Exxon Mobil Corporation (NYSE:XOM) Q3 2019 Earnings Conference Call - Final Transcript

Nov 01, 2019 • 09:30 am ET

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Exxon Mobil Corporation (NYSE:XOM) Q3 2019 Earnings Conference Call - Final Transcript

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Presentation
Executive
Neil Hansen

The broader margin environment remained challenging as short-term supply and demand imbalances continued to pressure natural gas prices and industry chemical and lube base stock margins.

Cash flow from operations and asset sales was $9.5 billion in the quarter. After adjusting for changes in working capital, cash flow was $8 billion. Capex for the quarter was $7.7 billion.

PP&E adds and net investments and advances, which is a proxy for cash capex was $6.6 billion, and that ratio is consistent with our rule of thumb. Net cash capex is generally 85% of total reported capex.

Free cash flow in the quarter increased to $2.9 billion, reflecting higher cash generation and moderately lower investments in the quarter.

I'll now go through a more detailed view of developments since the second quarter on the next slide. In the Upstream, both liquids and gas realizations were lower in the third quarter, consistent with a decrease in liquids markers and continued gas supply length. Production was in line with expectations, with continued growth in the Permian. The Liza Destiny FPSO is currently being commissioned in Guyana, and we announced the fourth discovery of this year with the Tripletail exploration well. We also made considerable progress on our $15 billion divestment program, reaching an agreement to sell our Norway non-operated assets.

In the Downstream, refining fuels margins improved during the quarter, with supply tightness and stronger distillate demand in Asia and Europe. On the other hand, North American logistics differentials narrowed, primarily driven by the addition of Permian pipeline capacity. Lower scheduled maintenance, most notably, the completion of turnaround activities at our Joliet refinery and improved reliability relative to the second quarter, contributed to stronger Downstream financial performance.

Although long-term fundamentals remained strong in the Chemical business, polyethylene and aromatics margins continued to be impacted by supply length from industry capacity additions. The recent startup of the polyethylene expansion at Beaumont is performing well, and running above planned rates, reporting efforts to grow sales of high-performance metallocene products that deliver sustainability benefits, including lighter packaging weight, lower energy consumption and reduced emissions. Lower scheduled maintenance across US Gulf Coast sites continued to -- contributed to improved Chemical earnings, although this was partly offset by a reliability event at Baytown.

We also progressed research and development of lower emissions technologies. We entered into an agreement with Mosaic Materials to explore breakthrough carbon capture technology using metal organic frameworks to separate carbondioxide from the air. The agreement expands our carbon capture technology research portfolio and will enable evaluation of opportunities for industrial uses at scale. We also signed an agreement with the Indian Institute of Technology. This partnership will focus on progressing research and biofuels and bioproducts, gas transport and conversion, and other low-emissions technologies for the power and industrial sectors. This expands our portfolio of research collaborations, which now stands at more than 80 universities, five energy centers and multiple private sector partnerships.

Let's move now to slide 6 for an overview of third quarter earnings