Q3 2021 Chevron Corp Earnings Call

Please standby were about to begin.

Good morning. My name is Katie and I will be your conference facilitator today. Welcome to Chevron's third-quarter 2021 earnings Conference call. At this time all participants are in a listen-only mode. After the speakers' remarks, there will be a question and answer session and instructions will be given at that time, if anyone should require assistance during the conference call. Please press star and then zero on your touchtone telephone.

Please press Star and then zero on your Touchtone telephone.

As a reminder, this conference call is being recorded. I will now turn the conference over to the General manager of Investor Relations of Chevron Corporation. Mr. Roderick Green. Please go ahead.

I will now turn the conference over to the General manager of Investor Relations of Chevron Corporation. Mr. Roderick Green. Please go ahead.

Thank you Katie welcome to Chevron's third quarter earnings Conference call. I'm Roderick Green GM of Investor Relations and on the call with me today are Mark Nelson EVP of downstream and chemicals and Pierre Breber, CFO.

Green G M of Investor Relations and on the call with me today are Mark Nelson EVP of downstream and chemicals and peer Burke CFO.

I'll refer to the slides and prepared remarks that are available on chevron's website.

Before we get started please be reminded that this presentation contains estimates projections and other forward-looking statements.

Please review the cautionary statement on slide two. Now I will turn it over to Pierre.

Now I will turn it over to Pierre Thanks.

Thanks Roderick.

We reported third-quarter earnings of $6.1 billion or $3.19 per share the highest reported earnings and more than eight years. Adjusted earnings were $5.7 billion or $2.96 per share. The quarter' results included two special items after sale gains of $200 million and pension settlement costs of $81 million. A reconciliation of non-GAAP measures can be found in the appendix to this presentation.

Adjusted earnings were $5 $7 billion or $2 96 per share.

<unk> results included two special items after sale gains of $200 million and pension settlement costs of $81 million a.

A reconciliation of non-GAAP measures can be found in the appendix to this presentation.

Adjusted Rosie was greater than 13%. And we lowered our net debt ratio to below 19%. Strong operating cash flow enabled us to deliver on our financial priorities, including the resumption of share repurchases. Compared to before Covid, operating costs are down. Production is up and was much more capital efficient.

We lowered our net debt ratio to below 19%.

Strong operating cash flow enabled us to deliver on our financial priorities, including the resumption of share repurchases.

Compared to before Covid.

Operating costs are down.

Production is up and were much more capital efficient.

Cost efficiency and capital efficiency are essential to navigate commodity price cycles. Providing resilience through the low periods and leveraging upside when markets are strong.

Providing resilience through the low periods and leveraging upside when markets are strong.

This has been evident over the past several quarters and especially so in the most recent one, as we generated company record free cash flow. Higher than the strongest quarters in 2008, and '11 when oil prices were well over $100 a barrel.

Higher than the strongest quarters in 2008, and 11 when oil prices were well over $100 a barrel.

Okay.

Adjusted earnings adjusted third quarter earnings were up more than $5 billion versus last year, primarily on higher prices margins and volumes.

Compared with last quarter, adjusted third-quarter earnings were up almost $2.5 billion.

Adjusted upstream earnings increased on higher realizations and positive timing effects, primarily related to managing LNG portfolio pricing exposure.

Adjusted downstream earnings increased primarily on higher refining and marketing margins.

All other variance was positive due to lower corporate charges and the use of deferred tax assets, which previously had evaluation allowance.

Third quarter oil equivalent production increased 7% year over year. Due to the noble acquisition and lower curtailments. Partly offset by price related entitlement effects and asset sales. Now I'll pass it over to Mark.

Due to the noble acquisition and lower curtailments.

Partly offset by price related entitlement effects and asset sales.

Now I'll pass it over to Mark.

Thanks, Pierre and downstream and chemicals, we delivered our best adjusted earnings and more than four years. Demand for our product is strong with recovery of jet fuel sales expected as international travel gradually returns.

Demand for our product is strong with recovery of jet fuel sales expected as international travel gradually returns.

And while the improving market environment helps, we're focused on what we can control safe and reliable operations. Capital and cost efficiency and value chain optimization to drive higher returns.

Capital and cost efficiency and value chain optimization to drive higher returns.

Some examples of our self-help actions include using digital tools to improve planning scheduling and prioritization of maintenance activity, leveraging data analytics and asset flexibility to increase margins and adopting new technologies like robotic inspection and maintenance procedures.

During our Investor day in March I highlighted the self help is expected to drive higher returns for downstream and chemicals.

We're on track to meet that guidance with benefits already flowing to the bottom line.

Chemicals performance was also strong at CP Chem response to current market conditions, while continuing to keep the focus on longer term unit cost reduction. GS Capex reached 100% design capacity of its mixed feed cracker ahead of schedule and under budget. Specifically in the US Gulf Coast II project continues to advance towards a final investment decision in a disciplined way the position the project to earn attractive returns through the cycle.

G. As Capex reached 100% design capacity of its mixed feed cracker ahead of schedule.

Your budget.

Specifically in the U S. Gulf Coast II project continues to advance towards a final investment decision in a disciplined way the position the project to earn attractive returns through the cycle.

And the work on project at <unk>, and we continue to evaluate this project.

We believe in the long term fundamentals of chemicals. Our investment focus continues to be on the low end of the supply cost curve advantaged feedstock competitive capital and cost structure and strong project execution.

Our investment focus continues to be on the low end of the supply cost curve advantaged feedstock competitive capital and cost structure and strong project execution.

Since our energy transition spotlight, we closed the acquisition of an equity interest in American natural gas and its network of 60, CMG retail sites with our partner <unk>, enabling us to meet customers' needs beyond California.

We're also delivering first gas through our brightwork partnership at all Cal Biogas forms are now online.

We sold the first sustainable aviation fuel produced from our El Segundo refinery to Delta Airlines. And earlier this month, we announced an agreement to acquire <unk> group III base oil business and its next base brand.

Pending regulatory approval, we anticipate closing in the first quarter of 2022. The acquisition is expected to provide a capital-efficient approach to expand our base oil offerings. And coupled with nobody's renewable products positioned chevron to be the supplier of choice to meet customers' needs now and into the future, back to you, Pierre.

The acquisition is expected to provide a capital efficient approach to expand our base oil offerings a.

Coupled with nobody's renewable products positioned chevron to be the supplier of choice to meet customers' needs now and into the future back to you Pierre.

Thanks Mark.

We recently released an updated climate change resilience report, which includes a stress test of our portfolio under LEA's net zero 2050 scenario.

A new target called portfolio, a carbon intensity that includes scope, one and two and scope three emissions from the use of our products.

And Chevron net-zero 2050 aspiration for upstream scope, one and two emissions.

I encourage everyone to read our latest report available on our website.

Now looking ahead in the fourth quarter, we expect lower production due to a planned turnaround and wheatstone, which was completed last week and repairs that the Alba gas plant in Equatorial Guinea. In addition, our participation in the [inaudible] PSC in Indonesia ended in August. Production from our <unk> averaged 84000 barrels of oil equivalent year to date.

Now looking ahead in the fourth quarter, we expect lower production due to a planned turnaround and wheatstone, which was completed last week and repairs that the Alba gas plant in Equatorial Guinea. In addition, our participation in the [inaudible] PSC in Indonesia ended in August. Production from our <unk> averaged 84000 barrels of oil equivalent year to date.

In the fourth quarter, we expect lower production due to a planned turnaround and wheatstone, which was completed last week and repairs that the Alba gas plant in Equatorial Guinea.

In addition, our participation in the <unk> PSC in Indonesia ended in August production from our <unk> averaged 84000 barrels of oil equivalent year to date.

We expect earnings from JKM related spot sales out of Australia to increase around $50 million from third quarter due to fewer spot cargos as our long term customers increased deliveries heading into winter.

We're also expecting three discrete cash items, a return of capital from Angola LNG, [TCO's] first dividend in several years and a federal income tax cash refund. There are no P&L impacts from these items. During 4Q, we expect to buy back shares at the high end of our guidance range.

<unk> first dividend in several years.

Federal income tax cash refund.

There are no P&L impact from these items.

During <unk>, we expect to buy back shares at the high end of our guidance range.

Finally, we are lowering our full-year see any guidance to $12 billion to $13 billion. Primarily due to Covid related project spend deferrals into next year. Lower non-op CAPEX in the Permian. And continued capital efficiencies.

Primarily due to Covid related project spend deferrals into next year.

Lower non op capex in the Permian.

And continued capital efficiencies.

To wrap up the quarter, we continued to make progress toward our objective of higher returns lower carbon. We're more capital and cost efficient. Generated record free cash flow.

We're more capital and cost efficient.

Generated record free cash flow.

We're taking actions to lower the carbon intensity of our operations and grow lower carbon businesses. We are executing our straightforward strategy. That is expected to deliver value now and well into the future. With that, I'll turn it back over to Roderick.

We are executing our straightforward strategy.

That is expected to deliver value now and well into the future.

With that I'll turn it back over to Roderick.

That concludes our prepared remarks, we're now ready to take your questions. Please try to limit yourself to one question and one follow up. We will do our best to get to all your questions. Please. Open up the lines Katy.

Please.

Open up the lines Katy.

Thank you, if you have a question at this time. Please press star one on your Touchtone telephone. You may ask one question and follow up question. If your question has been answered or you wish to remove yourself from the queue. Please press star two, if you're listening in on speakerphone. We ask you please lift your handset before asking your question to provide optimal sound quality again, if you have a question. Please press star one on your Touchtone telephone. Our first question comes from Devin Mcdermott with Morgan Stanley.

sound quality again, if you have a question. Please press star one on your Touchtone telephone. Our first question comes from Devin Mcdermott with Morgan Stanley.

Good morning. Congrats on the great results. So my first question Pierre I think is for you, I just wanted to ask you a little bit more detail on the reduction in the capital of spending guidance for this year. It sounds like the mix of different factors. Some of the deferral of this next year some of its mix of non-op and efficiency gains. Is bridge, the Delta a little bit more detail for us and also talk about whether or not these deferrals or how these deferrals impact planned 2022 spent.

So my first question Pierre I think is for you I just wanted to ask you a little bit more detail on the reduction in the capital expense spending guidance for this year. It sounds like the mix of different factors. Some of the deferral of this next year some of its mix of non op and efficiency gains.

Bridge, the Delta a little bit more detail for us and also talk about whether or not these deferrals or how these deferrals impact planned 2022 spent.

Thanks, we lowered our CAPEX guidance to $12 billion to $13 billion, that's from our budget of $14 billion and from our revised guidance that we had in the second quarter of $13 billion. So in the last quarter what changed, while we continue to see non-op spend in the Permian and below our expectations. We did have some deferred major capital project spending tied to hurricane Ida and the Delta variant wave and then we've seen continue to see continued capital efficiency across in the Permian and across the portfolio.

Thanks, Kevin we lowered our capex guidance to $12 billion to $13 billion, that's from our budget of $14 billion and from our revised guidance that we had in the second quarter of $13 billion. So in the last quarter what changed while we continue to see non op spend in the Permian and below our expectations we did.

have some deferred major capital project spending tied to hurricane Ida and the Delta variant wave and then we've seen continue to see continued capital efficiency across in the Permian and across the portfolio.

It does not change our CAPEX guidance, our CAPEX guidance for next year and through 2025 is 15% to $17 billion, we do expect higher CAPEX in the fourth quarter and next year. The low end of that range is about a 20% increase from the midpoint of our revised guidance. So these deferrals are very manageable and again I would think from the original 14 billion dollar budget about half you can think of deferrals and half I would say is our capital efficiency and cost savings were getting the same results for less capital.

2025 is 15% to $17 billion, we do expect higher capex in the fourth quarter and next year. The low end of that range is about a 20% increase from the midpoint of our revised guidance. So these deferrals are very manageable and again I would think from the original 14 billion dollar budget about half you can.

The deferrals in half I would say is our capital efficiency and cost savings where were getting the same results at for less capital.

Got it, it makes a lot of sense and then my follow up's on cash returns. So very strong free cash flow in the quarter. Your debt target is now below the bottom end of your target range. It is good to see the increase in the cadence of the buyback and 4Q. I guess my question is what are some of the things you are looking for to further increase that buyback target back to something closer to the pre-Covid run rate?

Buyback target back to something closer to the pre Covid run rate.

As you said that in our guidance for fourth quarter is at the high end of the range. So that's a $3 billion annual rate of $750 million in the quarter.

And as I said last quarter and I'll restate now will increase the buyback range. When Chevron is net debt ratio was comfortably below 20%.

We ended third quarter with a net debt ratio a little bit under 19% down from 21% at the end of the second quarter. So we just got below 20%, but we're fast approaching a net debt level, where we could increase the buyback range further.

As a reminder, David I know you know this we intend to main our buyback for multiple years through the cycle and so we're positioning our balance sheet below our mid cycle range. So that will enable us to continue buybacks. Even if the cycle turns.

Even if the cycle turns.

Got it very helpful. It makes sense congrats again on the strong quarter.

Thanks, Kevin.

We'll take our next question from Neil Mehta with Goldman Sachs.

Yes, I just wanted to echo great results here. Pierre, I wanted to take a moment to talk about the global gas market. You spent a lot of time looking at this over the years, how do you see it playing out from here? There are a lot of moving pieces as it relates to your gas portfolio, but one would be just any thoughts around spot cargos.

And the other would be it looked like you had some timing effects in the quarter that supported earnings I would think that would unwind later on but just any modeling advice there so. A lot of moving pieces there, but your thoughts on the gas portfolio.

And timing effects in the quarter that supported earnings I would think that would unwind later.

Later on but just any modeling advice there so a lot of moving pieces there, but your thoughts on the gas portfolio.

Thanks, Neil first I'd say that we are seeing high gas prices. It does feel more cyclical than structural we've seen demand very resilient through Covid on natural gas in particular. And supply has been impacted in part by lower associated gas just a slowdown in some supply activity, so seeing demand and supply a little bit how to think it's something that we've seen in the past and we expect that markets will work, we're seeing a commodity pricing right now and we expect markets to rebalance  over time, we have a very strong natural gas business, we have a nice position in North America, Australia, Eastern med through noble energy and in Africa.

Through Covid on natural gas in particular and supply has been impacted in part by lower associated gas just a slowdown in some supply activity, so seeing demand and supply a little bit how to think it's something that we've seen in the past and we expect that markets will work, we're seeing a commodity pricing right now and we expect markets to.

over time, we have a very strong natural gas business, we have a nice position in North America, Australia, Eastern med through noble energy and in Africa.

And so we're well-positioned there's not much in the short term that we can really do to increase supply. We have position in the Haynesville and we could increase activity there, but that'll have a modest impact on a company of our size I think over the medium to longer term, we're working expansion opportunities and particularly in the eastern med and I think this is positive for signing up customers and enabling kind of the next phase of expansion there. So it's something that we're certainly well-positioned for and we're looking to expand supply into it. In terms of the quarter a couple of things, yes, we did have a trading tming effect that was it related to LNG.

this is positive for signing up customers and enabling kind of the next phase of expansion there. So it's something that we're certainly well-positioned for and we're looking to expand supply into it. In terms of the quarter a couple of things, yes, we did have a trading tming effect that was it related to LNG.

In terms of the quarter a couple of things, yes, we did have a trading.

Timing effect that was it related to LNG.

And that's really tied to how we manage our overall portfolio of pricing. So we have customer contracts that are oil-linked and JKM link and then we have various supplies and we try to match up the pricing.

And that's really tied to how we manage our overall portfolio of pricing. So we have customer contracts that are oil-linked and JKM link and then we have various supplies and we try to match up the pricing.

And in order to do that. Essentially went long some GKN paper, which clearly. It was marked to market positive in the quarter. Now that's going to be matched against some physical deliveries in future quarters. So we call that timing because we expect to see that unwind windows physical cargoes are delivered. And then the last piece of guidance we had was really on fourth-quarter earnings effects, we guided towards $50 million of increased earnings in 4Q versus 3Q from Australia, LNG spot cargos. And that's just to make the point that we are going to have the spot cargoes. We of all five trains operating the wheatstone planned turnaround is complete.

Essentially went long some GKN paper, which clearly.

It was mark to market positive in the quarter now thats going to be matched against some physical deliveries in future quarters. So we call that timing because we expect to see that unwind windows physical physical cargoes.

delivered. And then the last piece of guidance we had was really on fourth-quarter earnings effects, we guided towards $50 million of increased earnings in 4Q versus 3Q from Australia, LNG spot cargos. And that's just to make the point that we are going to have the spot cargoes. We of all five trains operating the wheatstone planned turnaround is complete.

Earnings in <unk> versus <unk> from Australia, LNG spot cargos and Thats just to make the point that we are going to have the spot cargoes. We of all five trains operating the wheatstone planned turnaround is complete.

And we will have actually more cargoes delivered in fourth quarter, when you think of contract and spot, but because it's heading into winter in most of many of our customers in the northern hemisphere their nomination seasonally pick up. Heading into the winter and so they will have higher takes under the long term contracts, which are oil linked.

Heading into the winter and so they will have higher takes under the long term contracts, which are oil linked.

And that means we will have fewer cargoes getting the higher JKM prices, so higher prices clearly in 4Q versus 3Q, figure cargos, that's a net benefit of about $50 million. We also have some exposure out of our both Angola LNG in Equatorial Guinea, and so you can think about another $50 million or so from Scott spot cargoes from those operations.

So sorry, it's a long answer to cover the full breadth of natural gas this quarter.

There's a lot of moving pieces now that's great and then. You're tracking really well on Capex this year, now I think initially 14th at 13 now it looks like as lowest 12 next year. If I remember Capex is 15 to 17 is the range that you talked about. Or is it fair to assume that the lower capital spend this year would suggest that you'd be on the lower end of that range? And any moving pieces that we should think about as you set up to '22 spend level.

<unk>.

You're tracking really well on Capex. This year now I think initially 14th at 13 now it looks like as lowest 12 next year. If I remember Capex is 15 to 17 is the range that you talked about or is it fair to assume that the lower capital spend this year would suggest that you'd be on the <unk>.

Lower end of that range and any moving pieces that we should think about as you set up to 'twenty two spend level.

You'll see us increase capital in the fourth quarter, just to get to that 12 months to $13 billion because we're at $108.1 billion through the third quarters, and then you'll see that in the Permian. Two more rigs to more completion crews a lot higher activity levels at tengiz, we're going to maintain peak manpower through the winter. And then activity tends to be backloaded. So backend loaded. So we have some project milestone payments, we have exploration wells that we'll be drilling in the fourth quarter. So you'll see an increase in fourth quarter, I think we will announce our 2022 budget in December like we normally do. It'll be within the guidance I think it is fair to say it'll be towards the low end of the guidance again, even being at the bottom of the guidance of $15 billion of organic capital. That's at least a 20% increase off the midpoint of the guidance we just gave for this year.

Two more rigs to more completion crews a lot higher activity levels at tengiz, we're going to maintain peak manpower through the winter and then activity tends to be back loaded. So backend loaded. So we have some project milestone payments, we have exploration wells that we'll be drilling in the fourth quarter. So youll see an increase.

In fourth quarter, I think we will announce our 2022 budget in December like we normally do it'll be within the guidance I think it is fair to say it'll be towards the low end of the guidance again, even being at the bottom of the guidance of $15 billion of organic capital. That's a at least a 20% increase off the midpoint of the guidance. We just gave.

So again I don't want to get ahead of that but you should expect us to see capital in the lower end of that guidance range.

Good stuff thanks, guys.

Yeah.

Thank you we will take our next question from Doug Leggate with Bank of America.

Oh. Thanks, good morning, everybody. Thanks for taking my questions. I'll ask a housekeeping question, but you've got to help me out here a little bit on the tax. The way I'm thinking about this is that there's been a lot of changes in post knowable. Your mix has changed and obviously, we've got a lot more profitability in the US with a low tax rate. So can you help me is what is going on the attack sustainable? Or was that a mix issue or was there something unusual going on? Because we saw your tax rate. We are trying to highest tax rate going forward.

Oh. Thanks, good morning, everybody. Thanks for taking my questions. I'll ask a housekeeping question, but you've got to help me out here a little bit on the tax. The way I'm thinking about this is that there's been a lot of changes in post knowable. Your mix has changed and obviously, we've got a lot more profitability in the US with a low tax rate. So can you help me is what is going on the attack sustainable? Or was that a mix issue or was there something unusual going on? Because we saw your tax rate. We are trying to highest tax rate going forward.

Well, Kevin Mark Thanks for taking my questions.

Yes.

So ask a housekeeping question, but you've got to help me out here a little bit on the tax.

The way I'm thinking about this is that there's been a lot of changes in <unk>.

Post knowable.

Your mix has changed and obviously, we've got a lot more profitability in the U S with a low tax rate. So can you help me is what is going on the attack sustainable.

It was a mix issue or was there something unusual going on because we saw your tax rate, but more of them.

We are trying to highest tax rate going forward.

The tax benefit in the third quarter, which we cited are real so this is a deferred tax asset it was acquired three knowable. At the time of closing the transaction, we put a valuation allowance against it because these tax attributes expire at certain number of years and based on projections of financial performance at that time, we thought they would expire without us being able to use them. Our financial performance is so much stronger that we actually were able to use them in the third quarter. So that reduces our taxes, both on an earnings and on a cash basis. So it is very real and it's an additional synergy from Noble and it's not something that was included in our synergy estimates. That is not something that necessarily will recur will do a review of all of our tax attributes at year-end and see again what deferred tax assets  could have value going forward based on the changing conditions, but again I would say that that was in the all other segment, it's not something that you would expect it to recur.

The tax benefit in the third quarter, which we cited.

Our real so.

This is a deferred tax asset it was acquired three knowable at the time of closing the transaction, we put a valuation allowance against it because these tax attributes have a.

Buyer at a certain number of years and based on projections of financial performance at that time, we thought they would expire without us being able to use them. Our financial performance is so much stronger that we actually were able to use them in the third quarter. So that reduces our taxes, both on an earnings and on a cash basis. So it is very real and it's an.

<unk> synergy from noble and its not something that was included in our synergy estimates that is not something that necessarily will recur will do a review of all of our tax attributes at year end and see again, what deferred tax assets.

could have value going forward based on the changing conditions, but again I would say that that was in the all other segment, it's not something that you would expect it to recur.

That's really helpful, thanks. You did quantify what a normal contribution loss guidance.

You did quantify what a normal contribution loss guidance.

Well, it is. It's the primary variance in that segment, so we talked about lower corporate charges and tax benefits.

It's the primary variance in that segment, so we talked about.

Lower corporate charges and tax benefits.

Alright got it. My follow up is really. The balance sheet issue, but. Obviously going back five years ago. You guys did. That admittedly, there's a lot of projects going on. But when you think about the cost of debt, versus the the way you think about per share dividend goes? So I'm trying to think excellent talks now about 20% to 25% the right level for them. So what is the right level for you? Given that you can obviously refinance a very good economic level. And obviously set up the buy box if you choose to.

My follow up is really.

The balance sheet issue, but.

Obviously going back five years ago.

You guys did.

That admittedly, there's a lot of projects going on.

But when you think about the.

The cost of debt, which is obviously very variable CFO.

Yeah.

Versus the the way you think about per share dividend goes so I'm trying to think excellent talks now about 20% to 25% the right level for them.

Excuse me.

Will that tenant levels, what is the right level for you.

Given that you can obviously.

Very good economic level.

Obviously.

The buy box if you choose to.

When I became CFO. I answered this question that we didn't have a hard target on our net debt ratio, but 20% to 25% is a good place for us to be through the cycle and there could be times, where we go above it for example, when we showed our stress test the only company in the industry to show stress test last year at $30 Brent for two years to give confidence to our investors that we could maintain the dividend our net debt ratio did go above 25%. So that's appropriate. We do not need to be anywhere close to where we were before with no net debt, but when prices are above mid-cycle, we should be below the low end of the range. The range. And we are we got to less than 19% now and we're fast approaching a range, where we could increase our buyback. Our buyback guidance so. It's very close to where we're at.

I answered. This question that we didn't have a hard target on our net debt ratio, but 20% to 25% is a good place for us to be through the cycle and there could be times, where we go above it for example, when we showed our stress test the only company in the industry to show stress test last year at $30 Brent for two years to give confidence to our investors that we could.

Maintain the dividend our net debt ratio did go above 25%. So that's appropriate we do not need to be anywhere close to where we were before with no net debt, but when prices are above mid cycle, we should be below the low end of the range. The range and we are we got to less than 19% now and <unk>.

Fast approaching a range, where we could increase our buyback.

Our buyback guidance so.

It's very close to where we're at.

All of the excess cash that will be generating under these conditions and we showed that at $60 even prices are well below where we're at now that we can generate $25 billion of excess cash over five years. This is cash in excess of our capital and our dividends. All of that cash will be returned to shareholders over time in the form of a rising dividend and again, our dividend is up 12% since pre-COVID-19. The biggest increase in the sector. In a buyback that's ratable and we maintained through the cycle. We bought back shares 14 of the last 18 years.

Under these conditions and we showed that at $60 even prices are well below where we're at now that we can generate $25 billion of excess cash over five years. This is cash in excess of our capital and our dividends all of that cash will be returned to shareholders over time in the form of a rising dividend and again, our dividend is up 12% since pre COVID-19.

The biggest increase in the sector.

In a buyback that's ratable and we maintained through the cycle. We bought back shares 14 of the last 18 years.

So when we set a buyback rate we intend to maintain it through the cycle that means we will maintain it when the cycle turns. And this means that we can in fact be doing it off of that for some time period and will rebalance back into the range. When we continue to buy back shares. When if and when the cycle does turn down.

When if and when the cycle does turn down.

Well, let's hope us not anytime soon because last year, we saw good skills from last year. Thanks so much fear your answers I appreciate it thanks.

Thank you Doug.

We will take our next question from Jeanine Wai with Barclays.

Hi, good morning, everyone. Thanks for taking our questions. Morning. Morning, we wanted to follow up on. Devin's question, and then I guess that question as well getting back to the buyback. Here you have already commented that you plan to maintain the buyback through multiple years through the prior cycles, which is great.

Morning.

Morning, we wanted to follow up on.

Kevin's question, and then I guess that question as well getting back to the buyback and here you have already commented that you plan to maintain the buyback through multiple years through the prior cycles, which is great.

I think we remember prior commentary that the goal is not to reduce the buyback once it started. So we wanted to just check in on that and how you think that trajectory of any buyback increases it sounds more ratable versus opportunistic. We know there is a tremendous amount of free cash flow coming your way, but also it seems like investor expectations are running alongside that versus being more reasonable and that the strip is backward dated. So we just wanted to kind of checking on that trajectory.

Patients are running alongside that versus being more reasonable and that the strip is backward dated so we just wanted to kind of checking on that trajectory.

Thanks, Janine if you look back to our history. We've never ended a buyback program at the rate that we started.

Never ended a buyback program at the rate that we started.

We tend to increase them. I think you might be right that we haven't decreased them. Look I'm not opposed to that we have a range. We're using the range right. We were in the middle of the range in the third quarter. It's the first quarter that we since we've resumed buybacks we bought back shares in the first quarter of last year pre COVID-19.

And now we're using the top of the range and as I said, we're fast approaching a net debt level, where we can increase that guidance range further. So no.

No.

Our focus is on being ratable and maintained it through the cycle. Investors, our investors, our shareholders have different views on buybacks, where we have the most common ground is do it consistently.

And do it through the cycle when times are good and when times are tougher. And so we're setting the rates at a level that we have confidence that we can maintain it through a commodity price cycle.

Okay, great. Thank you for that second question is really on the Permian and the outlook on capital allocation.

Can you just talk a little bit about what you're seeing on inventory in supply-demand and maybe how close are you to potentially accelerating in the Permian a little bit beyond what you've already laid out. And I guess on that we know that it doesn't get much attention, but could you also be thinking about increasing activity in other short cycle phase? Thank you.

On that we know that it doesn't get much attention, but could you also be thinking about increasing activity in other short cycle. Please. Thank you.

We're going to increase capital in the fourth quarter and into next year, and so that'll be in the Permian and that'll be in other locations. Again as I said, even the bottom end of our guidance range 15 billion represents at least a 20% increase from where we expect to end up this year and we're seeing that in the fourth quarter.

And we will see two additional rigs in the Permian two additional completion crews are beginning to see a non-op pickup also again that's part of the reason why we lowered our guidance non-op has been a bit below our expectations.

Non op pickup also again thats part of the reason why we lowered our guidance non op has been a bit below our expectations and.

And you can see it in other basins, we have a great portfolio with a number of short cycle investments, but we're not changing our overall CAPEX guidance range, our CAPEX guidance anticipated that we would be in a recovery mode, and they would increase overtime and we showed a five-year outlook on the Permian. That shows that we can grow production as an outcome of a very capital efficient and there also carbon-efficient development of resource that we can grow that production from 600000 barrels a day to 1 million barrels a day. So we're executing our plan there is really no change in what we're doing it's playing out the way, we expected and seeing a buildup in activity in the Permian and across other parts of our portfolio is what we had planned to do and we're going to do that in a very capital and cost-efficient way.

Recovery mode, and they would increase overtime and we showed a five year outlook on the Permian that shows that we can grow production as an outcome of a very capital efficient and Theyre also carbon efficient develop development of resource that we can grow that production from 600000 barrels a day to 1 million barrels a day. So we're executing our plan there is really no.

No change.

what we're doing it's playing out the way, we expected and seeing a buildup in activity in the Permian and across other parts of our portfolio is what we had planned to do and we're going to do that in a very capital and cost-efficient way.

Great. Thank you.

We'll take our next question from Phil Gresh with Jpmorgan.

Hey, Pierre. The first question here just. Kind of circling around the capital allocation piece, a little bit more back in March you talked about having $25 billion of excess cash or greater than 25 billion in excess cash over five years at 60. Implicitly, suggesting the dividend would be covered around 50 ish brands I believe. I'm just curious if as you progress through this year. The performance that you've seen et cetera has anything changed with that to make you think that that breakeven would be moving lower or is that still an area where you're comfortable with?

First question here just.

Kind of circling around.

The capital allocation piece, a little bit more back in March you talked about having $25 billion of excess cash are greater than 25 billion.

And excess cash over five years at 60.

Implicitly, suggesting the dividend would be covered around 50 ish brands I believe I'm just curious if as you progress through this year.

The performance that <unk> seen et cetera has anything changed with that to make you think that that breakeven would be moving lower or is that still an area where you're comfortable with.

That's an area, where we're comfortable with it just keeping oil prices constant right, we're seeing mark Nelsons downstream and chemicals group performed very well, we talked about natural gas pricing being strong both in North America, Europe and international LNG. So those things arent held constant. So if you look at this quarter as a result I think you'd see our breakeven would be a little bit lower but in terms of mid-cycle assumptions for refining margins, chemical margins, natural gas prices. And then. And all breakeven about 50 is certainly where we're at now. That of course that changes as our dividend goes up and other things over time, because it's the dividend breakeven.

That's an area, where we're comfortable with it just keeping oil prices constant right, we're seeing mark Nelsons downstream and chemicals group performed very well, we talked about natural gas pricing being strong both in North America, Europe and international LNG. So those things arent held constant. So if you look at this quarter as a result I think you'd see our breakeven would be a little bit lower but in terms of mid-cycle assumptions for refining margins, chemical margins, natural gas prices. And then. And all breakeven about 50 is certainly where we're at now. That of course that changes as our dividend goes up and other things over time, because it's the dividend breakeven.

See our breakeven would be a little bit lower but in terms of mid cycle assumptions for refining margins.

Michael margins natural gas prices.

And then.

And all breakeven about 50 is certainly where we're at now that of course that changes as our dividend goes up and other things over time, because it's the dividend breakeven.

Covering our capital and our deepened and our dividend, but that math is still intact. We are a better company than we were a few years ago. We showed that chart where costs are lower, our production is higher and were much more capital efficient, we can sustain and grow this enterprise with less capital and that helps us deliver higher returns and lower carbon.

Got it okay. And then just a follow-up question on Wheatstone, there were some reports from your partners about reserves being written down there. I just wanted to get your commentary how do you think about this.

And then just a follow up question on.

On Wheatstone there were some reports from your partners about reserves being written down there.

I just wanted to get your commentary how do you think about this that does that.

Does that mean something in terms of future capital requirements given that it's a longer cycle project? Just any commentary you have there. Thanks.

It's unrelated to Chevron. So if you recall the Wheatstone project was the first project in Australia, and maybe the World where there was a third party. The reserves, the resources came from two different joint ventures.

The reserves the resources came from two different joint ventures.

And so it was Apache at the time and now its Woodside. So it was really Woodside announcing that the fields that supply their portion of that's told through Wheatstone that those reserves have a write-down. Chevron does not have an interest in those reserves. So the field. The Chevron fields that are supply Wheatstone are not affected.

And again, it's unrelated to Chevron activity. It is only that they essentially we share the facility through them and those fields are also being processed through. Wheatstone is doing very well we had a planned turnaround. That covered a portion of third quarter and early into fourth quarter as I said it was completed last week, and we expect to have all five of our Australia trains operating this quarter. And as I said, we expect more cargos. There's a lot of focus on Jay can but of course are oil-linked contract prices will also be higher because they adjust with oil prices are higher and then they adjust with oil prices on a three to six month lag.

That covered a portion of third quarter and early into fourth quarter as I said it was completed.

Last week, and we expect to have all five of our Australia trains operating this quarter and as I said, we expect more cargos. There's a lot of focus on Jay can but of course are oil linked contract prices will also be higher because.

They adjust with oil prices are higher and then they adjust with oil prices on a three to six month lag.

Great. Thanks for the clarification on that.

Thanks, Phil.

We'll take our next question from Ryan Todd with Piper Sandler.

Great. Thanks. Maybe a high level question, if you did your energy transition. Spotlight on that a little while back you said a share of the capital budget at close to a low carbon businesses being close to 10% of the capital budget. You've seen one of your peers here in the US raised arrays there as to a similar level. As you think about the feedback that you've received since then I mean, our view was that it was a pragmatic balanced between allocation of capital towards good low carbon businesses, but not too much to kind of protect returns dilution going forward.

Maybe.

A high level question, if you did your energy transition.

Spotlight on that a little.

A little while back you said.

Share of the capital budget at close to a low carbon businesses being close to 10% of the capital budget.

<unk> seen one of your peers here in the U S raised.

Arrays, there as to a similar level.

As you think about the.

The feedback that you've received since then I mean, our view was that it was it was a pragmatic balanced between allocation of capital towards.

good low carbon businesses, but not too much to kind of protect returns dilution going forward.

Is 10% of the budget as you've seen the feedback over the last couple of months give you that at 10% of the budgeted enough?

Or do you think that you're going to be something where you're going to see increasing pressure to kind of creep that higher going forward?

That's going to be something where you're going to see increasing pressure to to kind of creep that higher.

Going forward.

I'll start and then I'll ask Mark to talk a little bit about some of our renewable fuels activities in his portfolio. We have good shareholder support and alignment for our strategy and objectives of higher returns lower carbon. That's both lowering the carbon intensity of our traditional operations and then growing low carbon businesses that leverage our strengths our capabilities, assets and customer relationships and they target the sector that cannot be easily electrify the hard to abate sectors. So this is things like air travel industrial emissions, heavy-duty transport. The $10 billion of capital is connected to some pretty ambitious targets that go out to 2030. So 150000 tons per annum of hydrogen 25 million tons per year of carbon capture and storage. That's all consistent with that capital guidance. So we are more in the execution mode and getting it done versus let's say competing on Capex targets, it's not easy to do, these are ambitious targets.

Some of our renewable fuels activities in his portfolio, we have good shareholder support and alignment for our strategy and objectives of higher returns lower carbon that's both lowering the carbon intensity of our traditional operations and then growing low carbon businesses that leverage our strengths our capabilities assets and customer relationships and they target the sector.

That cannot be easily easily electrify the hard to abate sectors. So this is things like air travel industrial emissions heavy duty transport the $10 billion of capital.

Is connected to some pretty ambitious targets that go out to 2030.

No.

150000 tons per annum of hydrogen 25 million tons per year of carbon capture and storage. That's all consistent with that capital guidance. So we are more in the execution mode and getting it done versus let's say competing on on Capex targets, it's not easy to do these are ambitious targets.

They have challenges, lots of opportunities, but let me ask Mark to talk a bit about his portion of that on renewable fuels.

Thanks for the question. I could use a real tangible example, you think about our El Segundo refinery and our diesel Hydro Treater conversion. We've said a few things are really important to us when it comes to renewable diesel. We've said that the ability to sell it at the appropriate margin, the ability to have the right kind of feedstocks and the ability to be capital efficient as critical for us to be successful. In southern California, and they're also going to refinery are an example of all of that. We've already increased our sales.

The ability to sell it at the appropriate margin the ability to have the right kind of feedstocks and the ability to be capital efficient as critical for us to be successful in southern California, and they're also going to refinery are an example of all of that we've we've already increased our sales.

We're getting close to 40%, but let's say over 30% of renewable and biodiesel in southern California. We have our <unk> joint venture, where we're working towards definitive agreements as we speak and yet they're already supplying us at the El Segundo refinery. And finally, and perhaps most importantly capital efficiency, we indicated in our energy transition spotlight.

We have our <unk> joint venture, where we're working towards definitive agreements as we as we speak and yet they're already supplying us at the El Segundo refinery and finally, and perhaps most importantly capital efficiency, we indicated in our energy transition spotlight.

We expect to be a leader in the capital conversion of particular hydro processing units in our system. And we believe we can do that for less than a dollar per gallon of annual capacity and that's including any pretreatment requirements. So that gives us the ability to produce both renewable diesel and conventional diesel just with the catalyst change if that's necessary.

Capital conversion of particular hydro processing units in our system and we believe we can do that for less than a dollar per gallon of annual capacity and thats, including any pretreatment requirements. So that gives us the ability to produce both renewable diesel and conventional diesel just with the catalyst change if that's necessary.

So when you step back and you think about that work that's been done initially at El Segundo, where we did our co-processing investment for very very little money, we were able to test tanking and piping and metallurgy needs and now we are working towards a full conversion of that diesel hydrotreater here by the end of next year. That won't be easy, but the team is working really hard on it making very good progress and that would be 100% renewable diesel capacity and over 10000 barrels a day. Thanks for the question, Ryan.

Progress and that would be 100% renewable diesel capacity and over 10000 barrels a day. Thanks for the question Ryan.

Great. Thanks, Marc maybe a follow up on some of your comments earlier you mentioned, when you were talking about gas markets and you mentioned the eastern med opportunities, we haven't talked about that much in a little while. In your conversations with potential buyers of that gas in the basin in the past when it was operated by noble. It was there was talk of everything between European targets to pipelines, to Egypt, to floating LNG at all sorts of opportunities. Any thoughts on what may look like it makes the most sense there in the eastern med and opportunities for whether it's short term debottlenecking and opportunity there versus longer term project development.

A follow up on some of your comments earlier you mentioned when you were talking about gas markets and you mentioned the eastern med.

Opportunities, we haven't talked about that much in a little while.

Okay.

In your conversations with potential.

Buyers of that gas in the basin in the past.

When it was when it was operated by noble. It was there was talk of everything between European targets to.

Pipelines to Egypt to floating LNG at all sorts of opportunities.

Any thoughts on.

What what May look like it makes the most sense there in the eastern med.

Opportunities for whether it's <unk>.

Short term debottlenecking and opportunity there versus longer term project development.

All options are still on the table, Ryan and it's commercially sensitive so I don't want to show our hand in any way I mean, the point is that this is a great resource, there some very low-cost expansions that can be done and there's some larger expenses that can be done over time. What's really changed is that was in a geography that a year ago looked oversupplied for natural gas and now it looks much tighter and so as you know natural gas business internationally is really dependent on getting customers to sign up. And I think customers are more motivated now and look it's probably overdone as I said earlier, we expect the markets to correct.

So our hand in any way I mean, the point is that this is a great resource theres. Some very low cost expansions that can be done and there's some larger expenses that can be done over time, what's really changed is that was in a geography that a year ago looked oversupplied for natural gas and now it looks.

Much tighter and so as you know natural gas business internationally is really dependent on getting customers.

To sign up and I think customers are more motivated now and look it's probably overdone as I said earlier, we expect the markets to correct.

But it is a better time for recipe engaging so it is a great resource and in many cases is backing out our coal. It has expansion opportunities has been free cash flow positive from the moment that we closed a knowable. So it's just a great asset and it's well-positioned now to have opportunities to grow in the future.

We closed a knowable. So it's just a great asset and it's well positioned now to have opportunities to grow in the future.

Alright, thank you.

We'll take our next question from Paul Sankey with Thank you research.

Hi, everyone. Peter if I could start with you would it be possible to try and normalize your exposure to LNG given that there's so many moving parts over the course of the past year or so? I'm just noting that you said during your comments that your spot exposure will be somewhat different in Q4 as a result of customers pulling lump sum contracts. If we could just take it a part of it and sort of normalize into 2022, 2023, where are your volumes and how much of that is going to be long term versus spot?

Youll spot exposure will be.

Somewhat different in Q4 as a result of customers pulling lump sum contracts. If we could just take it a part of it and sort of normalize into 2022 2023, where are your volumes and how much of that is going to be.

Long term versus spot if you could have a good things.

Paul will cover that more in our fourth quarter call. When we give full year guidance on a number of items.

We have a long term contract that will begin next year. So it will take are waiting too long term contracts a little bit higher again, we've been notionally around 80%, but thats something thats why we very consciously just provided guidance for this quarter as it will change a little bit next year, but we will do that on the fourth quarter call but.

Okay, if I could only once a month, but if I could just slip a quick one a few in regards to modeling to assume that we put everything into buyback in terms of free cash flow are there any other items that you would highlight.

You know maybe pension or something that we should just be aware of going into 2022, and how much we consider you'll buyback to be right.

Over time, the vast majority of the excess cash will be returned to shareholders in the form of higher dividends and the buyback. We did a one time pension supplement last quarter. It was really tied to the very low interest rates from a year ago. It sounds like a long time ago, but under the pension benefit.

Guaranty Corporation rules.

The funding requirement is fixed by on the year end interest rates and so we were.

Little bit underfunded, and therefore would have paid a little higher what's called a variable interest rate essentially higher than our cost of borrowing and so that's why we supplemented it.

Obviously, we're in a much different place in terms of interest rates now and you would expect our pension contributions to be it has they have been and we provide guidance on pension in our in our 10-Q filing so.

I would not expect anything on that and so again, if you go to our financial priorities, Paul you know them well sustain and grow the dividend is up 12% since pre COVID-19. The biggest increase in the sector. Our capital guidance is going to be up but it's no change from the guidance range and it's been a very tight guidance range and very capital efficient and lower where it was pre COVID-19.

We're going to pay down a little more debt as I said, we're fast approaching a level, where we can increase our buyback range and so then the balance is excess cash and over time. It goes to shareholders, we're not going to sweep it out each quarter because investors are very clear that they want us to maintain our buyback through the cycle.

That would mean no specials.

I think it's time for you to ask the question to Mark.

<unk>.

[laughter].

Thanks. Thanks.

Mark, a very general question, but could you talk about how capacity is changing downstream both in refining and chemicals, because I know, we're adding a lot of chemicals. Obviously, we're also shutting down a lot of downstream. Has firstly is there any way that chevron is dramatically changing as capacity and exposure downstream? And secondly, could you talk about that in the context of where you see US and global capacity? I know this could take two hours I apologize, but if you can generally say you know how global capacity has shifted in the more numbers you could give us the better.

Our U S and global capacity I know this could take two hours I apologize, but if you can generally say you know how how global capacity has shifted in the more numbers you could give us the bedroom.

Yes, Thanks Paul.

Let's start with the refining side of the business we've used.

And used margin as the as the proxy for capacity being being utilized here. We've said demand has to recover for five value products inventory has to fall into traditional ranges and then we need some degree of refinery rationalization either closures or conversions.

Throughout throughout the system. If you are in the U S. Today, I think you're seeing much of that much of that demand recovery with jet still to come and that's even with your office does not not completely open and still some restrictions in place inventory tending to find itself in traditional boundaries and starting to see some some.

Closures and or conversions in some of our markets, especially the U S West coast, which means the market could be could actually be tight on things like motor gasoline, even jet five or six years from now so you see that in the United States, If I shift to Asia.

I would say that demand recovery on jet is a little bit behind that of the U S, especially given our exposure to south East Asia inventory reduction falling into those ranges is starting to happen some of that with with China's topics, whether its exports for the for the moment, but demand catching up with refinery capacity in Asia is still still needs.

To happen and that means that we both need some.

Some rationalization as well as demand just to catch up with the capacity that's there and so my high level comment would be that in the United States. We're seeing the actions to bring refinery margins into a into balance over time getting closer to historic ranges in just half days behind that maybe in Asia and then for the pet.

<unk> side of the equation.

Pet Chem margins have had a strong run this year on the back of good demand and considerable supply disruptions, we would expect to see margins come come off as we get to the fourth quarter normal seasonal type of type of drop off but we're actually preparing for with capacity growth over the next few years, we expect that to outpace.

Demand. So we're at that part of the cycle and even in 2025, we're presuming we'll be on the lower portion of the margin cycles. So that means that there'll be a period of catch up there in regard to demand.

Demand catching capacity hope that got to your to your cheese you did thanks. So much just from a chevron point of view is there any major changes in your capacity over the next five years that you anticipate refining and chemicals.

Other than the comments, we've made about you remember it was about a decade ago that we did much of our what I'll call rationalization, meaning taking things out of our portfolio and we've highlighted or energy transition spotlight that we had this opportunity for this very capital efficient conversion of individual hydro processing units.

We will certainly do that over the next decade to get to that 100000 barrels a day of Rd Saf capacity. Thanks, Paul we're going to have to go to the next.

Thanks, Paul.

Well go next to Roger read with Wells Fargo.

Yeah.

Hey, Thank you and good morning.

Yeah.

Sure I'm going to I'm going to hit you on capital returns buybacks and balance sheet.

I'm just kidding Mark.

Good luck.

Yeah.

I would like to ask you about the group oil base III acquisition kind of how that fits in the overall structure and what we should think about there. Whether or not we've seen some stories about renewable.

Whether or not we've seen some stories about renewable.

Feedstock for group three and maybe how you see that working out over time.

Yeah. Thanks, Roger has mentioned in the prepared remarks, we're excited about the announced acquisition of <unk> group III base oil.

Business in the next base brand and the reason for that is it's a very capital efficient.

<unk>.

Acquisition of both offtake of supply.

Appropriate qualifications and the brand next based brand itself and what that does for US is it allows us to expand our offering so we're going to add that to our existing group two two plus Andover Adobe offering to have a complete offering for the base oil needs for our customers in the future and think about the Adobe brand.

We've talked about I think in the energy transition spotlight, we shared that Walmart would be.

Selling online our Halloween Pro Rs the first renewable.

Lubricant line and we've actually brought some of that forward and starting next Monday, we will have our installer base in North America, specifically, the United States and Canada in particular.

Running a whole line of Pavel.

<unk> Pro RF, so we're creating that demand for the for the renewable portion of that offering and it really gives us something where we can be that supplier of the future for our base oil customers. Thanks for the question Roger.

Yeah, absolutely and then.

If we could come back to some of the things on the Capex you referenced delays out of the Gulf of Mexico, due to the storms, which totally makes sense.

You look at the development some of the exploration I think youre looking to do out there in the next couple of years is there any change to that or any any sort of.

Change in the order projects, we should pay attention to.

No we have a steady.

Stream of projects really with anchor that has been under way well that recently went to a final investment decision in <unk>, which is coming along so youll see a very ratable development program Gulf of Mexico is.

High return low carbon asset some of the lowest carbon intensity barrels and our portfolio in the single digits.

It is a business that we've been invested in for decades have knowhow and competitive advantages.

And can find attractive investment opportunities. So it's sort of a modestly growing part of the portfolio. If you think of the biggest growth that we have going forward clearly is in the Permian, which I referred to earlier Tengiz project that we're.

Investing in and it's the project is going very well and the project will come on in a couple of years, but when you get to Gulf of Mexico, The Rockies or Colorado. A few other places are also have very attractive investment opportunities that can deliver both higher returns and lower carbon.

Thank you.

We will take our next question from Brian <unk> with RBC.

Hi, Thanks for taking my question.

Two questions. The first one was just thinking about the balance sheet because of your conservatism in the way you manage your balance sheet, you've been able to make some counter cyclical moves in our label was obviously the most recent one given we're at the high point of the cycle that could you talk about any plans to accelerate asset sales I know it is not needed for the balance sheet.

But just interested to hear whether you think there are any opportunities out there and if so all the way across upstream downstream or chemicals.

And then the second question is on Tengiz, its good to see that the dividend come through.

Are there any loan repayments due in 2022.

Finally, just a quick comment and say thanks for the PCI calculation tool, which you published it's actually quite difficult to dig into some of those figures and understand all the variances. So I appreciate the transparency there.

Well. Thank you barrage for recognizing PCI, our teams will be very happy to hear that we wanted to make a tool that was transparent where you could use it for other companies because they know comparability is of interest to investors and so it's based on again transparent reporting data and comparability and so thank you for taking <unk>.

Vantage or that I encourage others to check it out and let me just talk about <unk> because as we look back we had a very successful spring and summer campaign. There we hit our productivity targets and we achieved a lot of our milestones when we had a full workforce. So we had a delta varian wave, which caused some higher levels of isolation in the middle.

The third quarter, but we ended the quarter with a positive rates very very low and we're back to a full workforce and as I mentioned earlier, we intend to maintain a peak manpower workforce level through the winter months, we have a vaccination rates over 85% for that work for us. So we're well positioned to make a lot of <unk>.

Yes. This winter now we have to be thoughtful about it because it can get cold. There. So were sequencing the work in a way that we're saving a work that can be done indoors or in sheltered locations during the coldest.

Of the winter so no change clearly in the guidance that we provided on second quarter in terms of budget and schedule, but I wanted to give an update things are going very well in tengiz and we're looking forward to a very productive winter season there.

In terms of the dividend you're right. It's the first dividend in three years. So that's nice to see we did have a modest loan repay back that occurred.

Last quarter.

And look we will give guidance on 2022, just like with Paul's question. When we look forward. It will depend clearly also on oil prices, but that's something that will give gift.

<unk> guidance on on our four key call in terms of asset sales, yes, we acquired noble win or announced the acquisition when Brent was in the low forties and now Brent is in the low eighties and so it's a commodity business. It has cycles ups and downs and when you buy or sell.

Assets.

Timing makes a difference where you are in the cycle and of course strategic fit in all the elements. We're very very pleased with the <unk> transaction, we talked about the timing of it the first to do it.

Synergies that were double than the tax benefits that we saw this quarter end and interest cost savings. So we did tender a number of bond offerings earlier.

This month, a lot of those bonds renewable bonds again that was not included in our synergies because we weren't quite sure we could achieve that and we will save over $100 million and interest cost savings. So so knowable just keeps contributing to the.

A company that is part of the reason why we're a better company now than we were several years ago, but it's a different market. So I view it more as a seller's market than a buyers market right now and so youre seeing us modestly increase some assets that don't compete.

For capital as well in our portfolio in fact, one of them.

Our position in the Eagle Ford So that was a noble legacy position Chevron legacy was not in it. So we don't have quite the scale that we would like but again essentially buying that position at $40 and now we have it on.

On the market Thats in the public domain.

And obviously, we expect to get a much higher value than what was implied in the purchase price we have some other U S onshore assets.

Or on the market again that we feel are very attractive to a lot of industry players, but just won't compete for capital as well in our portfolio.

Thanks Raj Okay.

Thank you.

We'll take our next question from Paul Cheng with Scotiabank.

Hey, guys good morning.

Two questions from me.

First one just for Mark.

The Pasadena refinery and at that time your St.

One off because the pump.

Pumping money plus accrued a refinery.

There's quite a lot when we finally are available for sale gains.

So wanted to see with the substantial amount of the refining capacity being shot does it change the way that how you're looking at that business or that you think you already have sufficient.

Past, the PMA supplement and you really don't need to add and also in the retail.

Marketing some of your peers that have been.

Aggressive need that building that up and including in the U S and you guys have.

I'll walk that fits us for more than 10 years.

We plan to going back.

So that on the energy transition, including the EV charger and all that.

The second question, Yes, Paul.

You talk about say that.

T O.

How about the Angola LNG.

Can you give us some idea that if the current commodity prices hold.

Should we assume as of yet.

That's both in Golar LNG and the Tcl is going to pay that and any kind of sensitivity you can provide that.

If the change in oil price, how that impact on that dividend payout going to look like.

All right Paul Thank you for the questions I'll take them I guess it in reverse order I think your second question was really about retail marketing and as you know we have three.

Three world class brands, and we've taken a capital light approach to selling our branded fuels in fact, one of the metrics that we often look at is the Opus brand power rating and we continue to be well at the top of that list and what that means is the majority of our retail sites around the world that you would see our owned by retailers.

Who are specifically chosen our brand and so we have our brand our fuel and generally not our capital. We also happen to have one of the strongest retail convenience franchising offerings out there extra miles that you've probably seen in fact, I think we hit our 1000th site. This year with very very little.

Attrition and so we believe that our limited capital approach.

<unk> provides us the majority of the margin in sustainably delivers high returns and still allows us to stay connected with customers.

That offering to customers yotzei.

Excuse me.

Charging stations in seven countries around the world and we're partnering with our retailers to continue to expand that offering as customers actually need it.

Your second question was I think about the refinery portfolio in general and maybe Pasadena specifically.

We're pleased with our refining portfolio today, and it's really because of that hydro processing capacity that we have across our system. It gives us flexibility to deal with the fuels of the future and renewable fuels in particular in a very very capital efficient way specific to Pasadena again, we have an opportunity there.

The premise of the acquisition continues to hold for us and processing, our equity crude being able to supply our own service stations of the Texas, Louisiana area, and then of course, having the intermediates back and forth between.

Pascagoula in Pasadena, that's all working as we would expect and we've shared that we think theres an opportunity there to have very efficient.

Expansion of light tight oil processing capacity and we've hinted that that's going to be a hydro skimming focus we're working on that real hard and look forward to talking more about that next year. Thanks for your question pop up here and on Angola LNG. So it's in our looking ahead slide Paul We guide towards $300 million of return of capital is essentially a.

And it just kind of an accounting.

Characterization of it is return of capital. It is cash is the bottom line and in terms of guidance going forward just Angola LNG.

Does sell into the spot market essentially both on oil linked strips and.

And into Europe, Tcf are international J Cam markets. So it does have exposure exposure to international natural gas pricing $300 million would be a nice return on capital here in the fourth quarter and again.

Just like with Paul <unk> question, we will provide guidance for our full LNG portfolio on the fourth quarter call for 2022 that will include Australia, Angola, LNG NR and our interest in Equatorial Guinea, which is again, it's another asset that was acquired through noble energy. Thanks, Paul.

We'll take our next question from Manav Gupta with credit Suisse.

Hey, guys two questions I'll ask them upfront. The first one is I'd like to pick your brain on the mid cycle chemical margins here historically, we thought the mid cycle would be more like 25 cents, obviously right now youre more like 65, and even though you did say you know the margins will decline some of the bigger chemical ethylene player that's not what they're saying.

We will settle for the next two three years above the mid cycle level. So while the mid cycle going to be 25, you could still see 35 to 40. So that's the first question and the second question is you've seen you get into the on CND distribution for the first time and I'm wondering if this is associated with your strategy of developing orange.

And basically controlling the entire value chain. So you can distribute LNG that youre pretty going to produce to your distribution network.

Thanks, guys.

Got you got your questions. So first on on petrochemical margins, we indicated as we look to the longest terms, we expect pet chem demand too to continue to to grow in line with the long term GDP growth.

We believe it in kind of the next four to five years, we do see capacity growth in the next couple of years going past.

Demand, which brings us to towards the bottom portion of the margin cycle and so I think we shared in our Investor day discussions last year that we brought our view down and it's been erring on the side of conservative, perhaps but it was gonna be 20 cents per pound in regard to where we could expect those margins over time and anything above that of course, we will.

It drives us and our <unk> joint venture to make sure that we continue to work on our unit cost reductions, which they have done a very good job on and we'll continue to do going forward and so we see that that is our number looking forward and then when I get to your comment on the R&D portfolio you read it exactly correctly R. R.

Our clothes on these 60 American natural gas sites is really about us leveraging our strength when we talk about renewable natural gas, we say a couple of things, we say it leverages our strengths and bio feedstocks are really important the strengths in particular, our value chain activation and partnerships.

The two areas, where you can see this at play actually in the formal presentation would be in the the gas that's now coming from.

Cal bio from all of the farms that we have there and then our bright mark activity experiencing their first delivered gas on the 60 <unk> sites that American natural gas CMG sites with Korea that allows us to follow at the request of our customers. If you will we're trying to get the <unk> to those customers throughout.

Our portfolio and Thats, the first step in doing it and the platform for us to grow.

Thank you.

It's been up.

Thank you our last question will come from Jason <unk> with Cowen Cowen.

Yeah. Thanks for squeezing me in I may have missed it but can you just discuss the drivers of why tcf's declaring the dividend now and kind of what we should look to to assess if they'll declare it.

Next year and just some background on how we can calculate that and then.

My second question.

Just on cost inflation, what you're seeing across your projects, if it's impacting tcl at all or any of your.

Either large or sorry long cycle projects are short cycle in the Permian.

Thanks, Jason Yeah, I Should've mentioned, no tcl is paying a dividend.

It was in the plan, but it could be higher than was planned which is why we've guided to a range primarily because two things one clearly the macro environment is stronger so.

It is it produces a light oil that attracts trades to a tight discount to Brent and with the physical terms in the rest of it is generating excess cash and also we've seen at the project some real cost savings again, we've seen some deferrals.

But that that would be factored into retaining cash and tcl, but we've seen some underlying greater efficiency efficiencies and we've seen some foreign exchange benefits. There. So it's a function of it things going well both from a market environment and from an execution of the project again in terms of 22 2022, we will provide guidance.

On the fourth quarter call like we have in prior years, we've guided historically to that cash flow line, which is the difference between dividends and affiliate earnings I think we also might just give separately a range unexpected dividends from tengiz and other other major affiliates.

And then in terms of cost, we're not really seeing any cost increases.

<unk> U S onshore rigs are may be creeping up but there is still well below where they were pre COVID-19 and in general the industry is operating below capacity. So although there are pockets.

Of goods and services that we use that are tied to the general economy like steel and clearly steel is up but the majority of our costs are tied to industry specific major equipment and that's still operating below capacity. So it could increase in the future I know theres a lot of talk out there about it but what we're seeing up to date as our costs are.

Well under control.

Thanks.

I would like to thank everyone for your time today.

We appreciate your interest in Chevron and everyone's participation on today's call. Please stay safe and healthy Katie back to you.

Thank you. This concludes chevron's third quarter 2021 earnings Conference call you may now disconnect.

Okay.

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