growing at about 1.5% per year between now and 2040 and we’ve got LNG growing over two times over this time period. So that is the prize that we’re working towards. Now of course in order to compete for that, we have got to have the lowest cost of supply. And you’ve highlighted two key areas, Papua New Guinea and Mozambique, we think will compete very strongly for that. Now obviously there’s a – with any LNG project, there is a very large upfront capital investment. We typically have walked in these funding decisions on long-term LNG contracts. We’ve got very strong marketing connections and a very strong reputation in the market. So we’re out there going ahead and putting in place the commercial structure. But fundamentally, Ryan, it really needs to be robust enough to underpin such a substantial investment. But we’re very positive about where we’re heading with it. We think we’re going to be very competitive with offerings that we have in both those assets as well as some others that we’re pursuing. And you’ll hear more about the details as we go into the Analyst Meeting.

Okay. Thank you.

You’re welcome.

Our next question comes from Brendan Warn with BMO Capital Markets.

Hi, Jeff. Just two questions, I guess first question on Chemicals. Can you just give us an update on the timing of your new capacity and I’d appreciate it if you can make some comments on your outlook for heading into some any other supply and just your view on margins over the next 12 months? And then my second question was just related to the 2 billion you announced in terms of additional infrastructure spend related to the Permian, is that included within the 24 billion or is it over the next few years? Can you just clarify that number for me please?

Yes. Well, on the first one in terms of our Chemical business and our investments, obviously – let me go back to the fundamentals again here. We’ve got from an ethylene demand perspective, we see ethylene growing about 5 million tons per year that will require about three to four world-class crackers per year to be started up. That is – the objective that we’ve is to compete in that space. And we’re very close to bringing our Baytown crackers online later this year. And then we’re still working the potential greenfield steam cracker development in South Texas which we add another 1.8 million tons per annum of potential capacity. But one of the advantages that we bring to that is, is not only do we have a good source of low cost advantage feed stock but we also have proprietary technologies that offer a premium product. And what I’m speaking to is metallocene polyethylene. So with that demand projection and our ability through our integration and our technology to compete, that is a significant growth area and one that we’re going to talk about next month as well. When you talk about – I think your other question was around the $2 billion that we discussed in investing in the Permian business, those are really so commensurate with the build-up of the volumes that we showed out to 2025. And there are really two components to it. One is expanding the Wink terminal. We currently have permitted capacity about 100,000 barrels a day at Wink and we’ll expand and commensurate with the growth projection than you see in the prepared remarks I gave. And then the second one is to add additional takeaway capacity and those expenditures would occur over this timeframe of about five years or so.

Okay. Thanks for the update.

You’re welcome.

Our next question comes from Roger Read with Wells Fargo.

Good morning, Jeff.

Good morning, Roger.

I guess we can – since the focus of this call the CapEx increase and I know more will come at the Analyst Day, but as you think about the 50 billion from both an Upstream and a Downstream and Chemical side, what is your – or what is baked in there in terms of a cost inflation? I just think about when we’ve seen major projects kickoff in a particular area, we always seem to get some of that. And then obviously in the Upstream side we are seeing some cost inflation on the well completion side. So maybe just kind of give us an idea of how you combat that within this big program?

Well, it’s an important aspect to make sure that we deliver on the financial performance of these investments. And when we lay out the projects and specifically individual execution plans for the investments, we’re very mindful about what can we bring to bear in order to really reduce the structural cost of these investments. And if you look over the last couple of years, I think over the last two years, we were able to reduce kind of near-term project inventory cost by about 30% down. And there’s a number of synergies that we’re picking up. We’re applying certain technologies, execution strategies and then we have built all that into our forward projection of investment notably within the long-cycle capital-intensive projects but also as you’ve seen us explain in our short-cycle business how we continue to build that learning curve going forward. So while we always got to be mindful about how these investments can create inflationary pressures, we also detail out these plans to make sure that we’ve put the right mitigators in place and we have strategies that will ensure that we can deliver on the investment expectations. So our view is that we’re going to continue to combat any type of inflationary pressures by these type of cost reduction initiatives that we’ve demonstrated over the last several years.

Okay. Thanks for that. And then kind of a follow up of some of the cash flow questions and then obviously the portfolio expansion you’ve done through the various acquisitions and investments here recently. Asset sales relatively light in '17 and I know you don’t guide a specific number for asset sales, but I’m just curious if you’re upgrading the portfolio in terms of future development, should we anticipate over the next couple of years maybe a slightly more aggressive hiving off of some of the more mature assets that are out there, especially thinking with this higher oil price potential buyers are a little more liquid?

Yes. Well, Roger, as you know, we have an ongoing asset management program that’s really designed to identify what assets we should be considering and testing the market with that in order to get greater value for monetizing them from continuing our operations. And if you look over the last five years, we’ve had – in fact from way back, we’ve had a very active divestment program, very successful divestment program. And if you look at the last five years, we’ve sold over I think it’s like $21 billion, $22 billion of assets in terms of proceeds from those sales which is about $4 billion a year. So in total, 4 billion a year has been about an average for us over an extended period of time. This year it is a little bit light compared to what we have done in the recent past. But we will continue to identify where we can get greater value and upgrade the portfolio. When you think about what we’re actually doing and why we view this asset management program as fundamental of how we manage the business is that on the upside we have a very focused exploration program and we have a targeted inorganic program and acquisition program that’s looking for opportunities that can be accretive to our investment inventory, our portfolio that upgrades the overall portfolio. And you think about things like Guyana and Papua New Guinea and the Jurong Aromatics and Mozambique assets. We’ve bought a lot of stuff at the very top of the portfolio. And concurrent with that, we’re looking at the bottom of the portfolio of things that don’t compete, assets that are late in life and we don’t see material upside and that’s what really sources our ongoing divestment program.

No, it’s helpful. I’m just interested if maybe with the churn in terms of new opportunities if that would increase sort of the churn or whatever on the mature scale of things. But it’s helpful and we’ll see you next month.

Thanks, Roger.

We will take our next question from Blake Fernandez with Scotia Howard Weil.

Hi, Jeff. Good morning. I’ll just use both my questions fairly straightforward on CapEx. For one, I just wanted to go back to 2017. I think the $23 billion number was about $1 billion above your original guidance. And I’m just trying to understand the delta there. Was that kind of activity-based or more inflation than you were expecting or maybe more M&A dollars?

Yes, Blake, it was really the last. So if you think about the 23 billion, we had a number of break-ins, but I want to make sure everybody understands that those break-ins were highly accretive to overall financial performance. And as a result, it pushed us up. But if you think just like in the Brazil acquisitions that we picked up, the bid prices in Jurong Aromatics, they both increased the CapEx well above what our plans were and the organization was able to absorb a majority of that through our ongoing blocking and tackling with capital efficiency improvements. There was some reprioritization of some capital plans. But I think the message I want to keep on emphasizing is, is that we have a robust opportunity in inventory of high-quality investments that we think will continue to grow materially long-term value for our shareholders. And as long as we’ve got such a strong inventory investment opportunity, we’re going to continue pursuing. And we’ve taken a full advantage of the down cycle in the market to capture some very attractive assets that are going to upgrade our portfolio.

Understood. I guess tying in with that, and this maybe goes back to Neil’s question, but just to understand. It seems like there’s a little bit of a shift in that. I guess your original guidance of 22 billion for '17 contemplated some form of M&A obviously, but now it sounds like going into '18, the 24 billion basically does not. So aside from the Brazil piece of it, I guess should we be thinking that any kind of M&A activity would be additive to that 24 billion? Just looking to confirm that.

Yes. So 2017 – to your point just to be clear, 2017 included although we didn’t advertise at the time, it included the Mozambique acquisition. On top of that, we picked up a number of additional opportunities as I said, Brazil and Jurong Aromatics. As you think about 2018, we always leave a little flexibility in our budget in order to pursue those type of opportunities. You want to make sure that you give yourself some room to go ahead and try to capture those opportunities when they come about. Fundamentally, we’ll go leverage our strong financial capability and balance sheet if something really big comes along and we think it’s going to be accretive for the shareholder. But going forward in the 2018 program, the only thing that is specific, that’s public is the Brazil payment for the farm-in into North Carcara which is round numbers, about $1.3 billion.

Understood. Thank you.

All right.

Our next question comes from Jason Gammel with Jefferies.

Thanks. Hi, Jeff. Jeff, you’ve been absent from Brazilian Upstream for a number of years and now a pretty massive shift all at one time into exploration development potential and strategic lines with Petrobras. Can you talk about anything that may have changed in your thoughts around Brazil or is this purely a lot of opportunities just coming up at the same time? And I’ll just ask my second question at the same time. You’ve also picked up a lot of other deepwater exploration acreage just over the last six months or so in Guyana and Mauritania and Ghana. Can you talk about how you’re looking in general at deepwater now competing on the global cost curve?

Sure. On the first one, Jason, in Brazil and I’ll certainly acknowledge that we’ve been absent – largely absent from Brazil where – I think we would all recognize has a very strong and rich resource endowment. One of the issues for us over the time, Jason, was that we’re going to invest where we believe the investment dollars are globally competitive. And as Brazil continued to evolve the fiscal reforms, it got to a point where the opportunity coupled with the changes in their reforms made it more attractive for us. And particularly if you think about some of the pre-salt acreage that we picked up, unlike some of the earlier bids, the acreage that we’ve got is covered by a concession contract and not a production sharing contract which just provides a better risk reward balance. So very pleased about the way Brazil has developed and progressed and we think we’ve got a very strong position there now. And as I alluded to previously, we’re going to be very focused to getting after it. The second question is the acreage that we had picked up around the world. It’s fairly obvious to everyone. We’re picking up additional exploration potential. Think about it this way. In terms of how we focus our exploration pursuits, it’s primarily in two key areas. One is where we can get into new play opening opportunities that we see a very high quality potential resource that would compete with global investment opportunities that we believe has a very – assuming we achieve the objectives of the exploration program, we’ll have a clear path to profitability relative to our other investment opportunities in the portfolio. The second area is where we have existing infrastructure and we see significant high quality potential that we can bring on and start generating revenue pretty quick. When you think about some of the deepwater areas that we’re in, Guyana is a great example. While we’ve had that acreage for a while, some of our technology that we’ve applied to sub-surface imaging has really positioned us well to see things that others historically had not seen there. And you’ve seen the result. We’ve got six very substantial discoveries there and the economics are very robust. At a $40 flat rail, we’re talking about double digit returns. The cost of supply for Guyana is very low. And I think we are – as with our partners are very well positioned to capitalize on it and we’re leveraging our global deepwater capabilities in doing so. But the same is true in some of these other areas in West Africa, in Cyprus, we’re looking at resources that could be very much on the low side of the cost of supply curve and can compete in a global view that maybe long on supply for a period of time.

Thanks, Jeff. I appreciate the thoughts.

All right, Jason.

Our next question comes from Biraj Borkhataria from Royal Bank of Canada.

Hi, Jeff. Good morning. Thanks for taking my question. Just had one question. On CapEx, obviously you’re increasing investment in the U.S. Could you talk a little bit about the projects which are effectively or the regions are losing competitiveness internally or moving down the priority list? I see the impairments you’ve taken are partly – it looks like Canadian gas is one of the losers within your portfolio and the impairment shows that. But any color around projects that aren’t going to have less capital going forward will be helpful.

Biraj, I wouldn’t call any area losers. You can think – rewind back over a decade and we were – the industry generally view that the U.S. was going to be declining in terms of energy supplies. And you look at – fast forward to today and look at the abundance that we’ve got. And it’s very relevant to the example that you just highlighted what’s really happened with these non-producing assets within Canada. Well, they’ve become less and less competitive as technology and learning curve benefits have continued to increase substantially the quality and quantity of unconventional resources in the U.S. So as a result we find ourselves in a circumstance where once again technology is going to continue to open up opportunities. So while there may be over certain periods of time maybe areas where you see resource potential or investment dollars declining, I just never short the full potential of technology and what it can bring to additional investment opportunities. As we were just talking per Jason’s question, you see that we’ve got a lot of exploration focus in some of these deepwater areas. Again, we’re trying to fully leverage the full capability of Exxon Mobil’s unique strengths in doing so. But we keep a brief across the whole global portfolio to see if there is anything new that’s coming up. And you’ve seen us going to some places after many years of absence and being very successful there.

Thank you. That’s helpful.

Our next question comes from Paul Cheng with Barclays.

Hi, guys. Good morning.

Good morning, Paul.

Jeff, a number of real quick questions. Do you have any – what’s the asset sales gain in the quarter and in what segment or regions?

So let me start with – per the press release, the total proceeds in the quarter was $1.4 billion. And most of that, Paul, I’d say about two-thirds of that was in the Upstream, the rest in the Downstream. And I really highlighted what that was in my previous comments. The Upstream is driven by our divestment of our operated assets in Norway, Downstream being driven by the divestment of our retail assets in Norway. If you look at earnings, in the quarter itself, it was just shy of – it’s about $540 million. Again, primarily split between the Upstream and the Downstream.

Is it also two-thirds, one-third in terms of earnings?

Well balanced. It’s probably 60/40 Upstream/Downstream.

Okay, 60/40. And just want to clarify. The Mozambique acquisition, the $2.8 billion, is that in 2017? Does that mean that it closed before the year or it closed after the year-end?

It closed before the year-end.

Before the year-end, okay.

It’s in the 2017 results.

Okay. And just curious that for Bakken, you drilled the three-mile – not exactly three-mile, I think 12,000-feet lateral well. Have you completed or brought that on stream that have any production data?

For the three-mile laterals?

Yes.

Yes, we don’t have anything sure at this point. We have brought it on stream. They’re working through facility constraints for the facility – for that region. And I think we’ve got two of the four wells now that are on production but – like I said, it’s still very early days right now. But I will tell you that they’ve met our pre-drill expectations.

Jeff, can you tell us that when did they come on stream or how long you already have the data?

It’s not very long, Paul. We’re talking about months. And as I said earlier, we also had this weather downtime notably up in the Bakken.

Okay. And for the $24 billion on the 2018 CapEx, can you tell us how much is associated with the equity of Eni?

Sorry, the equity of what now?

The equity of Eni, the non-consulting subsidiaries, because the 24 billion is your total rate including the consulting operation --

You’re talking for Mozambique?

No. I’m saying that in 2018, you’re CapEx of $24 billion, how much --

How much is equity companies?

Yes, equity companies.

Yes, Paul, we don’t break that out.

All right, will do. Thank you.

Thanks, Paul.

Our next question comes from Alistair Syme from Citi.

Thanks very much. Just a very quick one, Jeff. Can you just explain on the impairments, taking both U.S. and international, I think you said in 3Q that you were revising the oil and gas prices. So I just wanted to clarify what that change was.

Yes, so I talked about it a bit earlier when – first of all when we go through the process, it really starts through our business planning process, which includes a look at long-term supply and demand and in our planning process, if there’s anything that we see that is a fundamental change that will cause us to do a deeper dive. But one of the things that we have continued to see as a trend has been the substantial growth in commercial resources within the unconventional or within North America and the significant commensurate with that, a significant reduction in the cost of supply. And as a result, when you think about that and the impact it’s going to have longer term, it’s likely to depress longer term gas prices. Now kind of the flipside of all that is, one, that reduces the cost of energy. Also, that technology has, as I said, driven down the cost side of it. So it’s a matter of making sure that you’re pursuing the most competitive assets. And then when you think about some of these Canadian assets I referenced, they just don’t compete like they used to at this point. And as a result, we took the decision not to progress any more development planning activity and write them off.

Okay. Thank you for clarifying.

You bet.

Our next question comes from Theepan Jothilingam with Exane BNP.

Hi. Good morning, Jeff. Two quick questions. Firstly, just in terms of coming back to the cash flow number for the quarter, just objectively, are there any particular sort of one-offs or seasonal factors? I know it’s difficult just to extrapolate one quarter into sort of annual performance but I just want to know if there was any sort of cash taxes that were higher than a typical quarter or not. Second question, you’re growing that retail business in Mexico. I just want to understand where you think the position can get to or what are the ambitions for Exxon in Mexico in the Downstream? Thank you.

Theepan, there’s really nothing that is mentionable with respect to our cash flow in the quarter itself other than these kind of one-offs that were – and it’s an accumulation of a bunch of one-off, other earnings events that had a negative impact on earnings and therefore cash flow as well. But I will be the first to admit. Those happen throughout the year as well. So there’s nothing that I would point to, other than the impact from the tax reform that had the effects that we’ve already talked about on the other balance sheet items that I would be able to talk to.

Okay.

On Mexico, we went ahead and, I believe in the fourth quarter, we opened eight Mobil branded stations. We’ve got plans to go ahead and open up another 50 sites by the end of the first quarter. I think it’s important that Exxon Mobil is participating in Mexico on an integrated basis using our global refining capacity to supply the Mexican fuel demand. I believe we did announce that we’ve got plans to invest about $300 million in logistics, product inventories, and marketing over the next decade. But I think it provides another good opportunity and outlet for our refined products.

Okay. Thanks very much, Jeff. See you next month.

You’re welcome.

Our next question comes from Pavel Molchanov with Raymond James.

Hi, guys. Just one from me. I don’t think it’s been touched on yet. A lot of headlines over the last 10 days or so regarding the Groningen field. And I wanted to get your understanding of what the JV will be able to produce at Groningen in the course of 2018 beyond the output cap that went into effect this past October.

Yes. Well, right now, as you know, NAM, which is the operator, is continuing to operate under the current cap at 21.6 cubic meters. We clearly understand the concerns of the people that are experiencing these tremors and the related damage. We respect the government’s efforts to go in and address valid concerns. In terms of how NAM will respond to that, it’s really – they’re probably best to go ahead and address the matter. We continue to provide technical support to them. But I think if the cap, the current 21.6 stays in effect through the full year, Pavel, it would impact our 2018 volumes by about 40 million cubic feet a day lower than 2017. But, of course, as you probably saw on the recent announcement, the government is thinking about modifying that.

Okay, clear enough. Appreciate it.

You’re welcome.

Our next question comes from Rob West with Redburn.

Hi. Thanks, Jeff. There’s two shorter term questions I wanted to ask you. The first one is thank you for the breakdown of the production effects between divestments and PSCs and decline. I was wondering on the decline component, can you touch on whether the assets, particularly Africa and Asia, the weaker areas, are seeing any decline that’s above the level you’d expected or in line? And that is in the context of I think some of your peers are seeing lower declines generally because of digitization and reliability drives, because I was wondering where you were on that. That’s my first one.

Yes, Rob, it’s a great question because we monitor that very closely. And I’d say, by and large, over the last year we’ve been able to mitigate some of the natural field decline in a number of fields through very solid reservoir management, artificial lift improvement, changes to how we manage the assets, reliability. But, by and large, we’ve managed that very well and been able to offset those declines. So nothing in excess of what we would expect at this point.

Okay. That sounds like good news. On the second question, back to what Brendan was asking about on the Chemical side, the long-term view is clear. I was wondering more on the short term. I guess what we’ve got, particularly in the U.S., is quite a large number of start-ups really bunched together quite quickly. And I hear you on the long term of the market but particularly this quarter, you had big growth in volumes and with that, a slight weakening of margins. Do you see any short-term margin impacts as those big volumes ramp up? I’m just trying to get a sense of that prior comment you made, whether it’s a long-term comment or whether we should brace for some short-term margin impacts as the ramp-ups come?

Well, Rob, there’s always the possibility of short-term volatility. No doubt about it. I mean, if you think about – break it down to some elements, the olefins, polyolefins, demand growth has been very robust. But there are going to be some capacity start-ups here over the next two years or so that could have some implications. But what you’ve got to do is you’ve got to have the lowest cost of operation and you have to have a very high-value and appreciated product to sell. And if you look at our metallocene product sales, we’ve been growing at a much greater escalation than the demand growth for chemicals. But each one of these products, we pay very close attention to it. And our investment premise has primarily been based on our long-term expectation in terms of growth. And then you build the portfolio to be robust by lowering your feedstock flexibility, taking full advantage – for Exxon Mobil, taking full advantage of the lower cost structure from the integration between our chemical and our refining operations. And then, as I said, fully leverage our technology in order to provide a high-value product that the market appreciates and has a pull on.

Okay, great. Thank you. Look forward to asking some long-term ones at the strategy update.

Okay, great. Thank you.

Our next question comes from John Herrlin from Société Générale.

Yes, just two quick ones. With Liza Phase 2, are you going to own the FPSO or lease?

Yes, John, that’s to be determined.

Okay, that’s fine. And then with respect to the horizontal wells in the Midland, three-mile wells take a while to clean up. Can you give us a sense of how long it does take to clean up a well that long?

Yes, I really don’t have anything to share at this point. It’s still pretty early days on the start-up for these wells. I know there’s a lot of interest as a result of us pushing further and further out. But I will tell you that all of the technical work that we have done, the modeling, et cetera, in order to justify the incremental value proposition that we’re to get from these longer laterals that these wells so far are performing as expected, in terms of execution and initial rates. But when we get to the point where we’ve got some good data that we feel like is appropriate, we’ll go ahead and share it at that point.

Okay. Thank you.

You’re welcome, John.

This concludes today’s question-and-answer session. I’d like to turn the call back over to Mr. Woodbury for any additional or closing remarks.

Well, as always, I really do appreciate your interest, your engagement, and your very thoughtful questions. And as I noted earlier that we’re looking forward to having a good conversation next month at our Analyst Meeting. And we do have in sights a very aggressive plan to drive our value growth and intend to give more clarity around what that looks like, in terms of what it is, how we’re going to do it, and why it is important to the corporation and to our shareholders. So, again, I appreciate your interest and we look forward to seeing you next month.

This concludes today’s conference. Thank you for your participation and you may now disconnect.