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Exxon Mobil's (XOM) CEO Rex Tillerson Hosts Annual Shareholder Meeting (Transcript)

Exxon Mobil Corporation (XOM) Annual Shareholder Meeting Conference Call May 28, 2014 10:30 AM ET

Executives

Rex Tillerson - Chairman and Chief Executive Officer

David Rosenthal - Vice President, Investor Relations and Secretary

Marco Vargas

Fr. Michael Crosby

Shawn Gilchrist

Patricia Daly

Malcolm Shaw

Analysts

Frank Rauscher - Aquinas Associates

Julian Martinez - SER-Jobs for Progress National

David Martino

Jack Fuller

David Ridenour - National Center for Public Policy

Jim Markham

Rex Tillerson - Chairman and Chief Executive Officer

Good morning, ladies and gentlemen. You would please find your seats. I would ask that the meeting please come to order. I am Rex Tillerson, Chairman and Chief Executive Officer of the Exxon Mobil Corporation. And I am pleased that so many of you are here with us today in person, but I also want to welcome our shareholders around the world who are joining us by way of the internet on the simulcast. I hope that you have an opportunity while those of you that were here to meet some of our employees in person while visiting the various displays in the foyer this morning. These are just a small representation of the some 75,000 men and women of Exxon Mobil, men and women who are working on your behalf, 24 hours a day, 7 days a week, 365 days a year. And many of them are working in very challenging locations and under challenging circumstances around the world. All with one objective in mind and that’s to deliver the energy that the world’s economies and people need to maintain their lifestyles in all corners of the world.

I will have the opportunity to report to you on our financial and operating results, but I am really reporting to you on their results. And that is the highest honor I have is to speak on their behalf to you today. David Rosenthal is seated to my right. He is the Vice President of Investor Relations and the Corporate Secretary. He will assist me in running the meeting today. I will introduce the members of the board to you later in the meeting.

As mentioned on Page 2 of the proxy statement, it is the policy of the corporation to provide shareholders an opportunity for privacy in voting. For shareholders who returned their proxy cards without written comments, the voted proxies have not been seen by nor reported to the corporation, except in aggregate numbers. Anyone turning in a proxy card at this meeting who wishes to keep his or her votes secret may obtain an envelope from the ushers. Proxy cards will be collected later in the meeting.

A list of shareholders entitled to vote at this meeting or at any adjournment thereof is available for inspection. If anyone wishes to examine this list, an usher will be pleased to direct you to the proper location. Charlie (indiscernible) and Lori Chamoun of Computershare Trust Company have been appointed inspectors of election for this meeting. They have taken an oath of office that has been delivered to the Secretary for filing with the Minutes of the Meeting. Notice of this meeting has been properly given and the inspectors of election have determined that a quorum is present. There are more than 97,000 shareholders represented at this meeting, holding at least 3.5 billion shares or approximately 82.9% of the issued and outstanding shares of stock of the corporation which are entitled to vote. I direct that the inspectors’ written determination as to the number of shares entitled to vote at the meeting be filed with the minutes. I declare a quorum present and the meeting ready for business.

I would now like to explain our plan for conducting the meeting today. First, Secretary Rosenthal will outline the rules of conduct and how to gain recognition. Then I will make some brief comments about our business results and the future we see for your company. After that, the 8 items of business will be presented beginning with the election of directors, the ratification of independent auditors and the advisory vote to approve executive compensation, all of which are required by law. Then we will continue with the 5 shareholder proposals shown in the proxy statement, which was sent to all shareholders in advance.

As described in the annual meeting program, discussion on the 8 items of business will be deferred until all items have been presented. Time permitting, we will respond to some of the questions submitted ahead of time via proxy cards or the internet. Upon completion of the discussion on the items of business and voting, the polls will be closed. The formal business of this year’s annual meeting will be concluded and the inspectors of election will prepare their preliminary voting report. While this is occurring, there should be some time for additional comments and questions about Exxon Mobil’s business. When the inspectors are ready I will ask them to give us their voting report and we will then conclude the meeting.

At this time let me turn the podium to David Rosenthal to discuss the rules of conduct.

David Rosenthal - Vice President, Investor Relations and Secretary

Good morning. I would now like to cover several aspects of today’s meeting. Before we continue I would like to take this opportunity to familiarize everyone with the safety features of this auditorium. In case of an emergency, we will be notified through the public address system. The emergency exits for the ground level as shown on the screen above me, are situated at the rear of the auditorium, where you entered, and down and front on either side. If we need to evacuate, just proceed to the nearest exit and Meyerson personnel will guide you to the best way out. In addition, for safety reasons, please do not stand in the aisles or at the back of the hall and do not block the exits.

To ensure that the meeting is conducted in the interest of all shareholders, there are certain rules of conduct governing this meeting. These rules are posted on signs at the entrances to the meeting, are located in the program and are shown on the screen above me. Let me now cover several of the rules.

The distribution of pamphlets and other literature, banners, signs and other displays is strictly prohibited in this hall. Anyone who intentionally obstructs or interferes with this lawful meeting by physical action or verbal utterance is in violation of Texas law. Any persons engaging in such conduct will be asked to cease. And if they refuse, they will be escorted from the meeting. The laws of New Jersey, where Exxon Mobil is incorporated, provide that no business can be brought up for a vote unless proper notice has been given to all shareholders. Therefore, in fairness to other shareholders not in attendance, and in keeping with the laws that govern our annual meeting, formal business at today’s meeting is restricted to the items that were included in this year’s proxy statement. Additional proposals may not be introduced from the floor.

In order to present a proposal, you must have checked in at the admissions desk in the lobby and verified that you are the proponent or a duly authorized proxy under New Jersey law. Presenters whose credentials have been verified will be given a blue presenter’s pass. If neither the proponent nor an authorized proxy has checked in and obtained a presenter’s pass, we will presume the proponent is not present. And I will move the proposal for the purposes of the orderly conduct of the meeting and so that the shareholder votes cast may be recorded. However, I will not be acting as a representative of the proponent. The authorized presenter of a shareholder proposal will have up to 3 minutes to present the proposal. Time may not be shared with another speaker. No second to the motion is required. Discussion on all items of business will be deferred until the discussion period later in the meeting.

Only shareholders as of the record date or their properly appointed proxies are entitled to speak at this annual meeting of Exxon Mobil shareholders. Shareholders making comments during the meeting must speak or have their words translated into English so that the majority of shareholders present can understand what is being said.

Comments that are offensive or otherwise inappropriate will not be permitted. We would also ask that any issues of personal interest that are not relevant to all shareholders be raised directly with appropriate company representatives outside of the annual meeting. We request that individual shareholders respect the rights of others to speak and keep their comments as brief as possible. As noted in the proxy statement, the Chairman has broad authority to conduct the meeting in an orderly and timely manner.

If you wish to make comments, you must first fill out a speaker identification card that is included in the program that was provided to you as you entered the lobby. This card confirms that you meet the requirements to speak at this meeting. Give the completed card to the usher when you are recognized to address the meeting.

To ensure that as many shareholders as possible who want to address the meeting today have the opportunity to do so, we ask you to follow these additional instructions. If you would like to address the meeting, move to a reserved aisle seat, remain seated and raise your hand, holding your speaker identification card to indicate to the Chairman that you wish to speak. When recognized by the Chairman, give your completed speaker card to the usher and a microphone will be provided. Stand and begin by stating your name. Unless otherwise provided in these rules, you may speak for up to 2 minutes. Due to the large number of items on today’s agenda and the need to conclude the meeting within a reasonable period of time, we cannot assure that every shareholder who wishes to speak will be able to do so. First priority will be given to those who have not yet had an opportunity to speak.

As we have done in the past, we have provided a timing system with lights that will help speakers manage their time. I would like to demonstrate the system at this time. When the Chairman recognizes a speaker and a microphone has been provided by the usher, a green light will come on at the displays on both sides of the stage. The hall microphones will be activated only after the speaker has been recognized by the Chairman. When the speaker’s time remaining reaches 30 seconds, a yellow light will turn on. A red light will indicate the speaker is at the end of the time allowed.

Finally, as we typically note at the outset of similar meetings, I would like to draw your attention to our cautionary statement that is shown on the slide. This statement contains information regarding today’s presentation and discussion. You may also refer to our website ExxonMobil.com for additional information on factors affecting future results as well as supplemental information to finding key terms that we will use throughout the meeting today. Thank you.

Rex Tillerson - Chairman and Chief Executive Officer

Thank you, David. Shortly, we will address our items of business. However, I will first share with you some highlights from 2013 financial and operating results, give a summary overview of our annual energy outlook, and provide you with a business and operational update. I will touch on several elements of our business approach that enable Exxon Mobil to deliver superior long-term shareholder results.

I will start with a review of our financial and operating performance. In reviewing 2013, the corporation sustained solid financial and operating performance despite global economic challenges at a wide range of uncertainties. We continued our strong safety and environmental performance. We delivered earnings of $32.6 billion, a return on average capital employed of 17.2%, and generated cash flow from operations and asset sales of $47.6 billion. We invested $42.5 billion in our various business lines. Total shareholder distributions were $25.9 billion.

For the 20th consecutive year, we added more oil and natural gas reserves than we produced with our proved reserve replacement ratio exceeding 100%. These results reflect the strength of our integrated business model and the diligence, expertise and dedication of the 75,000 men and women who work for Exxon Mobil throughout the world. Exxon Mobil’s approach to business is built upon a commitment to integrity in all we do. Nowhere is that more evident than in our commitment to safe operations with a continued emphasis on both personnel and process safety.

As this chart shows our safety performance continues to improve and remains very strong in the industry, we believe that effectively managing risk will enable us to achieve our vision that nobody gets hurt. In 2013, Exxon Mobil was awarded the Green Cross for Safety medal by the National Safety Council in recognition of our performance and leadership in safety. At Exxon Mobil, we recognized that meeting the world’s growing need for energy while managing the impacts on the environment is one of society’s great challenges. We have implemented rigorous environmental management programs and results of our actions are significant, particularly in the area of energy efficiency and flare reduction.

As shown on this chart, we have reduced greenhouse gas emissions by nearly 11 million metric tons over the past five years. This is equivalent to taking almost 2 million cars off the road in United States. The investment in highly efficient code generation capacity to provide electric power and steam through our facilities is a key contributor to our efforts. We also continued to progress initiatives to reduce hydrocarbon flaring bringing our results over the past 10 years to the total reduction of 50%. We are also carefully managing freshwater consumption in our operations.

The chart on the left summarizes freshwater consumed in our upstream, downstream and chemicals segments. We experienced a 25% reduction across all business lines since our acquisition of XTO in 2011 or a decrease of almost 600 million barrels or to put that in metrics it may be relevant to you 25 billion gallons. Exxon Mobil has been active in industry initiatives to develop standards and tools for water resource management including mapping water use, screening potential water stress or scarcity of major facilities and identifying use and risk mitigation steps. We are actively involved in a number of research efforts individually as well as through partnerships to further enhance our understanding and capabilities to effectively manage water.

Let’s now take a look at our 2013 financial metrics. Exxon Mobil continues to lead our peer group with earnings of $32.6 billion in 2013. The decrease of $12.3 billion compared to 2012 largely reflects the lower net gains from divestments of $8.6 billion and lower earnings in our upstream and downstream segments which were in line with general industry conditions. Our earnings performance continues to capture the value of our balance portfolio and our integrated business model. In 2013 Exxon Mobil’s return on capital employed was 17.2% or about 3.5 percentage points higher than our nearest competitor. Over the past five years return on capital employed averaged 21% or about 5 percentage points higher than our nearest competitor.

Our industry leading ROCE performance has been maintained even through the recent period of intensive upstream capital investments which have been necessary to position the company to meet the world’s growing energy needs. Our sustained leadership and capital efficiency reflects our consistent disciplined investment approach, our industry leading project execution capabilities as well as application of our innovative technologies.

In 2013 we invested $42.5 billion in capital expenditures to continue positioning the business for long-term growth and sustainability. Over the past five years we have invested $178 billion utilizing the corporation’s financial strength and flexibility to invest through the business cycle and capture new opportunities.

As you can see on the graph most of the CapEx was associated with an intense recapitalization of our upstream business. We progressed several major projects and completed strategic acquisitions to strengthen our portfolio. Our future plans reflect ongoing significant albeit lower upstream spending and marginally higher spending in the downstream and chemical businesses which are targeted at advantage return projects. I will provide an update on a few of these projects later in the presentation. Our approach to investing is to advance all attractive opportunities that provide competitive returns when tested across a broad range of industry and market conditions. Maintaining capital efficiency and discipline underpins our long-term success.

Another measure the value created through strong financial and operating performance is the cash flow remaining after fully funding our attractive investment opportunities. Over the past five year Exxon Mobil generated $104 billion of free cash flow. This is more than two times the average of our competitors during the period of relatively high upstream capital intensity or the industry as a whole. Consistent, robust free cash flow provides capacity for unmatched shareholder distributions and underpins our strong financial position.

Exxon Mobil’s disciplined capital allocation approach preserves the capacity for investments and industry leading shareholder distributions, while maintaining the flexibility and capacity of our strong balance sheet for longer term planning and execution. Since the beginning of 2009 Exxon Mobil has distributed $131 billion to our shareholders. During this five year period Exxon Mobil distributed 50% of the cash flow from operations and assets sales to shareholders.

As you can see from the chart, this payout ratio is double that of our nearest competitors during this period. Our dividend payouts are made with a view to building long-term shareholder value and providing reliable dividend growth through the ups and the downs of the business cycle. Over the past five years, we distributed $46.5 billion in dividends to you, our shareholders. We recently announced a second quarter 2014 dividend payable June 10 of $0.69 per share, a 9.5% increase over the previous quarterly rate. This is the 32nd consecutive year of dividend per share increases. Since 1982, shareholders have received annual per share dividend increases at an annualized growth rate of 6.3% more than double the rate of inflation.

Share purchases are an efficient and flexible way of returning cash to our shareholders. In 2013, distributions to shareholders to share purchases were $15 billion and just over $84 billion for the last five years. Purchases have reduced shares outstanding by 37% since the Exxon and Mobil merger, including the impact of shares issued for the merger of XTO.

An important benefit of our ongoing share purchase program is the enhanced per share interest in all of Exxon Mobil’s assets. For example, each share of Exxon Mobil owns 16% more of the upstream oil and natural gas production volumes than it did in 2009. Since 2009, Exxon Mobil has delivered annualized production per share growth of 4%, nearly 4 percentage points higher than our nearest peer. As you can see, the competitor group is trending generally flat to down in per share production over the last five years.

This slide shows our all-in natural gas reserves replacement performance compared to competitors over the last five years. For the 20th consecutive year, we have replaced more than 100% of production. In 2013, we added proved oil and gas reserves totaling 1.6 billion oil equivalent barrels, of which nearly 76% are liquids. At year end 2013, proved reserves of oil and gas totaled 25.2 billion oil equivalent barrels comprised of 53% liquids and 47% natural gas. A broad diverse proved reserve base supports today’s production volumes as well as positions us for new supplies in future.

Exxon Mobil has a resource base of nearly 91 billion oil equivalent barrels. The bar on the left shows the diversity of the resource base with substantial holdings in essentially all resource types. It is split equally between gas and liquids as shown in the middle bar. The bar on the right provides a description of commercial maturity. We currently have just over 25 billion oil equivalent barrels in proved reserves. There are an additional 28 billion barrels in various stages of appraisal, engineering design, and development. The remainder of the portfolio approximately 37 billion barrels contains resources for future developments.

Exxon Mobil’s energy outlook, which we refresh and update annually guides our strategic investment programs necessary to meet the world’s growing energy needs. These investments help provide the affordable energy needed to promote economic growth and improve living standards around the world. The picture you see illustrates the changing living standards in the Shanghai suburbs.

Exxon Mobil’s 2014 energy outlook indicates that global energy demand is likely to grow by about 35%. Even taking into account, the offsetting impacts of significant energy efficiency gains, which we expect will capture the world over. Ensuring reliable and affordable energy supplies to support this growth safely and with minimum impact going in the environment, we will require broad-based economic solutions.

The bar chart on the left shows projected growth from 2010 to 2040 by energy type. Oil, gas and coal are the most widely used fuels today providing about 80% of supplies. Oil demand will remain most prominent with about two-thirds of its increase driven by expanding transportation needs. The use of natural gas will arise by about 65% and it will become the second most widely used source of energy surpassing coal. We expect global demand for the least carbon intensive fuels. Natural gas, nuclear, and renewables will rise at faster than average rates led by power generation requirements. We expect that oil and other liquid fuels will remain the world’s largest energy source even in the year 2040, meeting about one-third of the world’s energy demand. While conventional crude oil production will remain the most significant source of supply through 2040 more of the world’s demand will be met by emerging sources that only recently became available in significant quantities.

As you can see in the chart on the left, gains will be lead by deepwater production, which more than doubles to the year 2040. We also expect to see meaningful growth from all sands and tie all resources. And natural gas liquids supply will also increase as it benefits from techniques used to extract the unconventional shale gas. On the right, we see natural gas supply and demand. About 65% of the growth in natural gas supply is expected from unconventional resources, which will account for about one-third of global production in the year 2040. By 2040, we expect energy demand for the transportation sector to increase more than 40%.

As shown on the chart, we expect a continuing shift of the transportation fuel mix toward diesel with gasoline demand remaining flat to declining. In fact, we expect diesel will account to about 75% of the growth in liquid fuels for transportation. This reflects in part high growth rates in developing countries as economic activity expands and fosters greater truck, rail and marine transportation requirements. Natural gas will also contribute more significantly in the future to meet rising transportation needs.

We expect global chemical demand to grow at a faster pace than GDP as people seek higher standards of living and purchase more household and packaged goods manufactured with chemical products. We estimate two-thirds of chemical demand growth will be in the Asia-Pacific as the region acquired chemical feed-stock products to manufacture goods for both domestic and export markets. China alone is expected to represent over half of the global demand increase with its rapidly growing middle class and its expanding purchasing power. Like no other commodity energy touches every aspect of modern live and provides tremendous benefits to people everywhere. To sustain progress and further expand prosperity the world must increase the availability of reliable and affordable energy supplies. While the scale and complexity of the energy challenge are immense, practical and economically viable options to meet people’s energy needs do continue to expand. Access to high quality resources is critical as is our ability to develop supplies and ways that are secure and environmentally responsible.

In this regard, technology advances are a key enabler to both safe and effective development of traditional and emerging energy sources. Substantial investments are required to meet growing demand, including the development and use of advanced technologies that are expanding and diversifying energy supplies. Free markets supported by sound and reliable public policies remain vital for future energy developments. This includes policies that promote free and open trade and which encourage private sector investments by reducing regulatory and fiscal uncertainty. And over time, our industry must effectively plan, develop and execute the technologically complex and capital intensive projects that provide the energy people need.

So, we will turn now to some of our operating highlights. And this is one of my favorite pictures, hopefully you saw in the booth upfront. It’s just a gorgeous picture of the b Bakken area in North Dakota, where we are making a number of investments to grow unconventional liquids production. So, let me cover key elements of our corporate strategy as well as the business and operational update.

Exxon Mobil’s strategy has been adopted to achieve our commitment to create long term shareholder value. As discussed earlier, our relentless attention to operational excellence supports safe, reliable and efficient operations. Our diversified balanced portfolio is a fundamental competitive advantage enabling us to manage a wider growth of chemical market and geopolitical risk and maximize profitability through changing business cycles. Continuing to capture the benefits our integrating business model, the complementary strings of each of our businesses allow us to maximize the value of molecules across the entire supply chain. Our integration and global perspective enables us to pursue, select and advance the most attractive business investment projects.

Continuing innovation in the pursuit of technology leadership across all business segments enables our expanding reach, project execution and our operational capabilities. At the very heart of our success are the talented men and women of Exxon Mobil and their drive to achieve premier business results. We must continue to attract, retain and develop outstanding employees. Our long term approach to managing the company has positioned each of our businesses to be at the top at their respective areas of competition enabling the delivery of superior returns to you our shareholders. Risk management is the core of our business is there are elements of risk in virtually everything we do. We take a systematic approach to risk management, guarded by comprehensive system known as the operations integrity management systems or in short OIMS.

OIMS provides a risk management framework with rigorously applied systems and processes to manage safety, security, help and environmental risk and to achieve excellence in our operating performance. OIMS guides the activities of each of our employees as well as our third party contractors around the world. Through OIMS, we focus on clearly defined policies to reinforce accountability and leadership and set expectations, measure performance and recognize progress. Bottom line OIMS helps us to sustain superior operational performance and ultimately maintain our liaisons through operations. Exxon Mobil is well positioned to deliver profitable growth. This chart summarizes key elements of our strategy that provides the financial flexibility required to fund our business and generate robust shareholder returns.

In the upstream, we are adding 1 million net oil equivalent barrels per day of new production volumes by the year 2017 through major projects start ups. Also improving the production with higher liquids and liquids price linked gas volumes, and increasing unit profitability through improved fiscal terms and the pursuit of better margins for each barrel we produce. In the downstream and chemical segments, we are diversifying feedstocks through our flexible and integrated system continuously pursuing operating efficiencies and maximizing sales of high value products. Our businesses also generate cash flow through active ongoing portfolio management and continued CapEx discipline with a clear focus on delivering the industry leading returns on capitals employed. Operational excellence, integration advantages and technology leadership across all of our businesses underpin our ability to grow cash flow.

I will now provide more insight into each of our businesses. In the upstream Exxon Mobil has a large high-quality portfolio with more than 120 projects including 21 new startups planned between now and the year 2017. This slide highlights 8 of the major projects that we plan to startup either this year in 2014 or next. These projects are representative of our geographic diversity ranging from North America to Russia, Southeast Asia and Australia to Africa and the Middle East. We are investing across a broad set of resource types, including the liquefied natural gas, the Arctic, the deepwater, conventional and all sands developments. These projects provide a strong foundation for profitable volume growth across a diverse resourced pipe with a broad set of technology approaches and attractive fiscal regimes. And in the near-term, grow liquids and liquids price linked production. So let me give you a brief insight of our Papua New Guinea LNG project.

The picture shows the LNG plant near Port Moresby. And you can also see the loading jetty in the background extending out into water. The successful completion of the project is unlocking the potential of a very high quality gas resource. The Papua New Guinea demonstrates again Exxon Mobil’s world class project execution capabilities. Beginning with the construction of a 430 mile pipeline, the installation through mountainous jungle was accomplished while overcoming flooding, challenging volcanic soil conditions and steep pinnacle slopes. Because of the lack of preexisting infrastructure, we constructed supplemental roads, communication lines and build up a new airfield. A project requires substantial community and local travel outreach and engagement and effective relationships with the government and indigenous communities.

Despite the many challenges, the project progressed ahead of schedule with LNG production now having started up and the first cargo of LNG loaded in last few days on its way to Tokyo, Japan. We continue to assess potentials for expansion of this project. We are well positioned for a high margin liquid growth in North America, probably the most exciting story in the energy industry over the last 30 years. Our unconventional position totals more than 10 million acres including high quality tight oil, and liquids rich place in the Bakken, the Permian, the Woodford Ardmore, the Montney, Duvernay in Canada, and the Athabasca Oil Sands. And high quality shale positions in Hanesville and Marsalis basins. In addition we hold more than 10 million acres of conventional resource that will contribute to long term liquid production. The combination of XTO’s execution capability and Exxon Mobil’s research expertise is advancing improvements in both resource recovery and cost development. As shown in the lower left we are growing profitable liquid production from our North Amercian holdings to one million barrels per day by 2017 representing a 50% increase since 2012. While the gas production outlook in red reflects our current views of market demand, we do have a very deep ready to drill inventory of well locations, and the ability to quickly increase natural gas production if market conditions demand so.

Essential to our long term growth is developing and maintaining a very deep and diverse portfolio of resource discovery and development opportunities which are indicated on this map. The green color dots highlight conventional opportunities. These include activities in the established areas such as Nigeria, Papua New Guinea, The Gulf of Mexico and Tanzania as well as new areas where we have made significant additions to our portfolio including Brazil, Liberia, Gabon and South Africa. Red color dots highlight our unconventional portfolio. During the past year we had new opportunities in type and heavy oil in Canada. We also have significant activity in South America and soon in West Siberia. The audit portfolio we have shown with the blue dots, the audit section is our most recent and most substantial addition to our global portfolio with substantial new escalation acreage in the Russian audit. We are considering these long term opportunities we are well positioned to leverage the depth of our world wide experience.

Our global natural gas holdings are also extremely well positioned to capitalize on growing demands for LNG, which is expected to more than double by the year 2025. We are evaluating several potential new opportunities to supply this growing demand. Exxon Mobil has been a leading player in the development of the LNG industry through our existing equity interest and operating capacity in Qatar and in Indonesia which are shown in green. We also have interest in new LNG capacity indicated in yellow through our participation which I just described, Papua New Guinea and the Gorgon project in Australia. We are capitalizing on our world class experience technological capabilities and our marketing expertise as we progress a number of new exciting opportunities to grow the LNG portfolio as shown in the red box. These include Tanzania, Australia, Russia and North America.

So let’s now turn to the downstream where we continue to strengthen the portfolio by selectively investing in our strategic assets and capitalizing on Exxon Mobil’s technology, scale and integration. The picture you see is of our world scale Baytown refining and chemical complex down the Texas Gulf Coast. Lowering raw material costs continues to be a focus area particularly in North America where new light and heavy crude supplies are creating unique opportunities. During the last few years we have expanded our advantaged North American crude runs by 40%, given our installed capacity and feedstock flexibility, our investments in this area continue to be incremental and completed during maintenance turnarounds and which allows to a very rapid startup of these new facilities.

Many of our investments are focused on growing sales of high value products such as diesel, jet fuel and lubricants. For example, we recently commissioned a new Ultra Low Sulphur Diesel unit in Singapore and a new desulphurization plant in Saudi Arabia is nearing completion. We are also progressing plants to install a coker at our Antwerp refinery in Belgium to upgrade low value bunker fuel into higher value diesel which is in high demand.

In our lubricants business, we have projects underway to expand high performance base stocks and finished product manufacturing capacity. We are investing in logistics capabilities as highlighted by our joint venture rail terminal project in Edmonton, Alberta, Canada. This terminal would allow us to supply up to 100,000 barrels per day of crude from Alberta, Canada to our North American refining network.

Steps to reduce operating cost include investments in steam and electric cogeneration capacity that was recently completed in Augusta, Italy as well as a new cogeneration plant which is being progressed in Singapore. Our disciplined portfolio management process results in the best asset mix in the business. We continually upgrade the portfolio in possible ways to build shareholder value.

Since 2005 we have reduced our global refining capacity by more than 1 million barrels per day by divesting smaller, less competitive facilities. And we have completed the transition of our domestic retail fuels marketing to a more capital efficient and growing branded wholesale business model. Exxon Mobil’s commitment to disciplined investment extends to our chemicals business where we are developing major projects in the United States, Saudi Arabia and Singapore.

To build on our competitive advantage, we continued to invest in the world scale projects to capture advantage feedstocks. In the U.S. we are progressing a multi-billion dollar project to capitalize on the abundance of low cost North American ethane. We plan to expand Baytown’s capacity with 1.5 million ton per year ethylene plant and install associated polyethylene lines at the Mont Belvieu plastics plant which is shown in the picture. Projects are targeted to capture opportunities to reduce production cost by installing advanced process technologies that enhanced energy efficiency, achieved greater reliability and produce higher yields.

Continuing to invest on increasing production of high value products in an even ever changing market is important of the long-term success of the chemicals company. For example, a new 400,000 ton per year facility in Saudi Arabia will produce specialty elastomers to serve growing demand in the Kingdom, the broader Middle East and Asia. We also recently approved a world scale grassroots specialty polymers project in Singapore to produce synthetic rubber to support the growing tire market in Asia as well as premium resins for adhesive applications.

Integration of new projects with existing, refining and chemical units enables lower capital and production costs by leveraging the existing site feedstocks, the utilities, the infrastructure and the organization. Last year, we successfully completed the startup of a new world scale steam cracker at our Singapore complex. The site is now producing some of our most advanced plastics and synthetic rubbers and is well-positioned to serve the rapidly growing markets in Asia and beyond.

I am very proud of our operational performance and financial results of the past year. An example of our success is shown by the photo of modern LNG cargo vessels to parking Qatar is done to supply the world’s need for reliable and affordable energy. Simple through our strengths and competitive advantages is a steadfast commitment to operate with the high standards of ethical behavior and corporate citizenship. Building strong relationships with the customers we serve and the communities where we operate as I want to touch on, on the next slide.

Exxon Mobil has many responsibilities to our shareholders, our neighbors, our customers, and our communities. We strive to be responsible corporate citizens and our success is underpinned by our technological expertise, our operational excellence, our safety performance and an unwavering commitment to ethical standards. Exxon Mobil views effective risk management and a commitment to safety as a business imperative. As you can see, we strive to continuously improve our safety and environmental performance.

Our business presence serves as a positive long-term economic driver in the communities where we live and work. We continue to make significant progress in hiring host country workers, which advances economic development and education in the communities where we operate. In Indonesia, for example, nearly 90% of employees are Indonesian nationals. Working through the Corporation’s signature programs, promoting women as catalyst for economic development, fighting malaria and improving education, we promote social development in communities around the world. Last year alone, we invested more than $10 million in promoting economic opportunities for women, $13 million in the fight against malaria, and $100 million towards education initiatives worldwide.

As we have said for many years, financial results and stock market returns, particularly for highly capital intensive industries are best viewed over long time horizons. An industry like ours requires sustainable risk management of cash and capital and long cycle times for investments to deliver results. Exxon Mobil has generated greater shareholder returns in the broader market and greater returns in the average of our competitors over the last 10-year and 20-year periods. Over the last decade, the S&P annualized return was 7% versus Exxon Mobil’s annualized return of 12%.

I will leave you with the key messages shown on the screen. In summary, Exxon Mobil, your corporation is well-positioned to provide the technological and industry leadership to meet the world’s growing energy needs in a safe and responsible way. Our current portfolio of assets and long-term investments are laying the groundwork for extraordinary opportunities for investors and we will provide the energy needed to fuel global economic growth and advancement in a very dynamic time. So, I want to pause for a moment and take a look at a short video, where some of you may have seen running on the television stations.

(Video Presentation)

So, now I would like to turn to the formal business of the meeting today. To begin, let me make a few brief remarks on shareholder proposals and voting. Each year, the corporation receives a number of suggestions from our shareholders. Some of these are in the form of proposals to be presented at the Annual Meeting, but let me just share you each is given careful consideration. We seek dialogue with the sponsors prior to the meeting when there is more time to better understand each other’s position and very often we find agreement.

Let me be clear on the conduct of the meeting. Recognizing that the majority of our shareholders have voted by proxy and are not present, we have established procedures to facilitate the meeting in an orderly way. We have setup the process for speakers to identify themselves and express their views and we welcome those views. In order that as many shareholders as possible can participate, as Mr. Rosenthal indicated, we have set some time limits and a system to simply help you manage your time.

We have 8 items to consider. As Secretary Rosenthal said earlier, discussion on all items of business will be deferred to the discussion period. This will enable us to have some time for general comments and questions as well and conclude the meeting at a reasonable timeframe. For those of you, who wish to leave the meeting at anytime, let me express my appreciation for your attendance. Since we have a number of items yet to be discussed on the program and you have been sitting for a while now, I would invite you to take a brief moment to stand, stretch your legs just for a moment I ask to not leave the hall unless you absolutely need to.

Okay, you please take your seats. The first item of business is the election of 12 directors. I nominate the 12 persons identified on Page 17 through 20 of the proxy statement. These 12 people are highly qualified to serve on the board. All of our nominees are currently serving as Exxon Mobil directors. All board nominees are present today.

So now, I would like to ask the nominees here seated to my right in the orchestra terrace to stand as their names are called and then I will close the nominations. Michael Boskin, Peter Brabeck-Letmathe, Ursula Burns, Larry Faulkner, Henrietta Fore, Jay Fishman, Ken Frazier, William George, Sam Palmisano, Steve Reinemund and William Weldon. Before moving on, I also would like to recognize one person that is retiring from the board today. Ed Whitacre served as a Director of your company since 2008. And I’d like to recognize Ed and thank him for his service.

I declare the polls open for all who want to vote in the election of directors and the 7 remaining items. If you wish to change your proxy instructions on the election of directors or any of the other 7 items or if you have not submitted a proxy and wish to vote by ballot, they are available from the ushers. Please raise your hand if you would like a ballot at anytime during the formal business, they will be collected after all items have been discussed.

The next item on the agenda is the ratification of PricewaterhouseCoopers as the independent auditors. The Audit Committee of the Board has appointed PricewaterhouseCoopers to audit Exxon Mobil’s financial statements for 2014 and we are asking shareholders to ratify that appointment. PricewaterhouseCoopers is represented today by Mr. Alan Page. Alan, would you please stand? Thank you. The audit committee’s reasons for recommending PricewaterhouseCoopers appear in the proxy statement. I move the adoption of the proposal shown on Page 60 of the proxy statement.

The next order of business is consideration of the board-sponsored proposal regarding executive compensation. This board proposal calls for a shareholder advisory vote to approve executive compensation as required by law. The Board recommends a vote for this proposal as outlined on Pages 60 to 62 of the proxy statement.

The next order of business is consideration of the 5 shareholder proposals in the proxy statement. The first shareholder proposal regarding majority vote for directors is shown on Page 63 of the proxy statement. I understand Mr. Marco Vargas will present the proposal. Mr. Vargas?

Marco Vargas

Thank you, Mr. Chairman. I am Marco Vargas representing the United Brotherhood of Carpenters Pension Fund. Our funds collectively holds approximately 1,400,500 shares of Exxon Mobil common stock. We are committed long time owners. We appreciate the opportunity to gain an introduction, a majority vote shareholder proposal that we believe advances an opportunity in corporate governors. The governors appreciate the constructive dialogue, which we have maintained with Exxon Mobil representatives over many years an important corporate governance and executive compensation issues.

Our proposal is designed to encourage Exxon Mobil Board of Directors to adopt the majority of vote standard for the director selections despite the Board’s opposition to minority vote proposal receive 46% vote last year’s meeting. A majority vote standard used in the uncontested director election provides shareholders meaningful voting rights. The combination of minority vote standard with the company’s current director resignation policy would establish a strong election standard. The resignation policy provides for a post selection process in which the Board can exercise its judgment and make decisions on continued status on any unelected director. Nearly 90% of America’s largest corporations and all of Exxon Mobil’s peer companies have adopted the majority vote standard in compensation resignation policy. Exxon Mobil remains the largest American company that has not adopted to majority voting. We urge the Board to establish a majority vote standard and join the mainstream of America corporations on this important election reform. Thank you, Mr. Chairman.

Rex Tillerson - Chairman and Chief Executive Officer

Thank you. The Board recommends a vote against this proposal as outlined on Pages 63 and 64 of the proxy statement. The next shareholder proposal to limit directorships is shown on Page 64 of the proxy statement. I understand that Fr. Michael Crosby will present the proposal. Fr. Crosby?

Fr. Michael Crosby

Good morning, Mr. Tillerson and the rest of you on the Board and shareholders. I am here to on behalf of Kenneth Steiner of Great Neck, New York to move proposal 5, basically shareholders recommend that our board take the steps necessary to adopt a bylaw to limit our directors to a maximum of 3 board memberships in companies with sales in excess of $500 million annually. So that’s the proposal. And since Mr. Cynor and John Shalagan asked me to move it, I’d just like to say other reasons why from my perspective, this is a good resolution to support. And I want to back to what Mr. Tillerson said about the dialogue the company has taken with shareholders. We have a very good an informative meeting in New York with executives around the issue of climate change and other issues. And they were forthcoming. We had disagreements on some agreements on other. But that was in December and you all know we’ve been here before, our ongoing issue is that the company isn’t doing enough to address the crisis around climate change.

Now that was December. In March the intergovernmental panel on climate change, of which this company has part in it, said in effect first paragraph climate change is already having sweeping effects on every continent and throughout the world’s ocean. Scientists reported Monday. That was in March. Then earlier this year, I mean earlier this month, the Congress of the United States issued a mandated report where it’s more of the same in fact the world is at the door.

The effects of human induced climate change are being felt in every corner of the United States, scientists reported Tuesday. Our concern is that the directors, if they have too many outside responsibilities aren’t going to be able to address the crisis we are now in. Crisis is here. The world is at the door, every one of us is going to have to find creative ways to deal with how do we mitigate the risks? Even the company has said, it’s going to do that. So for this reason I urge support of this resolution so that all our efforts can find alternative ways to keep that low from blown down the house.

Rex Tillerson - Chairman and Chief Executive Officer

Thank you. The board recommends the vote against this proposal as outlined on page 64 of the proxy statement. The next shareholder proposal deals with an amendment to the corporations EEO policy and has shown on Pages 64 and 65 of the proxy statement. I understand that Michael Crosby will present this proposal.

Fr. Michael Crosby

Again I am Michael Crosby, Capuchin Franciscan. I am here on behalf of the New York State Common Retirement Fund to urge you to support the resolution of the New York State Common Retirement Fund, which holds 12,987,000 shares of Exxon Mobil. It believes the companies have a competitive a competitive advantage in recruiting and retaining employees from the widest pool of talent and the discrimination based on non-job related criteria can lead to less efficient business operations. It say over the last seven year a number of major U.S. corporations including a large majority of the Fortune 500 have agreed to add formal and explicit commitments to buy our discrimination based on sexual orientation and gender identity to their employee policy statement, partly say Exxon Mobil unfortunately is not one of these Fortune 500 companies.

The New York State Common Retirement Fund believes that Exxon Mobil has changed its policy and joined with the overwhelming majority of major U.S. corporations and supporting both human rights and more efficient business operations. And therefore on its behalf I submit the resolution to prohibit discrimination based on sexual orientation and gender identity filed in the proxy materials.

Rex Tillerson - Chairman and Chief Executive Officer

Thank you the board recommends a vote against this proposal as outlined on pages 65 and 66 of the proxy statement. The next shareholder proposal calls for a report on lobbying and has shown on pages 66 and 67 of the proxy statement. I understand Mr. Shawn Gilchrist will present the proposal.

Shawn Gilchrist

Our shareholders, we encouraged transparency and accountability in the use staff time and corporate funds to influence legislation and regulation both directly and indirectly. Absent a system of accountability, company assets could be used for objectives contrary to Exxon Mobil’s long-term interests. Exxon Mobil spent approximately $30 million in 2011 and 2012 on direct federal lobbying activities. These figures do not include lobbying expenditures to influence legislation in states. Exxon Mobil lobbied at state level with at least 286 lobbyists in 35 states between 2003 and 2011.

Exxon Mobil is listed as a member of the American Petroleum Institute and CEO, Rex Tillerson is a member of the Business Roundtable. In 2011 and 2012, the Business Roundtable spent more than $31 million on lobbying. Exxon Mobil does not disclose its memberships in, or payments to, trade associations, or the portions of amounts used for lobbying.

Corporate lobbying exposes our company to risks that could affect the company’s stated goals, objectives, and ultimately shareholder value, and we rely on the information provided by our company to evaluate goals and objectives, and therefore, have a strong interest in full disclosure of our company’s lobbying to assess whether our – whether our company’s lobbying is consistent with its expressed goals and in the best interests of shareholders and long-term value. Therefore we encourage our board to prepare a comprehensive disclosure related to direct, indirect and grassroots lobbying. Thank you.

Rex Tillerson - Chairman and Chief Executive Officer

Thank you. The board recommends a vote against this proposal as outlined on page 67 of the proxy statement. The last shareholder proposal calls for Greenhouse Gas Emissions Goals and has shown on pages 67 and 68 of the proxy statement. I understand that Mr. Patricia Daly will present the proposal. Mr. Pat.

Patricia Daly

Thank you Mr. Tillerson, good to see you this morning Mr. (indiscernible), thanks again for that meeting, the Crosby referenced and continued dialogue. Good morning members of the Board of Directors, it’s great to have you here and I appreciate these couple of minutes.

I represent my congregation the Dominican Sisters of Caldwell, New Jersey, also the American Baptist churches and about 40 institutional and individual shareholders, longtime shareholders in Exxon Mobil, some of them also longtime shareholders in Mobil. So I am here to move the resolution, we’ve been here for many years, about seven or eight years I think now asking our company to give us the business plan, to set goal to reduce screen definition in both operations and in product. Mr. Tillerson, I believe you started with Exxon in 1975 that is the year I entered the Dominican order, life has changed. That year ICCR members, we interface center on corporate responsibility, had shareholder resolutions about South Africa at both Exxon and Mobil.

We’ve been working with our company since 1996 on this issue, even longer with some other companies. Since then we have an additional 1.6 billion people on this planet. In 1996, there were 370 plus million of carbon in the atmosphere. Today we have well over 400 parts. Scientists tell us that 350 is the number to maintain a safe, loving environment. I think a lot of storms, right. But it’s no longer about the storms, it’s about food system on the planet, it’s about water, it’s about issues, it’s about ocean life, it’s about sea levels an incredible shift to this planet. Father Mike referenced the U.S. climate assessment report mandated by Congress how desperate that report now comes.

Back in 1997, our resolution that year asked for a report on climate risk, environmental liabilities. We are so grateful that our Board and our management has given us this report this spring. However, I am also concerned we took 17 years. So we have to report we are working on it, we work together, but our company continues to rely on a bid that the nations of the world will be nothing about climate change for the next 30 years.

I am working with the auto companies in the United States. They worked with the EPA to establish realistic new goal fuel standards, but they need the oil and gas industry to deliver the fuel, the cleaner fuels in order to make this happen. Our business plan impacts all businesses, not just in the United States, but around the world. It impacts people’s lives around the world.

I am seeing now that investors, major investors around the planet are now shifting money into the clean technology, the new businesses that we need. I know some of your board members, Mr. Weldon we have worked together with JPMorgan Chase. Mr. Reinemund is on that board. The financial sector we are witnessing a massive shift into new technologies. We need to step up to the responsibility as the nations of the world next year prepare for a new climate treaty. Retirees today depend on our business in the next 20 years, but employees today depends on the success of our business for the next 15 years and is got to be making the right investment.

I have a cousin who is about to start an engineering degree. I haven’t seen kids yet who are looking to go into the oil and gas business. The creators, engineers ongoing to the alternatives, we have got to be moving more money into the alternatives. Please give us the business plan to be able to pull that cost. Mr. Tillerson, thank you very much. Everybody, thanks so much for your time and patience today.

Rex Tillerson - Chairman and Chief Executive Officer

Thank you. The Board recommends a vote against this proposal as outlined on Pages 68 and 69 of the proxy statement. All items of business have now been introduced. I invite many of you that want to stand and stretch your legs for a minute and for those of you who wish to address the meeting in the discussion period this should be a good time to make your way towards one of the hall seat, so that you will have ready access to microphone. So, we will take a stretch for a minute.

Okay. If we could resume the meeting, you take your seats please? I now open the floor for discussion on the items of business presented. I would ask at this stage of the meeting that you limit your comments through the Board and shareholder proposals that are in the proxy statement as promised will have an opportunity for general comments or questions later. We received a number of questions on proxy cards and through our websites. And again, as I indicated as time permits, we will try to address some of those as well.

So, as described earlier, if you have not already done so, if you could get near an hall seat so that you are near the microphones and if you would remain seated until I call upon you, but simply raise your hand, holding your speaker identification card to indicate you like to address the meeting when I recognize you, please give your speaker card to the usher, stand and he will hand you a microphone and the microphone will be made live at that time. Again, I would ask that you keep your comments as brief as possible, so that we can allow as many people to speak and wish to do so. We will continue to use the lighting system just to help you manage your time. First priority will be given to those who have not spoken yet. So, let me begin over here.

Earnings Call Part 2: