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DealBook Online Summit 2021
November 10, 2021, Online
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Targeting Change
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About the talk

Darren Woods the chairman and chief executive of the country’s biggest oil producer defends his company’s commitment to reducing carbon emissions, and addresses the pressure to take more drastic steps to confront climate change head on at the 2021 DealBook Online Summit.

About speaker

Darren Woods
Chairman & CEO at Exxon Mobil
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My next guest is Darren Woods is the chairman and CEO of Exxon Mobil in this year. It became the target for change after 6 month, proxy battle, hedge fund, Engine Number 1, 1 2 3, Focus independent directors, on X on board. Now the company is trying to reposition itself to invest in a Greener future men while Captain profits from the rise in oil. Prices Darren Woods. Thank you for being here. It's nice to see you too. And thanks for having me. I appreciate you being here, but I can tell you in truth that over the course of probably. The last week. I must have gotten thousands of emails

from people saying cancel this interview. As, you know, cop26 is happening as we speak. And there are a lot of folks who are very concerned about the climate for very concerned about the role that fossil fuels are playing in all of this. And so, I believe we have to engage and I believe Colonel isn't about asking questions and interrogating ideas. I'm hoping I can do that together. But here's a want to start it and maybe it is in service of some of those emails which is how do you want to be a personal basis?

Think about what you do? And the reason I ask is because I think and maybe you can hold both ideas in your head at the same time. But this idea and one side that you are powering the world and on the other side that you may be killing the planet. I swear those ideas for you personally. I certainly understand the the level of enthusiasm in this debate and the concerns in there, which frankly, I share as well as many people at the company. Sure. We all have families and I have grand kids and we worry about

the future and focus on how we help the world transition from Energy System today that billions of people around the planet depend on and supports. What is Modern Life today. We recognize that brings a lot of benefits associated with it. But we also recognise there. A lot of cost to come with that and we've got a transition to a lower emissions Energy System, one that has a less carbonate and we accept that as a as a challenge and I need and I think everyone in the company does and what we've been working on his, how best to do that? How to strike that balance of continuing

to meet the needs of the world today, and energy systems required to support my Life why you transition to a much lower missions, the system. And I think actually, if you look at what's required to make that happen and we bought a focus on wind and solar electric vehicles, which are going to play an important part, but there are a lot of sectors of the economy, which are critical to supporting Modern Life that aren't easy to decarbonize, where we don't have good sign machines. And frankly, that's where I think mobile can bring value by bringing the technology capabilities that we have

to bear to see if we can't find ways and introduce Solutions can help bridge, that gap between what's needed today. What we want for tomorrow. But do you ever go home at night and say, man? I don't know if this is good. I think this actually made me really bad. But, you know, I think just look at what happens when, when were deprived of energy. I think people because the access certainly in the modern world today is it's very available. It's reliable. People pretend to take that for granted. But when it goes away, goes in at the impact on people's life is profound. And

so, I, I continue to think. While there is a an urgent need to address that risk. There's also an urgent need to continue to support people's lifestyle. When you think about what's needed to do to maintain Martin standard, living all around the planet, and there are many billions of people today who don't have the luxury of energy that we have and it we take for granted. And so I think for me, it's really, how do you describe the balance? How do you thoughtfully transition from one to the other? And I think it's going to require people with and companies like ours that have the

experience. In this system, the capabilities in the skills to help with that transition, in that conversation. The balance though because long-term it would seem to me. But if you succeed him, anyways, you put yourself out of business. Well, I don't actually don't think that's right. And if you look at what's so, you know, if you look at what the iaea and the intergovernmental panel on climate change says, they're going to be required to meet the Ambitions of the Paris Accord, and into the Net Zero by 2050, carbon capture and storage going to play an

important role. Hydrogen's, going to play an important role. Biofield tuning play an important role. Those are all sectors and businesses that were focused on his part of our low carbon Solutions, business, and frankly, leverage the same capabilities and skills that we have used in our traditional businesses. And so am. I what we see is an opportunity that has the world's transition to shift, our capabilities and skill sets from our traditional businesses into those areas that are growing and are required for the future. And so I think the modeling that we've done, the scenarios that are out

there, that suggest what an I-84, what a net-zero world looks like. Our business can be successful in that world with those other Technologies, apply to those other types of businesses. You've been an excellent now from 130 years. When do you think you personally accepted or knowledge? The idea of climate change and the role of fossil fuels in it? Why it's difficult to pinpoint a day. I certainly has that conversation has ramped up. I've been very aware of if I if I come back to the jobs that I was performing as I came up

through the company finding ways to do things more. Energy efficiently and to do things with lower mission to do to do things in our business, that lower the impact on the environment, has been a freak or part of the job. So, I can say personally, and we worry about a people safety and the safety of those who come to work on our site. And, and the communities where we operate in and we worry about the impact, they were having on the environment. So it's been hardened, parcel the job for as long as I can remember, obviously as things have ramped up in the climate space and concerns

to become more evident and and the discussions have evolved are thinking has evolved with that as well as his mind. But do you think you go back and say, is it early 2000s? You know, I'm thinking about the ipcc report back in 2001. Do you go back? Even farther than that? I mean there was obviously a lot of work that Exxon was doing even internally around some of these issues and some trying to understand them better. Do you do you remember when you personally sorta said yourself? Okay. This is a problem and we're going to figure it out. I can tell you when I certainly would have kind of

became fronts dinner with respect to the responsibility to have them, because when I came to our headquarters here in Dallas and was involved in an investor age industrialization rolls with her that became a much more explicit part of the job in the thinking until I had. There's a very clear job that I had in my mind where that became much more explicit versus an inherent part of managing the multitude of those back in 2001, 2001 information put out by the company back in in the 90s in before.

And even in into the office, I used to run ads in the New York Times of all places with the headline unsettled science. And I'm curious today, when you look back at that. Do you say, man. I wish we hadn't done that. You know, I think if you look at the position that we've taken, historically, our understanding and the public position that we've taken is been pretty consistent with what I would say is the general, understand understanding in the scientific Community. Let me take the article a few minutes just mention the unsettled science. If you read

that in that article in its entirety, when you get to the bottom of it, basically says enough is known today for companies governments and people to start making changes to try to address the risks of climate change. And so while the title maybe, you know, something that you can talk talk about and use as an example, I think, as you read through that, it is an article that suggests action needs to be taken. In more work, needs to be done to understand how best to thoughtfully address, the risks of climate change, and the 2014-2015

axon publicly said, The climate change was both real and a function of fossil fuels, and carbon emissions what happened. During those thirteen years inside of Exxon, given that I think the scientific Community had clearly gotten there much earlier, I think our position our public position that also feels and combustion of fossil fuels and Emissions that contribute to climate change. We made a public statement. Well before 2014 is our understanding is involved with the scientific community, and we have been

working on Technologies to try to address those areas of the economy that are hard to decarbonize. We took, we came out very publicly, supported the carbon tax, which today, we continued to support as a mechanism, to try to drive, put incentives in place in to drive activities across the economy to lower Mission. So I would say if you look across the span of time, the country has the company has continued to evolve. Its Banking and the work is doing the technology space and the work they were doing in the policy space to try to encourage. What I would say is a thoughtful transition

to try to continue to strike this balance. If we talked about earlier last week and I pushed you hard on the idea that we Raymond the former CEO of the company had been wrong in some of his statements and said, you think it was a mistake and it appeared that you were willing to give and say it was a mistake. And I just want to follow up with you on that because it seemed to me empirically. It was a mistake. No strongly about is taking understanding that we all have today and projecting was back to 25 years ago and asked to make judgments with what we know today back-to-back.

25 years ago. I don't think that's A good basis and particularly not in terms of moving forward. And I cannot come back to while they're, there was a fuse expressed around some of the challenges associated with the science. There was clearly, we clearly articulated that there's work that needs to be done and that we need to start taking steps to address the risks of climate change. I think the underlying philosophy that we've had it as a company. Is this is a large complex system that has a direct impact on people's living, all around the world. And we need to be very thoughtful as we think

through how we transition from that system that has been a. I think a fairly consistent in that we struck and even today, I think that continues to be a really important challenge. I would tell you, you know, one of the analogies that I think about it. We looked at the eight, they withdraw out of that Afghanistan, one of the post-mortems on that. There was a statement made that said, you know, doing the right thing in the wrong, wrong way can come the wrong thing. And I think in this space, the right thing is to find ways to reduce a Patience and move to a lower carbon emission system.

Energy System. We got to find the right way to do that. And I would tell you that the work that we are focused on the technology that we're trying to develop is, what is the right way? The best way to do that the strikes that balance. So that in the end, we do the right thing in the right way to get to the right answer, we talked about this proxy battle that happened this year. And now you have three new board members, who I think are pushing on this company, in a different way than before around climate, and I wanted to get your take on what that

experience was. Like, before we even talk about what it's like to have them inside the board right now. The proxy fight itself. You pushed back pretty hard and ultimately lost. So, maybe, I think it's important to some contacts in terms of where we came from, as we entered into that box. If you go back in time, starting 27, when I came into the job. It was very clear from from our perspective that we need to make a change in recapitalize the business and drive improve productivity better earnings for the cash flow. And so, we started what I recall is a counter counter cyclical investment

and putting money after which wasn't well-received by the investment committee, but we felt was very important with respect to how we were going to grow the business and move it going for. And the area vs GM in particular climate. Our view was at the time, the litmus test was whether or not we are investing in wind and solar in our view was that does not. It's important play, some pinochle roll. It doesn't leverage the strengths of our Corporation and while it's necessary is not sufficient and we were going to focus or we can bring the most value in areas that need, you have new

solutions, that wasn't a well-received and a counter-narrative approach that we were taking then you combine that The pandemic, when the bottom dropped out of the mark, the worst part we've seen in the results suffering. They put all that together as we entered into the proxy battle. And so think it was a Confluence of events to challenge Us in that space. If you look at the work that we were doing prior that proxy battle. So, we had in 2018 stirred up a carbon capture venture, to figure out how we can lower the cost of carbon capture. So that we could deploy that more effectively

treated to reduce emissions around the world. We are also tests that came with the existing technology to find applications were we could make that existing technology work at scale? And so that group was working on those opportunities. We stood up a low emissions fuels Venture and as we went into early and into January into February, we announced our low carbon Solutions business, which did those businesses up and took those projects that we're developing is part of the ventures and brought them into the business. And so that became the foundation of how are moving forward. And as we went

into the project discussion. Had that. Broader debate and as the new board members of, I think and we've taken him through that the work that we're doing. There's a there's a lot of support today for the Investments that were making the low carbon Solutions in the recognition. That what ExxonMobil can bring to this space is the is leveraging the skills and capabilities that we do, we developed over the last generation, multiple generations to support that transition invest in areas where you desperately need Solutions. Think it's been pretty well accepted it and where the work they were

doing. Now to grow that business. We just mentioned at the end of our third-quarter call that we've got fifteen billion dollars are going to that business and I expect it will continue to grow as policies. Develop around the world may need. You think you're no better off for having them on your bored. And we brought onto directors in January. I received today. We don't make a distinction between where they came from. The engine one directors of the other-directed. We have a cohesive board. We are encouraged by taking them through the strategy,

and they don't have Would you do it again? If your a driver tell you, we had I think a very confident board to start with one that despite what people may have said, was pretty energized in a latte or room to bake. We continue to have that. So I don't it's difficult to judge week. If you look at the path that we were on as we went into the proxy in the path. We're on today. I think you can see a an alignment across both of the board that we had in the new board that we've got today and I was just stating there's different perspectives and a diversity of thinking. Today. I like the

challenging in the thinking goes into that but I would also tell you that we had challenging directions prior to that. So it's it's, I would tell you that I'm comfortable with the dialogue that we're having the insight to come into the boardroom in the discussions that lead to the decisions that we make it collectively, as a board and management in the past, invest in carbon capture and to invest in this, Carbon unit that you've described how much money you openly going to put in and how quickly?

So I think you're feeling if I come back to that, when I mentioned that, we started carbon capture mention 2018, as we went in to this year, 2021. We had a pretty good portfolio of projects. What the board has brought to the discussion, is the challenge of how do you lead in his face and how far forward can you lean into it? And how can you help Society make this transition faster? The Houston Hub concept that we put out back in the February. March time frame was an idea that for the B Administration coming in that Arkham is committed to making a step-change

reduction in emissions. What can we do to help facilitate that that project as envisioned today takes 50 million tonnes per annum emissions. Reductions by 2030 in 100 million tonnes per annum by 2040. S 20 million cars off the road. The equivalent moving cars off-road that project can do that. With a at a lower cost than current policy today for every ton of carbon every Monday. We can do that at have to order the cost of the existing policy that some place today. So was that an opportunity to help shape the policy to get there to get the

results that were looking for? If this Society is looking for a network in that they're counting on. So the answer to your question of, how much will we spend? How far can we go? I think it's a function of the policy, that's required to support those types of large-scale investment to make. Those reductions is going to help. Determine that pace. That you think that the Houston project isn't some described it as fanciful. The other is that the whole idea of carbon capture on the way acts on his approach to this far, is really simply steal this or basic a separation

idea. This is from producing natural gas on one end and then selling it to other e&p companies to inject underground to loosen. What are hard to reach oil. Going on for years, that bad onto itself is not new new and that the sum of the sort of larger projects around the, you know, things that would actually deal with with scope 3. Emissions, that that's not that, that is not real investment being made there yet. So I think a couple Concepts that you brought up that I need to keep separated one is there's no doubt today that that that

carbon capture technology has been used to enhance oil recovery, which is what you're referring to, but I would separate out the application from the technology to technology exists to concentrate CO2. And in the application has been and where you get a return for that and enhance Amor recover. Just as easily. If you have an incentive to store carbon, you can take that kind of concentrated CO2 and stored underground, and sequester it. So there's a distinction between the technology and how you apply the technology into the extent. We want to move faster and further and an MD carbonized difficult

to decarbonize sectors of the economy. Carbon capture going to play an important role and thank God, we have technology that's been proven the challenges as the carbon stream to get more and more dilute that technology becomes more and more expensive. So we got to find new technologies to lower the cost of that. I think that's that's how we look at that and why I think while we got technology today that will work just to solve the For height. Intense carbon streams. We got to find somewhere to live streams with respect to scope 3. I think you again. There's

that you got to think about the supply and demand equation and it's been a lot of emphasis and focus on the supply side of the equation with your producers like ourselves, but the challenge is going to be the demand, which comes back to this point that I made earlier around the role that energy plays in people's lives and that generates the demand. And so, how, how do we dress that demand requires these Alternatives than me a number of criteria for consumers out there. Not just, not just the emissions piece of the equation, but also the affordability piece of the equation of the

availability piece of the equation, the reliability piece of the equation. So those are a number of criteria that the alternates have to address the challenge with transitioning from what works today to walk, needs to work in the future. And that's the demand side of the equation. Difficult for supplier to completely control that we are doing worked for these products to have Less emissions associated with him, but I think she's going to eventually have to play a role in terms of helping shape that demand. Otherwise, all we're going to do as we pressure some supplies to reduce their

production issue just of that demand and that's apply to some other suppliers and potentially to suppliers that are less visible and potentially have higher missions. Until I think we just moving around the deck chairs. A lot of the larger public companies, like yours are the best thing a certain assets, but potentially, I imagined investing than two players in in the business. Why only be really clear. We and I we have for a long time. Talk about the road to success. Here is looking across the world and how do you reduce a mission for society as a

whole? We never felt like way to dress. That is by moving the emissions that we have in our portfolio to somebody else's portfolio and claiming credit for that. And so we have very much try to focus on, reducing the amount of Nations associated with the portfolio that we manage and not take credit for a divestment if then moves that to somebody else to run those assets. We don't think that's the right solution solution to the day. You got to draw a box around the world and make sure that your is things that you're doing today, reduce the emissions for the globe as a whole. That's the way

we've been thinking about it. That's why we keep coming back to, we're going to need new technologies and new solutions to make those reductions come down. How do you think about the issue of investment and end of the reasons I ask is your now actually, pretty prophets all over again, you recently announced a plan to invest in this low carbon unit, but also to pursue BuyBacks to buy back some of the stock and I wonder if there's any part of you that said yourself. You know, what? Buying back the stock. We should either be investing that 10 billion dollars

directly into more technology like this, or we should be dividend to get back out to the shareholders in the shareholders. If they want to go invested in in new technologies. They should do that themselves. I'm thinking that's a really important a play. How we how we choose to allocate Jack happened to buy backs. If we do see that, we're returning cash to shareholders. We did raise the dividend as well. And third quarter on top of what was already. Very attractive dividend yield. So we should be raised the dividend. And if you look at the cycles of the business, we have set ourselves an

objective of doubling earnings and Dublin cash flow, and the growth in those two numbers. And as we look at the portfolio that we have today, the advances that we made in our application of Technology efficient that we've driven, we believe, we're going to meet that. We're back on track to deliver the growth in earnings and cash flow that we had anticipated back in 2018 and we are doing it with him. Atlas capital, and we're doing an environment where prices and margins were rising. And so we had that Capital that we can reallocate, and put in to buy back the pace for investment,

and the low carbon Solutions. I expect to grow, but it will be a function of finding the opportunities. That makes sense why we can bring value. And the pace of investing in technology is a function of how quickly we can advance to Discovery. And as you know, that you don't buy discoveries, it requires a lot of hard work and so the investment we've been putting in that space to partnering, we've been doing with private firms in Academia, and, and other, the National Labs is to try to advance that thinking and putting the money into supporting that advancement thinking. And as that

grows and we get Discovery. I think you're going to see the cash right in the investment start to grow in that space. As you know, there are a bunch of people who are saying that the push for DSG right now. Is go to effectively, push up the cost of energy and some of you been articulated the view that it is pushing up the price of energy today. Steve schwarzman recently said if you try and raise money to drill a hole today, it's almost impossible to get the money and he has views at this is going to wreak havoc across the world. Meantime, the CFO of Chevron. Your

rival says no no, no the price the rise in prices today feels more cyclical. And structural repair rapid demand decreases last year for the rapid increases this year. So it's hard for some of us apply to with just as quickly as demand and a that's the issue, which is it. Why? I actually think it was the oldest one in the same. As you think about the comment, the Steve made with respect to investment going and it comes back to do you have the revenue going into the investment since you go back in time and take, 2019 and 2020. If you look at the investment that we're going into the industry,

they were coming off and turn the cave off, steeply in 2020. And so in a depletion business, which is the oil and gas is, as you produce those both, those products you have less and less Supply. If you're not reinvesting, an array to offset the depletion, you're basically your ability to meet demand and is compromised or reduced. And as the master pick back up again, if you haven't been investing to keep your supply if you're going to find that pinpoints. So that is that commodity cycle. That other see, if I was responding to his supplies, come off. There's no doubt about that.

Demand is increasing and you got this tent and that is the classic commodity cycle. How we going forward? How much of that Supply remains inhibited based on esgi, things difficult to tell when it comes back to. My mind society's willingness to pay that price based on how you best strike that balance and it's difficult to judge. I mean, ultimately, moving from what is a very efficient and effective Energy Systems to something new. He's going to carry a cost in the question is, can we get that cost? And which is what we're focused on. We're trying to find a technology that will lower

the cost to give Alternatives that are just as reliable and affordable. But in the meantime is to question, do you pay more to the transition more quickly? I think that that's a question that no government and society and consumers, and they're going to have to answer typical for a company to answer that question in 2050. The world. It's a going to be a function of, you know, how technology of all is fundamentally to address the challenges of moving to a lower carbon emission system. It's going to

require developments in technology and it's going to require addressing the hard to solve problems, and it's difficult to judge how that technology is going to go on a Volvo me. Just give you an example. The the most cost-efficient to lowest cost to society way to address. This is to address the emission people. Quickly jumped oil and gas is being the problem. It's the emissions associated with the combustion of oil and gas has the problem. If you could address the emissions, There's technology, like there are Direct Care capture. The people are pursuing, you know, that will lead you to a

future that looks one way if instead you find completely alternative sources of energy that don't require hydrocarbons death is a future that looks another way inside. I think it's a function of how those Technologies developed a how affordable they are, how reliable they are and what we've been focused on from a strategy, standpoint is making sure that we can play. We can bring something to both sides of that spectrum and balance the resource allocation, to those as the technology advances and as the society in the evolution to lower carbon emissions

future advance. And so, I think what we're trying to do is make sure that we can contribute as we move along that path, whatever that path might look like. Darren Woods, I hope you do. Thank you. So, so, much for joining us. Nice, talking with you. And have you. All right.

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