Exxon Mobil Corporation (XOM) Q1 2012 Earnings Report, Transcript and Summary

Well, good day, everyone, and welcome to this Exxon Mobil Corporation First Quarter 2012 Earnings Conference Call. Today's call is being recorded. At this time, for opening remarks, I would like to turn the call over to the Vice President of Investor Relations and Secretary, Mr. David Rosenthal. Please go ahead, sir.

Good morning, and welcome to ExxonMobil's first quarter earnings call and webcast. The focus of this call is ExxonMobil's financial and operating results for the first quarter of 2012. I will refer to the slides that are available through the Investors section of our website. Before we go further, I would like to draw your attention to our customary cautionary statement shown on Slide 2. Moving to Slide 3. We provide an overview of some of the external factors impacting our results. Global economic growth slowed in the first quarter, primarily due to continued contraction in the European Union. The U.S. and Japanese economies are also expected to show declines from fourth quarter levels. China growth, while still robust, was also lower in the first quarter. Energy markets were mixed in the first quarter, with higher crude oil and non-U.S. natural gas prices. Industry refining margins also improved from the fourth quarter. While U.S. chemical margins remained strong, Europe and Asia continued at near bottom-of-cycle conditions. Turning now to the first quarter financial results as shown on Slide 4. ExxonMobil's first quarter 2012 earnings, excluding special items, were $9.5 billion, a decrease of $1.2 billion from the first quarter of 2011. Our effective tax rate for the quarter was 49%. Earnings per share for the quarter, excluding special items, were $2, down $0.14 from a year ago. Corporation distributed more than $7 billion to shareholders in the first quarter through dividends and share purchases to reduce shares outstanding. Of that total, $5 billion was distributed to purchase shares. Through the end of the first quarter 2012, we have repurchased the number of shares issued for XTO, and total shares outstanding are now lower than they were prior to the acquisition. Yesterday, the Board of Directors declared a cash dividend of…

[Operator Instructions] We'll take our first question from Doug Terreson with ISI Group.

My question's on the big increase in the dividend. And specifically, at the analyst meeting, Rex seemed pretty clear that a more balanced approach to distributions might be forthcoming. But on this point, the size of the increase represents a fairly marked departure from the 6% to 7% annualized growth rate you guys have provided over 5, 10, and I think, even 15 years. So my question's whether or not you could provide some color on this change and specifically, how we should consider it in the context of overall dividend policy at ExxonMobil.

Yes, Doug, that's an excellent question given our announcement yesterday. Let me kind of start with your last comment and move backwards from there. We really had no change in our dividend policy. The policy remains the same, as does our total allocation of cash generated by the business. We do have a continued trend in dividend increases as we have said before. If you go back over a long history of the company, we have, in other quarters, had fairly significant dividend increases. So again, no change in policy. But as we said at the analyst meeting, we are always evaluating the dividend policy and our cash distributions and studying how things are going. And the board decided yesterday to make the increase they did. But you also notice that our share repurchases remained at the $5 billion level that you saw across last year. So I would say the strategy remains the same, invest in that very robust investment program we have, and you saw our first quarter CapEx, very strong as those projects proceed, have a continuously growing dividend and then take the balance of the cash and buy the shares. And that policy and strategy, I think, continues on.

Okay, great. And let me just ask you one more question. There's been a lot of crosscurrents about the position in Iraq and specifically Exxon's current license, the strategy in Kurdistan and eligibility and/or interest on the upcoming licensing round. And so could you provide an update on that position, which covers these items, to the degree possible, David?

I really can't comment a lot on that other than just say the contracts that we have in place and it's our intent to honor and fulfill those contractual obligations. I will note in the South, we reached another milestone at West Qurna, where production has reached right at 400,000 barrels a day, and we're very pleased how that effort is coming along and the progress we're making there. We continue to develop the field and do the things that we committed to do, and so progress continues. But other than that, I really wouldn't have any further comments.

And now we'll hear from Doug Leggate with Bank of America Merrill Lynch.

I have a couple, also, if I may. You mentioned on your prepared remarks about the higher E&P tax rate. I'm wondering if you could just give us a little bit of color as to why that was, if it was just mix effects and what the driver was. And in the context of the same issue, you also mentioned underlifts in the international portfolio. It's unusual for you to mention that, I guess. To the extent that it was material, could you quantify that for us, either absolute or on a per barrel basis?

Sure, I'd be happy to do -- answer both of those, Doug. First of all, I'll start with the tax rate. You got the right word. You said mix. We have -- and it's a number of mix effects that we saw across the first quarter. One of those that kind of goes unmentioned is really the difference in a lot of the crude prices around the world. People tend to focus in on Brent and WTI. There was a lot of variability. For example, the Middle East crudes tended to do better than those markers. Some of the Canadian crudes, particularly the heavier crudes, tended to do less. You also have different fiscal regimes in each of these countries. And frankly, we saw some of the highest realization increases in countries with higher tax rates and some of the lower-than-average increases or even decreases in countries with lower tax rates. So the mix -- that mix there and then the corresponding mix of where your earnings were generated that uptick in this quarter on the tax rate. Let me talk about the underlifts. They were a factor this quarter, so maybe I'll go ahead and give some specifics here. In the first quarter of 2012, on a absolute basis, we were underlifted about 45,000 barrels a day. Last year, in the first quarter we were actually overlifted by about 18,000 barrels a day, though the delta quarter-on-quarter was about 63,000 barrels a day. All of that underlift was in either West Africa or the North Sea, which tend to be some of our higher-margin areas. The impact was actually, quarter-on-quarter, a little bit bigger sequentially, so let me provide those numbers to you. Again, on an absolute basis, we were 45,000 barrels a day underlifted in the first quarter. As I mentioned last quarter, we were actually overlifted about 37,000 barrels a day. You might recall across last year, we talked about kind of quarter-to-quarter, we were a little underlifted and we made a bunch of that up at the end of the year. So if you take the 45,000, we were underlifted in the first quarter and the 37,000 we were overlifted in the fourth quarter. Sequentially, we were down about 82,000 barrels a day. And again, all of that was in West Africa. So it's a bit unusual that you have that level of a lifting timing effect, but it did occur in the first quarter. And as you would guess by doing the math, did have an impact on our reported earnings.

David, would you be able to quantify the net income impact? Or is that not something you want to get into?

No, I don't have the net income effect on that. But again, as I mentioned, those are some of our higher-margin barrels, and you can probably use your own estimates and come up with a number. But I don't have one for you today.

Moving on, we'll go to Robert Kessler with Tudor, Pickering, Holt & Company. Robert A. Kessler - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Congratulations again on the Rosneft exploration JV. I wanted to go back to that for a minute. Your recent presentation and that of Rosneft highlighted or focused extensively on the oil prospectivity of the Kara Sea. So what about gas? By that, I mean estimates from, say, the USGS and others place more discoverable gas potential in the area than oil. To the extent that you discover natural gas, do the agreements contemplate and does the fiscal structure allow for economic development of the gas?

Well, that's an excellent question, and I'm glad you highlighted, to begin with, the progress we made because we really have made substantial progress. I think in the meeting we had last week, the term historic was actually used, and so we're very pleased as are our partners in Rosneft with the progress that we've made. I know there's a number of estimates out there in terms of the prospectivity in the Kara Sea. I think I've seen some different ones, the one you've mentioned. I think WoodMac has some numbers out there. Clearly, there's oil and gas potential out there. I don't think we know yet how to assess that, and really, that process is just getting underway. I really, in terms, so -- but again, as we said at the meeting, we are highly encouraged by the prospectivity on the oil side because of the extension of the prolific West Siberia basin plays that are already in existence and are already producing, so that's what kind of lends that. Looking forward, it's really premature to start discussing the contract details or arrangements or fiscal terms and that sort of stuff in detail. I would just point out, again, for those on the call that aren't as familiar, the Kara -- our position in the Kara Sea is equivalent in size to basically the North Sea and all of the leased acreage in the Gulf of Mexico. So again, a huge area of land, over 30 million acres, highly prospective. But again, under some rather harsh conditions, a challenging environment to work in and will require all of the technological and operational capabilities of the 2 partners to explore that resource and should it be successful, to then exploit those resources and move forward with development and production. We have a lot of experience in the Arctic, even in Russia. And again, if you just kind of look at the parameters and the vectors, we're encouraged by the progress. We're certainly excited and looking forward to the joint venture, as are our partners and in particular, as I mentioned, getting the seismic activity underway and preparing to drill our first wells here in the next 2 to 3 years. Robert A. Kessler - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: The scenario that was presented in terms of potential FID date and potential first production, both of those were presuming this was an oil discovery that would be made. Is that right?

I think that's generally correct. Again, though, I would just caution on looking forward. There's a lot of work to do, a lot of effort to be done here, and so I don't want to really start getting into specifics about FID dates and production and that sort of thing other than to say the schedule that we have in front of us, which is really getting that seismic underway this year, developing that drillable prospect inventory, siting that first well and getting that well done in what industry perspective-wise would be a fairly short time frame. So again, we're going after it aggressively. But this is true frontier exploration, and we'll certainly be disciplined and diligent in our approach. And, again, it is early days, so I think we'll focus a little more on the prospectivity and potential and a little less on what some of those specific dates might be in the outer years.

Morgan Stanley's Evan Calio has our next questions.

A question on Kearl. I appreciate your comments and then progress update. I know you guys have secured a transportation solution, but can you provide more color on the planned route to market so we can better understand potential relative realizations versus waterborne crudes? I know you mentioned earlier they're -- they've been quite lower than others.

Yes, if we're thinking about the initial phase, the first phase that's coming on this year, I can tell you we already have placement for that first page -- first phase, I'm sorry, so it's not an issue. We have multiple options within our own refining circuit to begin with, as well as some other options. But basically, we're looking to place those first barrels with existing infrastructure and routes. And again, the bulk of that will likely find its way within our own system, but we have some other options. I think what's important to know is that we can start up Kearl, take it up to its full initial production of 110,000 barrels a day without any concerns over logistical constraints.

Okay, good. And secondly, on Argentina, I mean, have your plans, pace of activity or thoughts changed at all in Argentina following the YPF nationalization? I know you have almost a 900,000-acre position and curious to see how you're thinking or kind of accounting for any potential investment risk there.

Sure. Let me start out by saying that our position, ExxonMobil and our activity down there has not been affected by some of the recent activities that you mentioned that have occurred down there. Our activity, our exploration activity, is continuing. In fact, I can tell you in the first quarter, we did complete our first 2 wells and get those down. We're in the process here in the second quarter of frac-ing those wells, and we'll be testing them in the second quarter, so those plans continue, and the objectives are being met. As you mentioned, we have a very large acreage position there. We're encouraged by the early results that we're seeing down there and look forward to profitably moving on with that venture. Having said that, of course, we are monitoring events that are occurring down there and what's happening, and we'll take all of that into consideration. But as we sit here today, we're meeting the objectives we set for the year, and plans are continuing. And again, we have a very long, successful history in Argentina and going forward, got a great set of acreage down there. And again, we continue to work on that per our plan coming into the year.

Have you had [ph] contact with the government and have some confirmation? Or is there any update on dialogue going there of your importance to the development of that resource?

I don't have anything specific to identify. Obviously, in any country where we have a lot of activity going on and investments, we're always in contact, in dialogue with the appropriate government agencies, as well as our partners. So I wouldn't look for anything specific out of any meetings or contacts. Those are ongoing just as they always have been, but wouldn't have any specifics to offer other than normal conversations that go on as we continue to really look at what we have down there and put together our plans and move forward.

And now we'll hear from Arjun Murti with Goldman Sachs.

David, a couple of questions regarding North America gas potential. ExxonMobil has a successful and large global petrochemicals business, global LNG business. The petrochemicals is focused on Asia and some in the Middle East growth. Can you comment on whether you see your now large domestic gas position as creating opportunities on both the export of LNG from the U.S. or potentially the western Canada and/or coming back to the U.S. in terms of some of the petrochemical expansions which you guys have otherwise focused on in the rest of the world? Do you see that as more of an opportunity going forward for you? And/or how do you plan to take advantage of that?

Arjun, that's a good question. And of course, behind that, it all starts with some of the obvious competitive advantages that we have across the entire space that you covered: our large prolific gas acreage that we have in the U.S., the advantages we have certainly and have already demonstrated and you're seeing in our U.S.-based Chemical business and of course, our global position in LNG. So given that competitive advantage background, I think -- don't think it'll come as any surprise to you that we're studying and assessing the very opportunities that you referred to. I don't have any specifics to offer you, again, other than to say we do have some advantages from all the way through the integration of resources in the products. And as we're always doing, we're thinking about how to optimally develop those, take advantage of the acreage position we have, the resource potential we have, the technology, the marketing advantages, et cetera, to, again, on an integrated basis, exploit those resources. So any ideas you have and are thinking about and the things you read others are doing, you can rest assured we got folks looking at that and studying that as well.

And maybe just a related question, can you talk about any update on your activities in the Marcellus and Utica, as well as the Bakken in terms of maybe how the rig counts are trending and what you're expected to do here over the rest of this year?

Sure, I'd be happy to. Let me start with the Bakken and back up a little bit because that is an area where we have been, over the last many months, increasing rigs, and we have continued to increase our rigs. We're now -- we've now got 8 operated rigs running in the Bakken. And that is progressing very well, and we are encouraged by that. In the Marcellus, we've got 5 rigs operating. And as you -- well, actually, we got 4 rigs operating. And as you know, we've got just under 700,000 acres in the Marcellus and another 87,000 in the Utica, and so we continue to progress there. But I can tell you, overall, when you're looking at our rig count and what we're doing, I think it's important to kind of step back and think about what we're doing overall. You might recall across most of last year or so, we tended to have, I recall, 70, 72 rigs running in total. We've got about 64 on average in the first quarter. We're running 61 rigs today, and we have continued to shift those to the liquids-rich plays that I mentioned, really focusing on the Bakken, Permian, the Ardmore that I mentioned there. We're looking at and getting ready to plan some wells, get some wells down in the Utica, so all of that's going well and, again, continuing to acquire liquids-rich acreage at attractive prices and shift our rig fleet over to those areas while minimizing the incremental exposure to dry gas wells.

And now we'll hear from Iain Reid with Jefferies. Iain Reid - Jefferies & Company, Inc., Research Division: Can I come back on the production in Africa? You talked about the underlift. But if you add that back, you're still going to face substantial fall from the first quarter of last year in your African production, and I think you said PSC effects. You've been through some threshold effects. Is that right to say that, that, the kind of 50,000, 60,000 barrel a day decline x the underlifts is due to threshold effects, profit all or cost all?

Yes, let me come at it a different way, and remember, the production that we list is the production, and the underlift is really just the sale. So if you come back to the -- just the Africa production decline that you saw in the supplement between the first quarter of last year and the first quarter this year, the bulk of that is accounted for by the entitlement effects that I mentioned, mostly the pricing spend but a little on the net interest side. Everything else kind of washed out. Iain Reid - Jefferies & Company, Inc., Research Division: Okay. So this is production, not liftings?

Yes, what we show you -- let me clarify that. What we show you in the supplement, that's a production number. And again, we had some project ramp-up that I mentioned, and we also had some better downtime performance, I'm pleased to say. And then that was basically offset mostly by declines, so the impact you're seeing there really is the impact of higher prices on our entitlement volumes. Iain Reid - Jefferies & Company, Inc., Research Division: Are we talking about Angola mainly here and some -- is it possible to say which fields, Blocks 15 or 17?

Well, I mean , a lot of it's Angola, but it's also Nigeria and some other places and then, of course, our large producing operations there, our Blocks 15 and 17. Iain Reid - Jefferies & Company, Inc., Research Division: Okay. And just thinking more generally about second quarter production. You've got some maintenance, I believe, in Angola coming up. Maybe a little bit of field ramp-up, but it was kind of past flow [ph]. Are we looking generally around the same sort of level of production in the second quarter as we saw in the first quarter?

I really don't have any guidance to give you on second quarter production, no real specific events. We do see the projects continuing to ramp up a bit, but I really don't have a real forward outlook for you. Iain Reid - Jefferies & Company, Inc., Research Division: Okay, David, could I just ask one more? You mentioned a couple of times asset sales affecting earnings, and yet there's nothing in the special items here. Is it possible you could tell us what the absolute asset sales was in the first quarter relative to the first quarter of last year in terms of the impact on earnings?

Sure, if you look at across the total corporation, as we mentioned in the press release, the absolute earnings associated with asset sales in the first quarter of '12 was about $400 million, and that was generally all in the Downstream. If you look compared to the first quarter of 2011, the number was about the same, about $500 million. But there, the bulk of that was in the Upstream, so you had kind of a switch there. The key variance that you see in our sequential earnings, as we go from the fourth quarter of last year to the first quarter of this year, the total earnings from asset sales in the fourth quarter last year were about $1.4 billion, about $1.1 billion of that in the Upstream and about $300 million of that in the Downstream. So the big sequential impact you see is in the Upstream, and that's really the absence of that significant divestment that we had last quarter. I'd also mention -- yes, let me just mention, just to be clear, in the Downstream, the asset sales that we had in the first quarter related to the previously announced divestments in Malaysia and Central America. We have not booked anything in Japan. As we mentioned last quarter, that'll be later in the year.

And now we'll open the floor up to Paul Cheng with Barclays.

If I could, I was looking at your cash flow statement. On the working capital and other is a positive swing of $6 billion. That seems to be a big number even for the size of Exxon. Is that related to the timing of taxes payment or anything like that? Or would that -- maybe my question is that, should we assume that, that is here to stay or that at some point in the later year, it's going to get reversed? The...

Let me answer that one first, Paul, and then I'll let you go to the second question. That's actually very straightforward. During the first quarter, that we saw a big decrease in working capital, and that was literally all due to higher payables. We have some other ins and outs, but the real net effect you're seeing there is a fairly decent increase in our payables counts.

You said related to crude purchase?

Yes, that's related primarily to crude purchases, and of course, that's price-driven, as you saw the prices ramp up across the quarter such that when you got to the end of the quarter, you had some pretty high prices. But, again, nothing really out of the ordinary, if you look at the quarter and you look at what prices did. But I'm glad you asked the question because that is the impact you're seeing there.

Great. In Woodford Ardmore, what is your current production? I know you normally that don't want to go down there to too much granularity in terms of what is the well production run rate, that kind of thing. But can you also tell us then what is the split between, say, the black oil, condensate, NGL and natural gas in that play and if there's any rough estimate on your 30-day IP that you've been seeing on those?

Yes, Paul, I'll be consistent with your expectations and just say no. I'm not prepared to give that level of detail today. I think what's important is not necessarily the actual production that we're generating there. What's real important is the effort we have underway now to delineate that acreage, to analyze what we have and really put together that comprehensive, long-term exploitation and development plan that we have, and that's what we'll deliver: the volumes and the rates and the earnings down the road. But as we sit here today, I think what's important, we're adding acreage. It's very attractive acreage. If you had a jigsaw puzzle of that area, you'd see that the things we're adding are plugging right in to adjacent properties that we already have. So the acreage position I mentioned isn't just an acreage position. It's a mostly contiguous acreage position, which, as you would guess, gives us really good opportunities to optimize around the development. So we are seeing nice increases in production as the wells are coming onstream, and we're encouraged by those results. But our focus is less on what today's production is. We're getting the rigs down there. I think I mentioned we added 2 more rigs this quarter to the Ardmore, so we've now got 10 running, and we're working on that area. And as the actual production goes into sales later on, we'll be in a better position to give more information.

Okay, and if I sneak in a quick question?

Sure.

Poland, how many additional well do you plan to drill this year?

Yes, if you take a look at our Polish position, I think I mentioned last quarter, the wells that we had drilled and how those turned out, I'll tell you that during the first quarter of this year, we did acquire a fourth 3-D seismic activity. The processing of that seismic is ongoing, and the analysis we get out of that compared with the learnings we got from the wells that we drilled will really give us kind of an all-inclusive set of results that we can evaluate and then plan our go-forward plan. But I got to tell you, the go-forward plan is really dependent on the 3-D seismic and again, the real geoscience evaluations that we'll do are really going to drive our future plans, and those just aren't set just yet.

And now we'll move on to Blake Fernandez with Howard Weil.

I wanted to go back, if I could, on 2 issues that you covered previously: one being the dividend; and the second, Russia. On the dividend, if I look historically, it's around this time of year that you -- the board basically sets a policy for the year. Is it fair to think that the dividend will remain at this level for the balance of the year? Or do you think that we have an opportunity to re-evaluate and potentially increase further in a later quarter?

Yes, Blake, that's a good question, but I really don't have a comment or wouldn't want to try to speculate or forecast what we might do going forward. I think, again, we did raise the dividend yesterday by 21%. Policy is unchanged, if look from a macro perspective. But I really wouldn't want to try to speculate or forecast anything on a go-forward basis.

Fair enough. The question on Russia, I'm just curious if you could talk a little bit about how you arrived at the North American assets to contribute to the JV. When you look at Exxon's portfolio in the U.S., obviously, you've got quite a few options. I'm just curious on the Cardium and Delaware, I mean, was it just similar geologic characteristics? Or was it more financially motivated? Any color you could give would be appreciated.

Sure, I'd be happy to provide a little more color on that. If you look at the assets that we're talking about in terms of what our partners would get here in the U.S., it's actually a variety of a number of high-quality assets. I mentioned the Cardium, a very attractive tight oil play for us where we've got wells going down and we're drilling. We talked about West Texas and some of the unconventional oil plays we have going on there. And of course, the ability for Rosneft to improve their understanding of the technology that's at work out there and some of the practices we have and that we're doing to optimize the development of that is important to them. And as I talked about, as we learn about the unconventional resources together, what we have in Canada, what we have in the U.S., what they have in western Siberia, there'll be a lot of learning out of that. I also mentioned the Gulf of Mexico where they're going to have an opportunity to farm into 20 blocks. And as you know, we have been expanding our own activity in the Gulf of Mexico, have had some very nice success recently. So it would certainly not be a surprise that those would be attractive acreage opportunities for them. So again, I think you have to step back and look at this partnership just the way we described it. It's a strategic agreement for both parties. It allows us to bring to the table, each of us, very high-quality prospective resources, all of which rely on state-of-the-art and forward-looking technology applications and bring together the best of both companies and also in the interest of both companies going forward. So that's -- and we're talking about other opportunities elsewhere around the world. And so again, I keep coming back to the term Strategic Cooperation Agreement because that's really what it's all about, and you'll see that as we move forward.

And now we'll hear from Ed Westlake with Credit Suisse. Edward Westlake - Crédit Suisse AG, Research Division: So strong cash flow, good returns. But I guess there's still some criticism of Exxon's sort of overall liquids position in North America, and your shifting -- lowering rig count and shifting to some of the liquids plays you have. But can you give some color on the sort of ability for Exxon to really move the needle in terms of acquiring acreage outside of the Woodford Ardmore, the Cardium and Viking that you're talking to?

Yes, I think it would be fair to say, Ed, it's really kind of both. I mean, we're obviously taking advantage of opportunities, again, to concentrate acreage where we already have a position, and those efforts are bearing fruit. And of course, as you get bigger and more concentrated positions, you've got a real opportunity to better the -- again, the analysis and exploitation of those resources. Moving the needle, there are certainly opportunities, we believe, for that, however you define moving the needle. But those are really going to come, again, with a very deliberate, disciplined, analytical approach to how we go about doing this. I think as I mentioned last quarter, we're very fortunate to have the financial strength the company does and the flexibility to be able to go after these things in a disciplined, diligent way without worrying about paying the bills at the end of the month, and we continue to progress in that arena. We are looking at a broad range of other opportunities that are out there. I can't give you the specifics yet because we're still in the evaluation phase, but there are a number of those out there in North America and, frankly, in other areas. But I'd be remiss if I didn't also remind you of the success -- recent success, we've had with liquid in the Gulf of Mexico, with the big discovery we had there last year. So when you look across North American liquids opportunities, it's not just the unconventional oil potential, but it's also the potential that we have in our attractive acreage position in the Gulf of Mexico. And then broader speaking, I think's important, and you raise a good point, when you see the decline in our liquids production recently. I'll just reiterate one of the comments we made at the analyst meeting in March. If you look at the projects that are going to start up between now and 2016, I think the number we quoted was about 80% of that production will be liquids. So whether it's the Kearl project, whether it's the Africa projects, some of the other things we got going on, we have a strong portfolio of liquids projects in development, and also, the pipeline of opportunities on the exploration side is quite robust. So I think if you continue to look a little longer term, I think we're going to be in really good shape, and we're looking forward, as I mentioned in my remarks, to getting the projects up that we have on the plate for this year and then, in particular, when you get in that 2014 to 2016 time frame, bringing some of those big projects along as well.

And Citigroup's Faisel Khan has our next questions.

If I can go back to Iraq. In your prepared remark or press release, you talked about a ramp-up in volumes in Iraq and kind of getting to your contracted volumes. Can you discuss a little bit about the infrastructure you're placing on the ground to get up to those contracted volumes that you guys have?

Faisel, help me out a little bit. In particular, infrastructure, what do have you have in mind?

Pipelines and water injection facilities, stuff like that, processing facilities, I guess, the basic midstream and infrastructure designed to deliver that oil to market.

Sure. It's a couple of things. If you're looking in the field, in particular, of course, it's important for us to get the flow lines in and do some of the debottlenecking that we can do and thus get some production up that way. If you're looking broader at the infrastructure in terms of the common seawater project, some of the lifting capabilities, in particular, there was a major ramp-up in the capability to take oil out of the country last quarter. So there's a number of projects going on. Again, some are kind of local and help get the production up. Some are broader. Those are progressing as well. I really don't have any specific comments in terms of timing of some of the other larger infrastructure projects, but those are progressing as well.

Okay. Then last question for me, on non-U.S. Downstream, in the quarter, if I strip out kind of the gains on asset sales and also Imperial Oil reported a pretty nice number in refining as well, if I kind of take that out, it looks like outside of Canada and the asset sales that non-U.S. Downstream reported fairly low earnings. Can you talk about what's dragging those results this quarter?

If you're looking at the Downstream earnings you're really talking about quarter-over-quarter. Is that kind of your emphasis, first quarter '12 versus first quarter '11?

Yes, that's right.

Yes, we had a number of things. I think the one I'd probably note, if you look at the margin impact that we showed slightly negative relative to some higher industry refining margins that you see quoted, we had a number of price timing effects on our feed slates into the refineries that had a negative impact there and probably would've given you a little impact there that you weren't expecting. Nothing out of the ordinary. It was positive in the first quarter of last year. We had the absence of that in the second quarter. So quarter-on-quarter, you kind of saw that. But I'll tell you, x those effects, things came in just about as we expected.

And now we'll go to Allen Good with MorningStar.

I wonder -- if I caught you correctly, you said 87,000 acres in the Utica. That seems to be up from the 75,000 you reported at the analyst day. I was just curious if you could confirm that. And then, you talked about the acreage adds in the Ardmore. Are there any other liquids-rich plays that are -- currently interest Exxon and you've been adding acreage in during the quarter?

Yes, let me just confirm, first of all, that the number I gave you of 87,000 is correct, and that is up from the 75,000 that we mentioned at year end. We have been incrementally adding some attractive acreage there as we went across the quarter.

Okay. And then, as far as the discovery in Tanzania, I just wonder, does that change Exxon's outlook there in East Africa? And would there be any potential there for additional acreage adds or maybe farm-ins with some already operators there in the region? Because it seems like it's -- it seems sort of a light portion of your portfolio currently, and obviously, the Tanzania discovery is a positive there. Just wonder sort of what's the outlook for Exxon in that region.

Sure. Let me first kind of hit the overall that you mentioned. There have been a number of discoveries announced by industry in that area over the last several months. We are very pleased to have the position we have in the block that we farmed into, and it's a very nice discovery. I think I mentioned 5 TCF of recoverable gas, so that's a very positive for us. We are very interested in appraising that prospect further and have some plans in place to do that. In terms of going forward and looking at other things, I wouldn't be any more specific other than to say we're always looking for opportunities, for good opportunities. We were looking when we found this one and pleased to have it. So without being specific or really any departure from past practice, we're always looking for good opportunities. This is one. We're pleased to have it. Probably get our next well underway here in the second quarter to further appraise that prospect. And I'll tell you, in terms of additional opportunities, there are a series of additional structures on the block we have to take a look at and do some more work and appraise. So more to come from on that block with our partner, Statoil. And again, we're both very encouraged with this. Lots to do on that block, but always looking for additional opportunities.

Argus Research Philip Weiss has our next questions.

Most of my questions have been answered. I just had one small one. On your profitability per barrel, was down relative to the movement in realizations, and I just wondered if that was a function of the underlift or if there's something else going on there.

It's a number of the things I mentioned. Certainly, the underlift would be a big component because you have the reported production that you're dividing the earnings by, and that's why I really wanted to give you the detail on the underlift. It's a big impact. Also, the tax rate impact I mentioned because of some of the mix that we saw, of course, had an impact on calculated unit profitability. Other than that, in the quarter, we did see a little higher OpEx, including some exploration expense higher, that you would've seen in the supplement that we gave you. But again, it's really the U.S. gas price on the North American side and then the mix that we saw overseas and some of the other factors that were the real driver there.

And Pavel Molchanov with Raymond James has our last questions. Pavel Molchanov - Raymond James & Associates, Inc., Research Division: Can you give an update on the status at PNG LNG? There's been some press reports about local conflict with residents, and construction, I believe, was suspended for a period of time.

Sure. Let me give you a progress update on how we're doing in the first quarter. We've done some additional drilling, a number of other efforts associated with the project, everything from the civil works to the work we're doing on the gas conditioning plant and just a number of progress items related to the pipelines, the plant and all of that. So that project is really progressing on schedule, and we're very pleased with how things are going there. You have seen in the press some of the issues around unrest. It's one of the challenges we have with the project. Each large project we seem to do around the world has its own unique set of challenges, so there's nothing out of the ordinary here. We are managing that situation in conjunction with the local communities and with the government. And as you would guess, there has, here and there, been some impact at the individual work sites where some of this activity has occurred. But I can tell you, if you step back and look across the whole project, and it is a complex project, we are on schedule. We're progressing as planned, and there's no change to our outlook for a 2014 startup of that very attractive project. Pavel Molchanov - Raymond James & Associates, Inc., Research Division: Okay. Can you just say if construction is currently ongoing at the LNG site?

Yes. Construction is ongoing, yes. We're continuing to progress all phases of the project. Thank you. I want to thank everybody for your time today and the excellent set of questions. So again, thank you and look forward to visiting with you again next quarter.

Ladies and gentlemen, that does conclude our conference call for today. Again, thank you for your participation. You may now disconnect.