Good day, everyone, and welcome to this Exxon Mobil Corporation Fourth Quarter 2019 Earnings Call. Today's call is being recorded. And at this time, I'd like to turn the call over to the Vice President of Investor Relations and Secretary, Mr. Neil Hansen. Please go ahead, sir.

All right. Thank you. Good morning everyone. Welcome to our fourth quarter earnings call. We appreciate your participation and continued interest in ExxonMobil. This is Neil Hansen, Vice President of Investor Relations. Joining me on the call today is our Chairman and CEO, Darren Woods. After I cover the quarterly and full year financial and operating results, Darren will provide his perspectives selecting on 2019 and the year ahead. Following Darren’s remarks, I'll be glad to address specifics on the reported results, while Darren will be available to take your questions on broader themes, including strategic priorities, progress on major growth projects, and views on market fundamentals. Our comments this morning will reference to slides available on the Investors section of our website. I would also like to draw your attention to the cautionary statement on Slide 2 and the supplemental information at the end of this presentation. I’ll now highlight fourth quarter financial performance starting on Slide 3. Earnings were $5.7 billion in the quarter or $1.33 per share including a positive $0.92 per share impact from the Norway divestment and a one-time tax item. Results were in line with expectations taking into account the challenging price and margin environment we have previously communicated. Liquids realizations were essentially flat, while Refining and Chemical margins weakened significantly in the quarter. The broader margin environment remained challenging as short-term supply and demand imbalances continued to pressure natural gas prices and moved base stock margins despite modest improvement in the fourth quarter. Cash flow from operations in asset sales was $9.4 billion in the quarter after adjusting for changes in working capital, cash flow from operations and asset sales was $11.1 billion. CapEx for the quarter was $8.5 billion and $31.1 billion for the full year, slightly ahead of the previous projection…

Thank you, Neil. Good morning everyone. It’s great to be on the call with you today. Let me start by sharing my perspective on last year beginning with margins. There is no doubt that 2019 was a challenging year for a number of our businesses. And I think Neil’s chart made that point near or at 10 year lows on prices and margins for Gas, Refining and Chemicals. Fourth quarter was particularly challenging for our Chemical business. Of course, it’s important to understand what’s driving us and the implications for our businesses and our investment plans. As Neil said, and I’ll show you later, the product demand underpinned our investments in each of these sectors remained solid. Depressed margins are driven by excess capacity, which will be a short-term impact particularly if industry pulls investments back significantly, which, by the way we are beginning to see. We know demand will continue to grow driven by rising population, economic growth and higher standards of living. We know that excess capacity will shrink, typically faster than people think and margins will rise, then, new capacity will be needed. These are the classic price cycles of capital-intensive commodity industries. We believe strongly that investing in the trough of this cycle has some real advantages. As industries pull back, project costs come down, resulting in lower cost capacity additions, they are then available to catch the cycle upswing. This is a win-win, capturing high margins at a low – lower cost. The downside of course is to grow on cash, which we are seeing and responding to. Our organization is very focused on driving further efficiencies and looking for opportunities to optimize and/or pace our investment portfolio, while preserving value and we reducing the draw. Our new projects organization in Upstream business lines are…

Okay. Thank you for your comments, Darren. We will now be happy to take any questions you might have.

[Operator Instructions] We will take our first question from Neil Mehta with Goldman Sachs.

Good morning, and Darren, again we appreciate you jump on the call and doing these with us. So, I guess, my first question is around, the capital spend and so, I think what you are signaling is capital spend in line with the prior guidance, which if I remember was $33 billion to $35 billion. And can you just talk about the framework if the environment stays challenging especially across Downstream and Gas. Is there downward flex on that spend? Or is the Exxon framework that you spend through the cycle with the long-term orientation?

So, good morning, Neil and thanks for your comments. Yes, so as I said, we at we have with the price environment and cash the draw really taken advantage of some of the organizational changes that we made last year. We formed a corporate-wide projects organization bringing together the experience and capability in that space into one organization that can then be deployed across our of the entire asset portfolio. The Upstream reorganization has given us a real good line of sight across the businesses, one that wasn't as clear in the past with the functional organization. So we're using those changes to take a real hard look at the opportunities we got. Of course the Chemicals and Downstream business is doing the same thing in looking for additional efficiencies to shape that portfolio. We are also looking at options to pace and to move projects around and out if we can do that without compromising the long-term value that we built those projects on the basis that we built those projects on. So, I think there is opportunity in that space. And if we continue to see very low margins and cash for all that we want to address, we got optionality to do that. We can move some things out and we can also slow down the pace in the Permian. We don't want to compromise the scale of the development in the Permian. So we are – there is a balance to be struck there. But we’ve got optionality and I think, as we go through the year to come, we will keep a real close eye on kind of how the market develops and then keep a hand on the lever to make sure that we make adjustments as we need to. I think it’s one of the great advantages of having a very large portfolio. We’ve got lots of optionality here. And so, I think we are comfortable with it and the one criteria is that we won't – we may defer some value capture. But we are not going to - we don't want to eliminate or pass up any value capture.

That’s very clear. And then just a follow-up on your comments on the Permian. We’re looking at the red line versus sort that the green bars if you will on the Permian slide and it’s hard to extrapolate how much quarter-to-quarter. But the production was a little bit more flat Q4 versus Q3. Is that just the timing of completions associated with the cube design? And should we expect that acceleration at some point earlier this year? And then just how do you think about Midland versus Delaware? I think one of the comments that was made on those conference calls a couple of quarters ago was that, Midland has gone really well, but Delaware is not performing as well as you would like on the drilling side. So any color there would be helpful.

Yes, I think with respect to the first points you made around, difficult to extrapolating for any one quarter is exactly right. I think when we introduced that end and Neil Chapman talked about it. We said it wasn't going to be a smooth development and that we would see a lumpy progress with respect to the volume’s growth. So I don't - I would draw whole lot. We’re not - we haven't seen anything in that development which would suggest anything other than continuing on that path. But again, it will be lumpy and I think if you look back at that red line, you'll see that lumpiness has been playing out historically. So, and I think you see that we continue to go forward. I think, a really important point, if you look at the volumes that we delivered in the Permian, we’re above what we said we were going to do last year at the Investor Day by about 20,000 barrels a day. So, that's clearly on track. With respect to the Permian and the Delaware, of course as I said the Delaware is much earlier in its development cycle. The organization continues to learn as we’re going through that development. I would tell you, we are making really good progress in what we’re seeing there. Neil did talk about Delaware being more difficult than the Midland. But I would also say, again, another advantage of the reorganization that we did last year in bringing kind of the best of Exxon Mobil with the best of our XTO organization into this space is that we’re making really, really good progress with respect to that. And like what we’re seeing and as I said, I tell it to guys and you are real – we are excited by the potential here. And I know they're anxious to spend some time in March taking you through some of the proof points of that. But I would tell you, we like what we are seeing in the Delaware and while it is different than the Midland nothing to suggest that that the opportunity there is not as great, if not better frankly.

Thanks very much, Darren,

Sure, Neil. Thank you.

Your next question comes from the line of Jon Rigby with UBS.

Thank you Neil and Darren. I just wanted to go to – I think, the fourth bullet point on your key message. You do flagged up driving efficiencies and improving the base business and although I think a lot of the focus does fall on your investment program, I mean, you need to fund it and it seems to me the evidence that there may have been some shortfalls in generating the earnings and cash in the base business to fund that investment. Is that a fair observation? It’s difficult to disaggregate underlying performance from the cyclical conditions, but are you able to sort of identify where there have been some unexpected shortfalls? And whether there are business improvement plans, et cetera to go after changing that into 2020?

Yes. Thank you, Jon. Good morning. Just on that with respect to the shortfalls, as I said in my prepared comments, it's really a function of the margin environment that we’ve seen out there and the sectors that we've invested in terms of our production capacity and the configuration of that capacity. As you look around different the Chemical businesses and Downstream businesses, what you typically see quarter-on-quarter and year-on-year and the big drivers of change in movement is how the margins vary and impact each of the configurations in the investment. So, as an example, as Neil Hansen mentioned, we have liquids cracking in the Chemical business in the quarter of the charts that he showed that was clearly had - clearly had an impact on the quarter. And so there is a lot of structural change and so we look across the businesses that’s basically what we’re seeing is the spreads that have changed across both Chemical and Downstream business given our configuration has impacted us. That doesn’t worry us particularly. In fact, if you go back in time and Chemical that configuration was very attractive and made us really good money over a number of years. We've had some significant investments in that space here recently, which has created this imbalance in supply and demand. But the business is growing fast and we will come out of that. And so, we expect to see the Chemical business and our base business return to where it was in the past as that the demand growth continues and that excess supply capacity is coming down. Don’t forget too in the Downstream, significant turnaround here last year. As Neil said, highest level of turnarounds been in the last 15 years. So, a lot of capacity was off - online last…

Right. Good. Thank you. And just a quick follow-up. You mentioned FID for Guyana in Brazil in 2020, so could we expect Mozambique as well at some point in the year?

Yes, Mozambique, we are working with our partners on. We are making progress with respect to that. But I would think, as we make progress, we will FID that when we get to the right stage. I think right now, we are working towards a timeline that would give us production somewhere back in 2025, something like that.

Okay. Thanks a lot.

You bet. Thanks, Jon.

Next we will go to Doug Terreson with Evercore ISI.

Good morning everybody. Declining dispersion of return to capital for the big oils suggest that competitive advantages may be converging between the different industry players over 5 to 10 years and on this point, you guys have historically indicated and I think you did a few minutes ago, the technology and scale and integration were key advantages that differentiated Exxon Mobil and lead to value creation over a longer term period. So my question is whether this premise is still as valid in your view meaning why your portfolio of opportunities is arguably the best in the peer group, maybe the strongest in a long time. Are you still as confident as you ever about the strength of your competitive advantages and the returns profile and results have proved this overtime? Or has it changed? And if it has changed, which area is becoming more difficult to defend?

Yes. Thanks, Doug, I appreciate the question. Obviously competition always makes this a challenging area and you’ve got to continue to innovate you want to try to maintain a premium above and beyond what the rest of competition is doing and we remain convinced that that premium will be driven by technology and technology developments. And I would also tell you we’re convinced that that premium will be earned through our other competitive advantages. I’ll talk a lot about the project execution that we’ve got in place. I think that is a huge competitive advantage. So, I continue to believe that we will have returns on capital employed that are higher than our competitors driven by those advantages. I think you got to step back and look at that over a broader timeline. If you look at where we are at today and investments that we’re making, those projects are very accretive and very high returns, but we are in the early stages of the capital without realizing the benefits of those. And so I think, as you go through time, you are going to see that move in any one year, but over the longer cycle, you are going to see the advantages of those begin to accrue. I mean, look at what we are doing in Guyana and the comments that I made around the discoveries. Enormous amount of resources that the organization has found and are bringing on with leading edge developments. That's got to drive better returns. I mean, the chart that we've showed demonstrates that. Look at what we are doing in the Downstream business. Historically, a low-margin, low-return business. One of the reasons why we haven't invested heavily in that business in the past is we couldn't find advantaged investments to change that yield…

Okay. And then also, the integrated business model has been the most productive model in the energy sector for several decades, although I guess, changes to competitive structure could always change that in the future. So, consistent with the points I think you just made about technology and execution, multinational experience et cetera, do you still consider the integrated model to be optimal? And the one that holds the greatest potential for superior returns and shareholder outcomes? And also Darren, has your thinking changed any on this topic over the past several years?

I would tell you I still believe this is an area of value and the only change in my thinking is, how much more potential there is to be realized in that process. I think you are aware, Doug, that we brought the entire organization together on the Houston campus starting in 2014. First time in the history of our company, where we had all of our businesses on one location, which allows those organizations to continue to explore and look for synergies. And I would tell you that we are in the early stages of finding a lot of significant opportunities. The projects organization is a great example of that. First time in our history that we had our Upstream, Chemical and our Downstream projects organization together and a lot of opportunities to take advantage of each of the strengths of those organizations applied to the other parts of the organization. So we like what we are seeing there. I'd tell you, if you want to look to a concrete example of what integration has brought to the company, look no further than the logistics that we started investing in to connect our Upstream developments with our Downstream and Chemical assets. In 2018, as the differentials opened up, we made $1.8 billion on that disconnect, which I think only an integrated company could capture. And that comes and goes and as we talked about in 2019, those differentials weren't there. But we anticipate that they will be back. And the final point I would make with integration, if you look at what we are doing in the Permian and the investments that we are making in Chemical and Refining, those are geared toward the barrels coming out of the Permian and some of the opportunities we see with those barrels. That would have been hard to do if we were a standalone Downstream company or a standalone Upstream company. So, only having both of those and being able to understand what's happening in each of those areas that you can find some unique value. So, I am convinced we have a lot more advantages to bring to the table that over time begin to manifest themselves as we continue to exercise the organizations that we've put in place down at the campus.

Yes. It sounds like the case is as strong as ever at least for you guys. And thanks again for joining us, Darren.

You bet, Doug. Nice talking with you.

Next we'll go to Roger Read with Wells Fargo.

Yes. Thank you. Good morning and welcome to the call, Darren.

Good morning.

I guess, so much of what we've heard from Exxon and from some of your peers is, it's definitely an unfavorable - call it, I guess, generally cyclical downturn here across all the various pieces. But the one area I was kind of curious about and is as weak as anything else seems to be on the global gas side. You are one of the major players in the LNG markets. You've got several different locations where you are looking to expand over the next couple of years. I was just curious how you see that sort of playing its way out. And whether or not there are any issues on the demand side there.

Yes, I would – you look at, I think, separate out maybe the LNG business with domestic gas business, those have some slightly different dynamics associated with them. Overall, continuing to see very good growth in the gas business. LNG, I think we are seeing and projecting about 4% growth, annual growth in LNG. I think both stories, both domestic and LNG is, again, it's very similar to the discussions that we are having in the Downstream and Chemicals, which is fairly solid and good growth. But we are seeing short-term oversupply and therefore lower margins and our expectation is that that demand will continue to grow in part driven by concerns of climate change and replacing coal for gas. But also, just as economies grow and people's standards of living grow, and more power is needed, gas is a very reliable and secure source of supply for power generation. So I think that dynamic is going to continue to happen. I think the LNG oversupply over time will work itself out. And I think investments in that space will probably slow and eventually the demand will catch up to the supply and things will improve. Again, it's the same dynamic of capital-intensive, long cycle investments and as those come on to the market, adjusts - and compared to demand, it just takes some time for those two to reach in balance. But you typically see that and I don't think that that dynamic is going to change. That's why, of course, we are very focused as we look at these investments of making sure that as you look across the global supply curve that we are on the left-hand side of the cost of supply curve, that the projects that we are investing in will have advantages and be lower cost than the broader industry and competition, so that as that oversupply impacts margins. We are on that left-hand side and can see - still see advantages to having those investments. Yes, the same dynamic that I've talked about in our Downstream and Chemical investments. The large investments that we've brought online and yet, we are making money in bottom of cycle conditions, why? Because they were advantaged and we wouldn't invest in those until we found a way to get them advantaged. Same is true in the LNG business.

Great, thanks and then, kind of along the lines of some of the other things you've talked about on potential for deferring CapEx if needed to keep things in balance. As we think about the dividend growth and I know you can't give us the number, whatever it goes to the Board. But how should we think about dividend growth in a kind of cash flow constrained environment with the larger commitment here to the CapEx side?

Well, I think as I've talked about before, and as we look at the business from a macro standpoint in allocation of capital. We start with in order for this business to maintain a long-term value proposition. We have to continue to invest and we have to continue to develop projects and opportunities that are advantaged versus industry. So that's a priority making sure that we invest in this capital too and certainly in the Upstream to offset the depletion that we know occurs in both the crude and gas side of the house. And in the Downstream, making sure that we are using technology to improve the yields as society's demand patterns change and those yield profiles change on a barrel of crude. And then, in Chemical is to keep up with the pace of high performance products that meet the needs of growing economies and populations where their standards of living are improving. And so, that's kind of job number one and we got to make sure that we continue to do that to keep pace and to have a long kind of prosperous business as we look into the future. We also feel very firmly that we've got a commitment with our shareholders to provide a reliable and growing dividend. So we would continue to look to do that and ride through these price cycles. Given the strength of the long-term fundamentals, we think that's an appropriate thing to do. And so, we would look to continue that trend of steady and reliable growth. And then, of course, it’s maintaining the balance sheet and our financial capacity with where it needs to be to ride through these cycles and to take advantage of the opportunities that we see in the down cycles. And then to also mitigate and manage the volatility that we've seen and recently experienced. So, that's kind of as we think about it the primary criteria for how we use cash. And at the end of the day, we met our criteria and we've got additional cash and then we go into buybacks and return excess cash to the shareholders. That's been the model for a long time. And I would tell you that that model remains pretty effective as we think about what we need to do in this business.

Thank you.

Thank you.

Next we'll go to Phil Gresh with JP Morgan.

Hi, Darren. Thanks for taking my question. And so, as we look at where you are on the asset sale plan, you talked about $15 billion over three years, $25 billion longer-term. There has been some reports out talking about maybe the plan is moving faster than that in terms of the three year plan. So, I just want to get your latest thoughts as to, relative to the risks of plan that you laid out there, how you are feeling about that now? And in terms of - if it does come in better, is the first use of asset sale proceeds basically going to be to fund any dividend coverage gap to this investment phase if we're at the bottom of the cycle here again in 2020 or to your point on buybacks, is that even in the cards in that type of scenario. Thanks.

Sure, Phil. Good morning to you. I would tell you, as we introduce the divestment program, and Neil Chapman talked about that last year, we always said it was a risk program and the intention was to put we would have more assets out because we didn't expect to transact on all of those opportunities. And so, I think the reports that you are seeing reflect the fact that there are - we are looking – we've got a number of assets out in the marketplace today. Again, we don't expect to transact on all of those and so we've made some risking in judgment. And whether or not, we exceed the numbers that we've talked about or in fact fall below this will be a function of the buyers and the deal space we find with those buyers. Clearly, last year, we found an opportunity where a buyer had saw a value – a higher value than we thought we could realize with our Norway asset that resulted in a transaction. I think a win-win for both of us. If we find more of those, more than we have anticipated, then I think we'll be above. On the other hand, we've had deals that we've worked and couldn't find the deal space and didn't transact. So, and that was the point I'm trying to make in my comments. This is really around a portfolio of high-grade and the only way I can convince myself that we are upgrading the portfolio is if we realize the value for an asset that's higher than what we think we can realize by keeping it in our portfolio. And so, I would just tell you, how fast that goes and how far we go is really going to be a function of the…

Sure. Okay. Second question, just, I think, probably the standard one we ask every quarter. But just, it seems like the energy sector valuations continue to deteriorate here at least for the public companies we are looking on our screen. So, from your perspective, is this an environment where you think valuations are getting more compelling to you in terms of potential M&A opportunities? Or just how do you think about that today? Thanks.

Yes. Thanks Phil. I think you know, well, first I would say, I believe that the highest value opportunities are the ones that you can generate organically because almost by definition, you are not paying a premium for them. And so I think, we've got a really attractive portfolio as we've talked about and that's what anything that we do has to compete against is those organic opportunities. And so, that's my starting point and then, we look to see if there are opportunities out there that we can transact on that compete or are better than those organic opportunities. And while the short-term market fluctuations are moving around, and you see that valuation change, obviously, the ability to capture that will be a function of people who are in the market selling and their longer term views of their business and whether or not what position they are in and whether they are forced to take the current valuations or whether they think longer-term and look at the value somewhat differently. So I think again, it's kind of a difficult to talk about generically. It will be a very specific case-by-case basis. We - just as we are active in the divestment side of the house and have got assets that we're out there marketing, we keep a very firm finger on the pulse of the industry and the opportunities and keep our eyes open for opportunities that could bring additional value to the company.

Okay. Thanks.

You bet. Good talking to you, Phil.

And next we'll go to Biraj Borkhataria with RBC.

Hi, thanks for taking my question. I have a question going back to the financial capacity. The numbers you referenced in your chart, I think were net debt-to-market cap, what we normally kind of look at is, either net debt-to-capital employed or net debt-to-cash flow. When I think about the capital employed number or the equity, I guess, investors need to be confident in the value of equity. And what we've seen in the last year or so, as a number of your peers announced impairments due to lower price decks. So could you – are you willing to share what price deck you are using for oil and gas to test for impairments? That would be my first question.

Yes, thanks Biraj. We don't typically put out a price deck and I wouldn't – I don't have any desire to kind of start doing that. Let me maybe tell you a little bit about how we think about pricing going forward. And the first thing I would say is, I don't think any of our peers and certainly within ExxonMobil, we feel like we can predict prices. I think there are just way too many variables involved. Too many developments that occur over time to really, I think, get firm handles on where short-term prices are going to go. What we do, do though is looking forward in the future and we start with kind of building up what I would say is a very fundamental approach to what will drive oil and gas demand, which comes back to economic growth and policies and all of those assumptions and how we think about how the world will evolve with respect to our industry. We publish in our energy outlook. So if you're interested in understanding what's driving our pricing assumptions, I would start with our energy outlook, because that forms the basis of everything that we do with respect to how we think about the future and how we make investment decisions. Again since that's our basis and then, since our business is commodity, we continue to believe that in the medium to long-term that market prices will be set by the marginal – the cost and return criteria of the marginal barrel that's needed to meet that demand. And so, it's classic economic supply and demand, marginal producer sets the market price. We try to take a kind of a high-level view of that. What will be the resources that come on and meet that last barrel of…

Okay, noted. The second question, I just wonder if you could give us an update on Papua New Guinea. And there were some article this morning about negotiations with the government not going according to plan for the expansions. Could you update us on where that project is? And what that means to the FID?

Sure. Let me just start with maybe the bigger picture of Papua New Guinea. Obviously, we are the operator of the PNG LNG project, which was a $19 billion project. It's brought employment to about 3,200 people in Papua New Guinea. Since 2010, we've spent about over $4 billion on Papua New Guinean services including about $2 billion spent with the landowner companies. We've invested almost $300 million in community and infrastructure programs focused on education, health, women's empowerment, a number of other areas. So, the established business that we have there I think has been a real benefit to Papua New Guinea and obviously, a benefit for us. We are looking at this expansion and we are looking at bringing in the Papua project with Total, along with P'Nyang and have been in negotiations with the government. We are disappointed here recently that we weren't able to reach agreement with the government on P'Nyang. But we are very hopeful that those discussions can move forward and continue. I think, from our perspective, we've got to find a way to get to a win-win proposition. We've got our big portfolio of opportunities as I've been referring to here this morning and anything that we decide to FID and move forward has to compete within that portfolio. So, that's the basis on which we are looking at this negotiation and working with the government. Need to be a win-win. I think we'll continue to try to establish that with the government. But I also think we've got some time given all the other opportunities in front of us. And frankly, given where we are at today in the supply demand balance of LNG, I think we can - we've got time to work it with the government and I am hopeful and I am fairly confident that at some point we'll find a way forward with them.

That's very helpful. Thank you.

Your next question comes from the line of Jeanine Wai with Barclays.

Hi, good morning everyone.

Good morning, Jeanine.

Good morning, Jeanine.

So, I guess my first question is on the Permian and it’s dovetailing off of Neil's question. And then specifically on the rig count. So can you provide a little more color on how operations are going? And if there is any change in the number of rigs you see required to make the 1 million barrels a day that you laid out earlier? So, when we look at the data, the rig count has been trending flat to down over the past six months. And I know that the rig counts can be pretty deceiving, given improving efficiencies and all. But have you encountered anything unexpected in particular, we're referring to the subsurface in the Delaware?

Yes, let me - I'll talk high-level. First of all, I am not a big believer in extrapolating rig counts into kind of what we are doing in the business and the approach that we are taking and the progress we are making in the development. I think it's a fairly crude measure, particularly for the work that we have been doing there. As you recall, what we laid out in the Permian and particularly in the Delaware was a large-scale approach, which is – which was unique to industry that leverages the scale that we have as a corporation, leverages the technology, some of the resources that we have within the company. And we have been developing the tools to model and develop that resource that we think is pretty unique in the industry. We've used a lot of rigs to help delineate what we are doing in that space. And as we collect that information, build those models and optimize, I think you're going to see movements around what we are doing there. So, I would not again take too much - draw too many conclusions from strictly speaking the rig count. And with respect to that work that we've been doing, as I mentioned in my prepared comments, we feel really good about the progress that we're making and seeing significant improvements in the initial production across 365 days and longer. We like what we are seeing with the recovery rates. We like what we're seeing with the D&C costs and those are coming down. And we like what we see around some of the well performance, particularly in the Delaware. I think if you look at the results that we are getting, we are leading industry, I think it's fair to say. So, good progress there and it's just really a question of how we want to continue going forward and pace that. And I know that Neil and his team are looking at that in light of the environments that we've come out of in 2019. And when we get to March, I think the folks will spend some time kind of sharing some of the proof points, some of the data with you to help you get a better picture of that. And then we'll talk more about kind of how we see the path going forward here. But bottom-line, the potential of that and the value propositions that we've talked about haven't changed, if anything, we like it better.

Okay. Great. That's really helpful. Thank you.

Thank you.

And then, just switching gears here quickly, as far as the light-sweet, heavy-sour spreads being slower than expected to adjust and the crude discounts maybe not being at full parity with the product pricing, you indicated in your prepared remarks that ultimately you expect these issues to improve or reverse. And so my question is, could this be a potential tailwind for as early as 1Q? And any additional comments you have on just timing and how you see that developing would be really helpful. Thank you.

Sure. I don't – when you say it’s developing slower than predicted, I don't know that we ever had a real firm prediction on how this is going to play out. I mean, the markets have got a lot of variables that go into it. This was a known event that was going to happen. And so, a lot of different players, a very fragmented market, lots of different actions with storage and inventory. And so, I think really difficult to predict exactly how all those variables and all those independent actions come together and results in what we're seeing in the marketplace. I can tell you, what you see is explainable. You can certainly put a rationale behind how long it takes to play out and get back to what we think eventually will be more market parity. I think it's really a function of where the different inventories and how people are choosing to optimize around the new requirements with respect IMO. The reason why we are convinced that eventually we'll get back to parity is because the fundamentals associated with IMO are pretty clear and the kind of the economics of refining aren't real hard to figure out. As you've taken sulfur out and the valuation of high sulfur feedstocks and products have dropped down, that's got to make itself back into the crude and crudes that are higher sulfur and heavier, they are producing more of those lower value products ultimately have to reflect the fact that their product, the yield profile of that barrel of crude is less attractive. So, I think, that's a pretty foundational element of crude markets in refining and eventually those will hold. And then, in the short-term depending on the different actions that folks have taken and what their position is and what moves it did earlier and what inventories look like, it's going to take time to work itself out. I would tell you from our perspective, we manage this based on the longer-term fundamentals. We made investments based on the longer-term fundamentals. We didn't make any investments that assumed credit for this transition and the benefits that might come along with it given a particular investment. We just recognized it would come, but the decisions that were made were based on more of the longer-term fundamentals.

Okay. Very helpful. Thank you very much.

Thank you, Jeanine.

And operator, I think we have time for one more question.

Right. We will take that question from Ryan Todd with Simmons Energy.

Okay, thanks. Maybe a quick follow-up on some of your comments earlier on the LNG markets. Are you seeing – can you comment on whether you are seeing any pressure on existing or currently negotiated contracts? And also some of your European peers have been successful in offsetting at least some of the ongoing price weakness and the medium-term price weakness via active portfolio trading globally? I believe you've looked to increase those capabilities across your organization globally. Can you maybe talk about progress in that direction? And how you may be able to mitigate medium-term weakness in global LNG prices?

Yes. Thanks, Ryan. I think, you're right. Your observations are pretty solid in terms of there are opportunities with portfolio trading to try to mitigate some of that shorter-term weakness. And I think, as you look at the markets, you see the market is kind of slowly evolving along those lines. At the same time, a lot of the buyers in LNG market are interested in ensuring long-term deliveries and surety of supply. And so, there is still a desire for the longer-term contracts as new projects are FIDed and developed often times a financing requires, secured outlets and terms on that. So, there are a lot of underlying dynamics that keep what I would say is the more traditional longer-term transactions in place. And so, while I think the markets will continue to develop and there'll be more trading on top of that. I think there will still be a layer of what I would say is the historical approach to LNG. And that will be a very slow moving transition over time. With respect to the LNG trading that we have, it's been widely reported and I have talked about it the last time I was on. We have begun looking and moving more into some of the trading as that market evolves. But our intention is to kind of evolve with the needs of the market and that will just become a bigger piece of our business as that becomes a bigger piece of the market and more relevant to the market.

Okay. Perfect, thanks. And then maybe one quick follow-up on Chemicals. Obviously, it's been a tough environment and you talked about the eventual rebalancing from a supply/demand point of view. Can you talk about, I guess, as we look over the next 12 months to 18 months, what you see maybe in terms of some of the market dynamics and the recovery from that point of view? And you highlight in your presentation growth-related expenses of $160 million, at least on a delta basis in the quarter. You have a pretty active growth program. Any help on maybe the direction of magnitude of those growth-related expenses going forward?

Yes, sure. I think – so let me start with your last point around growth-related expenses. I mean, obviously as large capital projects or large manufacturing investments, as you progress those, there are costs come along with them. I think you can think about those growth-related costs in three basic buckets. The first is, as you bring on new investments, so the steam crackers that we’ve brought on, the polyethylene lines that we brought on was different investments that are up and running. Obviously, there are costs associated with those new investments and as we first bring those up, we categorize those as growth expenses because they are new facilities and we want to make sure as we look at those, we think about those different than what the basic expenses are since we are driving base cost down. We've got at the same time recognized that more cost will come in from operating new facilities. So that's one bucket. Other projects that are in construction. So as an example, our cracker in Corpus Christi area, there are expenses associated with in-progress projects, which is another bucket to think about with growth. That's oftentimes not as large because a lot of the costs associated with that development gets capitalized. But there are expenses to go along with it. So that's within the bucket. And then the third growth expense is, as we look at further into the future and look at opportunities and project teams are working, the next project to fill the pipeline further out, that's a growth expense. And so, in the Chemical businesses, that's how you should think about those growth expenses. And obviously, we keep a pretty close eye on those and are making sure that as we grow, we are growing as efficiently as possible.…

Okay. Thank you.

All right. Thank you for your time and thoughtful questions this morning. We appreciate you allowing us the opportunity to highlight our fourth quarter and full year that included a number of key milestones and continued progress across our portfolio. And we look forward to seeing everyone on March 5th at our Investor Day in New York. We appreciate your interest and hope you enjoy the rest of your day. Thank you.

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