Exxon Mobil Corporation (XOM) Q1 2018 Earnings Conference Call Transcript

ExxonMobil Corporation (XOM -0.09%)
Q1 2018 Earnings Conference Call
April 26, 2018, 8:30 a.m. CT

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, everyone, and welcome to this ExxonMobil Corporation First Quarter 2018 Earnings Call. Today's call is being recorded.

At this time, I would like to turn the call over to Vice President of Investor Relations and Secretary, Mr. Jeff Woodbury. Please go ahead, sir.

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

Thank you. Ladies and gentlemen, good morning, and welcome to ExxonMobil's first quarter earnings call. My comments this morning will refer to the slides that are available through the Investors section of our website.

Consistent with our recent Analyst Meeting, you'll note additional detail in our press release and this morning's prepared comments. Our objective is to provide clarity on key business drivers in the quarter and describe progress being made to deliver on value growth potential outlined in the Analyst Meeting.

In the interest of time, I'll move through the prepared material efficiently to ensure there is sufficient time for your questions. Before we go further, I'd like to draw your attention to our cautionary statement shown on Slide 2. Please also see the supplemental information included in today's presentation.

Turning now to Slide 3, let me begin by summarizing the key headlines of our first quarter performance. ExxonMobil earned $4.7 billion in the quarter. Cash flow from operations and asset sales was $10 billion, the highest since 2014. Importantly, cash flow exceeded net investments in the business, distributions, and other financing activities by almost $3 billion.

In the United States, we achieved positive Upstream earnings of about $430 million. In Papua New Guinea, facility shut-in resulting from the earthquake reduced this quarter's earnings by about $80 million and volumes by 25,000 oil-equivalent barrels per day. We have since resumed production and expect to reach full capacity in early May. As I'll discuss shortly, we made good progress during the quarter in a number of areas that will support our value growth potential.

Moving to Slide 4, we provide an overview of our financial results. As indicated, ExxonMobil's first quarter earnings were $4.7 billion, or $1.09 per share, up 16% from the prior year quarter. Cash flow from operations and assets sales was $10 billion, including $1.4 billion in proceeds from asset sales that I'll discuss shortly.

In the quarter, the corporation distributed $3.3 billion in dividends to our shareholders. Our CapEx was $4.9 billion, up 17% from the prior year quarter, resulting in increased activity in the Permian consistent with our growth plans. Net was down to $40.6 billion at the end of the quarter and cash increased to $4.1 billion.

The next slide provides a high-level look at the key drivers for these business results. In Upstream, we benefited from higher realizations for both liquids and natural gas. However, our liquids realizations rose less in the benchmark prices due to widening of the Canadian heavy oil discount. These higher prices resulted in lower volume entitlements. Production was also reduced by downtime in the quarter and divestment of assets.

We're continuing to progress growth initiatives as outlined in our Analyst Meeting, including increased drilling in the Permian, advancing attractive new projects, and completing maintenance activities to enhance performance of our existing assets.

Finally, we're actively strengthening our portfolio through the acquisition of new assets, such as exploration acreage offshore Brazil. We also captured incremental value through divestments of assets. Refining margins remain strong in the Downstream, especially in North America. However, petroleum product demand was seasonally lower. US manufacturing reliability recovered from the fourth quarter and notably Joliet returned to full capacity in March.

We also continue to make progress in growing our Chemical business. Integration of the Jurong Aromatics plant into our existing Singapore business is progressing as planned. In North America, sales are increasing with a ramp-up of the new polyethylene lines at Mont Belvieu, supplying the growing demand for petroleum products. Within our base business, we successfully completed turnarounds in the Middle East and the US Gulf Coast.

The next slide provides additional detail on sources of cash. Earnings adjusted for depreciation expense, changes in working capital and other items, and our ongoing asset management program yielded $10 billion of cash flow from operations and asset sales. A positive adjustment for working capital mainly reflects favorable seasonable changes in payables, which were partly offset by an inventory build in the Downstream business, mostly due to maintenance. Negative adjustment for other balance sheet items reflect timing of equity company distributions.

Asset sales included Upstream properties, notably the Scarborough gas field and Downstream distribution in retail assets. Note that cash flow was higher than the prior quarter, largely due to the higher earnings.

Moving to Slide 7, I'll describe the uses of cash. Over the quarter, our cash balance increased from $3.2-4.1 billion. From our cash flow, we made shareholder distributions of $3.3 billion and confirmed our commitment to reliably grow the dividend. Earlier this week, the board of directors declared a second quarter cash dividend of $0.82 per share, representing a 6.5% increase from last quarter and marking our 36th consecutive of per share dividend growth.

Net investments in the business were $3.3 billion, lower than the prior quarter due to the absence of acquisition payments. Debt and other financing items decrease cash by about $2.5 billion. This included $1.9 billion in debt repayment and $425 million used to purchase 5 million shares to offset dilution related to benefit plans and programs. In the second quarter of 2018, ExxonMobil will limit share purchases to amounts needed to offset dilution related to our benefit plans and programs.

Moving to Slide 8 for a review of our segmented results. ExxonMobil's first quarter earnings of $4.7 billion increased $918 million from the previous quarter, excluding the fourth quarter impacts of US tax reform and impairments. Upstream earnings increased about $980 million, primarily due to higher prices. Downstream earnings decreased $12 million, driven by weaker refining margins.

Chemical business increased earnings by $76 million, primarily due to lower operating expenses. These were all partly offset by higher expenses in corporate and financing segment, due to the lower US corporate tax rate and higher pension expenses. Our total corporate and financing charges for the quarter were about $800 million. After further evaluation of the full impact of the US tax reform, we expect these expenses to range between $700-900 million per quarter for the remaining of 2018.

Our effective tax rate for the quarter was 40%, reflecting a higher proportion of non-US Upstream earnings. Looking at the remainder of the year, we expect the effective tax rate to range between 30-40% at current commodity prices and at current portfolio mix. The increase in guidance is driven by Upstream's higher proportion of earnings.

Moving to Slide 9 for a comparison to the prior year quarter. ExxonMobil's first quarter earnings increased $640 million from the year ago quarter, driven by higher Upstream realizations. This is partly offset by lower Downstream earnings resulting from lower asset management gains and lower volumes due to the higher maintenance in the US.

Chemical earnings decreased due to lower margins. And corporate and financing charges reduced earnings by another $270 million, again due to the lower US corporate tax rate and higher pension expenses.

Moving to Slide 10, we'll highlight some of the progress we've made over the first quarter that supports our growth plan shared at the Analyst Meeting. We made our seventh discovery on the Stabroek block, enabled by our proprietary subsurface imaging technology. Pacora well encountered 65 feet of high quality oil bearing sandstone. Pacora will be developed in conjunction with the giant Payara field. Along with other development phases, this will help bring Guyana's total production potential to more than 500,000 barrels per day.

Development activities on Liza Phase 1 are progressing well. The Stena Carron is currently drilling the Liza-5 appraisal well, which will help delineate the greater Liza resource. A well test is planned at Liza-5 and will begin shortly. After the completion of the test, the rig will return to the turbid area to drill a delineation well named Longtail.

As previously indicated, we mobilized the second rig to the basin, which drilled the exploration well Sorubim in advance of the start of development drilling for Liza Phase 1. Sorubim well reached total depth this week, but failed to encounter commercial quantities of hydrocarbons. We have additional exploration drilling planned later this year as we continue to explore the full potential of the Stabroek block.

In Papua New Guinea, a new resource assessment certified an 84% increase in the size of the P'nyang field, more than 4 trillion cubic feet of natural gas. These resources support our discussions with joint venture partners regarding a three-train expansion concept for the PNG LNG facility. One train will be dedicated to gas from P'nyang and two trains will be dedicated to gas associated with the Papua LNG project. This development concept would add approximately 8 million tons per annum, doubling capacity of our existing plant.

As planned, we continue to increase our US tight oil activity. We currently have 27 operated horizontal rigs in the Permian and four operated rigs in the Bakken. We remain focused on maximizing capital efficiency, drilling wells that are consistently longer than the industry average. Total unconventional production of Permian and Bakken has increased by 18% versus the first quarter of 2017, with strong well performance supported by optimized completions.

With respect to our portfolio, we added eight new blocks offshore Brazil, which I'll talk about shortly, and signed agreements for deep water blocks offshore Ghana and Namibia. As indicated, we continue to monetize assets, including our 50% interest in the Scarborough gas field. We also closed several Downstream divestments, including distribution in marketing assets in South America and retail sites in Europe. Further portfolio high grading remains a priority.

In the Chemical segment, we continue to be focused on increasing capacity to meet growing demand for higher value chemical products and began commissions our ethane cracker in Baytown, Texas, with start-up plan mid-year. This will enhance integration through lower feedstock costs with the associated polyethylene lines that started up in the fourth quarter of 2017.

Turning now to the Upstream financial and operating results, starting on Slide 11. First quarter Upstream earnings were $3.5 billion, an increase of about $980 million from the last quarter, excluding the fourth quarter 2017 impacts of US tax reform and impairments. Realizations increased earnings by $640 million. Crude prices rose just over $3.00 per barrel versus last quarter, but less than benchmark prices, due to the widening of the Canadian heavy oil discount.

Gas realizations increased $0.80 per thousand cubic feet. Volume and mix effects decreased earnings by $130 million. Primary drivers for this were the effects of two fewer days in the quarter, higher downtime, and lower entitlements, partly offset by project growth and seasonal gas demand. All other items increased earnings $470 million, largely due to lower operating expenses and positive net asset sales. Upstream unit profitability for the quarter was $10.30 per barrel, excluding the impact of noncontrolling interest volumes.

Moving to Slide 12, oil-equivalent production in the quarter was 3.9 million barrels per day, a decrease of 3% compared to the fourth quarter of 2017. Liquids production decreased 35,000 barrels per day as downtime in Canada, lower entitlements, and divestment of our Norway operated assets more than offset growth from new projects and work programs. In particular, we were pleased with initial results at Hebron, where performance from the new wells have exceeded expectation.

Natural gas production decreased about 400 million cubic feet per day, due to lower entitlements and downtime, notably in Papua New Guinea. This was partly offset by higher seasonal gas demand and project growth volumes.

Moving to Slide 13 for a comparison to the prior year quarter. First quarter Upstream earnings increased $1.2 billion due to higher realizations. Crude prices rose $10.80 per barrel versus the year ago quarter, and gas realizations increased $0.90 per thousand cubic feet. Volume and mix effects decreased earnings by $190 million. Lower entitlements and increased downtime, specifically in Papua New Guinea were partly offset by project volume growth. All other items increased earnings $10 million as net gains from asset sales were offset by higher operating expenses.

Moving to Slide 14, oil-equivalent production decreased 6% compared to the first quarter of 2017. Liquid production was down 117,000 barrels per day due to field decline, the fourth quarter divestment of our operated assets in Norway, and lower entitlements, partly offset by new project volumes. Natural gas production decreased 870 million cubic feet per day, driven by higher downtime, lower entitlements, and the decline in the US. This was partly offset by project and work program volumes.

Turning to Slide 15, we'll provide an update on earthquake recovery efforts in Papua New Guinea. First and foremost, on behalf of ExxonMobil, and in particular our staff in Papua New Guinea, I want to extend our thoughts and well wishes to the people of PNG as recovery continues following the devastation brought by this powerful earthquake and its aftershocks. In response to the initial earthquake, all of our production gathering, pipeline, and processing facilities were safely shut down.

ExxonMobil's humanitarian response to day has included the distribution of food, water, emergency shelters, and other supplies along with the transportation of medics into affected areas. We focus support on the most impacted remote communities neighboring our operations, and have also made a donation to relief agencies. Our facilities successfully withstood the magnitude 7.5 earthquake in late February and its aftershocks, due in large part to robust design and the immediate and effective response by our people. Because of its location, we accounted for a wide range of seismic activity in the original design, engineering, and construction for the PNG LNG project.

In mid-April, ahead of our projected recovery timeframe, we announced the safe resumption of LNG production. The second LNG train started up this week and the facility's ramping up to full capacity. LNG exports have also resumed. During the period that production was shut down, we also brought forward and completed maintenance to our facilities that was planned for later this year, enabling more efficient operations in the months ahead. We're proud of the response of our people in managing this extreme event and, importantly, caring for the community.

On Slide 16, we take a closer look at ExxonMobil's current acreage position offshore Brazil, which positions us with significant high-quality resource potential. You'll recall that last year we captured several attractive opportunities, including a combined farming and bid round award for the discovered, undeveloped Carcara field, which extends across both the BM-S-8 and North Carcara blocks.

Carcara field continues an estimated recoverable resource of more than 2 billion barrels, which with the co-venture group is progressing development planning activities. The groups near-term plans include up to three wells in the field, better delineate the resource, and define the development concept. As we shared at the Analyst Meeting, this proposed development yields attractive returns, even at crude prices of $40.00 per barrel.

At bid round 15 held last month, we were awarded an additional eight deep water blocks containing multibillion barrel prospects in the pre-salt play, taking our total acreage to more than 2 million acres across 24 blocks. ExxonMobil operates more than 60% of these acreage holdings and we will leverage our capabilities and proprietary technologies to maximize potential resource value.

We will be acquiring more than 19,000 square kilometers of 3D seismic data in 2018. As we already have 3D seismic for some of the blocks, we are also progressing plans for the first exploration well scheduled for the latter part of next year.

Moving to Slide 17, we'll now discuss Downstream financial and operating results. Downstream earnings for the quarter were $940 million, a decrease of $12 million from the previous quarter, excluding the fourth quarter 2017 impacts of the US tax reform and impairments. Lower refining margins decreased earnings by $200 million. Unfavorable volume and mix effects decreased earnings by $40 million, mainly due to lower seasonal demand and higher maintenance activity, partly offset by improved operations in the US. All other items increased earnings by $230 million, mainly driven by lower operating expenses, partly offset of the absence of last quarter's Norway retail divestment.

Moving now to Slide 18, Downstream earnings decreased $176 million compared to the first quarter of 2017. Margins were down $30 million due to lower non-US margins, partly offset by higher margins in the US. Unfavorable volume and mix effects decreased earnings by $60 million due to continued higher US maintenance activity, mostly at Joliet, which resumed full capacity in March. All other items reduced earnings by $90 million, mainly due to the absence of asset management gains from last year's Canadian poor credit asset sales.

Moving now to Chemical and financial and operating results on Slide 19. First quarter Chemical earnings were more than $1 billion, up $76 million versus the previous quarter, excluding fourth quarter 2017 impacts from US tax reform. Weaker margins and lower volumes, primarily due to turnaround activity, negatively impacted earnings by $30 million each. Lower operating expenses and favorable impacts from foreign exchange increased earnings by $140 million.

Turning to Slide 20, first quarter Chemical earnings were down $160 million compared to the prior year quarter. Weaker margins resulted in a decrease in earnings of $270 million as increased feedstock costs outpaced stronger realizations. Higher product sales from our new chemical operations in Singapore and the US improved earnings by $120 million. All other items in the quarter included higher expenses related to new operations and other growth opportunities, which were mostly offset by favorable foreign exchange effects. These growth opportunities are a key component of our plans detailed at the Analyst Meeting.

Now, turning to our final slide, the corporation is focused on growing value across our integrated businesses. Each of our businesses contributed to solid financial performance in the quarter, together earning $4.7 billion. Cash flow from operations and asset sales of $10 billion covered our next investments and dividends with free cash flow of $6.7 billion.

Upstream production volumes were 3.9 million oil-equivalent barrels per day, in line with our expectations. We expect second quarter volumes to be lower due to seasonal gas demand, and then growth in the second half with project and tight oil volumes, seasonal demand, and volume benefits from accelerated maintenance completed in the first quarter. Total CapEx was $4.9 billion with no change to our guidance. Continued strength in the Upstream portfolio through exploration, acreage capture, and selected divestments as well as disciplined execution of our investment program.

In the Downstream, we are progressing our advantage investments; such as those in Rotterdam and Antwerp; manufacture higher value products, capitalizing on our proprietary technology and integration. And, in the chemical business, we're focused on growing sales of our differentiated products, supported by new assets that are well positioned to meet global demand growth.

Finally, we remain committed to our shareholders, as demonstrated by 36 consecutive years of dividend increases.

That concludes my prepared remarks. Before we turn to your questions, I would like to note that, in the remaining quarters of this year, one of our management committee members will participate in the call to provide further perspective on progress and key developments relative to our plans. The Chairman and CEO will participate in the fourth quarter.

...

With that, I would now be happy to take your questions.

Questions and Answers:

Operator

Thank you, Mr. Woodbury. [Operator Instructions] We'll go first to Sam Margolin with Cowen & Co.

Sam Margolin -- Cowen & Co. LLC -- Analyst

Good morning. Just to start on the overall profitability spectrum, at the Analyst Day you offered a pretty clear view that the Upstream contributions would be after the post 2020 long cycle development program is wrapping and, in the interim, Downstream and Chemicals would carry a lot of earnings growth. The slides clarified that the margin environment wasn't necessarily supportive of that in one queue, but maybe just an update on how those two segments are performing in an apples to apples margin picture and what the fundamental outlook looks like for the remainder of the year and into that 2020 period where Upstream starts to contribute more?

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

Yeah, Sam. Good question. Thanks for taking us back to what our plans are as we detailed in the Analyst Meeting. As you may recall, in the Downstream, we have been making very strategic investments in order to high grade our products. I highlighted in prepared comments Antwerp and Rotterdam, which is going to take us out of lower valued products into higher valued products. We'll have Antwerp that will start up in the middle of the year, and then Rotterdam will start up by the end of the year. As well, in the Downstream, we have continued to expand our entry into some high growth areas such as Mexico and Indonesia. Everything is moving consistent with the plans that we laid out in the Analyst Meeting.

On the Chemical side, same story. We had laid out for you a plan of growth commiserate with what we saw in terms of chemical products. Importantly, as I indicated in the prepared comments, the Baytown cracker will be starting up middle of this year. It is the second half of the overall project. Remember, the first half being the two polyethylene lines in Mont Belvieu, which have started up and have been ramping up to full capacity. That will add a significant additional component to our chemical portfolio.

You'll also recall there are a number of other investments we made in Chemicals in Singapore. Importantly, we are making great progress in our integration of our Jurong Aromatics acquisition. We see significant value there and, as the organization continues to integrate that into our big Singapore manufacturing facilities, we continue to see additional opportunities. But right now, the focus on Singapore and Jurong Aromatics is primarily the integration and capturing the synergies that we saw.

I'll leave it there unless you have more questions on it.

Sam Margolin -- Cowen & Co. LLC -- Analyst

No, that's alright. I assume there will be more later in the Q&A. My follow-up is on Upstream. Could we dig in a little bit on these entitlement effects, specifically they were a little bit accelerated from 4Q, even though the oil price move was actually somewhat more substantial in 4Q versus 1Q. I know there are a lot of nuances in these contracts and some of them are subject to some disclosures and confidentiality. But, anything we could glean on the forward look for these entitlements, and maybe some future impacts -- maybe decelerating here -- considering the quarter-over-quarter increase in that piece of the production.

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

You're highlighting an important issue that has historically been a key criteria on how our overall volumes play out. If you go back and look at just sequential analysis versus last quarter, it was over 90,000 barrels a day it impacted us. As you appropriately recognize, each of these contracts that we have that have entitlement volumes are very unique. They're really a function of the commercial structure, the expenditure level, and prices.

On the good news side, don't lose sight of the fact that, if you have an asset that is not cost current, that just means accelerated recovery sooner. But, it's hard for us to convey specific guidance given the unique aspects of each of these contracts. But, if you just think about what you've seen sequentially -- 90,000 barrels a day. If you think about it, quarter-on-quarter -- which I believe is around 70,000 barrels a day -- it can have a material impact. But, remember, our fundamental objective here is to manage the business and to maximize the value proposition. That's what's most important here.

As I said, on the volumes going forward, you can really think about our volumes contributions in 2018 coming from the areas that I had mentioned -- our project growth, notably in places like Hebron, Odoptu, and Upper Zakum. The tight oil growth that we've been advertising, we're making great progress. We said we'd be at about 30 rigs by the end of this year. We're already at 27 rigs, so we're ahead of schedule.

The second piece to remember is that there have been a number of unplanned downtime events in the first quarter that we went ahead and took advantage of to accelerate scheduled downtime that we have in the latter part of this year into that first quarter to be more efficient in the downtime on the facility, notably in Papua New Guinea and the second area is in Syncrude. We took full advantage of the opportunity to optimize the business and well, as a result, have more efficient operations in the second half of the year. We won't have those planned events and, therefore, we'll get some more volume recovery.

The third thing you'll recall is in the second of the year we'll start seeing that seasonal demand start picking up on us again. And then, lastly, I'll mention we always have a robust conventional work program and those are fairly cheap, high value barrels that we're able to capture through the program.

Operator

We'll go next to Ryan Todd with Deutsche Bank.

Ryan Todd -- Deutsche Bank Securities, Inc. -- Analyst

Thanks. Good morning. I'd like to pass along thanks, not just for the incremental disclosure, but I think the addition of management team members to the calls will be welcome going forward by investors. That's great. The first one for me would be on Groningen. One of your partners wrote off reserves and booked an impairment of Groningen associated with the recent government announcement there. Can you speak to your thoughts here going forward as well as maybe help frame what the potential impacts would be, and whether you view there being a possibility of any compensation going forward?

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

Yeah. As you can appreciate, it is a very dynamic situation. We continue in discussions with NAM, the operator, and the government. Those are confidential discussion. Ryan, at this stage, I just don't want to speculate until we conclude those discussion. But, we're still operating. The field is still operating under the current cap of 21.6 billion cubic meters per year.

Ryan Todd -- Deutsche Bank Securities, Inc. -- Analyst

Okay. On Canada, I know you brought forward some of the turnaround there at Syncrude, but can you talk about your availability to get Canadian heavy out of there? Once Syncrude comes back up, are you anticipating limits in our ability to get it out? Are you moving things on how much on rail versus pipe? And how much are you able to run through your refineries to capture the benefit there?

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

Yeah. You've covered some of the answer there. In the first quarter, we did experience some constraints due to logistics. It was about 12,000 barrels a day in the quarter itself. If you think about going forward, right now we're able to clear all the barrels. Importantly, if you think back in our prior discussions, one of the objectives we've continued to press within our business is to maintain logistic flexibility. Several years ago, we went ahead and invested, by way of example, in the Edmonton Rail Terminal. That gives us another export option. We have pipeline capacity that we can leverage.

And then, importantly, we're also trying to capture the value chain benefits by bringing the heavy oil into our own equity capacity on refining. But, we continue to find the best value option for us in order to deliver those barrels to market. So, it's all about making sure that we're looking well ahead of the issue and identifying how we maximize that flexibility -- either take it into our equity capacity in our manufacturing footprint or to export it to capture a greater value.

Operator

We'll go next to Doug Leggate with Bank of America Merrill Lynch.

Doug Leggate -- Bank of America Merrill Lynch -- Analyst

Thanks. Good morning. Jeff, thanks for the incremental disclosure, but I think there is still some confusion out there on what's really going on in the operating cash flow. Could I trouble you to just walk through the dynamics of the net PP&E adds with the timing of affiliated distribution, and reconcile that with net income plus DD&A, which is $9.2 billion? Do you see what I mean? The CapEx at the affiliate level, as I understand it, is reported on a net basis above the operating line. If you could confirm that and just walk through the delta, because I think folks think that you cash flow number was closer to $8.2 billion.

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

If you look at our net PP&E adds, it was $3.3 billion and that reflects -- that's absent the cash requirements for affiliates. Okay?

Doug Leggate -- Bank of America Merrill Lynch -- Analyst

Right.

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

And that is down versus both the prior quarter -- fourth quarter of '17 -- as well as the prior year quarter, primarily due to the absence of acquisition funding.

Doug Leggate -- Bank of America Merrill Lynch -- Analyst

Just on that point, did you pay for Brazil in the first quarter?

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

What specific Brazil? There have been a number of transactions.

Doug Leggate -- Bank of America Merrill Lynch -- Analyst

The Carcara acquisition. Was the money out the door in the first quarter for Carcara?

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

Not yet. That is to come later this year.

Doug Leggate -- Bank of America Merrill Lynch -- Analyst

Alright. But your net capital spend after affiliates below the operating cash flow line was $3.3 billion? Is that the number we should be looking at?

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

That's correct.

Doug Leggate -- Bank of America Merrill Lynch -- Analyst

Okay. Great. Thank you. You slipped in your commentary about the Sorubim unsuccessful well. When we met with you a couple of weeks ago, Mike Cousins had made the comment that in a success case there could be a third rig option because it could potential put another play type. Has that option now gone away? Is that play type now abandoned? Or does this condemn the offsite exploration case? Maybe you could just frame how this changes the risk profile of the block. And I'll leave it there. Thanks.

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

Sure, Doug. Let me just characterize. Sorubim, like any exploration program -- there is a fair degree of risk in all of these exploration prospects. As I've indicated previously, every time we drill one of these wells, we pick up some additional insight and learnings. I wouldn't say that the well in itself would condemn the play or the prospect opportunities that we've got in Stabroek block. As it relates to the potential of a third rig, I would tell you that is always a possibility. But, we will make that decision based on the technical maturity of our prospects as we integrate the real time data that we get from Sorubim, Liza-5, and other analysis we're doing based on the 3D seismic that we went ahead and took.

Right now, the plan is to run the two rigs in parallel -- one primarily focusing on the development wells for Liza Phase 1, following the completion of the Liza-5 well test. And then the second will be following up on some prior discoveries. We will think about how we modify that rig line based on how we mature the technical prospects.

Operator

We'll go next to Phil Gresh with JP Morgan.

Phil Gresh -- JP Morgan Securities, LLC-- Analyst

Hi. Good morning. A little bit of a follow-up to Doug's question, you noted the equity affiliate's headwind in the quarter of $1 billion. I certainly appreciate you breaking that out from the working capital. So, I was just wondering how you think about that number for the full year. One of your peers, for example, has said the affiliates would be a $2 billion headwind on an annual basis and I know it can be lumpy quarter-to-quarter. Just any additional color you can provide there?

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

If you think about the equity companies, a big part of the $1 billion that we think about -- that's typically a seasonal pattern for us. Usually, we don't see those distributions until later in the year, if that's what you're trying to get your hands around.

Phil Gresh -- JP Morgan Securities, LLC-- Analyst

That was definitely part of it. It did sound seasonal in the quarter. But I was just wondering, on an annualized basis also -- you lumped together a number of factors in your disclosures, in your filings, and I was just wondering if that affiliate headwind on an annual basis would still be a headwind.

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

Broadly speaking, without giving you specific numbers, most all of the earnings are distributed throughout the year.

Phil Gresh -- JP Morgan Securities, LLC-- Analyst

Okay. So, more of a one to one is what you're saying, I guess -- earnings to cash flow.

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

Yeah, broadly speaking. There is going to be some timing impacts, depending on cash requirements from the equity companies.

Phil Gresh -- JP Morgan Securities, LLC-- Analyst

Yep. Okay, thanks. One of your peers is also giving a helpful statistic around base plus shale CapEx. Is there some kind of framework underlying your capital spending numbers you might be able to provide around base plus shale, given that for you guys it's essentially going to drive flat production for the long term?

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

Yeah. I think, from our prior discussions, what you really were looking at was capital efficiency. We clearly pay close attention to that versus how we expect we should perform as well as how our peers are managing this important area. Our conclusion continues to be that we'll lead in that area. Now, we don't take comfort in that, only because we think we've got to always do better. But, if you think about how we conclude that, it's through a number of things. One, I'd say that the ultimate measure of that is our return on capital employed. Not only do we lead in return on capital employed, but we've laid out a very attractive investment program that shows how we're going to continue to grow that lead out through 2025.

We also have looked at what are some spending annually. While we have a much bigger production base, our expenditure levels are comparable on an absolute basis. Lastly, if you look at another measure -- to me, it's a fairly simple one. Take your total capital employed per barrel of crude reserves -- in other words, the money spent to develop the reserves -- we have one of the lowest dollars per barrel out there. If the objective is to really try to qualify the capital efficiency of our business, that's what I would offer to you.

Operator

We'll go next to Neil Mehta with Goldman Sachs.

Neil Mehta -- Goldman Sachs -- Analyst

Good morning. When do you think you'll be in a position, as a company, to make and FID decision around PNG? Any update on Qatar and the latest in terms of both the timeline and progress around negotiations there?

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

On the first one, regarding the PNG, we have clearly made some really good progress. If I could just recap for the group, we did the InterOil acquisition. A significant resource at Elk-Antelope, which is right along the pipeline route from the Highlands to the plant. So, very clear synergies and opportunities. Total operates those assets and we've been in very close coordination with our existing co-venturers and Total. We're aligning on this expansion. In addition to that, two other things to note. One is that we continue to make significant additional resource captures with P'nyang earlier last year. We made a good discovery at Muruk. We've got a well that was spud there later this year. We think it's very significant and very close to the Hides gas field.

Lastly, we picked up a lot of good exploration, high quality acreage in the Highlands, through the InterOil, and then offshore of the LNG plant. The message in all of that is that we have built a very sizable, high quality resource potential in the PNG vicinity. That positions us for this expansion, as well as potential opportunities. In terms of the timing, that is yet to be determined. There are a lot of different players in this and, ultimately, the resource owner -- the PNG government -- needs to align with the plans and timing of that. I just say that I think it is very well positioned. I think the project in itself has demonstrated outstanding performance and the earthquake recovery is just another example of the quality of the people we have there and the asset itself.

And then, as you go forward, we're very well positioned to compete as one of the lowest cost of supply providers of gas in that market. So, we've got a full focused effort to make sure that PNG is executed consistent with its history of best in class performance. When we get closer, we'll provide a more specific timeline for you.

On Qatar, broadly speaking, we value that partnership that we have with the Qataris. We view that as, yet again, a very successful venture where both parties brought value to the arrangement. You step back many years later and you look at Qatar being one of the largest LNG exporters. Again, very low cost to supply. We're very proud of the role that we played in that. We participated in 12 of the 14 trains. We brought some very important technology to play, like the big LNG trains and big LNG carriers. We want to continue that relationship. You've seen us partner with the Qataris in places like Brazil and Cyprus. We'll continue to find opportunities where we can collectively leverage our mutual experiences and capabilities to build our portfolio and ultimately drive that into value for both Qatar and ExxonMobil.

Neil Mehta -- Goldman Sachs -- Analyst

Jeff, a quick modeling question here. In the Analyst Day deck you provided some cash flow levels at 60/80 Brent levels. What's the rule of thumb? Every dollar change in the price of Brent. What does that do to the ExxonMobil cash flow?

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

Yeah, we have the earnings sensitivity that's in our 10-K and for every dollar per barrel it's about $500 million of cash per barrel.

Operator

We'll go next to Doug Terreson with Evercore.

Doug Todd Terreson -- Evercore ISI -- Analyst

Good morning. The dividend increase of 7%, while pretty similar to the growth rate and the median during the past 10-20 years, is pretty significant. On this point, when considering the new financial disclosure, that Darren's going to be on the call later in the year, new returns targets -- there has been a lot of positive change in the company this year, in my opinion. What is the company trying to convey from the size of the dividend increase, if anything? If there is a new underlying message from this change, or some of the other changes we've seen this year, what is it?

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

Doug, thanks for the question. Simply put, we're keeping very focused on our core mission, to grow shareholder value. There is an intense focus by the corporation on value growth. If you think about our capital allocation approach, fundamentally we said one of the first priorities is growing shareholder value and distributing that success to our shareholders through our dividend. You've seen us, for 36 consecutive years, continue to grow that dividend.

When you look at the board's decision earlier this week, it was underpinned by the confidence that we have in our business plan. We made a decision, given a number of factors that coalesced, to be much clearer in terms of where we saw that value growth potential. Frankly, we believe that the investment community did not have a very good understanding of what our value growth potential was. We believe it was important to make that much clearer. Every one of the senior leadership that are running these businesses are committed to delivering that value potential.

Now, a key aspect of that is making sure that we are being very thoughtful and selective in growing that investment program so it's going to generate that accretive value. Ultimately, all these steps are around the simple message of value growth and making sure that is clearly understood by the investment community as to where we're going, and that we think ultimately it's differentiated by our technology, the integration of our businesses that add additional value that we believe is sustainable. As we go through this year and into next year, and you see us delivering on those expectations, ultimately people are going to have a better understand of the full scope and potential of this corporation, notably, from the integration of our three world class businesses.

Doug Todd Terreson -- Evercore ISI -- Analyst

Okay. Your tone underscores your enthusiasm toward the new value proposition. That's a good thing. What was the earnings impact from the gains on asset sales in the quarter? If you have specificity outside of Scarborough, which I think you mentioned, that would be appreciated, too.

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

Yeah. If you look at -- I'll give you a couple of comparisons for perspective. If you look at the quarter-on-quarter impact from earnings, it was about $180 million. Most of that was in the [audio cuts out]. Sequentially, it was a negative impact of about $130 million -- sequentially being versus the fourth quarter of 2017. Most of that negative impact was in our Downstream business.

Doug Todd Terreson -- Evercore ISI -- Analyst

Okay. Thanks a lot, Jeff.

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

The key aspects -- just a little bit more, Doug -- I mentioned Scarborough and then I mentioned some marketing and distribution assets in South America. I also mentioned the European assets, primarily retail assets. Okay?

Doug Todd Terreson -- Evercore ISI -- Analyst

Okay. Thank you.

Operator

We'll go next to Blake Fernandez with Scotia Howard Weil.

Blake Fernandez -- Scotia Howard Weil -- Analyst

Good morning. I know you ran through with Sam pretty good detail on the Downstream. But I wanted to ask you more specifically on the upcoming IMO changes in 2020. There's an awful lot of optimism among your independent refining peers, and I didn't know if Exxon had any view -- do you share in the same kind of enthusiasm as far as what that's going to do to demand and some of the heavy oil discounts. I just didn't know of the company had a view.

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

Yeah. Good question. If you think about our investments, they're all imbedded in our deep understanding of the energy markets, that's really informed by our energy outlook. That's why we do it, to get down into the very deep insights that guide our business strategy and investment plans going forward. This is one of those factors, how policy ultimately will impact the energy system and the products ultimately that society will need.

We've been watching this closely for some time. You have seen that we've made a number of strategic investments, notably in places like our European assets with Antwerp and Rotterdam. We're putting the delayed coker in Antwerp, as I said. Rotterdam, we're putting the hydrocracker in. That's going to take us out of the lower value products like marine fuel oil, into higher value distillates like ultra-low sulfur diesel, as well as grow Group 2 lubricant base stocks.

When you think about IMO 2020, specifically, we want to be positioned to offer a suite of options for the marine industry. We're going to be positioned to provide things like low sulfur blends, low sulfur marine gas oil, LNG capability, and also high sulfur fuels for ships with scrubbers. One of the advantages, in addition to these investments we make in Europe, is that we have a fairly comprehensive complex of refinery network in the US Gulf Coast that will provide these products as well.

In short, I'd just say that we are providing a lot of optionality and we are very well positioned to address this change in sulfur specs, as well as a number of other changes on the horizon.

Blake Fernandez -- Scotia Howard Weil -- Analyst

Understood. I can't believe buybacks haven't come up yet, but this quarter, kind of rewinding last year. First quarter seems to be fairly elevated as far as the requirement to offset dilution. I think you have $425 million. I'm trying to confirm that that number should theoretically roll off here throughout the year? And then, I didn't know if there were any triggering points -- debts reduced. You have free cash flow. Is there anything else you need to see in order to get the buyback program up and running over and above just dilution.

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

Let me make sure you understand the number I talked about in the first quarter. The $425 million was anti-diluted purchase associated with our benefit plans and programs. That usually happens in the first quarter of the year. If you think about the buybacks -- and I certainly understand the interest around buybacks -- simply put, buybacks remain on the table. The first priority is to be true to this core mission I talked about previously, and that is growing shareholder value. If we have opportunities that will provide accretive value investment opportunities, that's where the dollar will go. We are intensely focused on value growth.

Now, we do recognize the importance of distributing value to our shareholders, and we generally do that as a priority through our cash dividend. I think we've shown our commitment to reliably grow the dividend. It really does demonstrate the competence the corporation has in its business. But, as you think about the buyback, we continue to think about it quarterly and we think about what is the current financial position of the company. I'd say it's very strong.

Second, we look at what our investment and dividend requirements are. And then, we think about the near-term business outlook and the fundamentals, and what we think we're going to need in the near term in terms of additional cash for our investment program or debt maturity. And all of those go into a view on whether we want to start buying back shares again in a sustainable way.

I'll just highlight for everybody -- remember, since the merger of Exxon and Mobil, we have bought back about 40% of the shares outstanding. So, it has been a key part of our total distributions and it will continue to be one of the option that we'll consider. But, first and foremost, reliably grow the dividend. And then, second, accretively invest in our business. And then we'll think about how to use that extra cash. Does that help, Blake?

Blake Fernandez -- Scotia Howard Weil -- Analyst

Thank you.

Operator

We'll go next to Guy Baber with Simmons & Co.

Guy Baber -- Simmons & Co. -- Analyst

Good morning. I wanted to talk Permian midstream logistics and strategy a little bit, especially as it's such an important growth driver for you all. We've seen differentials widening out in the Permian for oil and for gas, and potentially widening out again later this year for some time for oil as those pipes get filled. Can you just help us to understand how your Permian crude is priced? How much exposure do you have to Midland pricing? How much do you move to higher priced markets? And then, maybe just an update on where you stand regarding some of the midstream capital investment opportunities that you've discussed and the strategy to just maximize the value of your product there -- and then I have a follow-up.

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

I'm happy you brought this one up. Remember, the fundamental strategy that we've taken within our business is this value chain perspective. Permian is an outstanding example where we've built what believe is an advantage position in the Permian, such that we can go ahead and develop the resource, leveraging our expertise in things like development planning, extended reach drilling, completion technology, reservoir management -- and drive the unit cost down lower than what we believe others will be able to do.

But, importantly, we have to carry that all the way to what we think as -- we have a very advantaged manufacturing footprint in the Gulf of Mexico, and thus the importance of the midstream segment. If you think about what we done, we have a good line of sight on that value chain to make sure that nothing's leaking out of there, from a value perspective, without us making a good business decision, that we shouldn't capture that value ourselves. We've done things like purchase the wind terminal. We're looking at the potential to go ahead and expand that. We entered into a joint venture with Energy Transfer Partners, or a subsidiary of Energy Transfer Partners, where we combined our pipeline assets. It gives us a broader export flexibility.

But, it's important, when we think about these things from a value chain perspective, it's all about making sure that you have a long-term view and you position yourself smartly, such that you are capitalizing on the value proposition. So, as we think about our Permian production, we have positioned not only the logistics network, but also the supply chain, to make sure we're maximizing the value proposition. You think about some of the disconnects and challenges some are having, we are clearing all of our Permian barrels. We've got ourselves lined up, that we're able to make sure that we get them into market and have the flexibility to either capture the value uplift of our manufacturing footprint or send them somewhere else via export in order to capture that value.

So, a very important example of how the integration has really provided significant value uplift for the corporation. Okay?

Guy Baber -- Simmons & Co. -- Analyst

Yep. Very helpful. One the CapEx front, understanding it's early in the year, the CapEx was up year-on-year. It was actually a little bit below our model. Can you just talk about what you're seeing globally from an inflationary or deflationary perspective as you're ramping up activity here in your key areas? And then, sorry if I missed this earlier, but in Guyana, Liza-5, was there anything incrementally share at Liza-5 at this point? How are you thinking about the size of that third FPSO as you integrate those results?

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

Let me start with the last question first. In Liza-5, we're still in early days. The well itself was within our expectations, and now we're moving into the testing program. So, there's really nothing more to share on it. We still are holding a recoverable resource of about 3.2 billion barrels. But, I will remind everybody that that excludes any additional add from Ranger and Pacora at this point. We still need to do some more delineation drilling in order to update the resource assessment.

All of that is being real time integrated into our development planning for the subsequent phases at Guyana. First phase, 120,000 barrel a day vessel. Second phase, looks like -- we haven't FID'd it yet, but it looks like it's going to be about a 220,000 barrel a day vessel. The third one, we're looking at it based on the data real time. We haven't landed on anything at this point. But, you can see what we're trying to do is get into more of this manufacturing routine like we've benefited from in the past, like in Angola -- to really get to the point where you start designing and rolling out these comparably, similarly designed facilities such that you maximize the value proposition there.

But, very exciting time for Guyana. There is a lot going on as you can appreciate, from an exploration all the way from now to planning for production. So, watch that space and we'll provide updates as we progress.

On your other question around generally the market and any inflationary pressures, clearly there are going to be certain services or specific geographic areas that there are inflationary pressures. There is a lot going on in the Gulf Coast, in the manufacturing areas, that have put pressure on craft labor. In the Permian, there is a lot of activity, and that's putting some pressure. But, it's always about making sure that you stay ahead of all of that and that you're positioning the business such that it can offset any type of pressures and, in fact, maintain the focus on structural reductions in our business. That frankly starts all the way back to how you design these projects.

But, if you think about the Permian by way of example, we continue to drive the unit cost down to our drilling efficiencies. It's all about capital efficiency, so that as you develop and produce these assets through the life, you're doing it at the lowest cost. But, there are areas that we continue to focus on. We're proactive in terms of our contract awards. We look at the total cost of ownership to identify supplier cost reduction opportunities. We leverage bidding. We have a very robust supplier relationship management program. We have the ability, because of the financial flexibility of the corporation, to accelerate and bundle equipment purchases.

So, it's all about making sure that we drive the cost down, which has historically been able to offset that inflationary pressure. Now, you may have some, in certain places, that we're working through, but by and large, it's what is the lowest life cycle cost of our assets. Is that good, Guy?

Guy Baber -- Simmons & Co. -- Analyst

That's perfect. Thanks, Jeff.

Operator

We'll go next to Paul Cheng with Barclays.

Paul Cheng -- Barclays Capital, Inc. -- Analyst

Good morning. On behalf of the investor, they all appreciate that Darren and the other management team will be coming to the call later in the year. I think that's a great step in the right direction. First, I think you have drilled a number of wells that are 12,000-15,000 feet lateral in both Bakken and Delaware several months ago. I assume that they've been producing for at least a couple of months by now. Is there any production data that you can share, what you have seen in terms of testing the limit there?

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

Let me give you an update on where we are on those. First, to remind everybody, we tried to give a view of what we saw the value was by extending the lateral lengths on these wells in the Analyst Meeting. You can always go back and refer to that. We have drilled a number of these 15,000-foot wells in the Bakken that are still early. They are producing. I would tell you that the results are meeting our expectations in terms of what we would expect in terms of the uplift. We have also drilled some in the Permian. They have not been completed. At this stage, you remember a lot of these wells are being drilled by pad. So, in order to optimize -- again, focused on capital efficiency -- they're going to come in batches.

I'll be very candid with you. We're being very careful on what information we disclose on this because we do think there is a competitor advantage here. But, I will tell you that we see the value uplift that we had portrayed in the Analyst Meeting.

Paul Cheng -- Barclays Capital, Inc. -- Analyst

Given the takeaway capacity in western Canada, it doesn't seem it's going to be resolved anytime soon. Looking at that portfolio within -- those opportunities within your portfolio, it also seems as though you have come down in terms of the pecking order or ranking. How should we look at the incremental oil sand development projects at this point from you guys? I think, up until even late last year, you guys were supposed to go ahead with a number of projects, including the Aspen and another one. Are those still being on track to be developed, or are those being put back onto the back burner?

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

Good question. As you know, we've been working the oil sands for over three decades, both in a mining and in situ perspective. Fundamentally, any new investment has to compete at the top of our investment portfolio. It has to generate an attractive return that's accretive to our financial performance and is durable in a lower price environment. We continue to identify opportunities to enhance profitability in both in situ and our mining operations. Imperial just talked about what we're doing in [audio cuts out] in terms of improving reliability. The same has been true in the in situ operations. By and large, not only optimizing the steam operations but trying to leverage the fairly deep technology work that we've been doing in our research facility and looking at how we can best apply the proprietary SA-SAGD potential that we think will not only improve recovery but also reduce costs, and importantly the environmental impact.

So, that portfolio is a fairly sizable amount of resource that we have up there. It's getting a lot of focus around applying the right technologies and capabilities in order to ensure that it competes at the top of the portfolio. I wouldn't' say that it has fallen down in the rank. It's just like every other resource we've got. We are working on it and if we come to a point at some stage that we think that the value proposition meets our objectives then we'll move forward with it. Is that good, Paul?

Paul Cheng -- Barclays Capital, Inc. -- Analyst

Yes. Were you in any way going to go ahead to extension the project without clear sight of takeaway capacity in Canada as being resolved?

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

It's very similar to the whole Permian discussion I had. We've been thinking about making sure that we have the takeaway capacity and that we've got the flexibility to run these crudes in our equity refining capacity. Staying ahead of that and making sure we've got that flexibility available. And frankly, that was the key justification in why we invested in Edmonton Rail Terminal. But, we are big supporters of making sure there's investment in infrastructure. And that has been more challenged in certain areas. But, we will continue to look forward to make sure that we are working the value chain in order to maximize that value proposition.

Paul Cheng -- Barclays Capital, Inc. -- Analyst

Alright. Thank you.

Operator

We'll go next to Roger Read with Wells Fargo.

Roger Read -- Wells Fargo Securities, LLC -- Analyst

Good morning. I'd like to follow-up a little bit on Guy's question on the Permian. I totally get that this is not anything but a planned program of development for you in midstream. But, if you were to need more pipeline capacity, should we presume that everything would be done within the joint venture with ETP or would you evaluate other options as you go forward? I'm just kind of thinking over the next several years we're going to have these periods of pipeline over capacity, pipeline under capacity, relative to production growth, and how you're looking at maybe specific routes out of the Permian for all of it, both the liquids and the gas side.

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

No, we would be evaluating all options. We would not restrict ourselves to one avenue. Remember, it's all about how we're going to maximize the value proposition. We're looking at all the different midstream options that we can consider. You may recall sometimes last year that we announced that we were looking at spending another $2 billion in the US for infrastructure investment -- things like the expansion of the link terminal and enhancing our logistics flexibility and offtake. We're considering a range of options.

Roger Read -- Wells Fargo Securities, LLC -- Analyst

Okay. I appreciate that. Looking at your rig count in the lower 48, four in the Bakken, 27 maybe going to 30 in the Permian, clearly the Permian area is set up for growth. As you think about the Bakken, with four operated rigs, is that more of a stability or is that actually also in a growth position?

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

If you look at the analyst presentation, where we showed the buildup from our US tight oil, you'll see in there that we had segmented that between the Bakken and the Permian. Through 2021-2022, if I remember right, you've got the Bakken actually growing in terms of volumes and in essence of plateaus. But, of course, we've maintained an active drilling program. The biggest buildup is coming from our Permian assets.

Operator

We'll go next to Jason Gammel with Jefferies.

Jason Gammel -- Jefferies International -- Analyst

Thanks. I realize we're not too far removed from the Analyst Meeting, but given the comments you made about the importance of integration on the US Gulf Coast with your Permian operations, and the preparations you're making for IMO, I was wondering if you could address any further progress you've made toward FID, the Beaumont light oil expansion, and the Singapore resid upgrade project -- and maybe any critical path items to actually reaching those FIDs?

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

I appreciate you asking. If you recall, in the analyst presentation, on the Permian, we showed that we were looking at significantly increasing our light oil process and capability by about 400,000 barrels a day by 2021, I think it was. A key aspect to that would be potential expansion of light crude refining capacity in North America. That is currently still being considered. No final investment decision has been made at this point. We're giving a lot of thought to a number of options. Clearly, we want to bring that to closure pretty quick. We would expect to see an FID decision sometime next year to get us on track to meet the objectives we laid out in the analyst presentation.

The Singapore resid upgrade project continues to move forward. There are a number of projects we have going on in Singapore right now. The resid upgrade is in progress and it should start up here shortly. To clarify, we're looking to come to an FID decision on that here soon.

Jason Gammel -- Jefferies International -- Analyst

On the PNG LNG expansion, are you actually actively marketing volumes from the expansion? Have you reached the informal agreements with any buyers -- HOA type of agreements?

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

Yeah. As you can appreciate, with the number of LNG projects that we're progressing forward, we have a number of efforts in progress to market those volumes. Not just the PNG, but others elsewhere. The specifics of those are confidential, but rest assured the fundamental premise we laid out in the Analyst Meeting is to move forward these projects were on the far left side of the cost of supply curve, such that they compete very well to that demand growth that we anticipate over this period out to 2040. So, very well positioned, and we are moving a number of those commercial discussion forward. Thank you, Jason.

Operator

We'll go next to Rob West with Redburn.

Robert West -- Redburn Europe Ltd. -- Analyst

Hello. I'm interested in making a couple of comments on some aspects of the results. I'm interested in your thoughts on how it looks to you and how you'd urge me to think about it. When I look at the production across the different geographies of the Upstream business, there is a lot of red in my spreadsheet of year-over-year decline, particularly in West Africa, where I see from one of your partners the investment levels going into some of those blocks in Angola. It looks like it might continue to be in decline for a while.

I'm quite excited by the long term projects you're doing and the new growth that should be coming through in a few years. And I'm quite excited that, next year when the Permian starts really inflecting -- but, in the near term, should we be expecting more year-over-year decline in the Upstream production volumes? How should we think about that?

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

Let me talk about it more generically. There are a number of levers that we pull in order to maximize profitable volumes. A key aspect of what we're doing is in the base business, where we have -- this is a depletion business. We have a very strong focus on how do you improve reliability and enhance ultimate recovery. You'll see a lot of what we invest in are very large resources that give us more flexibility to apply our technical know-how and technology to increase recovery.

So, there is a part of the organization that's focused on how you mitigate the decline by enhancing recovery and operational reliability. Then, there's another segment that is focused on accretive investment. Typically, that's what we spend a lot of time talking to. The investments that we make in these very large resources like Hebron, Sakhalin-1, Upper Zakum -- that's all focused on making sure that we bring long term value to the corporation that is durable with the volatility of commodity cycles.

Robert West -- Redburn Europe Ltd. -- Analyst

I'm deeply in favor of the value approach. But, in terms of the next few quarters, should we be expecting decline year-over-year and that's OK because the longer run growth is coming?

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

Yes. Certainly there is decline every quarter. All of these reservoirs are depleting. For 2018, we expect production to be comparable to 2017. In the second quarter, due to reduced seasonal gas demand, we expect it to be lower. As we turn the corner to the second half of the year, there are a number of things that we expect will drive our volumes upward. That would be the things I mentioned -- project activity, the tight oil activity, move into the higher gas demand period of the year, and then our ongoing conventional program. But no change to our communicated guidance that we'll be generally flat with 2017.

Robert West -- Redburn Europe Ltd. -- Analyst

Okay, thank you. That's clear. I was reflecting on the charges coming through the business, particularly the corporate line of the quarter. The tax write back for every dollar of charge has gone down. You used to get $0.35 on the dollar back and now it's $0.21. Has that triggered any cost reduction targets? Is it cutting corporate costs or some of those expenses you get a lower tax write back on?

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

Being with this company for 35 years, there is always an intense focus on optimizing our costs. It's just not in the --

Robert West -- Redburn Europe Ltd. -- Analyst

I thought you might say that.

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

It doesn't require something to trigger that mentality. That needs to be part of your DNA. That is an imperative part of a value proposition, finding ways to get more productive and to reduce the cost structure. So, rest assured that that is a focus across all aspects of our business. Thank you, Rob.

Operator

We'll go next to Pavel Molchanov with Raymond James.

Pavel Molchanov -- Raymond James & Associates -- Analyst

Thanks for taking the question. We've seen a lot of headlines about unwinding of your joint ventures with Rosneft due to the US and European sanctions. Can we get an update on the amounts of CapEx that you're investing in Russia this year and where that capital is going, given the restrictions of where you're able to invest?

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

Pavel, let me clarify this aspect and make sure that there's no misunderstanding. As it relates to resources that are covered by the sanctions, first and foremost, we have fully complied with the sanctions. There were a number of joint ventures. We had ten joint ventures that would've been covered by the sanctions. And as the US could apply those sanctions and expanded them to 2017, we chose to go ahead and withdraw them, which we initiated that process with our partners. We laid out the specific impacts it had in our 10-K. Specifically, that resulted in a write down of any expenditures that were associated with those joint ventures.

Now, separate from that, we do have other activities that are not impacted by the sanctions. By way of example, we have a very long-standing relationship, successful operation, on the East Coast of Russia, Sakhalin-1. That continues as it was previously. It has been very successful in terms of the investment program and the value proposition for both the resource owner and the co-venture partners. There's also some other joint venture relationships that we have throughout the world with Rosneft that we're pursuing.

So, I want to make sure it's clear that, as it relates to the sanctions, we are fully compliant with them. But, the rest of our business is progressing as intended.

Pavel Molchanov -- Raymond James & Associates -- Analyst

Okay. Can you share how much capital you're putting into Russia this year?

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

No, we don't have that information to share.

Pavel Molchanov -- Raymond James & Associates -- Analyst

Okay. Appreciate it.

Operator

We'll go next to Theepan Jothilingam with Exane BNP.

Theepan Jothilingam -- Exane BNP Paribas -- Analyst

Hi, Jeff. Firstly, thinking about your disposal program in the context of higher Upstream prices, I was wondering whether things change in terms of trying to increase that run rate I saw in the first quarter. It was quite reasonable and a bit ahead of that $4 billion per annum mark that you've guided to. Any thoughts there would be great. And then, just coming back to refining. Could you perhaps talk a little bit in the context of what margins you're seeing as we come through Q2 and maybe relate that also to what Exxon's seeing for global oil demand for 2018? Thank you.

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

Thanks for the question. [Audio cuts out] what I call our asset management program or divestments, we have been very focused on taking full advantage of where we think we can get incremental value on certain assets versus what we see as continued operations. It's all about making sure that we maximize the value proposition. Sometimes we don't ultimately get offers that would do that and we continue to operate those assets. We've been very careful to make sure that we don't force a divestment because we've communicated an expectation around a certain number of assets or a certain dollar value that we expect to get from it. But, rest assured -- as you saw in the first quarter, we had another $1.4 billion of gross proceeds from divestments that we will continue to pursue where we can get incremental value through the divestment program.

I think we've indicated a couple of times that we'd be very aggressive at that. But, we're not going to go ahead and walk away from value if the market's not going to offer what we think it's worth or more than that.

For the refinery margins, we don't project margins into the future. But, as we think about demand, we expect demand to be up in the second and third quarter, driven by seasonal impacts. We have to be making sure that we maximize the product value by the offerings that we have and also maintain the logistics and feedstock flexibility in order to increase the margin we'll get from our Downstream business.

And, Theepan, did you have a question about an oil demand?

Theepan Jothilingam -- Exane BNP Paribas -- Analyst

Yeah, I just wanted to get, in that context, how you see demand year-on-year. Clearly, you've got a very wide footprint globally. I just wanted to get a sense of that. Thank you.

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

Yeah. Broadly speaking, I think everybody recognizes that demand has been fairly strong the last couple of years. In fact, if you put it in the perspective of a 10-year average, it's been in excess of the 10-year average. Round numbers, last year's demand growth was probably in excess of 1.5 million barrels a day. It's been fairly robust. But, as you go into this year -- by the way, with that demand growth and with the supply, OPEC's objective of getting to the five-year average of OECD inventories is within reach. Recognizing we still have excess supplies versus where we were at year end 2013. That's something to continue to be mindful of, as well as the significant supply capacity that remains out there in the industry.

Going forward, we see it fairly similar to 2017 in terms of demand. That's very consistent if you go all the way back to our energy outlook. We see that oil demand has grown about seven-tenths of a percent between now and 2014 per year. It is the deep insights that we get from that demand assessment we do that really allows us to guide our business strategies and investment plans going forward. Thanks, Theepan.

Operator

At this time, there are no further questions.

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

I certainly want to thank everybody for their questions. I do want to clarify just one point to make sure my response was appropriate. There was a question about the earnings and cash sensitivity to the price of crude and we have some of this in our 10-K that you can reference. But broadly speaking, for every barrel of crude price, it relates to about $425 million of earnings and about $500 million of cash for the year.

But, going forward, I want to thank you again for your time and thoughtful questions. We always appreciate the engagement and insights you bring into the discussion. We're looking forward to continuing that engagement as we go forward. As you would appreciate, we have taken an extra effort in order to engage with the investment community at all levels of the corporation and I think that is allowing us, as we talked earlier, to provide a much clearer articulation of that value proposition that we laid out to the investment community in the Analyst Meeting. So, thank you for your time and interest and we'll be in touch in the future.

...

Operator

This does conclude today's conference. We thank you for your participation.

Duration: 100 minutes

Call participants:

Jeff J. Woodbury -- Vice President of Investor Relations and Secretary

Doug Todd Terreson -- Evercore ISI -- Analyst

Doug Leggate -- Bank of America Merrill Lynch -- Analyst

Phil Gresh -- JP Morgan Securities, LLC-- Analyst

Neil Mehta -- Goldman Sachs -- Analyst

Ryan Todd -- Deutsche Bank Securities, Inc. -- Analyst

Roger Read -- Wells Fargo Securities, LLC -- Analyst

Blake Fernandez -- Scotia Howard Weil -- Analyst

Jason Gammel -- Jefferies International -- Analyst

Paul Cheng -- Barclays Capital, Inc. -- Analyst

Theepan Jothilingam -- Exane BNP Paribas -- Analyst

Pavel Molchanov -- Raymond James & Associates -- Analyst

Robert West -- Redburn Europe Ltd. -- Analyst

Sam Margolin -- Cowen & Co. LLC -- Analyst

Guy Baber -- Simmons & Co. -- Analyst

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