Kathryn Mikells: The only other thing I would add is ultimately, we’re focused on continuing to high-grade our portfolio overall. And you would have seen in the past year, in what’s been a more buoyant market environment, you know that we’ve made a number of divestments where others saw more value in those assets than we saw. So, we’re always looking at both sides of this equation. And depending on the market and what’s available, and again, how we think about synergies, how we think about retention value, we’ll look to transact, but only when we think it’s going to earn good return for our shareholders.
Sam Margolin: Thank you so much.
Darren Woods: Thank you.
Operator: We’ll go next to Jason Gabelman with Cowen.
Jason Gabelman: Morning, thanks for taking my questions. The first one is for Kathy, just on a couple of items that I think impacted 4Q earnings. You had highlighted on the last earnings call that downstream trading benefits were particularly strong in 3Q and I was wondering if that continued into the fourth quarter? And you also highlighted in the 8-K for 4Q earnings that inventory impacts would be a headwind and that was hoping if you could quantify that as well? Thanks.
Kathryn Mikells: Yes. And so we obviously in the third quarter quantified that we had a number of favorable timing impacts that we didn’t necessarily think we’re going to repeat. So, what when you think about Energy Products performance in this quarter, you should think about the absence of some of those positives that we had overall last quarter, right. So, if I look at that just on a quarterly basis, overall, we had from third quarter to fourth quarter in Energy Products, unsettled derivatives of about $1 billion as a headwind, that’s really the absence of largely a positive that we would have had in the third quarter. And then again, in the third quarter, we talked about the fact that we have a program associated with achieving ratable pricing in our refinery runs and that had given us, again, I’ll call it benefit in the third quarter.
And in the fourth quarter, price timing differences were negative to the tune of about $400 million. I think the most important thing, though, is to actually take a step back and look at the full year results because what we’ve told you during the year is, look, we’re going to have these price timing impacts, especially mark-to-market on open derivative, positions are going to move around quarter-to-quarter and during the year. But if you looked at Energy Products on a full year basis, our unsettled derivatives were basically neutral, right? And price timing impacts, and again, I would have referred to this coming largely out of our priced inventory program, were about a $400 million negative when we look at just 2021 to 2022. So, like we have said all along, the quarter-to-quarter impact may be a little bit more volatile.
But when you look at the full year results, it tends to settle itself out.
Jason Gabelman: Got it. And then on the inventory, the year-end inventory impacts?
Kathryn Mikells: If you looked at overall year-end inventory impacts, they would have had the biggest impact in our Upstream business. And as part of the inventory adjustments we made, we had to look at gas inventories overall in Europe with prices declining pretty significantly. If you looked at our overall year-end adjustments to inventory outside of that, I would have called them kind of neutral to modestly favorable with the largest favorability incurring in Energy Products.
Jason Gabelman: Got it. Thanks. And then my follow-up is just on downstream maintenance, which it seems like refining maintenance will be particularly high in 1Q. I wonder if that’s just kind of a bunch of things getting — just getting aggregated into one quarter, if it’s going to be a higher year overall moving through the year, if there’s something else going on. Just a little more color on that number and the outlook for the year would be great. Thanks.
Darren Woods: Yes, I’ll take that one. I would just say turnaround timing is really a function of — and the spend that we have in that area is really a function of the mix and the units that we’re bringing in at the different — into turnarounds around the different refineries and the age of those units. And so I wouldn’t take away some structural change or outlook for the year. It’s really just a function of which refineries and which units that those refineries are coming into turnaround and the work that we have to do to get those units back on their maintenance schedule. So, that’s what’s happening there.
Jason Gabelman: Great. Thanks.
Operator: We’ll go next to Ryan Todd with Piper Sandler.
Ryan Todd: Hey thanks. Maybe a higher-level question, following up on some of your comments earlier on competitive position. Relative to past cycles, the competitive environment in upstream oil looks far different than many times in the past with both fewer players in the industry and many of your largest peers strategically under-investing in oil. How does it — how do you think this impacts global supply over time? And how does it impact your — as you look forward, how does it impact your competitive position within the space? Does it open the door for additional opportunities for you? And in E&P projects, does it — whether in terms of expiration leasehold, competition or project development or even within the asset transactions in the M&A space, have you seen an impact to-date? And how do you think that evolves in the coming years with the changed competitive landscape?
Darren Woods: Yes, thanks. I’ll take that one, Ryan. It’s — I think you hit on a very good point, which is — and the point that we’ve made historically is there has — we are under-investing as an industry in this space. And in the depletion business, we are not keeping up with that depletion or not offsetting it and covering the growth. You find yourself in tight markets. And I think as the broader public narrative has moved in this space and some of our competitors have stepped back for investment there, that does tighten the amount of capacity that’s coming on and the supply that gets brought in on over time. And until you have competitive alternatives, lower emissions, competitive alternatives that address the full set of needs for society, there’s going to continue to be a demand for oil and gas and oil products.
And so I think you’re seeing the potential for continued tight markets. I think we have found, certainly over the last five years, that our continued commitment to strengthening the capabilities that will allow us to bring on competitively sourced oil and gas and do that in an environmentally responsible way, that, that has resonated and is being recognized by resource owners around the world. And so I do think that does give us a bit of an advantage with respect to the opportunity set. And I would say that we continue to work to earn the advantage by developing those resources very effectively, bringing projects on ahead of schedule, under budget and doing things that, frankly, some of our competitors are challenged to do. And so I think it’s a very supportive environment that we find ourselves in.
The focus that we have in this space, I think, is appreciated and gives us an advantage versus the rest of the competition. And I’ll also add that we’re doing that while, at the same time, balancing the risk of the transition and investing in the low emission side of the equation. And so we’ve got this unique position where the same core capabilities that we’re using to drive value in our traditional businesses, we’re using those and leveraging them to drive value in the Low Carbon Solutions business and keeping a very keen eye on the developments in all those industries and making sure that we adjust our investments in our strategy and our allocation of capital based on the developments that we’re seeing in those space. So, we’ve got optionality and we’ve got flexibility.
And we’ve got a core set of competencies that lend themselves to every part of that — of those businesses and across our portfolio. So, I feel really good about that. And I think the folks that were out there or the partners that we’re looking to partner with recognize that and value it. So, I think we’ll see that manifest itself in the deals that we continue to do and the businesses that we continue to grow.
Ryan Todd: Thanks Darren.
