Exxon Mobil Corp 10-Q

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview In the first quarter of 2024 the price of crude oil remained flat relative to fourth quarter 2023 and near the middle of the pre-COVID 10-year range (2010-2019), as markets remained balanced. More recently, the market for crude has tightened driven by ongoing concerns over conflict in the Middle East. Natural gas prices decreased, moving back toward the middle of the 10-year range, on high inventory levels and lower demand. Refining margins in the quarter rose to the top of the 10-year range, as demand grew while turnarounds and global disruptions weighed on supply. Chemical margins remained relatively flat at bottom-of-cycle conditions, as new capacity additions offset demand growth. Recent Mergers and Acquisitions In October 2023, ExxonMobil announced that it had entered into a definitive merger agreement with Pioneer Natural Resources. The transaction represents an opportunity to deliver leading capital efficiency and cost performance as well as increase production by combining Pioneer's large scale, contiguous, high-quality undeveloped Midland acreage with ExxonMobil's Permian resource development approach. In addition to increasing production, we plan to pull forward Pioneer's Net Zero ambition by 15 years, from 2050 to 2035. See "Note 2. Pioneer Natural Resources Merger" of the Condensed Consolidated Financial Statements for additional information. Selected Earnings Factor Definitions The earnings factors have been updated to provide additional visibility into drivers of our business results starting this first quarter of 2024. The company evaluates these factors periodically to determine if any enhancements may provide helpful insights to the market. Listed below are descriptions of the earnings factors: Advantaged Volume Growth. Earnings impacts from change in volume/mix from advantaged assets, strategic projects, and high-value products. • Advantaged Assets (Advantaged growth projects). Includes Permian, Guyana, Brazil, and LNG. • Strategic Projects. Includes (i) the following completed projects: Rotterdam Hydrocracker, Corpus Christi Chemical Complex, Baton Rouge Polypropylene, Beaumont Crude Expansion, Baytown Chemical Expansion, Permian Crude Venture, and the 2022 Baytown advanced recycling facility; and (ii) the following projects still to be completed: Fawley Hydrofiner, China Chemical Complex, Singapore Resid Upgrade, Strathcona Renewable Diesel, Proxxima Venture TM , USGC Reconfiguration, additional advanced recycling projects under evaluation worldwide, and additional projects in plan yet to be publicly announced. • High-Value Products. Includes performance products and lower-emission fuels. Performance products (performance chemicals, performance lubricants) refers to products that provide differentiated performance for multiple applications through enhanced properties versus commodity alternatives and bring significant additional value to customers and end-users. Lower-emission fuels refers to fuels with lower life cycle emissions than conventional transportation fuels for gasoline, diesel and jet transport. Base Volume. Includes all volume/mix factors not included in Advantaged Volume Growth defined above. Structural Cost Savings. After-tax earnings effect of Structural Cost Savings as defined on page 19, including cash operating expenses related to divestments that were previously in the "volume/mix" factor. Expenses. Includes all expenses otherwise not included in other earnings factors. Timing Effects. Timing effects are primarily related to unsettled derivatives (mark-to-market) and other earnings impacts driven by timing differences between the settlement of derivatives and their offsetting physical commodity realizations (due to LIFO inventory accounting). 17 Earnings (loss) excluding Identified Items Earnings (loss) excluding Identified Items (non-GAAP) are earnings (loss) excluding individually significant non-operational events with, typically, an absolute corporate total earnings impact of at least $250 million in a given quarter. The earnings (loss) impact of an Identified Item for an individual segment in a given quarter may be less than $250 million when the item impacts several periods or several segments. Earnings (loss) excluding identified items does include non-operational earnings events or impacts that are generally below the $250 million threshold utilized for Identified Items. Management uses these figures to improve comparability of the underlying business across multiple periods by isolating and removing significant non-operational events from business results. The Corporation believes this view provides investors increased transparency into business results and trends and provides investors with a view of the business as seen through the eyes of management. Earnings (loss) excluding Identified Items is not meant to be viewed in isolation or as a substitute for net income (loss) attributable to ExxonMobil as prepared in accordance with U.S. GAAP. Three Months Ended March 31, 2024 Upstream Energy Products Chemical Products Specialty Products Corporate and Financing Total (millions of dollars) U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. Earnings (loss) (U.S. GAAP) 1,054 4,606 836 540 504 281 404 357 (362) 8,220 Total Identified Items — — — — — — — — — — Earnings (loss) excluding Identified Items (Non-GAAP) 1,054 4,606 836 540 504 281 404 357 (362) 8,220 Three Months Ended March 31, 2023 Upstream Energy Products Chemical Products Specialty Products Corporate and Financing Total (millions of dollars) U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. Earnings (loss) (U.S. GAAP) 1,632 4,825 1,910 2,273 324 47 451 323 (355) 11,430 Identified Items Tax-related items — (158) — (30) — — — — — (188) Earnings (loss) excluding Identified Items (Non-GAAP) 1,632 4,983 1,910 2,303 324 47 451 323 (355) 11,618 References in this discussion to Corporate earnings (loss) mean net income (loss) attributable to ExxonMobil (U.S. GAAP) from the Condensed Consolidated Statement of Income. Unless otherwise indicated, references to earnings (loss); Upstream, Energy Products, Chemical Products, Specialty Products, and Corporate and Financing earnings (loss); and earnings (loss) per share are ExxonMobil's share after excluding amounts attributable to noncontrolling interests. Due to rounding, numbers presented may not add up precisely to the totals indicated. 18 Structural Cost Savings Structural Cost Savings describes decreases in cash opex excluding energy and production taxes as a result of operational efficiencies, workforce reductions, divestment-related reductions, and other cost-savings measures that are expected to be sustainable compared to 2019 levels. Relative to 2019, estimated cumulative Structural Cost Savings totaled $10.1 billion, which included an additional $0.4 billion in the first three months of 2024. The total change between periods in expenses below will reflect both Structural Cost Savings and other changes in spend, including market factors, such as inflation and foreign exchange impacts, as well as changes in activity levels and costs associated with new operations. Estimates of cumulative annual structural savings may be revised depending on whether cost reductions realized in prior periods are determined to be sustainable compared to 2019 levels. Structural Cost Savings are stewarded internally to support management's oversight of spending over time. This measure is useful for investors to understand the Corporation's efforts to optimize spending through disciplined expense management. Dollars in billions (unless otherwise noted) Twelve Months Ended December 31, Three Months Ended March 31, 2019 2023 2023 2024 Components of Operating Costs From ExxonMobil’s Consolidated Statement of Income (U.S. GAAP) Production and manufacturing expenses 36.8 36.9 9.4 9.1 Selling, general and administrative expenses 11.4 9.9 2.4 2.5 Depreciation and depletion (includes impairments) 19.0 20.6 4.2 4.8 Exploration expenses, including dry holes 1.3 0.8 0.1 0.1 Non-service pension and postretirement benefit expense 1.2 0.7 0.2 — Subtotal 69.7 68.9 16.4 16.5 ExxonMobil’s share of equity company expenses (non-GAAP) 9.1 10.5 2.7 2.4 Total Adjusted Operating Costs (non-GAAP) 78.8 79.4 19.1 18.9 Total Adjusted Operating Costs (non-GAAP) 78.8 79.4 19.1 18.9 Less: Depreciation and depletion (includes impairments) 19.0 20.6 4.2 4.8 Non-service pension and postretirement benefit expense 1.2 0.7 0.2 — Other adjustments (includes equity company depreciation and depletion) 3.6 3.7 0.8 0.9 Total Cash Operating Expenses (Cash Opex) (non-GAAP) 55.0 54.4 13.9 13.2 Energy and production taxes (non-GAAP) 11.0 14.9 4.3 3.4 Total Cash Operating Expenses (Cash Opex) excluding Energy and Production Taxes (non-GAAP) 44.0 39.5 9.6 9.8 Change vs 2019 Change vs 2023 Estimated Cumulative vs 2019 Total Cash Operating Expenses (Cash Opex) excluding Energy and Production Taxes (non-GAAP) -4.5 +0.2 Market +3.6 +0.1 Activity/Other +1.6 +0.5 Structural Cost Savings -9.7 -0.4 -10.1 Due to rounding, numbers presented may not add up precisely to the totals indicated. 19 REVIEW OF FIRST QUARTER 2024 RESULTS ExxonMobil’s first-quarter 2024 earnings were $8.2 billion, or $2.06 per share assuming dilution, compared with earnings of $11.4 billion a year earlier. The decrease in earnings was mainly driven by declining industry refining margins and lower natural gas prices. Capital and exploration expenditures were $5.8 billion, down $0.5 billion from first quarter 2023. UPSTREAM Upstream Financial Results (millions of dollars) Three Months Ended March 31, 2024 2023 Earnings (loss) (U.S. GAAP) United States 1,054 1,632 Non-U.S. 4,606 4,825 Total 5,660 6,457 Identified Items (1) United States — — Non-U.S. — (158) Total — (158) Earnings (loss) excluding Identified Items (1) (Non-GAAP) United States 1,054 1,632 Non-U.S. 4,606 4,983 Total 5,660 6,615 (1) Refer to page 18 for definition of Identified Items and earnings (loss) excluding Identified Items. 20 Upstream First Quarter Earnings Factor Analysis (millions of dollars) Price – Price impacts decreased earnings by $820 million, driven by a 32% decrease in natural gas realizations, partially offset by a 4% increase in liquids realizations. Advantaged Volume Growth – Higher volumes from advantaged assets increased earnings by $430 million, mainly driven by Guyana liquids growth. Base Volume – Lower base volumes decreased earnings by $400 million, mainly driven by divestments, government-mandated curtailments, and unfavorable entitlement effects. Structural Cost Savings – Increased earnings by $90 million. Expenses – Higher expenses, primarily from depreciation, decreased earnings by $160 million. Other – Other items decreased earnings by $470 million, reflecting other primarily non-cash impacts from tax and inventory adjustments as well as divestments. Timing Effects – Less unfavorable timing effects from derivatives mark-to-market impacts increased earnings by $370 million. Identified Items (1) – 1Q 2023 $(158) million loss driven by additional European taxes. (1) Refer to page 18 for definition of Identified Items and earnings (loss) excluding Identified Items. 21 Upstream Operational Results Three Months Ended March 31, 2024 2023 Net production of crude oil, natural gas liquids, bitumen and synthetic oil (thousands of barrels daily) United States 816 820 Canada/Other Americas 772 670 Europe 4 4 Africa 224 220 Asia 711 749 Australia/Oceania 30 32 Worldwide 2,557 2,495 Net natural gas production available for sale (millions of cubic feet daily) United States 2,241 2,367 Canada/Other Americas 94 94 Europe 377 548 Africa 150 134 Asia 3,274 3,597 Australia/Oceania 1,226 1,276 Worldwide 7,362 8,016 Oil-equivalent production (1) (thousands of oil-equivalent barrels daily) 3,784 3,831 (1) Natural gas is converted to an oil-equivalent basis at six million cubic feet per one thousand barrels. 22 Upstream Additional Information (thousands of barrels daily) Three Months Ended March 31 Volumes reconciliation (Oil-equivalent production) (1) 2023 3,831 Entitlements - Net Interest — Entitlements - Price / Spend / Other (41) Government Mandates (17) Divestments (66) Growth / Other 77 2024 3,784 (1) Natural gas is converted to an oil-equivalent basis at six million cubic feet per one thousand barrels. 1Q 2024 versus 1Q 2023 1Q 2024 production of 3.8 million oil-equivalent barrels per day decreased 47 thousand oil-equivalent barrels per day from 1Q 2023. Excluding the impacts from entitlements, divestments, and higher government-mandated curtailments, net production grew by 77 thousand oil-equivalent barrels per day, mainly driven by Guyana. Listed below are descriptions of ExxonMobil’s volumes reconciliation factors which are provided to facilitate understanding of the terms. Entitlements - Net Interest are changes to ExxonMobil’s share of production volumes caused by non-operational changes to volume-determining factors. These factors consist of net interest changes specified in Production Sharing Contracts (PSCs), which typically occur when cumulative investment returns or production volumes achieve defined thresholds, changes in equity upon achieving pay-out in partner investment carry situations, equity redeterminations as specified in venture agreements, or as a result of the termination or expiry of a concession. Once a net interest change has occurred, it typically will not be reversed by subsequent events, such as lower crude oil prices. Entitlements - Price, Spend and Other are changes to ExxonMobil’s share of production volumes resulting from temporary changes to non-operational volume-determining factors. These factors include changes in oil and gas prices or spending levels from one period to another. According to the terms of contractual arrangements or government royalty regimes, price or spending variability can increase or decrease royalty burdens and/or volumes attributable to ExxonMobil. For example, at higher prices, fewer barrels are required for ExxonMobil to recover its costs. These effects generally vary from period to period with field spending patterns or market prices for oil and natural gas. Such factors can also include other temporary changes in net interest as dictated by specific provisions in production agreements. Government Mandates are changes to ExxonMobil's sustainable production levels as a result of production limits or sanctions imposed by governments. Divestments are reductions in ExxonMobil’s production arising from commercial arrangements to fully or partially reduce equity in a field or asset in exchange for financial or other economic consideration. Growth and Other comprise all other operational and non-operational factors not covered by the above definitions that may affect volumes attributable to ExxonMobil. Such factors include, but are not limited to, production enhancements from project and work program activities, acquisitions including additions from asset exchanges, downtime, market demand, natural field decline, and any fiscal or commercial terms that do not affect entitlements. 23 ENERGY PRODUCTS Energy Products Financial Results (millions of dollars) Three Months Ended March 31, 2024 2023 Earnings (loss) (U.S. GAAP) United States 836 1,910 Non-U.S. 540 2,273 Total 1,376 4,183 Identified Items (1) United States — — Non-U.S. — (30) Total — (30) Earnings (loss) excluding Identified Items (1) (Non-GAAP) United States 836 1,910 Non-U.S. 540 2,303 Total 1,376 4,213 Due to rounding, numbers presented may not add up precisely to the totals indicated. Energy Products First Quarter Earnings Factor Analysis (millions of dollars) Margin – Margins decreased earnings by $2,000 million driven by weaker industry refining margins. Advantaged Volume Growth – Higher volumes from advantaged assets increased earnings by $140 million, primarily driven by the Beaumont refinery expansion. Base Volume – Lower base volumes decreased earnings by $210 million, on divestment of three refining assets (Billings, Sriracha, and Trecate). Structural Cost Savings – Increased earnings by $140 million. Expenses – Higher expenses decreased earnings by $290 million, on higher scheduled maintenance and turnaround activity. Other – All other items increased earnings by $40 million. Timing Effects – Unfavorable timing effects from derivatives mark-to-market impacts decreased earnings by $660 million. Identified Items (1) – 1Q 2023 $(30) million loss related to additional European taxes. (1) Refer to page 18 for definition of Identified Items and earnings (loss) excluding Identified Items. 24 Energy Products Operational Results (thousands of barrels daily) Three Months Ended March 31, 2024 2023 Refinery throughput United States 1,900 1,643 Canada 407 417 Europe 954 1,189 Asia Pacific 402 565 Other 180 184 Worldwide 3,843 3,998 Energy Products sales (1) United States 2,576 2,459 Non-U.S. 2,656 2,818 Worldwide 5,232 5,277 Gasoline, naphthas 2,178 2,177 Heating oils, kerosene, diesel 1,742 1,770 Aviation fuels 339 312 Heavy fuels 214 215 Other energy products 759 803 (1) Data reported net of purchases/sales contracts with the same counterparty. 25 CHEMICAL PRODUCTS Chemical Products Financial Results (millions of dollars) Three Months Ended March 31, 2024 2023 Earnings (loss) (U.S. GAAP) United States 504 324 Non-U.S. 281 47 Total 785 371 Earnings (loss) excluding Identified Items (1) (Non-GAAP) United States 504 324 Non-U.S. 281 47 Total 785 371 (1) Refer to page 18 for definition of Identified Items and earnings (loss) excluding Identified Items. Chemical Products First Quarter Earnings Factor Analysis (millions of dollars) Margin – Increased North America feed advantage from lower natural gas prices and higher margins from performance chemicals realizations, more than offset industry margin decline, increasing earnings by $200 million. Advantaged Volume Growth – Additional high-value product volumes increased earnings by $40 million. Base Volume – Higher base volumes increased earnings by $160 million, primarily driven by strong reliability and absence of turnarounds. Structural Cost Savings – Increased earnings by $20 million. Expenses – Lower turnaround expenses increased earnings by $10 million. Other – All other items decreased earnings by $20 million. Chemical Products Operational Results (thousands of metric tons) Three Months Ended March 31, 2024 2023 Chemical Products sales (2) United States 1,847 1,561 Non-U.S. 3,207 3,088 Worldwide 5,054 4,649 (2) Data reported net of purchases/sales contracts with the same counterparty. 26 SPECIALTY PRODUCTS Specialty Products Financial Results (millions of dollars) Three Months Ended March 31, 2024 2023 Earnings (loss) (U.S. GAAP) United States 404 451 Non-U.S. 357 323 Total 761 774 Earnings (loss) excluding Identified Items (1) (Non-GAAP) United States 404 451 Non-U.S. 357 323 Total 761 774 (1) Refer to page 18 for definition of Identified Items and earnings (loss) excluding Identified Items. Specialty Products First Quarter Earnings Factor Analysis (millions of dollars) Margin – Stronger finished lubes margins due to lower feed costs more than offset weaker basestock margins, increasing earnings by $30 million. Base Volume – Unfavorable volume/mix effects decreased earnings by $20 million. Structural Cost Savings – Increased earnings by $20 million. Expenses – Higher expenses decreased earnings by $40 million. Specialty Products Operational Results (thousands of metric tons) Three Months Ended March 31, 2024 2023 Specialty Products sales (2) United States 495 476 Non-U.S. 1,464 1,464 Worldwide 1,959 1,940 (2) Data reported net of purchases/sales contracts with the same counterparty. 27 CORPORATE AND FINANCING Corporate and Financing Financial Results (millions of dollars) Three Months Ended March 31, 2024 2023 Earnings (loss) (U.S. GAAP) (362) (355) Earnings (loss) excluding Identified Items (1) (Non-GAAP) (362) (355) (1) Refer to page 18 for definition of Identified Items and earnings (loss) excluding Identified Items. Corporate and Financing expenses were $362 million for the first quarter of 2024, $7 million higher than the first quarter of 2023. 28 LIQUIDITY AND CAPITAL RESOURCES (millions of dollars) Three Months Ended March 31, 2024 2023 Net cash provided by/(used in) Operating activities 14,664 16,341 Investing activities (4,577) (4,925) Financing activities (7,982) (8,507) Effect of exchange rate changes (324) 102 Increase/(decrease) in cash and cash equivalents 1,781 3,011 Cash and cash equivalents (at end of period) 33,349 32,676 Cash flow from operations and asset sales Net cash provided by operating activities (U.S. GAAP) 14,664 16,341 Proceeds associated with sales of subsidiaries, property, plant & equipment, and sales and returns of investments 703 854 Cash flow from operations and asset sales (Non-GAAP) 15,367 17,195 Because of the ongoing nature of our asset management and divestment program, we believe it is useful for investors to consider proceeds associated with asset sales together with cash provided by operating activities when evaluating cash available for investment in the business and financing activities, including shareholder distributions. Cash flow from operations and asset sales in the first quarter of 2024 was $15.4 billion, a decrease of $1.8 billion from the comparable 2023 period primarily reflecting lower earnings. Cash provided by operating activities totaled $14.7 billion for the first three months of 2024, $1.7 billion lower than 2023. Net income including noncontrolling interests was $8.6 billion, a decrease of $3.3 billion from the prior year period. The adjustment for the noncash provision of $4.8 billion for depreciation and depletion was up $0.6 billion from 2023. Changes in operational working capital were a contribution of $2.0 billion during the period. All other items net decreased cash flows by $0.7 billion in 2024 versus a contribution of $0.6 billion in 2023. See the Condensed Consolidated Statement of Cash Flows for additional details. Investing activities for the first three months of 2024 used net cash of $4.6 billion, a decrease of $0.3 billion compared to the prior year. Spending for additions to property, plant and equipment of $5.1 billion was $0.3 billion lower than 2023. Proceeds from asset sales were $0.7 billion, a decrease of $0.2 billion compared to the prior year. Net investments and advances decreased $0.2 billion from $0.4 billion in 2023. Net cash used in financing activities was $8.0 billion in the first three months of 2024, including $3.0 billion for the purchase of 27.5 million shares of ExxonMobil stock, as part of the previously announced buyback program. This compares to net cash used in financing activities of $8.5 billion in the prior year. Total debt at the end of the first quarter of 2024 was $40.4 billion compared to $41.6 billion at year-end 2023. The Corporation's debt to total capital ratio was 16.0 percent at the end of the first quarter of 2024 compared to 16.4 percent at year-end 2023. The net debt to capital ratio was 3.2 percent at the end of the first quarter, a decrease of 1.3 percentage points from year-end 2023. The Corporation's capital allocation priorities are investing in competitively advantaged, high-return projects; maintaining a strong balance sheet; and sharing our success with our shareholders through more consistent share repurchases and a growing dividend. The Corporation distributed a total of $3.8 billion to shareholders in the first three months of 2024 through dividends. The Corporation has access to significant capacity of long-term and short-term liquidity. Internally generated funds are expected to cover the majority of financial requirements, supplemented by long-term and short-term debt. The Corporation had undrawn short-term committed lines of credit of $0.3 billion and undrawn long-term committed lines of credit of $1.9 billion as of first quarter 2024. The Corporation, as part of its ongoing asset management program, continues to evaluate its mix of assets for potential upgrade. Because of the ongoing nature of this program, dispositions will continue to be made from time to time which will result in either gains or losses. Additionally, the Corporation continues to evaluate opportunities to enhance its business portfolio through acquisitions of assets or companies, and enters into such transactions from time to time. Key criteria for evaluating acquisitions include strategic fit, cost synergies, potential for future growth, low cost of supply, and attractive valuations. Acquisitions may be made with cash, shares of the Corporation’s common stock, or both. Litigation and other contingencies are discussed in Note 3 to the unaudited condensed consolidated financial statements. 29 Contractual Obligations The Corporation and its affiliates have numerous long-term sales and purchase commitments in their various business activities, all of which are expected to be fulfilled with no adverse consequences material to the Corporation’s operations or financial condition. Through the first quarter of 2024, the Corporation entered into two long-term purchase agreements with an estimated total obligation of approximately $3.0 billion. TAXES (millions of dollars) Three Months Ended March 31, 2024 2023 Income taxes 3,803 4,960 Effective income tax rate 36 % 34 % Total other taxes and duties (1) 7,160 8,095 Total 10,963 13,055 (1) Includes “Other taxes and duties” plus taxes that are included in “Production and manufacturing expenses” and “Selli ng, general and administrative expenses”. Total taxes were $11.0 billion for the first quarter of 2024, a decrease of $2.1 billion from 2023. Income tax expense was $3.8 billion compared to $5.0 billion in the prior year. The effective income tax rate, which is calculated based on consolidated company income taxes and Exxonmobil's share of equity company income taxes, was 36 percent. This increased from the 34 percent rate in the prior year period due primarily to a change in mix of results in jurisdictions with varying tax rates. Total other taxes and duties decreased by $0.9 billion to $7.2 billion. CAPITAL AND EXPLORATION EXPENDITURES (millions of dollars) Three Months Ended March 31, 2024 2023 Upstream (including exploration expenses) 4,582 4,581 Energy Products 527 685 Chemical Products 433 831 Specialty Products 76 91 Other 221 192 Total 5,839 6,380 Capital and exploration expenditures in the first quarter of 2024 were $5.8 billion, down 8% from the first quarter of 2023. The Corporation plans to invest in the range of $23 billion to $25 billion in 2024. Actual spending could vary depending on the progress of individual projects and property acquisitions. 30 FORWARD-LOOKING STATEMENTS Statements related to future events; projections; descriptions of strategic, operating, and financial plans and objectives; statements of future ambitions and plans; and other statements of future events or conditions, are forward-looking statements. Similarly, discussion of roadmaps or future plans related to carbon capture, transportation and storage, biofuel, hydrogen, direct air capture, and other future plans to reduce emissions and emission intensity of ExxonMobil, its affiliates, companies it is seeking to acquire and third parties are dependent on future market factors, such as continued technological progress, policy support and timely rule-making and permitting, and represent forward-looking statements. Actual future results, including financial and operating performance; potential earnings, cash flow, dividends or shareholder returns, including the timing and amounts of share repurchases; total capital expenditures and mix, including allocations of capital to low carbon investments; realization and maintenance of structural cost reductions and efficiency gains, including the ability to offset inflationary pressure; plans to reduce future emissions and emissions intensity, including ambitions to reach Scope 1 and Scope 2 net zero from operated assets by 2050, to reach Scope 1 and 2 net zero in Upstream Permian Basin unconventional operated assets by 2030 and in Pioneer assets by 2035, to eliminate routine flaring in-line with World Bank Zero Routine Flaring, and to reach near-zero methane emissions from operated assets and other methane initiatives; meeting ExxonMobil’s divestment and start-up plans, and associated project plans as well as technology advances, including the timing and outcome of projects to capture, transport and store CO2, produce hydrogen, produce biofuels, produce lithium, create new advanced carbon materials, and use plastic waste as a feedstock for advanced recycling; timely granting of governmental permits and certifications; future debt levels and credit ratings; business and project plans, timing, costs, capacities and profitability; resource recoveries and production rates; and planned Denbury and Pioneer integrated benefits could differ materially due to a number of factors. These include global or regional changes in the supply and demand for oil, natural gas, petrochemicals, and feedstocks and other market factors, economic conditions, and seasonal fluctuations that impact prices and differentials for our products; changes in law, regulations, taxes, trade sanctions, or policies, such as government policies supporting lower carbon and new market investment opportunities such as the U.S. Inflation Reduction Act and the ability for projects to qualify for the financial incentives available thereunder, the punitive European taxes on the oil and gas sector and unequal support for different technological methods of emissions reduction or evolving, ambiguous and unharmonized standards imposed by various jurisdictions related to sustainability and GHG reporting; variable impacts of trading activities on our margins and results each quarter; actions of competitors and commercial counterparties; the outcome of commercial negotiations, including final agreed terms and conditions; the ability to access debt markets on favorable terms or at all; the occurrence, pace, rate of recovery and effects of public health crises, including the response from governments; reservoir performance, including variability and timing factors applicable to unconventional resources; the level and outcome of exploration projects and decisions to invest in future reserves; timely completion of development and other construction projects; final management approval of future projects and any changes in the scope, terms, costs or assumptions of such projects as approved; the actions of government or other actors against our core business activities and acquisitions, divestitures or financing opportunities; war, civil unrest, attacks against the company or industry, and other geopolitical or security disturbances, including disruption of land or sea transportation routes; expropriations, seizure, or capacity, insurance, shipping or export limitations imposed by governments or laws; opportunities for potential acquisitions, investments or divestments and satisfaction of applicable conditions to closing, including timely regulatory approvals; the capture of efficiencies within and between business lines and the ability to maintain near-term cost reductions as ongoing efficiencies; unforeseen technical or operating difficulties and unplanned maintenance; the development and competitiveness of alternative energy and emission reduction technologies; the results of research programs and the ability to bring new technologies to commercial scale on a cost-competitive basis; and other factors discussed under "Item 1A. Risk Factors" of ExxonMobil’s 2023 Form 10-K. Forward-looking and other statements regarding environmental and other sustainability efforts and aspirations are not an indication that these statements are material to investors or require disclosure in our filing with the SEC. In addition, historical, current, and forward-looking environmental and other sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future, including future rule-making. Energy demand models are forward-looking by nature and aim to replicate system dynamics of the global energy system, requiring simplifications. The reference to any scenario in this report, including any potential net-zero scenarios, does not imply ExxonMobil views any particular scenario as likely to occur. In addition, energy demand scenarios require assumptions on a variety of parameters. As such, the outcome of any given scenario using an energy demand model comes with a high degree of uncertainty. Third-party scenarios discussed in this report reflect the modeling assumptions and outputs of their respective authors, not ExxonMobil, and their use by ExxonMobil is not an endorsement by ExxonMobil of their underlying assumptions, likelihood or probability. Investment decisions are made on the basis of ExxonMobil’s separate planning process. Any use of the modeling of a third-party organization within this report does not constitute or imply an endorsement by ExxonMobil of any or all of the positions or activities of such organization. 31 Actions needed to advance ExxonMobil’s 2030 greenhouse gas emission-reductions plans are incorporated into its medium-term business plans, which are updated annually. The reference case for planning beyond 2030 is based on ExxonMobil’s Global Outlook (Outlook) research and publication. The Outlook is reflective of the existing global policy environment and an assumption of increasing policy stringency and technology improvement to 2050. However, the Outlook does not attempt to project the degree of required future policy and technology advancement and deployment for the world, or ExxonMobil, to meet net zero by 2050. As future policies and technology advancements emerge, they will be incorporated into the Outlook, and ExxonMobil’s business plans will be updated accordingly. References to projects or opportunities may not reflect investment decisions made by ExxonMobil or its affiliates. Individual projects or opportunities may advance based on a number of factors, including availability of supportive policy, permitting, technological advancement for cost-effective abatement, insights from the company planning process, and alignment with our partners and other stakeholders. Capital investment guidance in lower-emission investments is based on our corporate plan; however, actual investment levels will be subject to the availability of the opportunity set, public policy support, and focused on returns. The term “project” as used in this report can refer to a variety of different activities and does not necessarily have the same meaning as in any government payment transparency reports. 32 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information about market risks for the three months ended March 31, 2024, does not differ materially from that discussed under Item 7A of the registrant's Annual Report on Form 10-K for 2023.