# EXXON MOBIL CORP (XOM) FY 2024 MD&A Verbatim Item 7 Management's Discussion and Analysis from EXXON MOBIL CORP's 10-K for fiscal year 2024. SEC filing source: https://www.sec.gov/Archives/edgar/data/34088/000003408825000010/xom-20241231.htm Accession: 0000034088-25-000010 Filing date: 2025-02-19 Report date: 2024-12-31 Extracted from a later financial-section MD&A body after the formal Item 7 span was a short reference. Confidence: high Company profile: /company/XOM/ All MD&A years: /company/XOM/mda/ Previous year: /company/XOM/mda/fy2023/ (FY 2023) Next year: /company/XOM/mda/fy2025/ (FY 2025) MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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, lower-emission fuels, hydrogen, ammonia, direct air capture, ProxximaTM systems, carbon materials, lithium and other future plans to reduce emissions and emission intensity of ExxonMobil, its affiliates, and third parties are dependent on future market factors, such as continued technological progress, stable policy support and timely rule-making and permitting, and represent forward-looking statements. Actual future results, including financial and operating performance; earnings power; 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 and other new 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 heritage Permian Basin (1) unconventional operated assets by 2030, and in Pioneer Permian 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 to meet ExxonMobil’s emission reduction plans and goals, 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 and ammonia, produce lower-emission fuels, produce ProxximaTM systems, produce carbon materials, produce lithium, and use plastic waste as 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 Inc. (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; developments or changes in local, national, or international laws, regulations, taxes, trade sanctions, trade tariffs, or policies affecting our business, such as government policies supporting lower carbon and new market investment opportunities, 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 co-venturers, competitors and commercial counterparties; the outcome of commercial negotiations, including final agreed terms and conditions; the outcome of competitive bidding and project awards; the ability to access debt markets on favorable terms or at all; the occurrence, pace, rate of recovery and effects of public health crises; adoption of regulatory incentives consistent with law; reservoir performance, including variability and timing factors applicable to unconventional resources and the success of new unconventional technologies; the level, outcome, and timing of exploration and development projects and decisions to invest in future reserves and resources; timely completion of 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; decoupling of economies, and disruptions in trade alliances and military alliances; expropriations, seizure, or capacity, insurance, shipping, import 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 without impairing our competitive positioning; unforeseen technical or operating difficulties and unplanned maintenance; the development and competitiveness of alternative energy and emission reduction technologies; consumer preferences including willingness and ability to pay for reduced emission products; 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. 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 or any other regulatory authority. 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 (1) Heritage Permian Basin assets exclude assets acquired as part of the acquisition of Pioneer that closed May 3, 2024. 39 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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. 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 the Company’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. Current trends for policy stringency and development of lower-emission solutions are not yet on a pathway to achieve net-zero by 2050. As such, the Outlook does not 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 stable and 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. OVERVIEW The following discussion and analysis of ExxonMobil’s financial results, as well as the accompanying financial statements and related notes to consolidated financial statements to which they refer, are the responsibility of the management of Exxon Mobil Corporation. The Corporation’s accounting and financial reporting fairly reflect its integrated business model involving exploration for, and production of, crude oil and natural gas; manufacture, trade, transport and sale of crude oil, natural gas, petroleum products, petrochemicals, and a wide variety of specialty products; and pursuit of lower-emission and other new business opportunities, including carbon capture and storage, hydrogen, lower-emission fuels, ProxximaTM systems, carbon materials, and lithium. ExxonMobil's reportable segments are Upstream, Energy Products, Chemical Products, and Specialty Products. Where applicable, ExxonMobil voluntarily discloses additional U.S., Non-U.S., and regional splits to help investors better understand the Company's operations. The Company is organized along three businesses – Upstream, Product Solutions, and Low Carbon Solutions, aligning along market-focused value chains. Product Solutions consists of Energy Products, Chemical Products, and Specialty Products. Low Carbon Solutions is included in Corporate and Financing as the business continues to mature through commercialization and deployment of technology. The businesses are supported by centralized service-delivery groups, including Global Projects, Technology and Engineering, Global Operations and Sustainability, Global Trading, Supply Chain, and Global Business Solutions. ExxonMobil, with its resource base, financial strength, disciplined investment approach and technology portfolio, is well-positioned to participate in substantial investments to develop new supplies of reliable and affordable lower-emission energy and other critical products. The Company’s integrated business model, with significant investments in Upstream, Energy Products, Chemical Products, and Specialty Products segments and Low Carbon Solutions businesses, generally reduces the Corporation’s risk from changes in commodity prices. While commodity prices depend on supply and demand and may be volatile on a short-term basis, ExxonMobil’s investment decisions are grounded on fundamentals reflected in our long-term business outlook, and use a disciplined approach in selecting and pursuing the most attractive investment opportunities which target a low cost of supply to ensure long-term competitiveness. The annual Corporate Plan process establishes the economic assumptions used for evaluating investments and sets operating and capital objectives. The Global Outlook (Outlook), developed annually, is the foundation for the Corporate Plan assumptions. Price ranges for crude oil and natural gas, including price differentials, refinery and chemical margins, volumes, development and operating costs, including greenhouse gas emissions pricing, and foreign currency exchange rates are part of the Corporate Plan assumptions developed annually. Corporate Plan volume projections are based on individual field production profiles, which are also updated at least annually. Major investment opportunities are evaluated over a range of potential market conditions. All major investments are reappraised to ensure we learn from our decisions, and the development and execution of the project. Lessons learned are incorporated in future projects. 40 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS BUSINESS ENVIRONMENT Long-Term Business Outlook ExxonMobil’s business planning is underpinned by a deep understanding of long-term market fundamentals. These fundamentals include supply and demand trends; the scale and variety of energy needs worldwide; capability, practicality, and affordability of energy alternatives, including lower-carbon solutions; greenhouse gas emission-reduction technologies; and relevant government policies. The Outlook considers these fundamentals to form the basis for the Company’s long-term business planning, investment decisions, and research programs. The Outlook reflects the Company’s view of global energy demand and supply through 2050. It is a projection based on current trends in technology, government policies, consumer preferences, geopolitics, and economic development. In addition, ExxonMobil considers a range of scenarios - including remote scenarios - to help inform perspective of the future and enhance strategic thinking over time. Included in the range of these scenarios are the Intergovernmental Panel on Climate Change (IPCC) Likely Below 2°C scenarios and three scenarios from the International Energy Agency (IEA): IEA Stated Policies Scenario (STEPS), which reflects a sector-by-sector assessment of current policy in place or announced by governments; IEA Announced Pledges Scenario (APS), which reflects aspirational government targets met on time and in full; and IEA Net Zero Emissions by 2050 Scenario (NZE), which the IEA describes as extremely challenging, acknowledging that society is not currently on the IEA NZE pathway. No single transition pathway can be reasonably predicted, given the wide range of uncertainties. Key unknowns include yet-to-be-developed or changes in developed government policies, market conditions, and advances in technology that may influence the cost, pace, and potential availability of certain pathways. Scenarios that employ a full complement of technology options are likely to provide the most economically efficient pathways. Using our own experts and third-party sources, we monitor a variety of signposts that may indicate a potential shift in the energy transition. For example, the regional pace of the transition could be influenced by the cost of new technologies compared to existing or alternative energy sources. To effectively evaluate the pace of change, ExxonMobil uses many scenarios to help identify signposts that provide leading indicators of future developments and allow for timely adjustments to future versions of the Outlook. [[GREPCENT_TABLE]] [["Developing countries projected to drive energy demand growthPrimary energy - Quadrillion BtuSource: ExxonMobil 2024 Global Outlook","By 2050, the world\u2019s population is projected to be around 9.7 billion people, or nearly 2 billion more than in 2023. Coincident with this population increase, the Outlook projects worldwide economic growth to average approximately 2.5 percent per year, with economic output nearly doubling by 2050 compared to 2023. As economies and populations grow, and as living standards improve for billions of people, the need for energy is expected to continue to rise. Even with significant efficiency gains, global energy demand is projected to rise by almost 15 percent from 2023 to 2050. This increase in energy demand is expected to be driven by developing countries (i.e., those that are not member nations of the Organization for Economic Co-operation and Development (OECD)). By contrast, energy use in developed nations is expected to decline by more than 10 percent as efficiency improves. As expanding prosperity drives global energy demand higher, increasing use of energy-efficient technologies and practices as well as lower-emission products will continue to help significantly reduce energy consumption and CO2 emissions per unit of economic output over time. Substantial efficiency gains are likely in all key aspects of the world\u2019s economy through 2050, affecting energy requirements for power generation, transportation, industrial applications, and residential and commercial needs."]] [[/GREPCENT_TABLE]] Under our Outlook, global electricity demand is expected to increase more than 75 percent from 2023 to 2050, with developing countries likely to account for approximately 80 percent of the increase. Consistent with this projection, power generation is expected to remain the largest and fastest growing major segment of global primary energy demand, supported by a wide variety of energy sources. The share of coal-fired generation is expected to decline substantially to approximately 15 percent of the world’s electricity in 2050, versus approximately 35 percent in 2023, in part due to policies to improve air quality as well as reduce greenhouse gas emissions to address risks related to climate change. From 2023 to 2050, the amount of electricity supplied using natural gas, nuclear power, and renewables is expected to more than double, accounting for the entire growth in electricity supplies and offsetting the reduction of coal. Electricity from wind and solar is expected to increase more than 450 percent, helping total renewables (including other sources, e.g., hydropower) to account for approximately 90 percent of the increase in electricity supplies through 2050. Total renewables are expected to reach over 50 percent of global electricity supplies by 2050. Natural gas and nuclear are expected to be about 20 percent and 10 percent, respectively, of global electricity supplies by 2050. Supplies of electricity by energy type will reflect significant differences across regions reflecting a wide range of factors, including the cost and availability of various energy supplies and policy developments. 41 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Energy for transportation - including cars, trucks, ships, trains, and airplanes - is expected to increase by about 25 percent from 2023 to 2050. Transportation energy demand is expected to account for about 60 percent of the growth in liquid fuels demand worldwide over this period. Light-duty vehicle demand for liquid fuels is projected to peak by around 2025, and then decline to levels seen in the early-2000s by 2050, as the impact of better fuel economy and significant growth in electric cars, led by China, Europe, and the United States, work to offset growth in the worldwide car fleet of approximately 65 percent. By 2050, light-duty vehicles are expected to account for around 20 percent of global liquid fuels demand. During the same time period, nearly all the world’s commercial transportation fleets are expected to continue to run on liquid fuels, including biofuels, which are expected to be widely available and offer practical advantages in providing a large quantity of energy in small volumes. Almost half of the world’s energy use is dedicated to industrial activity. As the global middle class continues to grow, demand for durable products, appliances, and consumable goods will increase. Industry uses energy products both as a fuel and as a feedstock for chemicals, asphalt, lubricants, waxes, and other specialty products. The Outlook anticipates technology advances, as well as the increasing shift toward cleaner forms of energy, such as electricity and natural gas, with coal declining. Demand for oil will continue to grow as a feedstock for industry. As populations grow and prosperity rises, more energy will be needed to power homes, offices, schools, shopping centers, hospitals, etc. Combined residential and commercial energy demand is projected to rise by around 15 percent through 2050. Led by the growing economies of developing nations, average worldwide household electricity use is expected to rise more than 65 percent between 2023 and 2050. Liquid fuels provide the largest share of global energy supplies today reflecting broad-based availability, affordability, ease of transportation, and fitness as a practical solution to meet a wide variety of needs. By 2050, global demand for liquid fuels is projected to grow to approximately 110 million oil-equivalent barrels per day, an increase of about 10 percent from 2023. The non-OECD share of global liquid fuels demand is expected to increase to nearly 70 percent by 2050, as liquid fuels demand in the OECD is expected to decline by more than 25 percent. Much of the global liquid fuels demand today is met by crude production from conventional sources; these supplies will remain important, and significant development activity is expected to offset much of the natural declines from these fields. At the same time, a variety of supply sources - including tight oil, deepwater, oil sands, natural gas liquids, and biofuels - are expected to grow to help meet rising demand. Timely investments will remain critical to meeting global needs with reliable and affordable supplies. Natural gas is a lower-emission, versatile, and practical fuel for a wide variety of applications. Global natural gas demand is expected to rise more than 20 percent from 2023 to 2050, with approximately 75 percent of that increase coming from the Asia Pacific region. Significant growth in supplies of unconventional gas - the natural gas found in shale and other tight rock formations - will help meet these needs. In total, about 35 percent of the growth in natural gas supplies is expected to come from unconventional sources. At the same time, conventionally-produced natural gas is likely to remain the cornerstone of global supply, meeting around two-thirds of worldwide demand in 2050. LNG trade will expand significantly, meeting about 70 percent of the increase in global demand growth, with much of this supply expected to help meet rising demand in Asia Pacific. 42 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Oil and natural gas projected to play a critical role in the global energy mix [[GREPCENT_TABLE]] [["","Primary energy - Quadrillion Btu","Percent of primary energy"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","Source: ExxonMobil 2024 Global Outlook","Source: ExxonMobil 2024 Global Outlook"],["","* Electricity and hydrogen are secondary energies derived from the primary energies shown."],["","**Includes biomass, biofuels, hydropower, and geothermal."]] [[/GREPCENT_TABLE]] The world’s energy mix is highly diverse and will remain so through 2050. Oil is expected to continue as the largest source of energy with its share remaining close to 30 percent in 2050. Coal and natural gas are the next largest sources of energy today, with the share of natural gas growing to more than 25 percent by 2050, while the share of coal falls to about half that of natural gas. Nuclear power is projected to grow, as many nations are likely to expand nuclear capacity to address rising electricity needs as well as energy security and environmental issues. Total renewable energy is expected to exceed 20 percent of global energy by 2050, with other renewables (e.g., biomass, hydropower, geothermal) contributing a combined share of more than 10 percent. Total energy supplied from wind and solar is expected to increase rapidly, growing over 400 percent from 2023 to 2050, when they are projected to be nearly 12 percent of the world energy mix. Decarbonization of industrial activities will require a suite of nascent or future lower-carbon technologies and stable supporting policies. Lower-emission fuels, hydrogen-based fuels, and carbon capture and storage are three key lower-carbon solutions needed to support a lower-emission future, in addition to wind and solar. Along with electrification, lower-emission fuels are expected to play an important role in decarbonization of the transportation sector, particularly in hard-to-decarbonize areas, such as aviation. Hydrogen will be a key enabler replacing traditional furnace fuel to decarbonize the industrial sector. Hydrogen and hydrogen-based fuels like ammonia are also expected to make inroads into commercial transportation as technology improves to lower its cost and policy develops to support the needed infrastructure development. Carbon capture and storage on its own, or in combination with hydrogen production, is among the few proven technologies that could enable CO2 emission reductions from high-emitting and hard-to-decarbonize sectors such as power generation and heavy industries, including manufacturing, refining, and petrochemicals. 43 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Significant oil and natural gas investment needed to meet projected global demand Projected global oil supply and demand Million barrels per day Excludes biofuels; IEA STEPS, IEA APS, and IEA NZE Source: IEA WEO 2024; Global Outlook Source: ExxonMobil 2024 Global Outlook; IPCC Likely Below 2°C Average and Range Source: IPCC AR6 Scenarios Database hosted by IIASA release 1.0 average IPCC C3: 311 “Likely below 2°C” scenarios used; decline rates based on 10-yr Compound Annual Growth Rate (CAGR) Projected global natural gas supply and demand Billion cubic feet per day IEA STEPS, IEA APS, and IEA NZE Source: IEA WEO 2024; Global Outlook Source: ExxonMobil 2024 Global Outlook; IPCC Likely Below 2°C Average and Range Source: IPCC AR6 Scenarios Database hosted by IIASA release 1.0 average IPCC C3: 311 “Likely below 2°C” scenarios used; decline rates based on 10-yr CAGR Our Outlook projects that oil demand will remain above 100 million barrels per day to 2050. Even under the average of IPCC Likely Below 2°C scenarios, oil demand still comes to 66 million barrels per day in 2050 – about two thirds of current consumption. Our Outlook shows oil production declines at a rate of about 15 percent per year. At that rate, in the absence of continued investment, by 2030 oil supplies would fall from 100 million barrels per day to less than 30 million barrels, more than 70 million barrels per day short of what is needed to meet demand. Limiting investment to only existing fields would slow the decline to about 4 percent; however, this would still be well below the oil demand in the IEA APS and average of IPCC Likely Below 2°C scenarios. To meet projected demand, the Corporation anticipates that the world’s available oil and gas resource base will grow, not only from new discoveries, but also from increases in previously discovered fields. Technology will underpin these increases. The investments to develop and supply resources to meet global demand through 2050 will be significant and would be needed to meet even rapidly declining demand for oil and gas envisioned in aggressive decarbonization scenarios. International accords and underlying regional and national regulations covering greenhouse gas emissions continue to evolve with uncertain timing and outcome, making it difficult to predict their business impact. For many years, the Corporation has taken into account policies established to reduce energy-related greenhouse gas emissions in its long-term Outlook. The climate accord reached at the 2015 Conference of the Parties (COP 21) in Paris set many new goals, and many related policies are still emerging. Our Outlook reflects an environment with increasingly stringent climate policies and seeks to identify potential impacts of these climate-related government policies, which often target specific sectors. For purposes of the Outlook, a proxy cost on energy-related CO2 emissions is assumed, based on regional considerations and relative levels of economic development, and by 2050, reaches up to $150 per metric ton for OECD nations and up to $100 per metric ton for non-OECD nations. As people and nations look for ways to reduce risks of global climate change, they will continue to need practical solutions that do not jeopardize the affordability or reliability of the energy they need. The Corporation continues to monitor the updates to the Nationally Determined Contributions (NDCs) that are submitted by nations that are signatories to the Paris Agreement, as well as other policy developments in light of net-zero ambitions formulated by some nations. The information provided in the Outlook includes ExxonMobil’s internal estimates and projections based upon internal data and analyses as well as publicly available information from external sources including the International Energy Agency. 44 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Progress Reducing Emissions The Corporation’s strategy seeks to maximize the advantages of our scale, business integration, leading technology, execution excellence, and our people to build globally competitive businesses that lead industry in earnings and cash flow growth across a range of future scenarios. We strive to play a leading role, regardless of how an energy transition unfolds. Across our portfolio of opportunities, we retain investment flexibility to maximize shareholder value. With advancements in technology and clear, consistent, stable, and effective government policies, we aim to achieve net-zero Scope 1 and 2 greenhouse gas emissions in our operated assets by 2050. Our net-zero ambition is backed by a comprehensive approach centered on detailed emission-reduction roadmaps for our major operated assets that were completed in 2022. The roadmaps build on the Company’s 2030 emission-intensity reduction plans and, notably, include reaching net-zero Scope 1 and 2 emissions in our heritage Permian Basin (1) unconventional operated assets by 2030, and by 2035 for Pioneer assets. We continue to update the roadmaps, including to account for portfolio changes, to reflect technology and policy, and to account for the many potential pathways, and the pace of an energy transition. Compared to 2016 levels, our 2030 plans are expected to drive the following reductions: •20-30 percent reduction in corporate-wide greenhouse gas intensity; •70-80 percent reduction in corporate-wide methane intensity; •40-50 percent reduction in upstream greenhouse gas intensity; and •60-70 percent reduction in corporate-wide flaring intensity. Our emission-reduction plans and 2050 net-zero ambition cover Scope 1 and 2 emissions from assets we operate, which now include Pioneer and Denbury. The Corporation plans to continue to pursue advantaged growth opportunities and lower-emission investments. These investments are targeted at reducing emissions in the Company’s operations as well as reducing the emissions of other companies. At this early stage, stable and supportive policy remains critical to enable emissions reductions, advance technology, and drive scale to improve costs. ExxonMobil’s Low Carbon Solutions business is working with the Product Solutions and Upstream businesses to grow a pipeline of emission-reduction opportunities in carbon capture and storage, hydrogen, lower-emission fuels, ProxximaTM systems, and carbon materials, as well as lithium to supply the global battery and electric vehicle markets. Our customers, many governments, and strategic partners recognize our combination of experience, skills, and capabilities that have the potential to help reduce emissions for ourselves and others. For example, on the U.S. Gulf Coast, we see an opportunity to create a carbon capture and storage business that will enable industrial customers to reduce their emissions. The acquisition of Denbury expanded our capabilities in this area, providing ExxonMobil with the largest owned and operated network of CO2 pipelines in the United States, including more than 900 miles of pipelines and multiple CO2 storage sites near the largest industrial complexes on the Gulf Coast. Combining Denbury’s assets and our experience we have created the largest CO2 network in the world which gives us a unique ability to help customers in the region reduce their emissions at a lower cost and faster pace. A cost-efficient transportation and storage system has the potential to accelerate carbon capture and storage deployment for both ExxonMobil and our third-party customers. Stable policy support, along with technology advancements and the development of market-driven mechanisms, will continue to be important to the development and deployment of lower-emission solutions. (1) Heritage Permian Basin assets exclude assets acquired as part of the acquisition of Pioneer that closed May 3, 2024. 45 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Recent Business Environment During 2024, the price of crude oil remained near the middle of the pre-COVID 10-year range (2010-2019), as markets remained balanced. Through the first nine months of the year, natural gas prices declined towards the middle of the 10-year range due to strong supply and lower demand. In the fourth quarter, natural gas prices increased on rising demand driven by colder weather in the U.S. and Europe. Refining margins declined in 2024 from high 2023 levels as increased supply from industry capacity additions outpaced record global demand and remain near the bottom of the 10-year range. Chemical margins improved slightly in 2024 but remained well below the 10-year range driven by over-supply, primarily in Asia. The general rate of inflation across major countries peaked in 2022, rising from already elevated levels in 2021, due to additional impacts on energy and other commodities from the Russia-Ukraine conflict. Inflation has trended down since 2023 as a result of aggressive monetary tightening by major central banks and slowing global economic growth. However, there has been significant variation on the pace of change across OECD and non-OECD countries. With inflation gradually approaching the official targets in the U.S. and Eurozone, the Federal Reserve and the European Central Bank began lowering interest rates in 2024. Meanwhile, China has been under persistent deflationary pressure since 2023. The Corporation closely monitors market trends and works to mitigate both operating and capital cost impacts in all price environments. Organizational changes implemented over the past several years enabled the Corporation to capture $12.1 billion of structural cost savings(1) versus 2019, including $2.4 billion of savings during 2024, through increased operational efficiencies, workforce reductions, divestment-related reductions, and other cost-saving measures. The Company sees additional opportunities in areas such as supply chain efficiency, improved maintenance and turnarounds, modernized data management, centralization of activities, and simplified business processes. These savings are key drivers to further reduce our structural costs by $6 billion by 2030, thereby improving the earnings power of the Corporation. (1) Refer to Frequently Used Terms for definition of structural cost savings. Transportation of Kazakhstan Production The Corporation holds a 25 percent interest in Tengizchevroil, LLP (TCO), which operates the Tengiz and Korolev oil fields in Kazakhstan, and a 16.8 percent working interest in the Kashagan field in Kazakhstan. Oil production from those operations is exported primarily through the Caspian Pipeline Consortium (CPC), in which the Corporation holds a 7.5 percent interest. CPC traverses parts of Kazakhstan and Russia to tanker-loading facilities on the Russian coast of the Black Sea. In the event geopolitical issues escalate in the region, including ongoing military conflict, it is possible that the transportation of Kazakhstan oil through the CPC pipeline could be disrupted, curtailed, temporarily suspended, or otherwise restricted. In such a case, the Corporation could experience a loss of cash flows of uncertain duration from its operations in Kazakhstan. For reference, after-tax earnings related to the Corporation’s interests in Kazakhstan in 2024 were approximately $1.9 billion, and its share of combined oil and gas production was approximately 260 thousand oil-equivalent barrels per day. 46 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS BUSINESS RESULTS Upstream ExxonMobil has a diverse growth portfolio of exploration and development opportunities, which allows the Corporation to be selective in our investments, maximizing shareholder value and mitigating political and technical risks. ExxonMobil’s competitive strengths enable the Upstream’s business strategy, which is focused on developing an industry-leading portfolio underpinned by advantaged growth projects, applying ExxonMobil’s technology to enhance value and improve development efficiency, and leveraging the unique capabilities of the Company's global projects organization to deliver projects on time and in line with budgets. The Upstream capital program is focused on low cost-of-supply opportunities. ExxonMobil has a strong pipeline of development projects, including continued growth in Guyana and the Permian Basin, as well as LNG expansion opportunities in Qatar, Mozambique, Papua New Guinea, and the United States. As future development projects and drilling activities bring new production online, the Corporation expects a shift in the geographic mix and in the type of opportunities from which volumes are produced. Based on the current investment plans, the proportion of oil-equivalent production from the Americas is generally expected to increase over the next several years. Currently about two thirds of the Corporation's global production comes from unconventional, deepwater, and LNG resources. This proportion is generally expected to grow. The Corporation anticipates several projects will come online over the next few years providing additional production capacity. However, actual volumes will vary from year to year due to the timing of individual project start-ups, operational outages, reservoir performance, regulatory changes, the impact of fiscal and commercial terms, asset sales, weather events, price effects on production sharing contracts, changes in the amount and timing of capital investments that may vary depending on the oil and gas price environment, international trade patterns and relations, and other factors described in Item 1A. In 2024, crude and gas prices were within the pre-COVID 10-year historical range (2010-2019). ExxonMobil believes prices over the long term will continue to be driven by market supply and demand, with the demand side largely being a function of general economic activities, levels of prosperity, technology advances, consumer preference, and government policies. On the supply side, prices may be significantly impacted by political events, the actions of OPEC or OPEC+ and other large government resource owners, alternative energy sources, and other factors. Key Recent Events Guyana: Liza Destiny, Liza Unity and Prosperity floating production, storage and offloading (FPSO) vessels continued to produce above investment basis capacity in 2024. The combined gross production from the three operating vessels exceeded 615 thousand barrels of oil per day (kbd) in 2024 and exceeded 650 kbd in the fourth quarter of 2024. Yellowtail, Uaru and Whiptail, the fourth, fifth and sixth developments on the Stabroek Block, respectively, are progressing on schedule and each has an investment basis capacity of approximately 250 kbd. We announced plans for two additional developments and anticipate eight FPSO vessels will be in operation on the Stabroek Block by year-end 2030. We are working with the government of Guyana to secure regulatory approvals for the seventh project. Permian: ExxonMobil successfully closed the Pioneer Natural Resources Company (Pioneer) acquisition in May 2024, significantly increasing our Permian footprint. Total production volumes averaged approximately 1,185 thousand oil-equivalent barrels per day (koebd) in 2024, approximately 570 koebd higher than the previous year. ExxonMobil operations continue to deliver industry-leading capital efficiency and cost performance by leveraging scale, integration, and technology. Examples include deploying ExxonMobil cube design and proprietary proppant as well as leading capabilities and technology in drilling and completions. ExxonMobil remains on track to achieve industry-leading plans of Scope 1 and 2 net zero greenhouse gas emissions in the heritage Permian Basin (1) unconventional operated assets by 2030, and in Pioneer assets by 2035. ExxonMobil expects to roughly double production in the Permian Basin to approximately 2.3 Moebd by 2030. LNG: ExxonMobil continued work on LNG growth projects in 2024. Production commenced from two new gas wells in Papua New Guinea (PNG), marking completion of the Angore project and additional supply to support LNG export from the PNG LNG joint venture. In Mozambique, the Rovuma LNG project began the front-end engineering and design stage in 2024, in support of a final investment decision in 2026, to develop the Area 4 offshore gas resources. Construction continues on the Golden Pass LNG project with Train 1 mechanical completion and first LNG production expected at the end of 2025. (1) Heritage Permian Basin assets exclude assets acquired as part of the acquisition of Pioneer that closed May 3, 2024. 47 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Upstream Financial Results [[GREPCENT_TABLE]] [["(millions of dollars)","2024","","2023","","2022"],["Earnings (loss) (U.S. GAAP)"],["United States","6,426","","","4,202","","","11,728"],["Non-U.S.","18,964","","","17,106","","","24,751"],["Total","25,390","","","21,308","","","36,479"],["Identified Items (1)"],["United States","(360)","","","(1,489)","","","299"],["Non-U.S.","575","","","(812)","","","(3,238)"],["Total","215","","","(2,301)","","","(2,939)"],["Earnings (loss) excluding Identified Items (1) (Non-GAAP)"],["United States","6,786","","","5,691","","","11,429"],["Non-U.S.","18,389","","","17,918","","","27,989"],["Total","25,175","","","23,609","","","39,418"],["(1) Refer to Frequently Used Terms for definition of Identified Items and Earnings (loss) excluding Identified Items."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["2024 Upstream Earnings Driver Analysis"],["(millions of dollars)"]] [[/GREPCENT_TABLE]] Price – Price impacts decreased earnings by $1,250 million, driven by lower gas realizations. Advantaged Volume Growth – Higher volumes from advantaged projects increased earnings by $3,760 million, as a result of record production in Permian, driven by the Pioneer acquisition and growth in the heritage Permian (2), and record production in Guyana driven by the Prosperity FPSO start-up. Base Volume – Divestments of non-strategic assets and entitlements decreased earnings by $820 million. Structural Cost Savings – Increased earnings by $830 million. Expenses – Higher expenses decreased earnings by $1,350 million, primarily from higher depreciation (non-cash). Other – All other items increased earnings by $120 million, mainly driven by favorable impacts from divestments, partially offset by unfavorable tax and foreign exchange impacts. Timing Effects – Less unfavorable timing effects from derivatives mark-to-market impacts increased earnings by $280 million. Identified Items (1) – 2023 $(2,301) million loss primarily due to the impairment of the idled Santa Ynez Unit assets and associated facilities in California; 2024 $215 million gain mainly due to Argentina divestment, partly offset by Nigeria divestment and U.S. impairment. (1) Refer to Frequently Used Terms for definition of Identified Items and Earnings (loss) excluding Identified Items. (2) Heritage Permian Basin assets exclude assets acquired as part of the acquisition of Pioneer that closed May 3, 2024. 48 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS [[GREPCENT_TABLE]] [["2023 Upstream Earnings Driver Analysis"],["(millions of dollars)"]] [[/GREPCENT_TABLE]] Price – Lower realizations decreased earnings by $14,290 million, reflecting lower gas prices and crude price moderation resulting from increased inventory levels. Advantaged Volume Growth – Higher volumes from advantaged assets increased earnings by $1,270 million, driven by Guyana and Permian production.. Base Volume – Base volumes decreased earnings by $800 million as a results of divestments, the Russia expropriation, and higher government-mandated curtailments. Structural Cost Savings – Increased earnings by $730 million. Expenses – Higher expenses decreased earnings by $650 million, primarily on increased activity and depreciation. Other – All other items increased earnings by $320 million, mainly driven by favorable foreign exchange effects. Timing Effects – Unfavorable timing effects from derivatives mark-to-market impacts decreased earnings by $2,390 million. Identified Items (1) – 2022 $(2,939) million loss mainly driven by the Russia expropriation $(2,185) million and impacts from additional European taxes $(1,415) million, partly offset by gains of $886 million on the sale of the Romania, U.S. Barnett Shale, and XTO Energy Canada assets; 2023 $(2,301) million loss primarily due to the impairment of the idled Santa Ynez Unit assets and associated facilities in California. (1) Refer to Frequently Used Terms for definition of Identified Items and Earnings (loss) excluding Identified Items. 49 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Upstream Operational Results [[GREPCENT_TABLE]] [["","2024","","2023","","2022"],["Net production of crude oil, natural gas liquids, bitumen and synthetic oil (thousands of barrels daily)"],["United States","1,248","","803","","776"],["Canada/Other Americas","784","","664","","588"],["Europe","3","","4","","4"],["Africa","209","","221","","238"],["Asia","713","","721","","705"],["Australia/Oceania","30","","36","","43"],["Worldwide","2,987","","2,449","","2,354"],["Net natural gas production available for sale(millions of cubic feet daily)"],["United States","2,887","","2,311","","2,551"],["Canada/Other Americas","101","","96","","148"],["Europe","352","","414","","667"],["Africa","152","","125","","71"],["Asia","3,322","","3,490","","3,418"],["Australia/Oceania","1,264","","1,298","","1,440"],["Worldwide","8,078","","7,734","","8,295"],["Oil-equivalent production (1)(thousands of oil-equivalent barrels daily)","4,333","","3,738","","3,737"],["(1) Natural gas is converted to an oil-equivalent basis at six million cubic feet per one thousand barrels."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["Upstream Additional Information"],["(thousands of barrels daily)","2024","","2023"],["Volumes Reconciliation (Oil-equivalent production) (1)"],["Prior Year","3,738","","","3,737"],["Entitlements - Net Interest","(13)","","","(24)"],["Entitlements - Price / Spend / Other","(23)","","","56"],["Government Mandates","9","","","(28)"],["Divestments","(63)","","","(114)"],["Growth / Other","685","","","111"],["Current Year","4,333","","","3,738"],["(1) Natural gas is converted to an oil-equivalent basis at six million cubic feet per one thousand barrels."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["2024 versus 2023","2024 production of 4.3 million oil-equivalent barrels per day increased 595 thousand barrels per day from 2023. Permian and Guyana production grew by 680 thousand oil-equivalent barrels per day, more than offsetting impacts from divestments and entitlements. Excluding the impacts from entitlements, divestments, and government-mandated curtailments, net production grew by 685 thousand oil-equivalent barrels per day."],["2023 versus 2022","2023 production of 3.7 million oil-equivalent barrels per day is in line with 2022. Permian and Guyana production grew by more than 120 thousand oil-equivalent barrels per day, more than offsetting impacts from divestments. Excluding the impacts from entitlements, divestments, and higher government-mandated curtailments, net production grew by 111 thousand oil-equivalent barrels per day."]] [[/GREPCENT_TABLE]] 50 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Listed below are descriptions of ExxonMobil’s volumes reconciliation drivers, 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 drivers. These drivers 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 drivers. These drivers 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 drivers 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 drivers comprise all other operational and non-operational drivers not covered by the above definitions that may affect volumes attributable to ExxonMobil. Such drivers 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.  Energy Products ExxonMobil's Energy Products is one of the largest, most integrated businesses of its kind among international oil companies, with significant representation across the entire fuels value chain, including refining, logistics, trading, and marketing. This segment includes the fuels and aromatics value chains, and catalysts and licensing. With the largest refining footprint among international oil companies, ExxonMobil’s Energy Products earnings are closely tied to industry refining margins. Refining margins are largely driven by differences in commodity prices and are a function of the difference between what a refinery pays for its raw materials and the market prices for the products produced. Crude oil and many products are widely traded with published prices, including those quoted on multiple exchanges around the world (e.g. New York Mercantile Exchange and Intercontinental Exchange). Prices for these commodities are determined by the global marketplace and are influenced by many factors, including global and regional supply/demand balances, inventory levels, industry refinery operations, import/export balances, currency fluctuations, seasonal demand, weather, and political considerations. While industry refining margins significantly impact Energy Products earnings, strong operational performance, product mix optimization, and disciplined cost control are also critical to strong financial performance. In 2024, refining margins decreased to the middle of the pre-COVID 10-year historical range (2010-2019) despite record demand, due to supply length. Refining margins are expected to remain volatile with changes in global factors, including geopolitical developments; demand growth; recession fears; inventory levels; and refining capacity utilization, additions and rationalizations. Key Recent Events Strathcona Renewable Diesel project: Progressed project with expected start-up in 2025 at Strathcona refinery to use low-carbon hydrogen, locally-sourced and grown feedstocks, and our proprietary catalyst to produce 20 thousand barrels of renewable diesel per day to help reduce greenhouse gas emissions. Fawley Hydrofiner project: Progressed project with expected start-up in 2025 at Fawley site to increase production of ultra-low sulfur diesel and reduce production of other products, including high-sulfur distillates. Fos-sur-Mer Refinery divestment: In October 2024, ExxonMobil divested the Fos refinery and select midstream assets in France. MiRO Refinery sale: In October 2023, ExxonMobil reached an agreement to sell its interest in the MiRO refinery located in Karlsruhe, Germany. The transaction is expected to close in 2025. 51 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Energy Products Financial Results [[GREPCENT_TABLE]] [["(millions of dollars)","2024","","2023","","2022"],["Earnings (loss) (U.S. GAAP)"],["United States","2,099","","","6,123","","","8,340"],["Non-U.S.","1,934","","","6,019","","","6,626"],["Total","4,033","","","12,142","","","14,966"],["Identified Items (1)"],["United States","(34)","","","192","","","(58)"],["Non-U.S.","113","","","(48)","","","(626)"],["Total","79","","","144","","","(684)"],["Earnings (loss) excluding Identified Items (1) (Non-GAAP)"],["United States","2,133","","","5,931","","","8,398"],["Non-U.S.","1,821","","","6,067","","","7,252"],["Total","3,954","","","11,998","","","15,650"],["(1) Refer to Frequently Used Terms for definition of Identified Items and Earnings (loss) excluding Identified Items."],["Due to rounding, numbers presented may not add up precisely to the totals indicated."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["2024 Energy Products Earnings Driver Analysis"],["(millions of dollars)"]] [[/GREPCENT_TABLE]] Margin – Significantly weaker industry refining margins decreased earnings by $6,280 million. Margins declined from historically high levels as increased supply from industry capacity additions outpaced record global demand. Advantaged Volume Growth – Higher volumes from advantaged projects increased earnings by $140 million. Base Volume – Lower base volumes decreased earnings by $1,240 million, driven by scheduled maintenance and divestments. Structural Cost Savings – Increased earnings by $630 million. Expenses – Higher expenses related to scheduled turnarounds and maintenance, and advantaged project spend decreased earnings by $970 million. Other – All other items, mainly unfavorable tax and forex impacts, decreased earnings by $310 million. Timing Effects – Decreased earnings by $10 million. Identified Items (1) – 2023 $144 million gain driven by favorable tax effects partially offset by additional European taxes on the energy sector; 2024 $79 million gain. (1) Refer to Frequently Used Terms for definition of Identified Items and Earnings (loss) excluding Identified Items. 52 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS [[GREPCENT_TABLE]] [["2023 Energy Products Earnings Driver Analysis"],["(millions of dollars)"]] [[/GREPCENT_TABLE]] Margin – Margins decreased earnings by $3,510 million, mainly driven by industry refining margins which declined from 2022 highs, partially offset by stronger marketing margins. Advantaged Volume Growth – Higher volumes from advantaged projects, increased earnings by $480 million, mainly driven by the Beaumont expansion. Base Volume – Lower base volumes decreased earnings by $560 million driven by higher planned maintenance and divestments, partially offset by improved reliability. Structural Cost Savings – Increased earnings by $450 million. Expenses – Higher expenses decreased earnings by $830 million, mainly driven by Beaumont project activities and planned maintenance costs. Other – All other items decreased earnings by $10 million. Timing Effects – Absence of unfavorable timing effects associated with derivatives increased earnings by $330 million. Identified Items (1) – 2022 $(684) million loss was primarily as a result of impairments and unfavorable tax items. 2023 $144 million gain driven by favorable tax effects partially offset by additional European taxes on the energy sector. (1) Refer to Frequently Used Terms for definition of Identified Items and Earnings (loss) excluding Identified Items. 53 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Energy Products Operational Results [[GREPCENT_TABLE]] [["(thousands of barrels daily)","","2024","","2023","","2022"],["Refinery throughput"],["United States","","1,865","","1,848","","1,702"],["Canada","","399","","407","","418"],["Europe","","1,039","","1,166","","1,192"],["Asia Pacific","","432","","498","","539"],["Other","","165","","149","","179"],["Worldwide","","3,900","","4,068","","4,030"],["Energy Products sales (1)"],["United States","","2,722","","2,633","","2,426"],["Non-U.S.","","2,696","","2,828","","2,921"],["Worldwide","","5,418","","5,461","","5,347"],["Gasoline, naphthas","","2,251","","2,288","","2,232"],["Heating oils, kerosene, diesel","","1,769","","1,795","","1,774"],["Aviation fuels","","355","","336","","338"],["Heavy fuels","","200","","214","","235"],["Other energy products","","844","","829","","768"],["Worldwide","","5,418","","5,461","","5,347"],["(1) Data reported net of purchases/sales contracts with the same counterparty."],["Due to rounding, numbers presented may not add up precisely to the totals indicated."]] [[/GREPCENT_TABLE]] Chemical Products ExxonMobil is a leading global manufacturer and marketer of petrochemicals that support modern living. Chemical Products help meet society’s essential needs by providing a wide range of innovative products efficiently and responsibly. The Company is uniquely positioned with a combination of industry-leading scale, integration, and proprietary technology, which are fundamental to producing affordable products that are more sustainable, use less material, save energy, and reduce waste. These competitive advantages are underpinned by operational excellence, advantaged investments, and cost discipline. This segment includes olefins, polyolefins, and intermediates. Over the long term, worldwide demand for chemicals is expected to grow faster than the economy, driven by global population growth, an expanding middle class, and improving living standards. Chemical Products integration with refineries, performance product mix, and project execution capability improves returns on investments across a range of market environments. In 2024, chemical industry margins remained bottom-of-cycle, below the pre-COVID 10-year historical range (2010-2019), as capacity additions from 2022-2024 have exceeded demand growth. The Company optimized production across our global footprint to profitably meet customer demand. Our earnings benefited from record reliability, record high-value products sales, and a large North American footprint where low ethane prices provide a feed advantage. Key Recent Events China Chemical Complex: ExxonMobil is investing in a petrochemical complex in the Dayawan Petrochemical Industrial Park in Huizhou, Guangdong Province, which is a significant step in growing our global manufacturing footprint and will be the first 100 percent foreign-owned petrochemical complex built in China. The facility will be focused on producing our unique high-performance polyethylene and polypropylene products. When completed, the complex will have three polyethylene and two polypropylene production lines for a combined capacity of over 2.5 million metric tons per year. This capacity will more efficiently serve China’s domestic demand, which is currently being met with imports. Advanced Recycling: ExxonMobil is combining proprietary technology and advantaged integrated sites to process hard-to-recycle plastic waste. The Company’s first Baytown facility started up in 2022 and represents one of the largest advanced recycling facilities in North America. ExxonMobil is expanding advanced recycling capacity with two additional Baytown units starting up during 2025. The Company plans to build additional units to reach a global recycling capacity of 1 billion pounds per year by 2027. 54 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Chemical Products Financial Results [[GREPCENT_TABLE]] [["(millions of dollars)","2024","","2023","","2022"],["Earnings (loss) (U.S. GAAP)"],["United States","1,627","","","1,626","","","2,328"],["Non-U.S.","950","","","11","","","1,215"],["Total","2,577","","","1,637","","","3,543"],["Identified Items (1)"],["United States","(43)","","","32","","","\u2014"],["Non-U.S.","(52)","","","(420)","","","\u2014"],["Total","(95)","","","(388)","","","\u2014"],["Earnings (loss) excluding Identified Items (1) (Non-GAAP)"],["United States","1,670","","","1,594","","","2,328"],["Non-U.S.","1,002","","","431","","","1,215"],["Total","2,672","","","2,025","","","3,543"],["(1) Refer to Frequently Used Terms for definition of Identified Items and Earnings (loss) excluding Identified Items."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["2024 Chemical Products Earnings Driver Analysis"],["(millions of dollars)"]] [[/GREPCENT_TABLE]] Margin – Improved company margins on North American ethane feed advantage and improved product realizations increased earnings by $890 million, despite continued bottom-of-cycle market conditions. Advantaged Volume Growth – Record high-value product sales increased earnings by $410 million. Base Volume – Portfolio optimization and product sales mix decreased earnings by $270 million. Structural Cost Savings – Increased earnings by $190 million. Expenses – Higher advantaged project spend and inflation effects decreased earnings by $490 million. Other – All other items decreased earnings by $80 million. Identified Items (1) – 2023 $(388) million loss was primarily driven by impairments; 2024 $(95) million loss driven by impairments. (1) Refer to Frequently Used Terms for definition of Identified Items and Earnings (loss) excluding Identified Items. 55 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS [[GREPCENT_TABLE]] [["2023 Chemical Products Earnings Driver Analysis"],["(millions of dollars)"]] [[/GREPCENT_TABLE]] Margin – Weaker margins decreased earnings by $870 million due to bottom-of-cycle price conditions, as industry supply additions continued to outpace demand growth. Advantaged Volume Growth – High-value product sales growth increased earnings by $210 million. Base Volume – Reduced volumes from product sales mix decreased earnings by $360 million. Structural Cost Savings – Increased earnings by $220 million. Expenses – Higher project spend and scheduled maintenance costs decreased earnings by $690 million. Other – All other items decreased earnings by $30 million. Identified Items (1) – 2023 $(388) million loss was primarily driven by impairments. (1) Refer to Frequently Used Terms for definition of Identified Items and Earnings (loss) excluding Identified Items. Chemical Products Operational Results [[GREPCENT_TABLE]] [["(thousands of metric tons)","","2024","","2023","","2022"],["Chemical product sales (2)"],["United States","","7,038","","","6,779","","","7,270"],["Non-U.S.","","12,354","","","12,603","","","11,897"],["Worldwide","","19,392","","","19,382","","","19,167"],["(2) Data reported net of purchases/sales contracts with the same counterparty."],["Due to rounding, numbers presented may not add up precisely to the totals indicated."]] [[/GREPCENT_TABLE]] 56 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Specialty Products ExxonMobil Specialty Products is a combination of business units that manufacture and market a range of performance products, including high-quality lubricants, basestocks, waxes, synthetics, elastomers, and resins. Leveraging ExxonMobil’s proprietary technologies, Specialty Products focuses on providing performance products that help customers improve efficiency in the transportation and industrial sectors. Specialty Products is well-positioned to help meet growth in lubricants demand through advantaged projects that leverage ExxonMobil's integration, technology, and world-class brands, such as Mobil 1TM. In 2024, Specialty Products continued to deliver strong earnings from our portfolio of high-value products and brand market position. Key Recent Events Singapore Resid Upgrade project: Progressed project with expected start-up in 2025, which will leverage two proprietary technologies to upgrade fuel oil to Group II lubes and diesel, further strengthening ExxonMobil’s position as the largest basestock producer in the world. ProxximaTM Systems: ExxonMobil's advanced polyolefin thermoset resin uses components of gasoline and catalyst technology to create a material that is lighter, stronger, and more durable than conventional products, providing alternatives for the construction, coatings and transportation industries. These systems are designed to drive product substitutions in existing markets and enable expansion into new applications like structural composites and steel substitutes. ExxonMobil plans to grow the manufacturing capacity of ProxximaTM products up to 200,000 tons per year by 2030. Carbon Materials venture: ExxonMobil is growing its carbon materials venture by applying proprietary process technology to capture attractive opportunities in the battery anode market. The Company has developed an advanced coke product by converting low-value, bottom-of-the-barrel molecules that can deliver a higher performance differentiated graphite. These carbon materials enable batteries that can provide up to 30 percent higher capacity, 30 percent faster charging time, and extended battery life. Specialty Products Financial Results [[GREPCENT_TABLE]] [["(millions of dollars)","2024","","2023","","2022"],["Earnings (loss) (U.S. GAAP)"],["United States","1,576","","","1,536","","","1,190"],["Non-U.S.","1,476","","","1,178","","","1,225"],["Total","3,052","","","2,714","","","2,415"],["Identified Items (1)"],["United States","(4)","","","12","","","\u2014"],["Non-U.S.","(9)","","","(105)","","","(40)"],["Total","(13)","","","(93)","","","(40)"],["Earnings (loss) excluding Identified Items (1) (Non-GAAP)"],["United States","1,580","","","1,524","","","1,190"],["Non-U.S.","1,485","","","1,283","","","1,265"],["Total","3,065","","","2,807","","","2,455"],["(1) Refer to Frequently Used Terms for definition of Identified Items and Earnings (loss) excluding Identified Items."],["Due to rounding, numbers presented may not add up precisely to the totals indicated."]] [[/GREPCENT_TABLE]] 57 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS [[GREPCENT_TABLE]] [["2024 Specialty Products Earnings Driver Analysis"],["(millions of dollars)"]] [[/GREPCENT_TABLE]] Margin – Stronger basestocks and finished lubes margins increased earnings by $590 million. Advantaged Volume Growth – High-value products volume growth increased earnings by $70 million. Base Volume – Decreased earnings by $10 million. Structural Cost Savings – Increased earnings by $130 million. Expenses – Higher expenses including new product development costs, decreased earnings by $300 million. Other – All other items decreased earnings by $220 million, mainly unfavorable foreign exchange effects and absence of prior year favorable year-end inventory effects. Identified Items (1) – 2023 $(93) million loss mainly from impairments; 2024 $(13) million loss. (1) Refer to Frequently Used Terms for definition of Identified Items and Earnings (loss) excluding Identified Items. 58 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS [[GREPCENT_TABLE]] [["2023 Specialty Products Earnings Driver Analysis"],["(millions of dollars)"]] [[/GREPCENT_TABLE]] Margin – Stronger margins increased earnings by $450 million, driven by high-value products and lower feed costs. Advantaged Volume Growth – High-value products volume growth decreased earnings by $20 million. Base Volume – Base Volumes decreased earnings by $100 million on weaker global demand. Structural Cost Savings – Increased earnings by $120 million. Expenses – Higher expenses decreased earnings by $100 million. Identified Items (1) – 2022 $(40) million loss from impairments; 2023 $(93) million loss mainly from impairments. (1) Refer to Frequently Used Terms for definition of Identified Items and Earnings (loss) excluding Identified Items. Specialty Products Operational Results [[GREPCENT_TABLE]] [["(thousands of metric tons)","","2024","","2023","","2022"],["Specialty Products sales (2)"],["United States","","1,922","","","1,962","","","2,049"],["Non-U.S.","","5,745","","","5,635","","","5,762"],["Worldwide","","7,666","","","7,597","","","7,810"],["(2) Data reported net of purchases/sales contracts with the same counterparty."],["Due to rounding, numbers presented may not add up precisely to the totals indicated."]] [[/GREPCENT_TABLE]] 59 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Corporate and Financing Corporate and Financing is comprised of corporate activities that support ExxonMobil's operating segments and Low Carbon Solutions business. Corporate activities include general administrative support functions, financing, and insurance activities. Low Carbon Solutions activities will be included in Corporate and Financing until the business is established with a material level of assets and revenue. Corporate and Financing Financial Results [[GREPCENT_TABLE]] [["(millions of dollars)","2024","","2023","","2022"],["Earnings (loss) (U.S. GAAP)","(1,372)","","","(1,791)","","","(1,663)"],["Identified Items (1)","30","","","76","","","302"],["Earnings (loss) excluding Identified Items (1) (Non-GAAP)","(1,402)","","","(1,867)","","","(1,965)"],["(1) Refer to Frequently Used Terms for definition of Identified Items and Earnings (loss) excluding Identified Items."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["2024","Corporate and Financing expenses were $1,372 million in 2024 compared to $1,791 million in 2023, with the decrease mainly due to lower financing costs."],["2023","Corporate and Financing expenses were $1,791 million in 2023 compared to $1,663 million in 2022, with the increase mainly due to the absence of prior year favorable tax-related items, partly offset by lower financing costs."]] [[/GREPCENT_TABLE]] 60 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES [[GREPCENT_TABLE]] [["Sources and Uses of Cash"],["(millions of dollars)","2024","","2023","","2022"],["Net cash provided by/(used in)"],["Operating activities","55,022","","","55,369","","","76,797"],["Investing activities","(19,938)","","","(19,274)","","","(14,742)"],["Financing activities","(42,789)","","","(34,297)","","","(39,114)"],["Effect of exchange rate changes","(676)","","","105","","","(78)"],["Increase/(decrease) in cash and cash equivalents","(8,381)","","","1,903","","","22,863"],["Total cash and cash equivalents (December 31)","23,187","","","31,568","","","29,665"]] [[/GREPCENT_TABLE]] Total cash and cash equivalents were $23.2 billion at the end of 2024, down $8.4 billion from the prior year. The major sources of funds in 2024 were net income including noncontrolling interests of $35.1 billion, the adjustment for the noncash provision of $23.4 billion for depreciation and depletion, proceeds from asset sales of $5.0 billion, other investing activities of $1.9 billion, and cash acquired from mergers and acquisitions of $0.8 billion. The major uses of funds included spending for additions to property, plant and equipment of $24.3 billion; dividends to shareholders of $16.7 billion; the purchase of ExxonMobil stock of $19.6 billion; debt repayment of $5.9 billion; additional investments and advances of $3.3 billion; and an increase in working capital of $1.8 billion. Total cash and cash equivalents were $31.6 billion at the end of 2023, up $1.9 billion from the prior year. The major sources of funds in 2023 were net income including noncontrolling interests of $37.4 billion, the adjustment for the noncash provision of $20.6 billion for depreciation and depletion, proceeds from asset sales of $4.1 billion, and other investing activities of $1.6 billion. The major uses of funds included spending for additions to property, plant and equipment of $21.9 billion; dividends to shareholders of $14.9 billion; the purchase of ExxonMobil stock of $17.7 billion; additional investments and advances of $3.0 billion; and a change in working capital of $4.3 billion. 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. On December 31, 2024, the Corporation had undrawn short-term committed lines of credit of $0.2 billion and undrawn long-term lines of credit of $1.3 billion. To support cash flows in future periods, the Corporation will need to continually find or acquire and develop new fields, and continue to develop and apply new technologies and recovery processes to existing fields, in order to maintain or increase production. After a period of production at plateau rates, it is the nature of oil and gas fields to eventually produce at declining rates for the remainder of their economic life. Decline rates can vary widely by individual field due to a number of factors, including, but not limited to, the type of reservoir, fluid properties, recovery mechanisms, work activity, and age of the field. In particular, the Corporation’s key tight-oil plays have higher initial decline rates which tend to moderate over time. Furthermore, the Corporation’s net interest in production for individual fields can vary with price and the impact of fiscal and commercial terms. The Corporation has long been successful at mitigating the effects of natural field decline through disciplined investments in quality opportunities and project execution. The Corporation anticipates several projects will come online over the next few years providing additional production capacity. However, actual volumes will vary from year to year due to the timing of individual project start-ups; operational outages; reservoir performance; regulatory changes; the impact of fiscal and commercial terms; asset sales; weather events; price effects on production sharing contracts; changes in the amount and timing of investments that may vary depending on the oil and gas price environment; and international trade patterns and relations. The Corporation’s cash flows are also highly dependent on crude oil and natural gas prices. Please refer to Item 1A for a more complete discussion of risks. The Corporation’s financial strength enables it to make large, long-term capital expenditures. Cash Capex in 2024 was $25.6 billion, reflecting the Corporation’s continued active investment program, and includes plans to invest in the range of $27 billion to $29 billion in 2025 (see the Cash Capital Expenditures section for more details). Actual spending could vary depending on the progress of individual projects and property acquisitions. The Corporation has a large and diverse portfolio of development projects and exploration opportunities, which helps mitigate the overall political and technical risks of the Corporation’s Upstream segment and associated cash flow. Further, due to its financial strength and diverse portfolio of opportunities, the risk associated with failure or delay of any single project would not have a significant impact on the Corporation’s liquidity or ability to generate sufficient cash flows for operations and its fixed commitments. 61 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 and other 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. Cash Flow from Operating Activities 2024 Cash provided by operating activities totaled $55.0 billion in 2024, $0.3 billion lower than 2023. The major source of funds was net income including noncontrolling interests of $35.1 billion, a decrease of $2.3 billion. The noncash provision for depreciation and depletion was $23.4 billion, up $2.8 billion from the prior year. The adjustment for the net gain on asset sales was $1.2 billion, an increase of $0.7 billion. The adjustment for dividends received less than equity in current earnings of equity companies was an increase of $0.2 billion, compared to an increase of $0.5 billion in 2023. Changes in operational working capital, excluding cash and debt, decreased cash in 2024 by $1.8 billion. 2023 Cash provided by operating activities totaled $55.4 billion in 2023, $21.4 billion lower than 2022. The major source of funds was net income including noncontrolling interests of $37.4 billion, a decrease of $20.2 billion. The noncash provision for depreciation and depletion was $20.6 billion, down $3.4 billion from the prior year. The adjustment for the net gain on asset sales was $0.5 billion, a decrease of $0.5 billion. The adjustment for dividends received less than equity in current earnings of equity companies was an increase of $0.5 billion, compared to a reduction of $2.4 billion in 2022. Changes in operational working capital, excluding cash and debt, decreased cash in 2023 by $4.3 billion. Cash Flow from Investing Activities 2024 Cash used in investing activities netted to $19.9 billion in 2024, $0.7 billion higher than 2023. Spending for property, plant and equipment of $24.3 billion increased $2.4 billion from 2023. Proceeds from asset sales and returns of investments of $5.0 billion compared to $4.1 billion in 2023. Additional investments and advances were $0.3 billion higher in 2024, while proceeds from other investing activities including collection of advances increased by $0.4 billion. 2023 Cash used in investing activities netted to $19.3 billion in 2023, $4.5 billion higher than 2022. Spending for property, plant and equipment of $21.9 billion increased $3.5 billion from 2022. Proceeds from asset sales and returns of investments of $4.1 billion compared to $5.2 billion in 2022. Additional investments and advances were $0.1 billion lower in 2023, while proceeds from other investing activities including collection of advances increased by $0.1 billion. 62 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cash Flow from Financing Activities 2024 Cash used in financing activities was $42.8 billion in 2024, $8.5 billion higher than 2023. Dividend payments on common shares increased to $3.84 per share from $3.68 per share and totaled $16.7 billion. During 2024, the Corporation utilized cash to repay debt of $5.9 billion. During 2024, the Corporation continued its share repurchase program, including the purchase of 167 million shares at a book value of $19.1 billion in 2024. In its 2024 Corporate Plan Update released December 11, 2024, the Corporation stated that it is expected to continue its share repurchase program with a $20 billion repurchase pace per year through 2026, assuming reasonable market conditions. The stock repurchase program does not obligate the Company to acquire any particular amount of common stock, and it may be discontinued or resumed at any time. The timing and amount of shares actually purchased in the future will depend on market, business, and other factors. 2023 Cash used in financing activities was $34.3 billion in 2023, $4.8 billion lower than 2022. Dividend payments on common shares increased to $3.68 per share from $3.55 per share and totaled $14.9 billion. During 2023, the Corporation continued its share repurchase program for up to $50 billion in shares through 2024, including the purchase of 162 million shares at a book value of $17.5 billion in 2023. Contractual Obligations The Corporation has contractual obligations involving commitments to third parties that impact its liquidity and capital resource needs. These contractual obligations are primarily for leases, debt, asset retirement obligations, pension and other postretirement benefits, take-or-pay and unconditional purchase obligations, and firm capital commitments. See Notes 9, 11, 14 and 17 for information related to asset retirement obligations, leases, long-term debt and pensions, respectively. In addition, the Corporation also enters into commodity purchase obligations (volumetric commitments but no fixed or minimum price) which are resold shortly after purchase, either in an active, highly liquid market or under long-term, unconditional sales contracts with similar pricing terms. Examples include long-term, noncancelable LNG and natural gas purchase commitments and commitments to purchase refinery products at market prices. These commitments are not meaningful in assessing liquidity and cash flow, because the purchases will be offset in the same periods by cash received from the related sales transactions. Take-or-pay obligations are noncancelable, long-term commitments for goods and services. Unconditional purchase obligations are those long-term commitments that are noncancelable or cancelable only under certain conditions, and that third parties have used to secure financing for the facilities that will provide the contracted goods or services. These obligations mainly pertain to pipeline, manufacturing supply and terminal agreements. The total obligation at year-end 2024 for take-or-pay and unconditional purchase obligations was $49.9 billion. Cash payments expected in 2025 and 2026 are $5.5 billion and $6.3 billion, respectively. Guarantees The Corporation and certain of its consolidated subsidiaries were contingently liable at December 31, 2024 for guarantees relating to notes, loans and performance under contracts (Note 16). Where guarantees for environmental remediation and other similar matters do not include a stated cap, the amounts reflect management’s estimate of the maximum potential exposure. Where it is not possible to make a reasonable estimation of the maximum potential amount of future payments, future performance is expected to be either immaterial or have only a remote chance of occurrence. Guarantees are not reasonably likely to have a material effect on the Corporation’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. 63 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Financial Strength On December 31, 2024, the Corporation had total unused short-term committed lines of credit of $0.2 billion (Note 6) and total unused long-term committed lines of credit of $1.3 billion (Note 14). The table below shows the Corporation’s consolidated debt to capital ratios. [[GREPCENT_TABLE]] [["(percent)","2024","","2023","","2022"],["Debt to capital","13.4","","16.4","","16.9"],["Net debt to capital (1)","6.5","","4.5","","5.4"],["(1) Net debt is total debt less cash and cash equivalents excluding restricted cash. Net debt to capital ratio is net debt divided by net debt plus total equity. Total debt is the sum of notes and loans payable and long-term debt, as reported in the Consolidated Balance Sheet."]] [[/GREPCENT_TABLE]] Management views the Corporation’s financial strength to be a competitive advantage of strategic importance. The Corporation’s financial position gives it the opportunity to access the world’s capital markets across a range of market conditions, and enables the Corporation to take on large, long-term capital commitments in the pursuit of maximizing shareholder value. The Corporation's total debt level remained relatively flat in 2024, ending the year at $41.7 billion. Litigation and Other Contingencies As discussed in Note 16, a variety of claims have been made against ExxonMobil and certain of its consolidated subsidiaries in a number of pending lawsuits. Based on a consideration of all relevant facts and circumstances, the Corporation does not believe the ultimate outcome of any currently pending lawsuit against ExxonMobil will have a material adverse effect upon the Corporation’s operations, financial condition, or financial statements taken as a whole. There are no events or uncertainties beyond those already included in reported financial information that would indicate a material change in future operating results or financial condition. Refer to Note 16 for additional information on legal proceedings and other contingencies. CAPITAL AND EXPLORATION EXPENDITURES Capital and exploration expenditures (Capex) represents the combined total of additions at cost to property, plant and equipment, and exploration expenses on a before-tax basis from the Consolidated Statement of Income. ExxonMobil’s Capex includes its share of similar costs for equity companies. Capex excludes assets acquired in nonmonetary exchanges, the value of ExxonMobil shares used to acquire assets, and depreciation on the cost of exploration support equipment and facilities recorded to property, plant and equipment when acquired. While ExxonMobil’s management is responsible for all investments and elements of net income, particular focus is placed on managing the controllable aspects of this group of expenditures. [[GREPCENT_TABLE]] [["(millions of dollars)","2024","","2023"],["U.S.","","Non-U.S.","","Total","","U.S.","","Non-U.S.","","Total"],["Upstream (including exploration expenses)","11,252","","","10,596","","","21,848","","","8,813","","","10,948","","","19,761"],["Energy Products","756","","","1,610","","","2,366","","","1,195","","","1,580","","","2,775"],["Chemical Products","739","","","1,332","","","2,071","","","751","","","1,962","","","2,713"],["Specialty Products","145","","","270","","","415","","","63","","","391","","","454"],["Other","851","","","\u2014","","","851","","","622","","","\u2014","","","622"],["Total Capex","13,743","","","13,808","","","27,551","","","11,444","","","14,881","","","26,325"]] [[/GREPCENT_TABLE]] Capex in 2024 was $27.6 billion, as the Corporation continued to pursue opportunities to find and produce new supplies of oil and natural gas to meet global demand for energy. Upstream spending of $21.8 billion in 2024 was up $2.1 billion from 2023, reflecting higher spend in the U.S. Permian Basin following the Pioneer acquisition. Development projects typically take several years from the time of recording proved undeveloped reserves to the start of production and can exceed five years for large and complex projects. The percentage of proved developed reserves was 63 percent of total proved reserves at year-end 2024, and has been over 60 percent for the last ten years. Capital investments in the three Product Solutions businesses totaled $4.9 billion in 2024, a decrease of $1.1 billion from 2023, reflecting lower global project spending. Key investments in 2024 included the China petrochemical complex and Singapore Resid Upgrade project. Other spend of $0.9 billion primarily reflects investments in the Low Carbon Solutions business to advance carbon capture and storage, lithium, and virtually carbon-free hydrogen (with approximately 98% of the carbon captured and stored) projects and technologies. 64 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CASH CAPITAL EXPENDITURES (Non-GAAP) The Corporation has transitioned to providing forward investment guidance on a cash capital expenditures (Cash Capex) basis instead of the historical capital and exploration expense (Capex) basis. This approach is a useful measure for investors to understand the cash impact of investments in the business and is more aligned with standard industry practice. Cash Capex is the sum of Additions to property, plant and equipment; Additional investments and advances; and Other investing activities including collection of advances; reduced by Inflows from noncontrolling interests for major projects, each from the Consolidated Statement of Cash Flows. The components of Cash Capex and a reconciliation to the previous Capex metric are presented in the following table: [[GREPCENT_TABLE]] [["(millions of dollars)","2024","2023"],["Capital and Exploration Expenditures (Capex)","27,551","","26,325"],["ExxonMobil\u2019s share of Capex for equity companies","(2,546)","","(2,741)"],["Exploration expenses excluding prior year dry holes","(755)","","(567)"],["Other activities including finance leases","56","","(1,098)"],["Additions to property, plant and equipment","24,306","","21,919"],["Additional investments and advances","3,299","","2,995"],["Other investing activities including collection of advances","(1,926)","","(1,562)"],["Inflows from noncontrolling interests for major projects","(32)","","(124)"],["Total Cash Capex (Non-GAAP)","25,647","","23,228"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(millions of dollars)","2024","","2023"],["U.S.","","Non-U.S.","","Total","","U.S.","","Non-U.S.","","Total"],["Upstream","11,276","","","8,985","","","20,261","","","8,783","","","8,122","","","16,905"],["Energy Products","705","","","1,513","","","2,218","","","1,284","","","1,547","","","2,831"],["Chemical Products","671","","","1,212","","","1,883","","","718","","","1,702","","","2,420"],["Specialty Products","145","","","263","","","408","","","63","","","391","","","454"],["Other","877","","","\u2014","","","877","","","618","","","\u2014","","","618"],["Total Cash Capex (Non-GAAP)","13,674","","","11,973","","","25,647","","","11,466","","","11,762","","","23,228"]] [[/GREPCENT_TABLE]] Cash Capex in 2024 was $25.6 billion. The Corporation plans to invest in the range of $27 billion to $29 billion in 2025. Included in the 2025 capital spend range is $8.1 billion of firm capital commitments. An additional $10.0 billion of firm capital commitments have been made for years 2026 and beyond. Actual spending could vary depending on the progress of individual projects and property acquisitions. 65 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS TAXES [[GREPCENT_TABLE]] [["(millions of dollars)","2024","","2023","","2022"],["Income taxes","13,810","","","15,429","","","20,176"],["Effective income tax rate","33%","","33%","","33%"],["Total other taxes and duties","29,894","","","32,191","","","31,455"],["Total","43,704","","","47,620","","","51,631"]] [[/GREPCENT_TABLE]] 2024 Total taxes on the Corporation’s income statement were $43.7 billion in 2024, a decrease of $3.9 billion from 2023. Income tax expense, both current and deferred, was $13.8 billion compared to $15.4 billion in 2023. The effective tax rate, which is calculated based on consolidated company income taxes and ExxonMobil’s share of equity company income taxes, was 33 percent. This was flat compared to 2023. Total other taxes and duties of $29.9 billion in 2024 decreased $2.3 billion from 2023. 2023 Total taxes on the Corporation’s income statement were $47.6 billion in 2023, a decrease of $4.0 billion from 2022. Income tax expense, both current and deferred, was $15.4 billion compared to $20.2 billion in 2022. The effective tax rate, which is calculated based on consolidated company income taxes and ExxonMobil’s share of equity company income taxes, was 33 percent. This was flat compared to 2022, with higher effective rates from various jurisdictions offset by a lower impact from additional European taxes on the energy sector. Total other taxes and duties of $32.2 billion in 2023 increased $0.7 billion from 2022. ENVIRONMENTAL MATTERS Environmental Expenditures [[GREPCENT_TABLE]] [["(millions of dollars)","2024","","2023"],["Capital expenditures","3,607","","","2,799"],["Other expenditures","5,348","","","4,336"],["Total","8,955","","","7,135"]] [[/GREPCENT_TABLE]] Throughout ExxonMobil’s businesses, new and ongoing measures are taken to prevent and minimize the impact of our operations on air, water, and ground. These include significant investments in refining infrastructure and technology to manufacture clean fuels; projects to monitor and reduce air, water, and waste emissions, both from the Company’s operations and from other companies; and expenditures for asset retirement obligations. Using definitions and guidelines established by the American Petroleum Institute, ExxonMobil’s 2024 worldwide environmental expenditures for all such preventative and remediation steps, including ExxonMobil’s share of equity company expenditures, were $9.0 billion, of which $5.3 billion were included in expenses with the remainder in capital expenditures. As the Corporation progresses its emission-reduction plans, worldwide environmental expenditures are expected to increase to approximately $12 billion annually in 2025 and 2026, with capital expenditures expected to account for approximately 55 percent of the total in each year. Environmental Liabilities The Corporation accrues environmental liabilities when it is probable that obligations have been incurred and the amounts can be reasonably estimated. This policy applies to assets or businesses currently owned or previously disposed. ExxonMobil has accrued liabilities for probable environmental remediation obligations at various sites, including multiparty sites where the U.S. Environmental Protection Agency has identified ExxonMobil as one of the potentially responsible parties. The involvement of other financially responsible companies at these multiparty sites could mitigate ExxonMobil’s actual joint and several liability exposure. At present, no individual site is expected to have losses material to ExxonMobil’s operations or financial condition. Consolidated company provisions made in 2024 for environmental liabilities were $277 million ($208 million in 2023), and the balance sheet reflects liabilities of $734 million as of December 31, 2024, and $701 million as of December 31, 2023. 66 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MARKET RISKS [[GREPCENT_TABLE]] [["Marker (1)","2024","","2023","","2022"],["Brent ($ per barrel)","80.76","","","82.62","","","101.19"],["Henry Hub ($ per metric million British thermal unit)","2.27","","","2.74","","","6.65"],["TTF ($ per metric million British thermal unit)","10.77","","","15.15","","","40.22"],["(1) Markers reflect the average prices from the year."]] [[/GREPCENT_TABLE]] Crude oil, natural gas, petroleum product, and chemical prices have fluctuated in response to changing market forces. The impacts of these price fluctuations on earnings have varied across the Corporation's operating segments. For the year 2025, a $1 per barrel change in the Brent price would have an approximately $650 million annual after-tax effect on Upstream consolidated plus equity company earnings, excluding the impact of derivatives. This Brent sensitivity includes oil-linked LNG sales which make up approximately 10 percent of the sensitivity. A $0.10 per million metric British thermal unit change in the Henry Hub price would have an approximately $75 million annual after-tax effect on Upstream consolidated plus equity company earnings, excluding the impact of derivatives. Similarly, a $0.10 per million metric British thermal unit change in the Title Transfer Facility (TTF) price would have an approximately $20 million annual after-tax effect on Upstream consolidated plus equity company earnings, excluding the impact of derivatives. This TTF sensitivity primarily represents LNG sales. These price markers have a direct impact on our realized prices. For any given period, the extent of actual benefit or detriment will be dependent on the price movements of individual types of crude oil, results of trading activities, taxes and other government take impacts, price adjustment lags in long-term gas contracts, and crude and gas production volumes. Accordingly, changes in benchmark prices for crude oil and natural gas only provide broad indicators of changes in the earnings experienced in any particular period. In the very competitive petroleum and petrochemical environment, earnings are primarily determined by margin capture rather than absolute price levels of products sold. Refining margins are a function of the difference between what a refiner pays for its raw materials (primarily crude oil) and the market prices for the range of products produced. These prices in turn depend on global and regional supply/demand balances, inventory levels, refinery operations, import/export balances and weather. The global energy markets can give rise to extended periods in which market conditions are adverse to one or more of the Corporation’s businesses. Such conditions, along with the capital-intensive nature of the industry and very long lead times associated with many of our projects, underscore the importance of maintaining a strong financial position. Management views the Corporation’s financial strength as a competitive advantage. In general, segment results are not dependent on the ability to sell and/or purchase products to/from other segments. Instead, where such sales take place, they are the result of efficiencies and competitive advantages of integrated refinery and chemical complexes. Additionally, intersegment sales are at market-based prices. The products bought and sold between segments can also be acquired in worldwide markets that have substantial liquidity, capacity, and transportation capabilities. Refer to Note 18 for additional information on intersegment revenue. Although price levels of crude oil and natural gas may rise or fall significantly over the short to medium term due to global economic conditions, political events, decisions by OPEC or OPEC+ and other major government resource owners and other factors, industry economics over the long term will continue to be driven by market supply and demand. The Corporation evaluates investments over a range of prices, including estimated greenhouse gas emission costs even in jurisdictions without a current greenhouse gas pricing policy. The Corporation has an active asset management program in which nonstrategic assets are considered for divestment. The asset management program includes a disciplined, regular review to ensure assets are contributing to the Corporation’s strategic objectives. Risk Management The Corporation’s size, strong capital structure, geographic diversity, and the complementary nature of its business segments reduce the Corporation’s enterprise-wide risk from changes in commodity prices, currency rates, and interest rates. In addition, the Corporation uses commodity-based contracts, including derivatives, to manage commodity price risk and to generate returns from trading. The Corporation’s commodity derivatives are not accounted for under hedge accounting. At times, the Corporation also enters into currency and interest rate derivatives, none of which are material to the Corporation’s financial position as of December 31, 2024 and 2023, or results of operations for the years ended 2024, 2023, and 2022. Credit risk associated with the Corporation’s derivative position is mitigated by several factors, including the use of derivative clearing exchanges and the quality of and financial limits placed on derivative counterparties. No material market or credit risks to the Corporation’s financial position, results of operations or liquidity exist as a result of the derivatives described in Note 13. The Corporation maintains a system of controls that includes the authorization, reporting and monitoring of derivative activity. 67 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Corporation is exposed to changes in interest rates, primarily on its short-term debt and the portion of long-term debt that carries floating interest rates. The impact of a 100-basis-point change in interest rates affecting the Corporation’s debt would not be material to earnings or cash flow. The Corporation has access to significant capacity of long-term and short-term liquidity. Internally generated funds are generally expected to cover financial requirements, supplemented by long-term and short-term debt as required. Commercial paper is used to balance short-term liquidity requirements. Some joint-venture partners are dependent on the credit markets, and their funding ability may impact the development pace of joint-venture projects. The Corporation conducts business in many foreign currencies and is subject to exchange rate risk on cash flows related to sales, expenses, financing, and investment transactions. Fluctuations in exchange rates are often offsetting and the impacts on ExxonMobil’s geographically and functionally diverse operations are varied. The Corporation makes limited use of currency exchange contracts to mitigate the impact of changes in currency values, and exposures related to the Corporation’s use of these contracts are not material. CRITICAL ACCOUNTING ESTIMATES The Corporation’s accounting and financial reporting fairly reflect its integrated business model involving exploration for, and production of, crude oil and natural gas; manufacture, trade, transport and sale of crude oil, natural gas, petroleum products, petrochemicals, and a wide variety of specialty products; and pursuit of lower-emission and other new business opportunities including carbon capture and storage, hydrogen, lower-emission fuels, ProxximaTM systems, carbon materials, and lithium. The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (GAAP) requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities. The Corporation’s accounting policies are summarized in Note 1. Oil and Natural Gas Reserves The estimation of proved oil and natural gas reserve volumes is an ongoing process based on rigorous technical evaluations, commercial and market assessments, and detailed analysis of reservoir and well performance, development and production costs, and other factors. The estimation of proved reserves is controlled by the Corporation through long-standing approval guidelines. Reserve changes are made within a well-established, disciplined process driven by senior level geoscience and engineering professionals, assisted by the Global Reserves and Resources Group which has significant technical experience, culminating in reviews with and approval by senior management. Notably, the Corporation does not use specific quantitative reserve targets to determine compensation. Key features of the reserve estimation process are covered in Disclosure of Reserves in Item 2. Oil and natural gas reserves include both proved and unproved reserves. •Proved oil and natural gas reserves are determined in accordance with Securities and Exchange Commission (SEC) requirements. Proved reserves are those quantities of oil and natural gas which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible under existing economic and operating conditions and government regulations. Proved reserves are determined using the average of first-of-month oil and natural gas prices during the reporting year. Proved reserves can be further subdivided into developed and undeveloped reserves. Proved developed reserves include amounts which are expected to be recovered through existing wells with existing equipment and operating methods. Proved undeveloped reserves include amounts expected to be recovered from new wells on undrilled proved acreage or from existing wells where a relatively major expenditure is required for completion. Proved undeveloped reserves are recognized only if a development plan has been adopted indicating that the reserves are scheduled to be drilled within five years, unless specific circumstances support a longer period of time. The Corporation is reasonably certain that proved reserves will be produced. However, the timing and amount recovered can be affected by a number of factors including completion of development projects, reservoir performance, regulatory approvals, government policy, consumer preferences, and significant changes in oil and natural gas price levels. •Unproved reserves are quantities of oil and natural gas with less than reasonable certainty of recoverability and include probable reserves. Probable reserves are reserves that, together with proved reserves, are as likely as not to be recovered. Revisions in previously estimated volumes of proved reserves for existing fields can occur due to the evaluation or re-evaluation of (1) already available geologic, reservoir, or production data, (2) new geologic, reservoir, or production data, or (3) changes in the average of first-of-month oil and natural gas prices and/or costs that are used in the estimation of reserves. Revisions can also result from significant changes in development strategy or production equipment and facility capacity. 68 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Unit-of-Production Depreciation Oil and natural gas reserve volumes are used as the basis to calculate unit-of-production depreciation rates for most upstream assets. Acquisition costs of proved properties are depreciated using a ratio of asset cost to total proved reserves while capitalized drilling and developments costs are depreciated using a ratio of actual production volumes to proved developed reserves. The volumes produced and asset cost are known, while proved reserves are based on estimates that are subject to some variability. In the event that the unit-of-production method does not result in an equitable allocation of cost over the economic life of an upstream asset, an alternative method is used. The straight-line method is used in limited situations where the expected life of the asset does not reasonably correlate with that of the underlying reserves. For example, certain assets used in the production of oil and natural gas have a shorter life than the reserves, and as such, the Corporation uses straight-line depreciation to ensure the asset is fully depreciated by the end of its useful life. To the extent that proved reserves for a property are substantially de-booked and that property continues to produce such that the resulting depreciation charge does not result in an equitable allocation of cost over the expected life, assets will be depreciated using a unit-of-production method based on reserves determined at the most recent SEC price which results in a more meaningful quantity of proved reserves, appropriately adjusted for production and technical changes. Fair Value Used in Business Combinations In accounting for business combinations, the purchase price paid to acquire a business is allocated to its assets and liabilities based on their respective estimated fair values as of the date of acquisition. If applicable, any excess of the purchase price over the fair value is recorded as goodwill. The assessment of fair value is based upon the views of a likely market participant group. On May 3, 2024, the Corporation acquired Pioneer Natural Resources Company (Pioneer), an independent oil and gas exploration and production company. To effect the acquisition, we issued 545 million shares of ExxonMobil common stock having a fair value of $63 billion on the acquisition date, and assumed debt with a fair value of $5 billion. In respect of the Pioneer acquisition, the most significant amount of judgment involved the estimated fair values of property, plant and equipment related to crude oil and natural gas properties, for which we used discounted cash flow models. Inputs and assumptions used in discounted cash flow models include estimates of future production volumes, commodity prices consistent with the average of third-party industry experts, drilling and development costs, and risk-adjusted discount rates. The assumptions and inputs incorporated within the fair value estimates are subject to considerable management judgement and are based on industry, market, and economic conditions prevalent at the time of the acquisition. Actual results may differ from the projected results used to determine fair value. See Note 21 for further information regarding the Pioneer acquisition during 2024. Impairment The Corporation tests assets or groups of assets for recoverability on an ongoing basis whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. The Corporation has a robust process to monitor for indicators of potential impairment across its asset groups throughout the year. This process is aligned with the requirements of ASC 360 and ASC 932, and relies, in part, on the Corporation’s planning and budgeting cycle. Because the lifespans of the vast majority of the Corporation’s major assets are measured in decades, the future cash flows of these assets are predominantly based on long-term oil and natural gas commodity prices and industry margins, development costs, and production costs. Significant reductions in the Corporation’s view of oil or natural gas commodity prices or margin ranges, especially the longer-term prices and margins, and changes in the development plans, including decisions to defer, reduce, or eliminate planned capital spending, can be an indicator of potential impairment. Other events or changes in circumstances, including indicators outlined in ASC 360, can be indicators of potential impairment as well. In general, the Corporation does not view temporarily low prices or margins as an indication of impairment. Management believes that prices over the long term must be sufficient to generate investments in energy supply to meet global demand. Although prices will occasionally drop significantly, industry prices over the long term will continue to be driven by market supply and demand fundamentals. On the supply side, industry production from mature fields is declining. This is being offset by investments to generate production from new discoveries, field developments, and technology and efficiency advancements. OPEC+ investment activities and production policies also have an impact on world oil supplies. The demand side is largely a function of general economic activities, alternative energy sources, and levels of prosperity. During the lifespan of its major assets, the Corporation expects that oil and gas prices and industry margins will experience significant volatility. Consequently, these assets will experience periods of higher earnings and periods of lower earnings, or even losses. In assessing whether events or changes in circumstances indicate the carrying value of 69 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS an asset may not be recoverable, the Corporation considers recent periods of operating losses in the context of its longer-term view of prices and margins. Global Outlook and Cash Flow Assessment. The annual planning and budgeting process, known as the Corporate Plan, is the mechanism by which resources (capital, operating expenses, and people) are allocated across the Corporation. The foundation for the assumptions supporting the Corporate Plan is the Global Outlook (Outlook), which contains the Corporation’s demand and supply projections based on its assessment of current trends in technology, government policies, consumer preferences, geopolitics, economic development, and other factors. Reflective of the existing global policy environment, the Outlook does not attempt to project the degree of necessary future policy and technology advancement and deployment for the world, or the Corporation, to meet net zero by 2050. As future policies and technology advancements emerge, they will be incorporated into the Outlook, and the Corporation’s business plans will be updated accordingly. If events or changes in circumstances indicate that the carrying value of an asset may not be recoverable, the Corporation estimates the future undiscounted cash flows of the affected properties to judge the recoverability of carrying amounts. In performing this assessment, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. Cash flows used in recoverability assessments are based on the assumptions developed in the Corporate Plan, which is reviewed and approved by the Board of Directors, and are consistent with the criteria management uses to evaluate investment opportunities. These evaluations make use of the Corporation’s assumptions of future capital allocations, crude oil and natural gas commodity prices including price differentials, refining and chemical margins, volumes, development and operating costs including greenhouse gas emission prices, and foreign currency exchange rates. Notably, when assessing future cash flows, the Corporation includes the estimated costs in support of reaching its 2030 greenhouse gas emission-reduction plans, including its goal of net-zero Scope 1 and 2 greenhouse gas emissions from unconventional operated assets in the Permian Basin, and in Pioneer assets by 2035. Volumes are based on projected field and facility production profiles, throughput, or sales. Management’s estimate of upstream production volumes used for projected cash flows makes use of proved reserve quantities and may include risk-adjusted unproved reserve quantities. ExxonMobil considers a range of scenarios - including remote scenarios - to help inform perspective of the future and enhance strategic thinking over time. While third-party scenarios may be used for these purposes, they are not used as a basis for developing future cash flows for impairment assessments. As part of the Corporate Plan, the Company considers estimated greenhouse gas emission costs, even for jurisdictions without a current greenhouse gas pricing policy. Fair Value of Impaired Assets. An asset group is impaired if its estimated undiscounted cash flows are less than the asset group’s carrying value. Impairments are measured by the excess of the carrying value over fair value. The assessment of fair value is based upon the views of a likely market participant. The principal parameters used to establish fair value include estimates of acreage values and flowing production metrics from comparable market transactions, market-based estimates of historical cash flow multiples, and discounted cash flows. Inputs and assumptions used in discounted cash flow models include estimates of future production volumes, throughput and product sales volumes, commodity prices (which are consistent with the average of third-party industry experts and government agencies), refining and chemical margins, drilling and development costs, operating costs, and discount rates which are reflective of the characteristics of the asset group. Other Impairment Estimates. Unproved properties are assessed periodically to determine whether they have been impaired. Significant unproved properties are assessed for impairment individually, and valuation allowances against the capitalized costs are recorded based on the Corporation's future development plans, the estimated economic chance of success, and the length of time that the Corporation expects to hold the properties. Properties that are not individually significant are aggregated by groups and amortized based on development risk and average holding period. Long-lived assets that are held for sale are evaluated for possible impairment by comparing the carrying value of the asset with its fair value less the cost to sell. If the net book value exceeds the fair value less cost to sell, the assets are considered impaired and adjusted to the lower value. Judgment is required to determine if assets are held for sale and to determine the fair value less cost to sell. Investments accounted for by the equity method are assessed for possible impairment when events or changes in circumstances indicate that the carrying value of an investment may not be recoverable. Examples of key indicators include a history of operating losses, negative earnings and cash flow outlook, significant downward revisions to oil and gas reserves, and the financial condition and prospects for the investee’s business segment or geographic region. If the decline in value of the investment is other than temporary, the carrying value of the investment is written down to fair value. In the absence of market prices for the investment, discounted cash flows are used to assess fair value, which requires significant judgment. Recent Impairments. Impairments in 2024 were immaterial. In 2023, the Corporation recognized after-tax charges of $3.4 billion, primarily related to the idled Upstream Santa Ynez Unit assets and associated facilities in California, which reflected the continuing challenges in the state regulatory environment that impeded progress towards restoring operations. Other impairments in the year included a $0.6 billion charge related to an Upstream equity investment. 70 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS In early 2022, in response to Russia’s military action in Ukraine, the Corporation announced that it planned to discontinue operations on the Sakhalin-1 project (“Sakhalin”) and develop steps to exit the venture. The Corporation’s first quarter 2022 results included after-tax charges of $3.0 billion representing the impairment of its Upstream operations related to Sakhalin. (Refer to Note 2 for further information on Russia.) During 2022, other after-tax impairment charges of $1.6 billion and $0.3 billion were recognized in Upstream and Energy Products, respectively. Factors which could put further assets at risk of impairment in the future include reductions in the Corporation’s price or margin outlooks, changes in the allocation of capital or development plans, reduced long-term demand for the Corporation's products, and operating cost increases which exceed the pace of efficiencies or the pace of oil and natural gas price or margin increases. However, due to the inherent difficulty in predicting future commodity prices or margins, and the relationship between industry prices and costs, it is not practicable to reasonably estimate the existence or range of any potential future impairment charges related to the Corporation’s long-lived assets. For further information regarding impairments in equity method investments, property, plant, and equipment, and suspended wells, refer to Notes 7, 9, and 10, respectively. Asset Retirement Obligations The Corporation is subject to retirement obligations for certain assets. The fair values of these obligations are recorded as liabilities on a discounted basis, which is typically at the time the assets are installed. In the estimation of fair value, the Corporation uses assumptions and judgments regarding such factors as the existence of a legal obligation for an asset retirement obligation, technical assessments of the assets, estimated amounts and timing of settlements, discount rates, and inflation rates. See Note 9 for further information regarding asset retirement obligations. Pension Benefits The Corporation and its affiliates sponsor about 70 defined benefit (pension) plans in 40 countries. Note 17 provides details on pension obligations, fund assets, and pension expense. Some of these plans (primarily non-U.S.) provide pension benefits that are paid directly by their sponsoring affiliates out of corporate cash flow rather than a separate pension fund because applicable tax rules and regulatory practices do not encourage advance funding. Book reserves are established for these plans. The portion of the pension cost attributable to employee service is expensed as services are rendered. The portion attributable to the increase in pension obligations due to the passage of time is expensed over the term of the obligations, which ends when all benefits are paid. The primary difference in pension expense for unfunded versus funded plans is that pension expense for funded plans also includes a credit for the expected long-term return on fund assets. For funded plans, including those in the U.S., pension obligations are financed in advance through segregated assets or insurance arrangements. These plans are managed in compliance with the requirements of governmental authorities and meet or exceed required funding levels as measured by relevant actuarial and government standards at the mandated measurement dates. In determining liabilities and required contributions, these standards often require approaches and assumptions that differ from those used for accounting purposes. The Corporation will continue to make contributions to these funded plans as necessary. All defined-benefit pension obligations, regardless of the funding status of the underlying plans, are fully supported by the financial strength of the Corporation or the respective sponsoring affiliate. Pension accounting requires explicit assumptions regarding, among others, the long-term expected earnings rate on fund assets, the discount rate for the benefit obligations, and the long-term rate for future salary increases. Pension assumptions are reviewed annually by outside actuaries and senior management. These assumptions are adjusted as appropriate to reflect changes in market rates and outlook. The long-term expected earnings rate on U.S. pension plan assets in 2024 was 6.8 percent. The 10-year and 20-year actual returns on U.S. pension plan assets were 4 percent and 5 percent, respectively. The Corporation establishes the long-term expected rate of return by developing a forward-looking, long-term return assumption for each pension fund asset class, taking into account factors such as the expected real return for the specific asset class and inflation. A single, long-term rate of return is then calculated as the weighted-average of the target asset allocation percentages and the long-term return assumption for each asset class. A worldwide reduction of 0.5 percent in the long-term rate of return on assets would increase annual pension expense by approximately $140 million before tax. Differences between actual returns on fund assets and the long-term expected return are not recognized in pension expense in the year that the difference occurs. Such differences are deferred, along with other actuarial gains and losses, and are amortized into pension expense over the expected remaining service life of employees. 71 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Litigation and Tax Contingencies A variety of claims have been made against the Corporation and certain of its consolidated subsidiaries in a number of pending lawsuits. The Corporation accrues an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated. For contingencies where an unfavorable outcome is reasonably possible and significant, the Corporation discloses the nature of the contingency and, where feasible, an estimate of the possible loss. As described in Note 16, for purposes of our contingency disclosures, “significant” includes material matters, as well as other matters, which management believes should be disclosed. Management has regular litigation reviews, including updates from corporate and outside counsel, to assess the need for accounting recognition or disclosure of these contingencies. The status of significant claims is summarized in Note 16. Management judgment is required related to contingent liabilities and the outcome of litigation because both are difficult to predict. However, the Corporation has been successful in defending litigation in the past. Payments have not had a material adverse effect on our operations or financial condition. In the Corporation’s experience, large claims often do not result in large awards. Large awards are often reversed or substantially reduced as a result of appeal or settlement. The Corporation is subject to income taxation in many jurisdictions around the world. The benefits of uncertain tax positions that the Corporation has taken or expects to take in its income tax returns are recognized in the financial statements if management concludes that it is more likely than not that the position will be sustained with the tax authorities. For a position that is likely to be sustained, the benefit recognized in the financial statements is measured at the largest amount that is greater than 50 percent likely of being realized. Significant management judgment is required in the accounting for income tax contingencies and tax disputes because the outcomes are often difficult to predict. The Corporation’s unrecognized tax benefits and a description of open tax years are summarized in Note 19. 72