The Long View: Interview with Darren Woods, Chairman and CEO of ExxonMobil

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Cold OPEN: “…Even as you project out to 2050, and even if you take very aggressive assumptions about a transition or an evolution where you move more, you know, more electrification and moving more nuclear. The timescale to make the change and the size of what needs to change means that you're going to continue to need oil and gas. And it will probably be providing, you know, still around 50% of the world's energy mix, even out in 2050…”

Eric Veiel

Welcome back to “The Angle from T. Rowe Price”, a podcast for curious investors. I'm Eric Veiel, head of global investments and chief investment officer here at T. Rowe Price Associates. In this episode, I'm excited to welcome Darren Woods, chairman and chief executive officer of ExxonMobil, one of the world's largest publicly traded energy providers and chemical manufacturers. Darren's time with ExxonMobil spans over three decades. He became CEO in January of 2017 and his commitment to balancing economic growth with environmental stewardship has been a hallmark of his tenure.

Welcome to Baltimore, Darren. Thank you for being on The Angle.

Darren Woods

That's great to be here. Thanks for inviting me. Looking forward to it.

Eric Veiel

ExxonMobil is one of these companies, and I think everybody thinks they know and understand. Right? Oh, it's really big. You've got 60,000 employees, 350 billion in revenue. I know what ExxonMobil is. One of the things that I think people don't recognize is 100 million barrels per day produced in the world. You guys are, what, 4%?

Darren Woods

That's right. Yeah. Exactly.

Eric Veiel

So what do you think are the biggest misconceptions about ExxonMobil?

Darren Woods

Well, I think for a long time we've let external publications define who we are, or at least talk about who we are. We've been, more recently, really trying to make sure that we're telling our own story, being faithful to who we are. The first job I had with the company, my supervisor said, let me give you some advice. And this was like day two or something. He said, if you're ever doing in this company, if you're ever doing something, you'd be embarrassed for your mother to read about on the front page of the paper, stop doing it. The other thing he said to me was, if you, you you said you got to get up every morning, look yourself in the mirror, make sure you like what you see. Okay, they’re very simple things, but they've stuck with me for 33 years and, you know, this philosophy that we have as a company and one that I've grown up with for the last 33 years, is do the right thing in the right way. And so that for all of my career, there's not been a decision that I've made that. There have been hard ones, for sure, but one that I haven't felt like was the right decision for the company, for the best interest of our shareholders, our employees, the communities that we've been operating in.

And so, I think that is if there was anything that summarized what we try to do as a company is the right thing in the right way. We hold ourselves to a very high standard. Integrity is a really important value for us. Intellectual integrity is an important value for us. Courage is one of our values. We believe, you know, you have to be. You have to stick, stick to what you believe is right and be willing to fight for it, and take the blows that come with that.

Resilience is another one of our values. You know, this industry and the jobs that we have to do, the  challenges that we face, will not be easy. You will get knocked down. No shame in being knocked down. There's a lot of shame in not getting back up again. And so, fight your way back up and just keep after it. I think that's who we are as a company. That's why I joined 33 years ago. I never thought I'd be here this long on. I can still remember when I, the HR manager was talking my first joined the company. He was talking about our long-term benefits and all this. And I'm remember, I can still remember telling her, you know, you're talking like we just got married. As far as far as I'm concerned, this is a date, and I really felt like that for I don't know how long. I don't know when I realized I was actually married, but for a long time I thought we were dating, but it just worked out that, I'd found and I guess my life mate with respect to the company, it's been a great kind of great ride.

Eric Veiel

Let's talk a little bit about the industry. You know, I had a Jensen Huang, the CEO of NVIDA, on, last month, and we were talking about AI, and he mentioned, and we talked a lot about the fact that the biggest limiter right now in AI is actually power. Power generation. And that almost what seems insatiable demand from that one area, of the, of the market for, for energy. You guys put out a really interesting report, the 2050 Global Outlook piece. There was a stat in there that I was fascinated by, which was basically I, I won’t misquote it I hope – even if every new car sold in the world in 2035 were electric, 2050 would still need 85 million barrels per day, based on your, on your estimates. So given all of that, how are you all investing today to meet these growing needs, and then at best, flat, but likely growing needs.

Darren Woods

You know, it's a constant challenge. And what often gets overlooked, primarily because it's people who aren't in the industry and dealing with the daily challenge, you know, don't have a perspective on it. And frankly, the industry's done such a good job that they don't have to worry about it is we're in a depletion business. So every barrel you produce is a barrel less available. It's it's not like general manufacturing where you build a facility and facilities there for the next 200 years, and you just got to keep putting feedstock through it. In this case, you got to keep finding, you know, a replacement. So it's a little bit like having a bottle of water and you drinking the water out of it. Eventually the bottle goes empty and you better have another bottle sitting around somewhere for the next drink. So that's the big challenge.

With the unconventional shale play that's come into the energy mix and the crude supply and gas supply, for that matter, that has a much faster decline rate. And it's gotten to be such a large part of the global energy supply that it's actually changed the decline rate, the depletion rate of the global crude supply. So today, if no other investments were going into the industry to produce more crude, we estimate that the decline rate is 15 million barrels a day. And so, if you know, people talk about stop investing, leaving it in the ground, the world would very quickly run out of crude oil with that kind of; give me 100 million barrels a day. You're losing 15 million barrels a day. Doesn't take you long as you drop off every year, 15% decline, that you you quickly run out of resource. If you start making incremental investments. So no new exploration and, but just start to offset some of the decline by some of the things you can do on the periphery of what's already operate. And you can you can slow that down to about 4%, but it's still a significant decline rate.

So it is a huge challenge for the industry to not only, support growth, but just to offset the depletion. And so everyone in the industry, including ourselves, are constantly looking for the next barrel, for squeezing more out of what you what we have, finding new technologies to become more productive. It is a, it is a nonstop challenge. And so we've always from the very beginning, and we were doing a lot of this in the 2018, 2019, timeframe, getting a lot of criticism for it because at that time there was a view that you should stop because the energy transition was coming and these investments weren't going to, you know, we're going to get stranded. We never believed that because of this depletion dynamic and worked very hard to invest and bring those barrels on. And I'm glad we did because we now have that resource to take advantage of. But it is a huge; there's a technology play that we're spending a lot of time investing in to make sure that we're finding ways to better extract, more effectively find, more effectively squeeze the resources out of what we do find, so that we keep filling that hole. But it is a significant challenge.

Eric Veiel

So one of the, you know, major projects that you guys have is in Guyana, and our analyst Priyal was out there. And the images that I've seen, the description that she gives is an amazing amount of just material and a huge; the scope of that is huge. If we think 20 years into the future, do you envision the industry starting projects like that new, or do you think we've moved to, to a different technology or a different way of powering our world?

Darren Woods

No, I think, I think you're going to continue to need, you know, oil and gas. Even as you project out to 2050, and even if you take very aggressive assumptions about a transition or an evolution where you move more, you know, more electrification and moving more nuclear, the timescale to make the change, and the size of what needs to change means that you're going to continue to need oil and gas. And it will probably be providing, you know, still around 50% of the world's energy mix, even out in 2050, even with aggressive assumptions about that, just because the system is so large that to change it. And if you go back in time, there's been no energy transition that's happened quickly.

The bigger challenge, even with that, the size and the time it's going to take is the affordability issue. And I think it's easy for many of us and, you know, very developed nations, very prosperous nations to talk about making a change and paying for that. You know, there are 4 billion people around the planet that are living in absolute energy poverty that I think, desperately, strive for and frankly deserve a much higher standard of living, which will require more energy.

There are economies around the world that have, the need to to grow and the potential to significantly grow. That's going to require more energy. And so, we can look at some of the more developed nations who can start to make progress and pay for that. But there's a whole chunk of the world, and it's a big one that still very early on that curve, and they're going to need to come up and they're going to need affordable, reliable energy, and today we don't have good options other than the system that we have.

That, I'm still optimistic, though, because we do believe strongly that the world needs to find ways to reduce emissions. You know, one of my, concerns, or complaints has been that we've lost sight of the objective statement. That through the debate, and I think a lot of the ideology that's been out there for many years is, it’s turn the need to reduce emissions into the need to reduce oil and gas. I don't think oil and gas will ever go away because it's a critical component to chemical products, and chemical products that we make and others make form the foundation of modern living today. I don't think people realize that how much hydrogen and carbon molecules go into day-to-day life and the appliances, the tools, the clothing and just about everything that they use.

Eric Veiel

The technology.

Darren Woods

Everything. It's, you know, it's buried in that and it's it's an inherent part of that, and so it's going to be for around for a long, long time. But we've got to focus on is less combustion of hydrogen and carbon molecules. And when we do have to combust and find ways to deal with the emissions. I think if we get a more, sophisticated or better objective statement and get focus back on the real objective. Let's deal with the emissions, we can make a lot faster progress at a lot lower cost.

Eric Veiel

One of the things that I've always appreciated, about you, Darren, is, you tell it like it is and you've been very clear, climate change is real. You’ve acknowledged it many times, but you've also said we need pragmatic solutions, which is sort of what you're referring to here. In your mind, what are the foundations of those pragmatic solutions that will help us in, obviously capture is probably part of it, but I'm curious.

Darren Woods

No, I think. You know, the the, I think if I go back in time, probably the biggest mistake, I’ll say society made is we jumped to an answer, a solution set, that I think was defined by, frankly, a very narrow set of ideologues who did not have any practical experience. And, certainly the energy system, let alone probably manufacturing or, you know, running and making products that society needs, and so. And for a long time, I think the mistake we made was we criticized a lot of the policies that were coming out and the approach without offering a thoughtful alternative. One of the things that we challenge ourselves with; okay, we don't like, we think what's happening and some of the approaches are flawed. What would we do? If at the end of the day, they gave us the keys and said, you guys figure this out, what would be your approach?

And so we challenge ourselves to think through what would we recommend, based on what we know. I'm not, so, naive to think that I can figure out a solution for the whole. But we do understand our industry and the sector that we operate, and so for our sector, what do we think would be a, a reasonable solution that's consistent with macroeconomic policies? It doesn't impede economic growth. It doesn't, impinge people's lifestyle or standard of living. And, what we started with is, first and foremost, we need a carbon accounting system. The thing that blows me away is that we have, and the world talks about getting to net zero and eliminating all the carbon emissions, but we have no system for accounting for carbon emissions. And so I wonder, how do you eliminate something that you're not accounting for? I don't know of any example that anyone can point to.

Eric Veiel

You manage what you measure. And if you can't measure it, you can't manage it. That's a pretty basic principle.

Darren Woods

Absolutely. And I think even measuring can be hard, but at least you should account for it so that at the end of the day, you have a system that when you add it all up, it's equal to the total emissions of the planet. So now I can begin to characterize where are the emissions coming from in my society and the products. So that's job one. And the point I make with, a number of constituencies I talked to, whether you think you need that right now or not, I think ultimately everyone can agree that if you're ever going to get down to zero, you're going to have to have it at some state. So let's start working on it now, because I think if you had a carbon accounting system, we could start to move down the emissions reduction path much quicker.

Because the second step is once you know how to, you know, properly account for them, and you’ve agree that around the planet. You can calculate the carbon intensity of every product and service, services society uses. Once you can, calculate the carbon intensity of a product, you can put a spec on it. And so our our approach would be let's go do carbon accounting. Let's start calculating carbon intensity. And I don't you know, again that's a hard problem to solve, but we can make some simplifying assumptions. The important thing is we do it in a consistent way that reflects some level of realism and reality and then put a carbon intensity specification. All the government needs to do is specify the carbon intensity, and then get out of the way, and let industry figure out how to meet that carbon intensity specification.

And that then starts to bring in the market forces as a producer. And I would offer up do it for gasoline, do it for diesel. So take the transportation pool in the U.S., put a carbon intensity specification on it, and then let us figure out how we meet that carbon intensity specification. That will drive me to find ways to do it at a lower and lower cost to get a competitive advantage. If I find that, that advantage accrues to me because the marginal supplier with the highest cost will set the price in the marketplace. That gives me an advantage, it incentivizes me to invest in technology. It gets the government out of picking winners and losers. It gets the government out of collecting revenues and redistributing them and paying subsidies.

And then you pick the, the, core products that are driving most of the emissions. You don't have to do it economy wide, but you could, you know, 20% of it's causing 80% of the problem. Go focus on those 20% and work like crazy on those. And then, you know, if you want to, if you're in the camp that will transition to something brand new. I'm okay with that as well. It gives us the time to do that and then and then natural, time horizon its going to take. And so I think we've done the math on that. You could decarbonize. Think about decarbonizing the transportation system today and all of the cars and trucks that are out there today. You can incrementally reduce the carbon at a small amount of carbon emissions from all that, across such a large volume, that the cost would be small, the volume impact would be big, and the time scale to achieve it much, much faster than EVs. And so we could start to affect real emissions reductions at a much lower cost, much faster.

Eric Veiel

So at the start of that, the accounting that we need, is that something that comes from the industry, from the government, needs to be globally?

Darren Woods

Right, I think that needs to be a broad. In fact, I've been having conversations, talked to a group at the World Economic Forum there other. We've got a coalition that we're talking about forming that you need a cross-industry group. I don't think it's our industry that does that. I don't think it's our company that does that. We can contribute, can bring some thinking. But I think you need a much, you know, academics need to be involved, the right kind of academics, some governments. But ultimately, you know, it's like calories on food. Somehow the world figured out how to calculate calories consistently all around the planet. And we kind of stick to that. There's, there is a mechanism, and we've got accounting standards today. And financial accounting is very different than the kind of accounting that I'm talking about, but the fact that the world has arrived at standards and approaches that everyone conforms with, demonstrates to me that this can happen. We just got to put the right body together, go make that work.

Eric Veiel

Carbon capture is an area you guys have invested a lot in over time, but I think you've been pretty clear that it's really not economically feasible in a lot of ways in its current form. Is there is there a path where that becomes some part of the solution or a bigger part of the solution?

Darren Woods

So, you know, our approach in that space, you know, for a long time, a lot of pressure the company came under to invest in wind and solar because this idea that you're an energy company and therefore, as an energy company and one that's, where the world's worried about emissions, you should move to electrons. And the point I kept making is we don't know anything about wind and solar. We're a molecule company. We're not an electron company. So let's focus on, how we can address the societal need, which is emissions reductions, using our capabilities in molecules. That's I'd say the, the simple formula that we landed on. And it sounds rather simplistic, and I think somewhat intuitive is do the things you know how to do.

So in the molecule space, what can we do? What makes sense? Carbon capture and storage is a very good fit with our core capabilities. Biofuels is another area. We've got refineries all around the world. We can process biofeeds and produce fuels, have lower emissions profiles. So another area and then we're looking at low carbon hydrogen. So those were the areas that we felt like lend themselves to our molecule technology and where we could bring something to bear.

So our view is carbon capture is going to be needed. It's going to be, a competitive technology. We're doing a lot of work on the technology, bring the cost down because we have to do that. But typically when you don't need it and you don't have to bring costs down, you won't. So that's the work that I think has to happen. I'm not sure when, when that will take off or if society will ever, commit, truly commit to the ambition of reducing the emissions. But, when they do, and we think they should, we're going to be in a position to, to, help provide that.

And, actually, with respect to your AI question, and Jensen, we now have because of those investments that we've made the opportunity to offer low carbon data centers. And in the time frame that many of the tech companies are talking about needing that low carbon data centers, we’re uniquely positioned to provide that.

Eric Veiel

Let's pivot a little bit to your personal journey as a leader. You know, you started off as you said, you know, thinking you were dating. And here you're, you're, well, married to, to, ExxonMobil at this point. Began as an electrical engineer. How do you think that training in that background sort of formed your decision-making strategies and, and led you to, to be CEO?

Darren Woods

Well, when I was an undergraduate, I wanted to be a Ph.D. I wanted to go into electromagnetic field. I wanted to do R&D. And, my senior year in college, I did a, some research that, I guess for lack of a better term, burned me out on that whole whole idea. And so I decided to go work for a little while, with the intention of going back to school. And, I got out and got a job as a technical consultant, advising the Air Force on a missile system. And it became, very clear to me early on that you could be the best engineer in the world, but if you didn't know how to make money or to get funding that you couldn't fund the ideas. And it wasn't, you know, you only I can only advanced stuff that you could afford to advance. And so, I felt like I didn't have a good understanding of how to make money or the whole financial world or business. And so, after three years working as this technical advisor, I went back and got an MBA.

And so I think, you know, my foundation as an engineer, you know, that helped me throughout my career because we deal with a lot of engineering problems. And while I can, I think, honestly say I've never done a day's work of electrical engineering, the principles that you'll learn and how you think about engineering and the problem-solving skills, and how do you take these large, ambiguous problems and break them down into pieces that you can think about and solve – the logical approach associated with doing that, that's all been, absolutely critical, throughout my career and even today, continue to use those core foundations of how you think about solving engineering problems.

And then, of course, I do not discount the education I got within my company, within ExxonMobil. I'm very proud of the fact that we bring in people early in their careers, usually right out of school, and we invest a lot of time to develop them. And, I spend today and throughout my career, I've always had - everyone who joins the company and supervises or manages somebody. You're told your job is to develop the next CEO. You don't know who is going to be, but that's your job. Find the next CEO, develop people to their full potential. And so from the very early days in my career, always looking at how do you help get help people reach their full potential.

Your potential can change with time and your performance. It can go up because you've you hit a growth spurt, spurt, so to speak, or you got into a groove. You began. And so we've seen people just surprise us and do things that we didn't anticipate. We've seen other people reach a level where they, that what's required to advance the next wasn't something that they wanted to invest in. And so that was a potential. So it's a it's a very dynamic thing, but I would say less transparent in the past than we are today, and still not as transparent as I hope we'll get to as we develop.

Eric Veiel

Learning from mistakes is an important part of being a good investor and having sort of the intellectual honesty to critique what you got wrong. Own it, and then try to move on from it. What's a mistake you've made and a lesson you've learned from it through some point in your career, Darren.

Darren Woods

You know, it's a funny thing. I, talk, so we are very, like our company. We're very critical of ourselves. And so we're constantly looking for where we could have done better. We do a lot of after-action things, and I think most people who grew up in the company will tell you, we tend to focus on what we could do better, rather than what we did well. Again, that's something that we want to try to strike a little better balance on.

I think, you know, the probably one of the, the very early, mistakes that I made in my career that really shaped me for a long time to come. I was very early, in a refinery. I was working in a plant. I had a supervisor who recognized I came in as an MBA, so didn't have the same development through operations that many of our young engineers that come in get to start at a plant, work their way up, and then get into more management jobs. I kind of came in at management levels and didn't have the benefit of the experience of being in a plant and being in operations.

I had a supervisor, when I was over in the UK that said, you need that experience, and so dropped me into one of those roles, which, was a step down from a hierarchical standpoint, but really critical development step that I needed. In that role, we had some unit issues that I thought I understood what we needed to do, and the more experienced manufacturer around me thought there was a different approach that we needed to take. And so, I didn't necessarily agree with it, but I deferred to their experience and judgment. And then in hindsight, turned out I was right and they were wrong. But we only learned that by doing it their way and then had to go back, and at the time it probably cost us several millions of dollars with lost throughput and what have you. And for me, I can still remember that whatever that number was, it's in the scheme of what I think about today, it's a very small number, but at the time it seemed enormous and it, it bothered me. I for I can't, I can't tell you how long at that ate at me that. The regret that you knew what the right thing to do was in and you were too afraid to stand up and fight for it.

I said, I don't want to experience this ever again. And so from that point forward, I I've lived up to that commitment. And I've always made sure that everybody understands my point of view, whether you agree with it or not. And I try to make as a compelling argument as possible. I think that has. Most people that have worked with me through my career, I think they would recognize that, that how I behaved since then. But it was it came from a very hard lesson that I taught myself. And I just I just didn't want to feel that way ever again. And it's served me well so far.

Eric Veiel

It's really interesting. One of the mistakes we see young analysts make is they try to anticipate what they think the portfolio manager wants the answer to be on the stock, as opposed to having their own conviction and then staying with it, even if their research has led them a certain, a certain place. It's very similar to what you experience. They're having, you know, strong views. We like to say strong views held lightly. Right. So have those strong views but be willing to think about new information that might change them.

Darren Woods

Yeah. We talk about courage of conviction. You've got to have courage of conviction. And so we need to be convinced of something obviously, but then have the courage to represent it.

Eric Veiel

So, what do you want your legacy to be at ExxonMobil? You're far away from having to, like, put that in stone, but it's important to think about those things before you get to the end.

Darren Woods

You know, I, I really, I don't think of a legacy maybe, in the way others do. I mean, I, I came to this job in an unusual way. I never aspired to it. It wasn't something that. I wasn’t ambitious in that respect. You know, my my love of the company and the career I've had with this company is just getting lots of hard problems to solve and being recognized for that and giving me another, another hard, hard problem to solve. I get to travel all around the world. I had some great experiences and so I've always enjoyed. And so I hadn't I didn't come to this job with this ambition to have it. I came to the job and when I took it was, if you need me to, I will.

And so I would just say my ambition is to basically realize the full potential of this company. I came into the job with a, the weight of the, what I would say is the legacy that I inherited, the, you know, the 100 plus years of, of, you know, employees and leaders and, you know, this company that that I was now responsible for. I just felt a huge, sense of responsibility to deliver and to make the best out of the thing that was given to me to be responsible for and to leave something better for the next person.

I think, you know, every job ever have the company you are, you go into with the mindset of how do I make this better for the person who's going to take it from me. And I would say, I've taken this, this job with that same mindset, how do I make this better for the person who comes in behind me. It will always be an opportunity to make it better. So my view is, you know this and I've never criticized the things left for me to pick up in jobs I've inherited over the years because I've, I don't know what they started with. And everybody starts with something. And your job is to make it better and leave it for the next person to carry on. So, I think that's, you know, my, I really want to leave a company a better place. I want to leave a company that the people who work for it are proud.

Eric Veiel

These are obviously stressful times and stressful role. What do you do to try to ease some of that, that stress when you're not in the office? Any go to ways to unwind?

Darren Woods

I,I, I like to get away, and, solitude and family. So, I have, I'm lucky enough to, we have some property in the hill country of Texas, which we can escape to on some long weekends. And it's, out in the middle of nowhere and very few people, and a lot of nature very, very pretty place. And so, the family often congregates there and just quiet time alone. We've got a place on a lake up north that we get to on occasion and spend there. It's really around getting out of the flow, quiet time, it’s really around nature and family. It's kind of what I like to do. And, yeah.

Eric Veiel

Turn your phone off when you're out there.

Darren Woods

The phone always stays on. I think, you know, most people don't want to call me. I’ve generally found, but I'm always available. But I think, I think we all respect the fact that every one of the employees that we have, all our folks work really hard. And, you know, we recognize that when you're off work, I certainly feel this way. I try not to send emails, you know, significantly out of hours. I try not to send emails over the week. I just don't want to have people feel like they need to be responding on the instant. So we, we, I try to be very respectful of other people's time. Often times the job doesn't allow that, but I am conscious of that, and I think everybody else is conscious. They don't. You know, if there's something that can wait to talk about or email or what have you, the people will wait until after the weekend. I think that's a good practice. And then the things that do come in, you give it your attention.

Eric Veiel

Well, speaking of being respectful of time, I've already taken more of yours than than I said I would. So, let's end it there. But, you know, Darren, thank you so much. This has been great. Really interesting conversation. Really appreciate you spending the time with us.

Darren Woods

Thank you. Thanks for the time. Enjoyed it.

Eric Veiel

Absolutely. Thanks.

Eric Veiel

Again. I'm Eric Veiel. Thank you for listening to The Angle. We look forward to your company on future episodes. You can find more information about this and other topics on our website. Please rate and subscribe wherever you get your podcasts. The Angle. Better questions, better insights. Only from T. Rowe Price.

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