Q3 2023 Chevron Corp Earnings Call
Okay.
Speaker 1: transcript
Speaker 1: Good morning. My name is Katie and I will be your conference facilitator today. Welcome to Chevron's third quarter 2023 earnings conference call.
Good morning, My name is Katie and I will be your conference.
Later today welcome to Chevron's third quarter 2023 earnings conference call at.
Speaker 1: transcript
Speaker 2: At this time, all participants are in a listen-only mode. After the speaker's 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 then zero on your touch-tone telephone. As a reminder, this conference call is being recorded. I will now turn the conference call over to General Manager of Investor Relations of Chevron Corporation, Mr. Jake Spearing. Please go ahead.
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 then zero on your Touchtone telephone as a reminder, this conference call is being recorded I will now turn the conference call over to general manager of Investor Relations of Chevron Corporation, Mr. Jake Spearing. Please.
Go ahead.
Speaker 2: transcript
Speaker 3: Thank you, Katie. Welcome to Chevron's third quarter 2023 earnings conference call and webcast. I'm Jake Spearing, General Manager of Investor Relations.
Thank you Katie.
Welcome to Chevron's third quarter 2023 earnings conference call and webcast I'm, Jake Spearing General manager of Investor Relations, our chairman and CEO, Mike Wirth, and CFO, Pierre bread or on the call with me today.
Speaker 2: transcript
Speaker 4: Our Chairman and CEO , Mike Worth, and CFO , Pierre Brebert, are on the call with me today.
Speaker 2: transcript
Speaker 5: We will refer to the slides and prepared remarks that are available on Chevron's web.
We will refer to the slides and prepared remarks that are available on chevron's website.
Speaker 2: transcript
Speaker 6: Before we begin, please be reminded that this presentation contains estimates, projections, and other forward looking statements.
Before we begin please be reminded that this presentation contains estimates projections and other forward looking statements.
Speaker 2: transcript
Speaker 7: Please review the cautionary statement on slide 2. Now I will turn it over to Mike. Thanks Jake. I want to start.
Please review the cautionary statement on slide two.
Now I will turn it over to Mike.
Thanks Jake.
I want to start by acknowledging the tragic events in the middle East.
Speaker 3: transcript
Speaker 8: We're deeply saddened by the loss of life and our hearts go out to those affected by the war.
We're deeply saddened by the loss of life and our Hearts go out to those affected by the war.
Speaker 3: transcript
Speaker 9: We continue to prioritize the safety and well-being of our employees and their families and the safe delivery of natural.
We continue to prioritize the safety and wellbeing of our employees and their families and.
And the safe delivery of natural gas.
Speaker 3: transcript
Speaker 10: Earlier this week, we announced that Chevron entered into a definitive agreement to acquire HESS Corp.
Earlier this week, we announced that Chevron and entered into a definitive agreement to acquire Hess Corporation.
Speaker 3: transcript
Speaker 11: We expect this transaction to close in the first half of 2024, and we look forward to providing updates in the future.
We expect this transaction to close in the first half of 2024.
We look forward to providing updates in the future.
Speaker 3: transcript
Speaker 12: Now, turning to the third quarter, we continue to make progress on our objective to safely deliver higher returns and lower carbon. By returning more than $5 billion to shareholders for the sixth consecutive quarter and delivering ROCE greater than 12% for the ninth consecutive quarter, and investing in traditional energy by closing the PDC energy acquisition and in new energies by acquiring a majority stake in a green hydrogen production and storage hub in Utah.
Now turning to the third quarter, we continue to make progress on our objective to safely deliver higher returns and lower carbon.
Returning more than $5 billion to shareholders for the sixth consecutive quarter and delivering our oce greater than 12% for the ninth consecutive quarter.
And investing in traditional energy by closing the PDC energy acquisition and.
The new energies.
We're acquiring a majority stake in a green hydrogen production and storage hub in Utah.
Speaker 3: transcript
Speaker 13: And earlier this month, we released our climate change resilience.
And earlier this month, we released our climate change resilience report.
Speaker 3: transcript
Speaker 14: details our approach, actions, and progress in reducing carbon intensity and growing new lower carbon businesses. I encourage everyone to read the report.
Which details our approach actions and progress in reducing carbon intensity and growing new lower carbon businesses.
I encourage everyone to read the report available on <unk> Dot com.
Speaker 3: transcript
Speaker 15: At TCO, base business continues to deliver good results.
At Tcl base business continues to deliver good results. The planned turnaround was completed ahead of schedule. The reservoir is performing well and the plant remains full.
Speaker 3: transcript
Speaker 16: plant turnaround was completed ahead of schedule, the reservoir is performing well and the plant remains full. We expect a higher dividend in the fourth quarter.
We expect a higher dividend in the fourth quarter.
<unk> has achieved mechanical completion at the future growth project.
Speaker 3: transcript
Speaker 17: Following slower than expected commissioning progress, we conducted an independent cost and schedule review.
Following slower than expected commissioning progress, we conducted an independent cost and schedule review.
Speaker 3: transcript
Speaker 18: We now forecast the Wellhead Pressure Management Project, which is the field conversion from high pressure to low pressure to begin startup in the first half of 2024 and to continue through two major train turnarounds.
We now forecast the wellhead pressure management project, which is the field conversion from high pressure to low pressure.
To begin startup in the first half of 2024.
And to continue through two major train of turnarounds.
Speaker 3: transcript
Speaker 19: FGP is expected to start up in the first half of 2025 and ramped a full production within three months.
<unk> is expected to startup in the first half of 2025.
And ramp to full production within three months.
Speaker 3: transcript
Speaker 20: Total project cost is expected to increase between 3 and 5.
Total project cost is expected to increase between three and 5%.
Speaker 3: transcript
Speaker 21: TCO production on a 100% basis in 2024 is forecasted to be about 50,000 barrels of oil equivalent per day lower than 2023 due to a heavier turnaround schedule and planned downtime for WPMP conversion.
CTO of production on a 100% basis in 2024 is forecasted to be about 50000 barrels of oil equivalent per day lower than 2023 due to a heavier turnaround scheduled and planned downtime for WP empty conversions.
Speaker 3: transcript
Speaker 22: BCO is expected to reach greater than 1 million barrels of oil equivalent per day in 2025 when FGP fully ramps up.
<unk> is expected to reach greater than 1 million barrels of oil equivalent per day in 2025 with FTP fully ramps up.
Speaker 3: transcript
Speaker 23: Pre-cash flow from TCO in 2025 is expected to be more than $4 billion.
Free cash flow from <unk> in 2025 is expected to be more than $4 billion.
Speaker 3: transcript
Speaker 24: Chevron's share at $60 Brent, down about $1 billion from our prior.
Chevron's share at $60, Brent down about $1 billion from our prior estimate.
Speaker 3: transcript
Speaker 25: Our focus remains on safe and reliable commissioning and startup.
Our focus remains on safe and reliable commissioning and startup.
I'll now turn it over to Pierre to discuss the financials.
Speaker 4: transcript
Speaker 26: Thanks, Mike. We delivered another quarter with strong earnings, cash flow, and ROCE.
Thanks, Mike we delivered another quarter with strong earnings cash flow and our oce.
Speaker 4: transcript
Speaker 27: This quarter's results included two special items, a one-time tax benefit of $560 million in Nigeria, and pension settlement costs of $40 million. Foreign currency benefits were $200 million in 2008,
This quarters results included two special items, a onetime tax benefit of $560 million in Nigeria.
And pension settlement costs of $40 million.
Foreign currency benefits were $285 million.
Speaker 4: transcript
Speaker 28: The appendix of this presentation contains a reconciliation of non-GAAP measures.
The appendix of this presentation contains a reconciliation of non-GAAP measures.
Speaker 4: transcript
Speaker 29: Organic capex this quarter included about $200 million for PDC legacy operations after closing in August .
Organic capex this quarter included about $200 million for PDC legacy operations after closing in August.
Speaker 4: transcript
Speaker 30: Our balance sheet remains strong, ending the quarter with a net debt ratio in the single digit.
Our balance sheet remains strong ending.
Ending the quarter with a net debt ratio in the single digits.
Speaker 4: transcript
Speaker 31: Another quarter of solid cash flow enabled us to deliver on all of our financial priorities.
Another quarter of solid cash flow enabled us to deliver on all of our financial priorities.
Speaker 4: transcript
Speaker 32: Despite restrictions during the PDC transaction, we were able to repurchase well over $3 billion to check on share.
Despite restrictions during the PTC transaction.
We were able to repurchase well over $3 billion in Chevron shares.
Speaker 4: transcript
Cash used to reduce debt was primarily related to PDC's higher cost borrowing.
Cash used to reduce debt was primarily related to pdc's higher cost borrowing.
Speaker 4: transcript
Cash balances end of the quarter near $6 billion, a little above what's needed to run our business.
Cash balances ended the quarter near $6 billion.
A little above what's needed to run our businesses.
Speaker 4: transcript
Adjusted third quarter earnings were down $5.1 billion versus the same quarter last year.
Adjusted third quarter earnings were down $5 $1 billion versus the same quarter last year.
Speaker 4: transcript
Adjusted upstream earnings were lower, mainly due to realizations and negative timing.
Adjusted upstream earnings were lower mainly due to realizations and negative timing effects.
Speaker 4: transcript
Higher unfavorable discrete tax charges and exploration expenses were partly offset by lower DDNA, Venezuela cash recoveries, and other favorable items.
Higher unfavorable discrete tax charges and exploration expenses were partly offset by lower DD&A, Venezuela cash recoveries and other favorable items.
Speaker 4: transcript
Adjust the down stream earnings decrease, primarily due to a negative swing in timing effects, and lower marketing marks.
Adjusted downstream earnings decreased primarily due to a negative swing in timing effects and lower marketing margins.
Speaker 4: transcript
Compared with the last quarter, adjusted earnings were down just over $50 million.
Compared with last quarter adjusted earnings were down just over $50 million.
Speaker 4: transcript
adjusted upstream earnings were roughly flat, as higher prices and volumes were offset by unfavorable discrete tax charges and negative timing effects due to the rise in price.
Adjusted upstream earnings were roughly flat.
Higher prices and volumes were offset by unfavorable discrete tax charges and negative timing effects due to the rise in prices.
Speaker 4: transcript
DDNA and OpEx are both higher in part due to the addition of PDC legacy assets for two months in the quarter.
DD&A and Opex were both higher in part due to the addition of PDC legacy assets for two months in the quarter.
Speaker 4: transcript
adjusted downstream earnings increased primarily due to higher refining margins, partially offset by unfavorable timing.
Adjusted downstream earnings increased primarily due to higher refining margins, partially offset by unfavorable timing effects.
Speaker 4: transcript
All other was down on unfavorable tax items and decreased interest income in line with lower cash balance.
All other was down an unfavorable tax items and decreased interest income in line with lower cash balances.
Speaker 4: transcript
Third quarter oil equivalent production was up 6% over last quarter, primarily due to two months of legacy PDC production.
Third quarter oil equivalent production was up 6% over last quarter, primarily due to two months of legacy PDC production.
Speaker 4: transcript
This was partly offset by a planned turnaround at TCO and pit stop at Gorgon.
This was partly offset by planned turnaround at Tcl and Pitstop at Gorgon.
Speaker 4: transcript
The Permian, excluding Legacy PDC, was down 2% due to lower non-operated production. Company operated production was flat with the second quarter.
The Permian, excluding legacy PDC was down 2% due to lower non operated production.
Company operated production was flat with the second quarter.
Now looking ahead.
Speaker 4: transcript
Our fourth quarter estimate for turn around and downtime includes approximately 30,000 barrels of oil equivalent per day for tomorrow.
Our fourth quarter estimate for turnarounds and downtime includes approximately 30000 barrels of oil equivalent per day for tomorrow.
Speaker 4: transcript
We anticipate affiliate dividends in the fourth quarter to be largely from TCO.
We anticipate affiliate dividends in the fourth quarter to be largely from Tcl.
Speaker 4: transcript
As a reminder, we record a 15% withholding tax on TCO dividends.
As a reminder, we recorded a 15% withholding tax on TCR dividends.
Speaker 4: transcript
Due to the pending transaction with HES, share repurchases will be restricted pursuant to SEC regulations.
Due to the pending transaction with Hess share repurchases will be restricted pursuant to SEC regulations.
Speaker 4: transcript
To have an expect Sherry purchases in the fourth quarter, to be around $3 billion plus or minus 20%.
Chevron expect share repurchases in the fourth quarter to be around $3 billion, plus or minus 20%.
Speaker 4: transcript
depending primarily on the timing of the HESS definitive proxy statement mailing.
Depending primarily on the timing of the Hess definitive proxy statement mailing.
In summary.
Speaker 4: transcript
Our actions and performance show that Chevron keeps delivering strong results.
Our actions and performance so that chevron keeps delivering strong results.
Speaker 4: transcript
The strategy that remains clear and consistent we're well positioned to deliver value to our shareholders in any environment. With that, I'll turn it back to...
So the strategy that remains clear and consistent.
We are well positioned to deliver value to our shareholders in any environment with that I'll turn it back to Jake.
Speaker 2: transcript
That concludes our prepare remarks. We are now ready to take your question.
That concludes our prepared remarks, we are now ready to take your questions.
Speaker 2: transcript
To allow for questions from more participants, we ask that you limit yourself to one question. We will do our best to get all of your questions answered.
To allow for questions from more participants we ask that you limit yourself to one question.
We will do our best to get all of your question to answer Katy. Please open the lines.
Speaker 1: transcript
Thank you. If you have a question at this time, please press star one on your touchtone telephone. To allow for questions from more participants, we ask you limit yourself to one question. If your question has been answered or you wish to remove yourself from the queue, please press star two. If you're listening on the speaker phone, we ask you please lift your hands up before asking your question to provide optimum sound quality. Again, if you have a question, please press star one on your touchtone telephone. We'll take our first question from Roger Reed with Wells Fargo.
Thank you if you have a question at this time. Please press star one on your Touchtone telephone to allow for questions from more participants. We ask you limit yourself to one question. If your question has been answered or you wish to remove yourself from the queue. Please press star two if you are listening in on the speaker phone. We ask you. Please lift your handset before asking your question to provide <unk>.
<unk> sound quality again, if you have a question. Please press star one on your Touchtone telephone.
We will take our first question from Roger read with Wells Fargo.
Yes. Thank you good morning.
Speaker 5: transcript
I was hoping we could dig into the international upstream just a little short on what we were expecting this quarter with what some of the factors were other than the ones called out the FX issue and the tax.
I was hoping we could dig into the international upstream.
A little.
Short on what we were expecting this quarter with some of the factors where other than the ones called out the FX issue and the tax benefit in Nigeria.
Speaker 3: transcript
Yeah, Roger, look, I'll let Pierre cover this in a little more detail, but I recognize this quarter was a tough one to model. And there's pretty material or significant non-cash charges. Timing effects, primarily inventory costs. We see with the rising prices, some tax reserves, charges for leading on the ban on other things, and then some lower realizations, which are mixed.
Yes Roger.
Look I'll.
I'll, let Pierre cover this in a little more detail, but theres I recognized this quarter was a tough one to model and there is pretty material.
Our significant noncash charges timing.
Timing effects, primarily inventory costs, we see the rising prices some tax reserves and charges for legal abandon that and other things and then some lower realizations, which are mix and.
Speaker 3: transcript
and the lag effect is over LNG pricing. On timing and inventory costs and particular.
The lag effect in some of our LNG pricing.
On timing and inventory costs in particular.
Speaker 3: transcript
On period to period comparisons where we had a prior period, whether it was last quarter or the same quarter of last year, where prices were coming down. And in the current period, we see prices strengthening significantly. You really get a pretty significant delta.
On period to period comparisons, where we had a prior period, whether it was last quarter and same quarter last year, where prices were coming down and then in the current period, we see prices strengthening significantly you really get a pretty significant deltas.
Speaker 4: transcript
on the way we cost inventory. And if you go back to the, I think, the first quarter of 22, we had some similar dynamics. So anyway, that's a kind of high level on the pyramid. You can talk a little bit more about the upstream, international upstream in particular. Yeah, it's a subset of what you talked to, Mike, Roger. So, you know, timing effects.
On the way, we the way we cost inventory and if you go back to the I think the first quarter of 'twenty two we had some similar dynamics.
So anyway, that's kind of a high level on the peer maybe you can talk little bit more about the upstream international upstream in particular, yes. Its a subset of what you talk to Mike Rogers, So timing effects the largest timing effects. This quarter were on cargoes on the water.
Speaker 4: transcript
The largest timing effects this quarter were on, car goes on the water, so you'll see that primarily in the international upstream, international downstream. Timing effects are in three buckets, you have paper marked to market.
So youll see that primarily in the international upstream international downstream.
Sorry, three buckets, you have paper Mark to market you have on the water inventory then you have on land inventory. So it's really cargoes on the water that drive most of the effect of cargoes that are in transit and crossover.
Speaker 4: transcript
you have on the water, inventory, and then you have on land, inventory. So it's really cargo's on the water that drive most of the effect. Cargo's that are in transit and cross over quarterly periods. And so that's what the trajectory of prices as Mike.
Orderly periods, and so thats, what the trajectory of prices as Mike indicated is really what drives that Mike talked about abandonment estimate so those will show up in depreciation and you saw that in the international upstream and then.
Speaker 4: transcript
indicated is really what drives that. Mike talked about it, bandiment estimates, so those will show up in depreciation and saw that in the international upstream. And then in LNG, you see some lag pricing. We also saw some mix between contrast.
And LNG you see some lag pricing. We also saw some mix between contract cargos and spot cargoes on LNG and on the liquid side, we saw some mix effects. So it's a bit of where the listings are relative to production in terms of tax jurisdictions. The types of products, how they how they trade in terms of discounts to Brent so.
Speaker 4: transcript
cargoes and spot cargoes on LNG and on the liquid side we saw some mix effects So it's a bit of where the lifting are relative to production in terms of texture restrictions
Speaker 4: transcript
types of products, how they trade in terms of discounts to Brent. So there were a number of items in international upstream and you could fall up Roger with Jake and cover any more details.
There were a number of items in international upstream and you could follow up Roger with Jake and cover any more details.
Speaker 5: transcript
No thanks, all sum it up as messy, I appreciate it.
No. Thanks, I'll sum it up as messy I appreciate it thanks.
Speaker 3: transcript
We get one- We'll take our next question. We get one- We'll take our next question. We'll take our next question. Every now and again. Go ahead.
We will take our quarter every now and again go ahead Katy.
Speaker 1: transcript
We'll take our next question from Josh Silverstein with UBS.
I apologize we will take our next question from Josh Silverstein with UBS.
Speaker 6: transcript
Thanks, good morning guys. On the TCO, you had mentioned that in 2025, you would have expected the cash flow to be about a billion dollars lower around four billion versus five billion previously. Is that just due to the project delays or is there a higher cost estimates now in that figure lower distribution from there or is there something else that's driving us?
Hey, Thanks, good morning, guys.
The <unk> you had mentioned that in 2025, you'd expect that the cash flow to be about $1 billion lower around $4 billion versus 5 billion. Previously is that just due to the project delays or is there higher cost estimate now and that certainly lower distributions from there or is there something else that's driving that.
Speaker 3: transcript
Yeah, so Josh, there's going to be some more capital. We said three to five percent. So think about around a billion dollars of insurance share over 24 and 25. Probably a little more weighted to 24 than 25.
Yeah, So Josh.
There's going to be some more capital, we said, 3% to 3% to 5% so think about around $1 billion severance share over 24% and 25%.
Probably a little more weighted to <unk> 24 25.
Speaker 3: transcript
cash flow from the operations will be lower by about a billion and a half dollars at $60 a brand in total over the next two years.
Cash flow.
From the operations will be lower by about 1 billion and a half dollars at $60 Brent in total over the next two years.
Speaker 3: transcript
Really, due to the delay in the project, so it's equivalent to about 50,000 barrels a day in that production in each of those.
Really due to the.
The delay in the projects so that's equivalent.
To about 50000 barrels a day of net production in each of those years. So.
Speaker 3: transcript
years. So in total, you know, we expect our share of dividends to be lower by about $2.5 billion across 24 and 25.
In total.
We expect our share of dividends to be lower by about $2 $5 billion across $24 25.
Speaker 3: transcript
from the prior guidance. And so it's a combination of those things. And so we had previously guided to above 5, we're now seeing above 4. In.
<unk>.
From the prior guidance.
<unk>.
So it's a combination of those things and so we had previously guided to about five we're now seeing above four.
In.
Speaker 3: transcript
A little more of that coming from production and cash flow from ops as opposed to cash.
A little more of that coming from production.
Cash flow from ops as opposed to Capex.
Speaker 4: transcript
And the delay in WP and P doesn't have any impact really, because there was no incremental production. So the effects that a mic was talking about in production are really from the delay and the start of the FGP, which obviously adds incremental production. Thank you, Dr. Oshan.
And the delay in W. Pnp doesn't have any impact really because there was no incremental production. So the effects that Mike was talking about on production are really from the delay in the start up of the <unk>, which obviously adds incremental production.
Thank you Joseph.
Thanks.
We'll go next to Neil Mehta with Goldman Sachs.
Yes. Thank you I just wanted to stay on the Tcl question as you think about Mike the biggest gating factors to getting from here to completion around FTP skewed watched us through the landscape.
Speaker 2: transcript
Yeah, thank you. I just want to stay on the TCO question. As you think about Mike, the biggest skating factors to getting from here to completion around FGP, keep it watch us through the landscape and the key milestones that you'll be watching and we should be watching to get us conviction that the project is coming into service.
Key milestones that you'll be watching and we should be watching to give give us conviction that the projects coming into service.
Yeah. So.
No.
Speaker 3: transcript
The main message here, Neil, is
The main message here Neil is.
Speaker 3: transcript
As we completed both WPMP and then mechanical completion of FGP, and we've begun to get deep into the commissioning, we've, I think previously mentioned, we worked through some technical issues with our utility system.
As we completed.
Both WPZ and <unk> and then mechanical completion of FTP and we've begun.
To get deep into the commissioning.
I think previously mentioned, we worked through some technical issues with our utility systems.
Speaker 3: transcript
And as we did that and we saw some of these impacts, we commissioned an independent cost and schedule review off-cycle. We normally do these annually, but we didn't want to wait. And so as we saw some of this evidence that things were going slower, there was some more discovery work. We sent in an independent team to give us kind of a cold eyes assessment on cost and schedule. And I think the main thing that I would
And as we did that and we saw some of these impacts we commissioned an independent cost and schedule review off cycle. We normally do these annually, but we didn't want to wait and so as we saw some of this evidence that things were going slower there was some more discovery work, we send in an independent team to give us a kind of a call.
<unk> assessments on cost and schedule.
And.
And I think the main thing that I would distill that down to is the recommendations from that and that are embedded in our updated guidance today.
Speaker 3: transcript
to still that down to is the recommendations from that and that are embedded in our updated guidance today.
Speaker 3: transcript
reflective more conservative forecasts of commissioning progress.
Reflect a more conservative forecast of commissioning progress.
Speaker 3: transcript
And so we're assuming things will take longer than the prior plan. We're assuming we're going to have discovery items that tend to come up in complex.
And so we're assuming things will take longer than the prior plan, we're assuming we're going to have discovery items that the.
They tend to come up in complex projects like this and in response, we've implemented some significant changes in terms of how we're approaching this.
Speaker 3: transcript
projects like this and in response we've implemented some significant changes in terms of how we're approaching this.
Speaker 3: transcript
We've moved contract resources over from 3GI, which is a portion of the Future Growth Project, which is now.
We've moved contract resources over from three GI, which is a portion of the future growth project, which is now completed and fully commissioned over onto the other commissioning work. So we've added.
Speaker 3: transcript
completed and fully commissioned over on to the other commissioning work. So we've added contract resources that we've brought in experienced turnaround and operations people that are very skilled in the discovery work in managing through the restart of an operations of part of this service.
Tracked resources that we brought in experienced turnaround in operations people that are very skilled in the discovery work in managing through the restart of and operations of facilities now to help US with this and then we've also added technical resources to to address any unplanned discovery items.
Speaker 3: transcript
And then we've also added technical resources to address any unplanned discovery items.
Speaker 3: transcript
that would come up. So we've had a significant change in our approach to this. We've got a more conservative guidance here that we're issuing.
That would come up so we've had a significant change.
Change in our approach to this we've got a more conservative guy.
Guidance here that we are issuing now.
Speaker 3: transcript
And we'll continue to talk about this every quarter.
And we'll continue to talk about this every quarter.
Speaker 3: transcript
you know i guess the the main things to look at uh... here are we've got uh...
I guess.
The main things to look at here or we've got.
Speaker 3: transcript
big compressor trains that will start up for pressure boost, which is a key driver of this high pressure to low pressure conversion. These are very large machines. And so those are key models.
Big compressor trains that will startup for pressure pressure boost which is a key driver of this high pressure to low pressure conversion. These are very large machines.
And so those are key milestones.
Speaker 7: transcript
After that, we've got metering stations that are converted from high-pressure to low-pressure. And so over the next few quarters, and there's, I think, 40-some-odd metering stations as you go out through the entire field, we've got these two big turnarounds that I've talked about. All of those are really key milestones that we'll be tracking very closely, and we'll update you on those as we go forward. Thanks, Neal. We'll go next to Devon.
After that we've got metering stations that are converted for high pressure to low pressure.
So over the next few quarters and there is.
I think 40, some odd metering stations as you go out through the entire field. We've got these two big turnarounds that I've talked about all of those are really key milestones that.
We will be tracking very closely and we'll update you on those as we go forward.
Thanks Neil.
We will go next to Devin Mcdermott with Morgan Stanley.
Hey, good morning, Thanks for taking my questions.
Speaker 4: transcript
I wanted to stick with upstream, but actually ask about out.
I wanted to stick with upstream would actually ask about Venezuela.
Speaker 4: transcript
You've had some increase in production in your year given the initial sanction relief, because there's obviously been some additional sanction relief announced just here since the last quarterly call. I think it might have been on an interview this morning. You made some comments that you could see a sequential increase in production between now and year end. I just want to bring you a step back.
<unk> had some increase in production year over year, given the initial sanction relief and Theres, obviously been some additional thanks, Ron leaf announced just here soon.
Since the last quarterly call I think it might have been an interview. This morning, you made some comments that you could see a sequential increase in production between now and year end I was wondering if you just step back talk through what.
Speaker 4: transcript
talk through what impact the sanction relief has on your production profile and also willingness to invest in that region. And can you remind us how impactful Venezuela volumes are for your corporate cash flow?
Impact the sanction really has on your production profile and also willingness to invest in that region and can you remind us how impactful Venezuela volumes are for your corporate cash flow.
Speaker 3: transcript
Sure, so we have seen some action now from the U.S. government. We had been previously operating under an OFAC license, which was modified at the beginning of this year. A general license, there are some specific licenses, they go with that, that define the terms under which we can operate. The recent action in the new general license issued by OFAC
Sure so.
Yes, we have seen some action now from the U S government, we had been previously operating under.
Oh fact license, which was modified at the beginning of this year, a general license or some specific licenses because they go with that that define the terms under which we can operate.
The recent action in the new general license issued by effect.
Speaker 3: transcript
really kind of opens up operating room for others, more so than it does for us. We already, it doesn't materially change our circumstances here. And so I think what you'll see is some more people lift and crew, bring it to the U, you'll see more crew flow to the U.S.
Really kind of opens up operating room for others more so than it does for US we already had that doesn't materially change our.
Our circumstances here and so I think what you'll see is some more people lift in crude bringing it to the U S. You'll see more crude flow to the U S.
Speaker 3: transcript
I don't think the impact on our operations really is not particularly significant. We are up to something around 130,000 barrels a day from maybe 60,000 barrels a day earlier this year. We still think we can get to 150 or so by year ends. So we are seeing improvements and expect there's some more that we can see through the balance of the year. our flights. And you know, at that...
I don't think the impact on our operations really is not.
Particularly significant we are up to something around 130000 barrels a day from maybe 60000 barrels a day earlier. This year, we still think we can get to a $150 or so by year end. So we are seeing improvement and expect there. So.
The more that we can see.
Through the balance of the year end.
<unk>.
That's.
Speaker 3: transcript
Driving, you know, the cash from that is going to pay legitimate operating expenses, tax and royalties.
Driving the cash from that is going to pay legitimate operating expenses taxes and royalties.
Speaker 3: transcript
recover some you know some pass-and-dos that we are owed
Katie: Good morning, my name is Katie, and I will be your conference facilitator today. Welcome to Chevron's third quarter, 2023 earnings conference call. At this time, all participants are in a listening mode.
To recover some some past dues that we are owed and and we're really working on what I would call pretty straightforward field maintenance and things.
Katie: After the speaker's 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 then zero on your touchstone telephone. As a reminder, this conference call is being recorded.
Speaker 3: transcript
And we're really working on what I would call pretty straightforward field maintenance and things to restore production that aren't particularly long cycle or capital intensive and staying within the kind of cash that's being generated from those sales in order to fund that.
Thanks to restore production that arent, particularly long cycle or capital intensive.
Staying within the kind of cash that's being generated from those sales in order to fund that.
Speaker 3: transcript
I would expect that the posture will remain in for a while here until we see how the longer-term sanctions environment plays out the political situation, the country with elections and the like.
I would expect that's the posture, we will remain in for for a while here.
Jake Spiering: I will now turn the conference call over to General Manager of Investor Relations of Chevron. Mr. Jake Spiering, please go ahead. Thank you, Katie. Welcome to Chevron's third quarter, 2023 earnings conference call and webcast. I'm Jake Spiering, General Manager of Investor Relations. Our Chairman and CEO, Mike Worth, and CFO, Pierre Breber, are on the call with me today. We will refer to the slides and prepare remarks that are available on Chevron's website. Before we begin, please be reminded that this presentation contains estimates, projections, and other forward-looking statements. Please review the cautionary statement on slide two.
Until we see how the longer term sanctions environment plays out of the political situation in the country with elections and the like.
Speaker 3: transcript
and continue to make progress on recovery of the past dues that I mentioned. And so, not a lot of change, I guess I would say.
<unk>.
And continue to make progress on recovery of the past dues that I mentioned and so.
Not a lot of change I guess I would say from our point of view, Peter maybe you want to comment on.
Speaker 3: transcript
from our point of view, here maybe you want to comment on the cash and product.
The cash and production, yes, consistent with what Mike just said, we're continuing to do cost affiliate accounting, which means we are not we don't record production or reserves right. So that's not reflected in our numbers and we only record earnings when we receive cash and so we're not.
Speaker 2: transcript
Yeah, consistent with what Mike just said, we're continuing to do cost affiliate accounting, which means...
Speaker 2: transcript
We are not, we don't record production or reserves, right? So that's not reflected in our numbers. And we only record earnings when we receive cash.
Michael Wirth: Now, I will turn it over to Mike. Thanks, Jake.
Speaker 2: transcript
So we're not recording a proportionate chair of equity earnings, but only will we actually receive in cash.
Michael Wirth: I want to start by acknowledging the tragic events in the Middle East. We're deeply saddened by the loss of life, and our hearts go out to those affected by the war. We continue to prioritize the safety and well-being of our employees and their families and the safe delivery of natural gas.
A recording a proportionate share of equity earnings, but only what we are actually receiving cash and that's something that we'll continue to look at and as Mike said, depending on all of those potential triggers down the road elections and such we could go back to.
Speaker 2: transcript
And that's something that we'll continue to look at. And as Mike said, depending on all those potential triggers down the road, elections and such, we could go back to equity accounting at some point in time, but we have not made that decision yet. In terms of cash flow, it's about 1% of our cash flow. So it's...
Michael Wirth: Earlier this week, we announced that Chevron entered into a definitive agreement to acquire HES Corporation. We expect this transaction to close in the first half of 2024, and we look forward to providing updates in the future. Now, turning to the third quarter, we continue to make progress on our objective to safely deliver higher returns and lower carbon. By returning more than $5 billion to shareholders for the sixth consecutive quarter, and delivering ROCE greater than 12% for the ninth consecutive quarter, and investing in traditional energy by closing the PDC energy acquisition, and in new energies by acquiring a majority stake in a green hydrogen production and storage hub in Utah.
Equity accounting at some point in time, but we have not made that decision yet in terms of cash flow, it's about 1% of our cash flow. So.
It's modest of course, but it's more than it was before and so as Mike said operations. There are continuing well and we're getting a little bit of cash and we'll just see where it goes from here.
Speaker 8: transcript
Modest, of course, but it's more than it was before. And so as Mike said, operations there are continuing well and we're getting a little bit of cash and we'll just see where it goes from here. Great, thank you. Thank you.
Great. Thank you.
Thank you Devon.
We'll go next to barrage <unk> with RBC.
Speaker 9: transcript
Hi, thanks for taking my question. I'm sure you get a few more on PCI. I just want to ask about the Permian last quarter. You get some very helpful data points on well productivity this year. I was wondering particularly for the for the new Mexico side, if you had any incremental comments for your world's driven on the third quarter, because it was a pretty small sample size of of pop in the first half of the year. So any comments there would be helpful.
Alright, Thanks for taking my question.
I'm sure you get a few more on the TSA I just want to ask about the Permian last quarter. You gave some very helpful data points on well productivity this year.
I'm wondering particularly for the for the New Mexico side, if you had any incremental comments for wells drilled in the third quarter, because I think it was a pretty small sample size of of pumps in the first half the year. So any comments there would be helpful. Thank you.
Michael Wirth: In earlier this month, we released our Climate Change Resilience Report, which details our approach, actions, and progress in reducing carbon intensity, and growing new, lower carbon businesses, and encourage everyone to read the report available on Chevron.com. At TCO, base business continues to deliver good results. The plan turnaround was completed ahead of schedule. The reservoir is performing well and the plant remains full.
Speaker 3: transcript
Yeah, it might give you some kind of broader commentary on Permian performance as well. Overall production was down just a little bit, about 2% in the quarter. That was entirely true.
Yeah, and it might give you some kind of broader commentary on Permian performance as well.
<unk> production was down just a little bit about 2% in the quarter that was.
Entirely driven by non operated joint ventures, and primarily a couple of the operators had delays and putting wells online due.
Speaker 3: transcript
joint ventures and primarily a couple of the operators.
Michael Wirth: We expect a higher dividend in the fourth quarter. TCO has achieved mechanical completion at the Future Growth Project. Following slower than expected commissioning progress, we conducted an independent cost and schedule review. We now forecast the Wellhead Pressure Management Project, which is the field conversion from high pressure to low pressure, to begin startup in the first half of 2024, and to continue through two major train turnarounds. FGP is expected to start up in the first half of 2025, and ramped the full production within three months.
Speaker 3: transcript
I had delays in putting wells online due to frackets and some other factors.
Due to Frac hits and some other factors.
Speaker 3: transcript
There was also some take-away capacity on the Permian Highway, you know, constraints that resulted in some unplanned downtime. So co-op production in the third quarter was essentially flat.
There was also some takeaway capacity on the Permian Highway.
Constraints that resulted in some unplanned downtime so co op production in the third quarter was essentially flat.
Speaker 3: transcript
from the the prior quarter, which is what we had guided to
From the prior quarter, which is what we had guided to.
Speaker 3: transcript
And that's despite having some wells that were choked back due to some surface constraints. In one development area we're seeing higher than expected CO2 content in the gas.
And that's despite having some wells that were choked back due to some surface constraints.
One development area, we are seeing higher than expected to content in the gas.
Michael Wirth: Total project cost is expected to increase between three and five percent. TCO production on a 100 percent basis in 2024 is forecasted to be about 50,000 barrels of oil equivalent per day lower than 2023, due to a heavier turnaround schedule and planned down time for WPMP conversion. PCO has expected to reach greater than 1 million barrels of oil equivalent per day in 2025, when FGP fully ramps up. Pre-cash flow from TCO in 2025 is expected to be more than $4 billion. Chevron's share at $60 Brent, down about $1 billion from our prior estimate. Our focus remains on safe and reliable commissioning and startup.
Speaker 3: transcript
and others in the area are as well. So we've got third party handling and process facilities. They're constrained by that and can't handle all the CO2s. So we're choking a Wells back.
And others in the area as well so we've got third party handling and process facilities, they're constrained by that and can't handle all the <unk>. So we're choking wells back Theres, a new federal regulation.
Speaker 3: transcript
There's a new federal regulation that I won't get into the details, but it affects how we meter production and prevents co-mingling. And so we got Wells Choke back until we can get some new meters in place.
I won't get into the details, but it affects how we meter production and it prevents co mingling and so we've got wells choked back until we can get some new meters in place and then we've got some produced water limits that have come into effect in some areas. So there is a number of things.
Speaker 3: transcript
And then we've got you know some produced water limits that have come into effect in summary so there's a number of things
Speaker 3: transcript
that are not indicative of well performance but other surface realities that we're working our way through that are impacting co-op production a little bit.
That are not indicative of well performance, but other surface.
Realities that we're working our way through that are impacting co op production a little bit.
Speaker 3: transcript
In New Mexico, you're right. We got more pops in the second half of the year. We've popped about 60% of the planned wells.
In New Mexico, you are right, we got more pops in the second half of the year.
Pierre Breber: I'll now turn it over to Pierre to discuss the financials. Thanks, Mike. We delivered another quarter with strong earnings, cash flow, and ROCE.
We've talked about 60% of the planned wells in new Mexico, So the balance.
Speaker 3: transcript
uh... in new mexico so the balance you know almost half come on in the fourth quarter uh... pop performances generally been strong some of those wells are hit by the facility constraints
Almost half come on in the fourth quarter.
Pierre Breber: This quarter's results included two special items, a one-time tax benefit of $560 million in Nigeria, and pension settlement costs of $40 million. Foreign currency benefits were $285 million. The appendix of this presentation contains a reconciliation of non-gap measures. Organic CapEx's quarter included about $200 million for PDC legacy operations after closing in August. Our balance sheet remained strong, ending the quarter with a net debt ratio in the single digits. Another quarter of solid cash flow enabled us to deliver on all of our financial priorities.
<unk> performance has generally been strong some of those wells are hit by the facility constraints that I've talked about but overall well performance is aligned with our type curve expectations I think when we get to the <unk>.
Speaker 9: transcript
that I've talked about, but overall well performances aligned with our type curve expectations. I think when we get to the fourth quarter call, Buraj, we'll come back with some more detail on type curves. We'll have enough of them online, we'll have enough months that we can start to give you some of the same kind of evidence that we did last quarter to show you the performance. Okay, I'm understood. Thank you very much. Thank you.
Fourth quarter call barrage, we'll come back with some more detail on type curves. We will have enough of them online will have enough months that we can start to give you. Some of the same kind of evidence that we did last quarter to show you the performance.
Okay understood. Thank you very much.
Thank you.
We'll go next to Sam Margolin with Wolfe Research.
Hi, good morning, Thanks for taking the question Sam.
Speaker 5: transcript
Maybe we'll stick with the US and ask about just that the US upstream CAPX number. You know, there's a lot of moving parts in here. You've got incorporation of PDC. You have...
Maybe I'll stick with the U S and ask about just the U S upstream capex number.
Pierre Breber: Despite restrictions during the PDC transaction, we were able to repurchase well over $3 billion in Chevron shares. Cash used to reduce debt was primarily related to PDC's higher-cost borrowing. Cash balances ended the quarter near $6 billion, a little above what's needed to run our businesses.
There's a lot of moving parts in here you've got <unk>.
Incorporation of PTC you have.
Speaker 3: transcript
kind of gone projects and Bound War coming into play, inflation, and then timing effects that you alluded to. I guess when you think about, you know, this quarter's US upstream capital, would you characterize it just overall? Would you say it's sort of on plan or influence or like overly influenced by any one of these factors that may or may not be mitigated over time? Thank you.
Gum projects and Palomar coming into play inflation, and then timing effects that you alluded to I guess when you think about.
Pierre Breber: Adjusted third quarter earnings were down $5.1 billion versus the same quarter last year. Adjusted upstream earnings were lower mainly due to realizations and negative timing effects. Higher unfavorable discrete tax charges and exploration expenses were partly offset by lower GDNA, then as well as cash recoveries and other favorable items. Adjusted downstream earnings decreased primarily due to a negative swing in timing effects and lower marketing margins. Compared with the last quarter, adjusted earnings were down just over $50 million.
This quarter's U S upstream capital how would you characterize it just overall would you say, it's sort of on plan or like overly influenced by any one of these factors that may or may not be mitigated over time. Thank you.
Speaker 3: transcript
Yeah, Sam, you're right. I mean, we are seeing pressure in the US and I think we're probably gonna end up higher than our budget is we end the year. You know, PDC has been integrated into the factory pretty much as we expected. And so it's an increment because it wasn't in our original plan, but, you know, it's,
Yes, and Youre right I mean, we are seeing pressure in the U S and I think we will probably end up higher than our budget as we end the year.
PTC has been integrated into the factory pretty much as we expected and so it's an increment because it wasn't in our original plan but.
But it's really not a driver of this the big thing is we're seeing.
Speaker 3: transcript
really not a driver of this. The big thing is, we're seeing actually more feet drilled per rig.
Pierre Breber: Adjusted upstream earnings were roughly flat as higher prices and volumes were offset by unfavorable discrete tax charges and negative timing effects due to the rise in prices. GDNA and OptX are both higher in part due to the addition of PDC legacy assets for two months in the quarter. Adjusted downstream earnings increased primarily due to higher refining margins partially offset by unfavorable timing effects. All other was down on unfavorable tax items and decreased interest income in line with lower cash balances.
Actually.
More feet drilled per rig.
Speaker 3: transcript
uh... and more uh... completion feet uh... than we had planned and so uh... the productivity of the primary development activity has continued to improve uh... but that means we spend more money on on tubulars on sand on water then uh... we had anticipated so it's kind of a good news but it brings with it some some costs
And more completion feet than we had planned and so.
The productivity of the primary development activity has continued to improve.
But that means we spend more money on on tubular on sand on water than we had anticipated. So it's kind of a good news, but it brings with it some costs.
Speaker 3: transcript
We've got some long lead items where we're seeing supply chain realities that say we need to place long lead orders earlier.
Got some long lead items, where we're seeing supply chain realities that say, we need to place long lead orders earlier. So some things we otherwise would have ordered next year that we've actually moved.
Speaker 3: transcript
So some things we otherwise would have ordered next year that we've actually moved.
Speaker 3: transcript
ordering and initial payments on into this year, so there's some long-lead dynamics going on. And then I mentioned earlier, produced water is becoming an issue, you know, the re-injection of that and doing that in a way that...
Pierre Breber: Third quarter oil equivalent production was up 6% over last quarter, primarily due to two months of legacy PDC production. This was partly offset by plan turn around at TCO and Pidstop at Gorgon. The Permian, excluding legacy PDC, was down 2% due to lower non-operated production. Company operated production was flat with the second quarter.
Ordering and initial payments on into this year. So there's long lead dynamics going on in that I mentioned earlier produced waters, becoming.
And issue the reinjection of that and doing that.
Speaker 3: transcript
minimizes the incidences of induced seismicity. So we've got some more produced water handling infrastructure spend. So I would say those are kind of the primary drivers.
Way that minimizes the incidences of induced seismicity.
Got some more.
Produced water handling infrastructure spend so I would say those are kind of the primary drivers.
Pierre Breber: Now, looking ahead. David, our fourth quarter estimate for turnaround and downtime includes approximately 30,000 barrels of oil equivalent per day for tomorrow. We anticipate affiliate dividends in the fourth quarter to be largely from TCO. As a reminder, we record a 15% with holding tax on TCO dividends.
Speaker 3: transcript
And that's pushing the Permian to be a little hot. Gulf of Mexico is pretty well right on plan. And so what you're seeing there is really a function of PTC, which is just an increment that's been added. And then some additional costs in the Permian program that we really hadn't anticipated as we went into these.
And that's pushing the Permian to be a little hot Gulf of Mexico is pretty well right on plan and so what youre seeing there is really a function of PTC, which is just an increment. That's been added and then some additional costs in the in the Permian program that we really hadn't anticipated as we went into the year.
Speaker 8: transcript
Hey, all of a sudden, so if you take out inorganic, which is 600 million year-to-date, right, 400 million in the third quarter for, primarily for ACEs, and the 200 million that we had for PDC in the third quarter, through third quarter year-to-date, we're about 200 million above the rateable budget. Of course, you know, fourth quarter tends to be higher, so as Mike says, we'll likely end the year a little bit above budget. Thanks, Sam. Understood. Thank you.
Hey, I'll just add so if you take out inorganic which is 600 million year to date, we're at $400 million in the third quarter for primarily for <unk> and the 200 million that we had for PDC in the third quarter through third quarter year to date, we're about $200 million above the ratable budget.
Pierre Breber: Due to the pending transaction with Hess, share repurchases will be restricted, pursuant to TCO regulations. Chevron expects share repurchases in the fourth quarter to be around $3 billion plus or minus 20%, depending primarily on the timing of the Hess definitive proxy statement mailing.
Of course, you know fourth quarter tends to be higher so as Mike says, we'll likely end the year, a little bit above budget.
Pierre Breber: In summary, our actions and performance show that Chevron keeps delivering strong results. The strategy that remains clear and consistent were well positioned to deliver valued our shareholders in any environment.
Thanks, Sam I understood. Thank you.
We'll go next to Paul Cheng with Scotiabank.
Speaker 10: transcript
Thank you. Good morning. Mike, can I get back to TCO? It's a little bit of the main stage for the crossing grease and everything.
Thank you good morning.
Can I get that.
Jake Spiering: With that, I'll turn it back to Jake. That concludes our prepare remarks.
Can I go back to T C L.
SMB has been off the main stage product cost increases and everything.
Katie: We are now ready to take your questions. To allow for questions from more participants, we ask that you limit yourself to one question. We will do our best to get all of your questions answered.
Speaker 10: transcript
I guess the question is that I mean what have we learned from this process and to ensure that your future
I guess the question is that I mean, what have we learned from this core sets and to ensure that your future.
Speaker 10: transcript
Project execution will become better and not fading to try out problem that I mean it has been a
Katie: Katie, please open the lines. Thank you.
Execution will become better and not facing the entire problem that I mean, you had been any.
Katie: If you have a question at this time, please press star one on your touchtone telephone. To allow for questions from more participants, we ask you limit yourself to one question. If your question has been answered or you wish to remove yourself from the queue, please press star two.
Speaker 10: transcript
a challenging project that all along due to a number of different reasons, but quite frankly that this is a bit disappointing at this very last stage for the speed of the sleep in the schedule and also the cost increase. Thank you.
A challenging project.
All along I think to a number of different reasons, but.
Hi, great. Thanks.
Yes, a bit disappointing.
Last page for the beat up as sneaking in the schedule and also the cost increase thank you.
Katie: If you're listening on the speaker phone, we ask you please lift your hands up before asking your question to provide optimum sound quality. Again, if you have a question, please press star one on your touchtone telephone.
Speaker 3: transcript
Yeah Paul, thank you and look I share the sentiment. So I understand where you're coming from. You know, big complex project you've been along for the whole ride. So you know early on there were some engineering issues that we confronted and addressed.
Yeah, Paul Thank you and look I share.
Roger Reed: We'll take our first question from Roger Reed with Wells Fargo. Yeah, thank you. Good morning.
The sentiment.
So I understand where youre coming from.
Yes, Big complex project, you've been along for the whole ride. So you know early on there were some engineering issues that we confronted and addressed in the middle of the Big thing was the pandemic and demobilizing re mobilizing building medical facilities and a whole bunch of stuff that.
Michael Wirth: I was hoping we could dig into the international upstream just a little short on what we were expecting this quarter, with some of the factors where other than the ones called out, the affects issue and the tax benefit in Nigeria. Yeah, Roger. Look, I'll let Pierre cover this in a little more detail, but I recognize this quarter was a tough one to model, and there's pretty material or significant non-cash charges. Timing effects, primarily inventory costs.
Speaker 3: transcript
You know, in the middle of it, the big thing was the pandemic and demobilizing, remobilizing, building medical facilities and a whole bunch of stuff that, you know, that we had to manage our way through and was complex and difficult. And our folks did a great job, but it clearly impacted costs and schedule.
We had to manage our way through and it was complex and difficult and our folks did a great job, but it clearly impacted cost and schedule.
Speaker 3: transcript
And the big thing here, Paul, is as we've gotten into, and you have to remember, this is, we're redoing the power infrastructure for the entire field, which is geographically speaking, it's an enormous...
The Big thing here, Paul is as we've gotten into it and you have to remember.
This is.
We're redoing the.
Power infrastructure for the entire field, which is.
Geographically speaking, it's an enormous.
Michael Wirth: We see with the rising prices some tax reserves and charges for leading on the ban and other things, and then some lower realizations which are mixed and the lag effect and so on our LNG pricing. On timing and inventory costs in particular, on period to period comparisons where we had a prior period, whether it was last quarter or same quarter last year where prices were coming down, and in the current period we see prices strengthening significantly.
Speaker 3: transcript
space and this is infrastructure. Frankly, it goes back a lot of it to kind of Soviet days. So there's an entire new
Space and this is infrastructure frankly, it goes back a lot of it to kind of.
Soviet days, so there is an entire new.
Speaker 3: transcript
power distribution system. We're taking the entire field and taking it from high pressure production to lower pressure in the WPMP process and then building the really large sour gas injection and incremental production facilities. And it's almost a field-wide refurbishment of a lot of it and then this big increment of production. And the commissioning of that is incredibly complex.
Our distribution system, we're taking the entire field and and taking it from high pressure production to lower pressure in the WP NP process, and then building the really large.
So our gas injection in incremental production facilities and it's so it's.
Michael Wirth: You really get a pretty significant delta on the way we cost inventory. And if you go back to the, I think the first quarter of 22, we had some similar dynamics. So anyway, that's the kind of high level on the pyramid. You can talk a little more about the international upstream in particular. Yeah, it's a subset of what you talk to Mike, Roger. So, you know, timing effects. The largest timing effects this quarter were on cargoes on the water, so you'll see that primarily in the international upstream, international downstream.
It's almost a field wide.
Refurbishment of a lot of it and then this big increment of production and the commissioning of that is incredibly complex.
Speaker 3: transcript
And as we went in and did this cost and schedule review early in the relatively early commission process based on what we were seeing, what became evident is that we need to account for that complexity in our schedule. And I don't think it was fully reflected in the schedule. And in a big complex project like this, you find things. And early on we found challenges in the utilities.
And as we went into this cost and schedule review early in the relatively early in the commissioning process.
Yes based on what we were seeing.
It became evident is that we need to account for that complexity in our schedule.
And I don't think it was fully reflected in the schedule and in a big complex project like this you find things and early on we found challenges in the utility system and it cost us some time and it.
Michael Wirth: Timing effects are in three buckets. You have paper marked to market. You have on the water, inventory, and then you have online inventory. So it's really cargoes on the water that drive most of the effect. Cargoes that are in transit and cross over quarterly periods. And so that's what the trajectory of prices as Mike indicated is really what drives that. Mike talked about abandonment estimates. So those will show up in depreciation and saw that in the international upstream.
Speaker 3: transcript
and it cost us some time and it, you know, that ripples through. And so the guidance we're giving you now is really what I would say is it's more conservative because it assumes that those kinds of things are going to be encountered for the balance of the project.
And that ripples through and so the guidance. We're giving you now is really what I would say is it's more conservative because it assumes that those kinds of things are going to be encountered for the balance of the project and we need to set expectations that those are the realities that we're gonna be dealing with.
Speaker 3: transcript
And we need to set expectations that those are the realities that we're going to be dealing with. And so that's why the schedule lights, all in commissioning, its bulk construction is completed. Every all the equipment is there. And this really is the final commissioning process.
Michael Wirth: And then in LNG, you see some lag pricing. We also saw some mix between contract cargoes and spot cargoes on LNG. And on the liquid side, we saw some mix effects. So it's a bit of where the listings are relative to production in terms of tax jurisdictions, the types of products, how they trade in terms of discounts to Brent. So there were a number of items in international upstream and you could call up Roger with Jake and cover any more details. Michael's. No thanks.
And and so that's why the schedule. It's all in commissioning its bulk construction is completed every all the equipment is there and this really is the final commissioning process.
Speaker 3: transcript
If we do well, we could end up on the front end of those windows that I gave you, but we've given you those because our experience says we should not plan for that way to plan for the reality of these things. And as I mentioned in response to the earlier question by Neil, we've added incremental resources in multiple areas now to anticipate and be prepared for these kinds of challenges. And so I think the lesson is on the projects like this of which there are few.
No.
If we if we do well.
Could end up on the front end of those windows that I gave you, but we've given you those because our experience says we should not plan for that way to plan for the reality of these things and as I mentioned in response to the earlier question by Neil.
Roger Reed: I'll sum it up as messy. I appreciate it. Thanks.
We've added incremental resources in multiple areas now ought to be to anticipate and be prepared for these kinds of challenges and so I think the lesson is on the projects like this of which there are few.
Josh Silverstein: We'll take our next question. We'll take our next question from Josh Silverstein with UBS. Thanks.
Speaker 3: transcript
In the future, our commissioning plans will reflect that complexity more completely than the commissioning plans did on this.
In the future our commissioning plans will reflect that complexity more completely than the commissioning plants did on this one.
Josh Silverstein: Good morning, guys. On the TCO, you had mentioned that in 2025, you would have expected the cash load to be about a billion dollars lower, around four billion versus five billion previously. Is that just due to the project delays or is there higher cost estimates now in that figure lower distributions from there, or is there something else that's driving them? Yeah. So Josh, there's going to be some more capital. We said three to three to five percent.
Speaker 8: transcript
I'll just add some comments on affiliate dividends. So we've given a guide on fourth quarter affiliate dividends, which falls short of the full year guide that we did at the start of the year. That shortfall is not from TCO, that's from CPCAM. It's our own Phillips Chemical Company on lower pet chem margins. It's also from Angola LNG on lower TTF prices and we had assumed. We've also had some of the Angola LNG cash has come back to us at return to capital.
I'll just add some comments on affiliate dividend. So we've given a guide on fourth quarter affiliate dividends, which falls short of the full year guide that we did at the start of the year that shortfall is not from Tcl that's from CP Chem Chevron Phillips chemical company on lower Pet Chem margins. Its also from Angola, LNG on lower <unk>.
CTF prices than we had assumed we've also had some of the Angola LNG cash has come back to us and return of capital.
Josh Silverstein: So think about around a billion dollars seven share over 24 and 25, probably a little more weighted to 24 than 25. Cash flow from the operations will be lower by about a billion and a half dollars at $60 in total. Over the next two years, really due to the delay in the project. So it's equivalent to about 50,000 barrels a day in that production in each of those years. So in total, we expect our share of dividends to be lower by about two and a half billion dollars across 24 and 25 from the prior guidance.
Speaker 8: transcript
In terms of TCO, we had a $600 million dividend Chevron share in the second quarter. We can't get ahead of the TCO board on the fourth quarter, but
In terms of <unk>, we had a $600 million dividends chevron share in the second quarter.
We can't get ahead of the Tcl board on the fourth quarter, but.
Speaker 8: transcript
90% or so of the fourth quarter guide is related TCO. Reminds you last year that TCO, Diven was 1.6 billion Chevron share. All these numbers are before the withholding tax.
90% or so of the fourth quarter guide as it relates to Tcl.
Remind you last year that <unk> dividend was $1 6 billion Chevron share all of these numbers are before the withholding tax so.
Speaker 8: transcript
So we'll see a pretty significant increase in the total year TCO dividend.
We'll see a pretty significant increase in the total year PTO dividend now some of that was the.
Speaker 8: transcript
getting some of the excess cash off the balance sheet like we were talking about, but if you go back to the period prior to the start of this construction, so the period into 2015, we're seeing dividends now.
Getting some of the excess cash off the balance sheet like we are talking about but he go back to the period prior to the start of this construction so the period.
Into 2015.
Josh Silverstein: And so it's a combination of those things. And so we previously got it to above five. We're now seeing above four. A little more of that coming from production and cash flow from ops as opposed to CapEx. And the delay in WP and P doesn't have any impact really because there was no incremental production. So the effects that Mike was talking about production are really from the delay and the start of the FGP, which obviously adds incremental production. Thank you, Josh.
We're seeing dividends now or this.
Speaker 8: transcript
or this year's Divin will be similar to what we saw from that time period. So the inflection is happening after five years.
This year's dividend will be similar to what we saw.
Josh Silverstein: Thanks.
From that time period, so the inflection is happening after five years.
Speaker 8: transcript
of either not receiving dividends are in fact putting cash out, essentially having negative free cash flow. So we know production is...
Either not receiving dividends are in fact, putting cash out essentially having negative free cash flow. So we know production is going to be down next year. We showed that so you would expect dividends to reflect that a little bit and we have a little bit of an increase in capex and then we'll be heading to this more than $4 billion in 'twenty five and all of that is that that guidance is at 60. So.
Speaker 7: transcript
going to be down next year, we showed that. So you'd expect dividends to reflect that a little bit. We have a little bit of increasing CAPEX. And then we'll be heading to this more than 4 billion in 25 and all of that is, that that guidance is at 60. So we're seeing some positive news in terms of the cash low coming out, clearly disappointing news on the revised schedule, but we're going to work hard to deliver it in the front end of the range. Thanks, Paul. Thank you.
We are seeing some positive news in terms of the cash flow coming out clearly disappointing news.
Neil Mehta: We'll go next in the Elmetta with Goldman Sachs. Yeah, thank you. I just want to stay on the TCO question.
On the revised schedule, but we're going to work hard to deliver it in the front end of the range. Thanks Paul.
Michael Wirth: As you think about Mike, the biggest gating factors to getting from here to completion around FGP, keep it watch us through the landscape and the key milestones that you'll be watching. And we should be watching to give us conviction that the project is coming into service. Yeah, so the main message here, Neil, is we completed both WP and P and then mechanical completion of FGP and we've begun to get deep into the commissioning.
We'll go next to John Royall with Jpmorgan.
Hi, Good morning, Thanks for taking my question, so I have a.
Speaker 11: transcript
So I have a follow-up on the Permian XPDC. You were down 2% in 3Q, including the non-op piece. And really helpful color there from Mike on Bharadwaj's question. But it does leave a pretty big jump to hit guidance in 4Q around 10% if I calculate it right. So are you sticking with that 770 guide for the legacy piece? And if not, is there a good way to think about 4Q production in general?
A follow up on the Permian ex PTC, you were down 2% in <unk>, including the non op piece.
And really helpful color there.
From Mike Barrages question.
But just it does leave a pretty big jump to hit our guidance in <unk> around 10% if I calculate it right. So.
Are you sticking with that 770 guide for the legacy piece and if not is there a good way to think about <unk> production in general.
Michael Wirth: We've, I think previously mentioned, we worked through some technical issues with our utility systems. And as we did that and we saw some of these impacts, we commissioned an independent cost and schedule review off cycle. We normally do these annually, but we didn't want to wait. And so as we saw some of this evidence of things were going slower, there was some more discovery work. We sent in an independent team to give us kind of a cold eyes assessment on cost and schedule.
Speaker 3: transcript
Yeah, John , we're not we're not changing the guidance overall on production, excluding PDC, which would be the lower end of overall guidance. Permian production is expected to ramp up in the fourth quarter full year production expected around seven seventy seven eighty or so. If you include PDC and so yeah, the guidance is.
Yes, John we're not we're not changing the guidance.
Overall on production, excluding PDC weeks, which would be the lower end of overall guidance Permian production is expected to ramp up.
In the fourth quarter full year production expected at around <unk> 70.
780, or so if you include PVC.
Michael Wirth: And I think the main thing that I would distill that down to is the recommendations from that and that are embedded in our updated guidance today. Reflect a more conservative forecast of commissioning progress. And so we're assuming things will take longer than the prior plan. We're assuming we're going to have discovery items that tend to come up in complex projects like this. And in response, we've implemented some significant changes in terms of how we're approaching this.
And.
So yes the guidance is.
Speaker 8: transcript
is still intact for the permit go ahead pure yeah might talk about the two percent shortfall on on up which averages about point five percent he talked about also some of the surface constraints so we have worked to overcome you know that the shortfall we saw an on up in third quarter deliver that so no changing guidance but clearly uh... we have a little more work to do in the fourth quarter to achieve it we do expect the fourth quarter more pop some more production uh... you know in line with the plan that we laid out earlier this year date here
It is still intact for the Permian go ahead, Pierre Yes, Mike talked about the 2% shortfall on non op, which averages about 5%. He talked about also some of the surface constraints. So we have work to overcome.
The shortfall, we saw in up in third quarter to deliver that so no change in guidance, but clearly.
We have a little more work to do in the fourth quarter to achieve it we do expect the fourth quarter more pops and more production.
In line with the plan that we laid out earlier this year.
Michael Wirth: We've moved contract resources over from 3Gi, which is a portion of the future growth project, which is now completed and fully commissioned over on to the other commissioning work. So we've added contract resources that we've brought in experienced turnaround and operations people that are very skilled in the discovery work in managing through the restart of an operation. And then we've also added technical resources to address any unplanned discovery items that would come up.
Thank you.
Well go next to Doug Leggate with Bank of America.
Speaker 12: transcript
Thanks. Good morning, everyone. Mike, I know you've been traveling around, so thank you for making the time for us this morning. I want to try and defend you a little bit here this morning, because if you look at the remaining life of Tengiz, about half of that value has been taken out of your stock this morning. I can't imagine you're happy about announcing another series of challenges. So my question is this.
Thanks, Good morning, everyone, Mike I know you've been traveling around so thank you for that.
For us this morning.
I'm going to try and defend your a little bit here. This morning, because if you look at the remaining life of Tengiz.
About half of that volume has been taken out of your stock. This morning, I can't imagine you're happy about announcing other series of challenges to Mike. My question is this.
Speaker 12: transcript
At a philosophical level, how would you characterize what you and your management team and the organization are doing to avoid these kind of issues on major projects going forward? You've got a lot of things in the queue through 2027. Why should the market be comfortable that you can execute on that timeline with what you have in your portfolio?
On a philosophical level, how would you characterize what you and your management team and the organization are doing to avoid these kind of issues on major projects going forward, you've got a lot of things in the queue through 2027, what why should the market be comfortable that you can execute on that.
Michael Wirth: So we've had a significant change in our approach to this. We've got a more conservative guidance here that we're issuing now. And we'll continue to talk about this every quarter. You know, I guess the main things to look at here are we've got big compressor trains that will start up for pressure, pressure boost, which is a key driver of this high pressure to low pressure conversion. These are very large machines. And so those are key milestones.
In line with what you have in your portfolio.
Speaker 3: transcript
Well, Doug, you know, you're right. I think the, you know, that there has been a reaction, apparently, in the market this morning to this.
Well Doug.
Youre right I think the.
There hasn't been a reaction.
Apparently in the market this morning to this.
Speaker 3: transcript
We've spent a lot of time, you know, go back to Jake Hansen, spending, you know, time not only in these calls, but on traveling around, talking about what we're doing on Capitol Project.
We've spent a lot of time and I'll go back to Jay Johnson spin and you know.
Michael Wirth: After that, we've got metering stations that are converted from high pressure to low pressure. And so over the next few quarters. And there's I think 40 some odd metering stations as you go out through the entire field. We've got these two big turner runs that I've talked about. All of those are really key milestones that will be tracking very closely and will update you on those as we go forward. Thank you.
Not only are these calls but on traveling around talking about what we're doing on.
Capital project execution. This is a unique project and I won't repeat the things that I went through.
Speaker 3: transcript
This is a unique project. I won't repeat the things that I went through earlier with Paul, but this is a large multi-year effort that had supply chains coming in from all the way around the world through the Russian and London Waterway System through the pandemic. And...
Earlier with Pall, but this is a large multi year.
Efforts that.
Had supply chain is coming in from all the way around the world through the Russian inland waterway system through the pandemic and and we've.
Devin Mcdermott: We'll go next to Devin McDermott with Morgan Stanley. Hey, good morning, thanks for taking my questions. I wanted to stick with upstream, but actually ask about Ben as well. You've had some increase in production in the year, given the initial sanction relief, and there's obviously been some additional sanction relief announced just here since the last quarterly call. I think it might have been on an interview this morning. You made some comments that you could see a sequential increase in production between now and year end.
Speaker 3: transcript
You know, we've had our challenges with it. There are not projects in our queue that are remotely similar to the...
We've had our challenges whether they're are not projects in our queue that are remotely similar to this one.
Speaker 3: transcript
you know the kinds of things that we're talking about now are factory development projects across multiple shale basins their deep water developments that you know, I think the track record on those is is quite different and and so I
These are things that we're talking about now are factory development projects across multiple shale basins, there deepwater developments that.
I think the track record on those is quite different.
And so.
Speaker 3: transcript
I think the lessons on these really complex capital projects are that, despite employing the best engineering and construction firms in the world, bringing in partners that have strong capability, they're really complex and challenging. Part of the way we mitigate that is we be very selective about the ones we do.
I think the the lessons on these really complex capital projects are that.
Michael Wirth: I was wondering if we could just step back, talk through what impact the sanction relief has on your production profile and also willingness to invest in that region. Can you remind us how impactful Ben as well volumes are for your corporate cash flow? Sure, so we have seen some action now from the U.S, government. We had been previously operating under an OFAC license, which was modified at the beginning of this year, a general license.
Despite employing the best.
Engineering and construction firms in the world.
And partners that have strong capability that really complex and challenging.
Michael Wirth: There's some specific licenses that go with that that define the terms under which we can operate. The recent action in the new general license issued by OFAC really kind of opens up operating room for others more so than it does for us. It doesn't materially change our circumstances here. I think what you'll see is some more people lift and crew bring it to the U.S. You'll see more crew flow to the U.S.
And part of the way, we mitigate that as we will be very selective about the ones we do.
Speaker 3: transcript
uh... you know we we walked away from the kid at lng project because we uh... despite a lot of efforts to make that project better uh... we had concerns about execution in that kind of an environment
We walked away from the Kitimat LNG project, because we are despite a lot of efforts to make that project better.
We had concerns about execution in that kind of an environment and and ultimately said, we're not going to take on a project like that particularly.
Speaker 3: transcript
and ultimately said we're not going to take on a project like that, particularly.
Speaker 3: transcript
you know at this point in time and so part of it is the way you choose what you do a part of it is continuing to learn and uh... apply those learnings many of which from uh... you know a decade ago have been implemented in
At this point in time, and so part of it is the way you choose what you do part of it is continuing to learn.
And apply those learnings many of which from a you know a decade ago had been implemented in two the Tcl project, but some of which from the Tcl project will be implemented and integrated into other projects that go forward of similar complexity. So look we're close to the finish line on this thing and and we've got.
Speaker 3: transcript
to the TCO project, but some of which from the TCO project will be implemented and integrated into other projects that go forward.
Michael Wirth: I don't think the impact on our operations really is not particularly significant. We are up to something around 130,000 barrels a day from maybe 60,000 barrels a day earlier this year. We are seeing improvements and expect there's some more that we can see through the balance of the year. That's driving the cash from that is going to pay legitimate operating expenses, tax and royalties, recover some past dues that we are owed and we're really working on what I would call pretty straightforward field maintenance and things to restore production that aren't particularly long cycle or capital intensive and staying within the kind of cash that's being generated from those sales in order to fund that.
Speaker 3: transcript
of similar complexity. So look, we're close to the finish line on this thing and we've got a...
Michael Wirth: I would expect that the posture will remain in for a while here until we see how the longer-term sanctions environment plays out the political situation, the country with elections and the like, and continue to make progress on recovery of the past dues that I mentioned.
Speaker 3: transcript
uh... a full court press on it uh... to make sure that the commission is safe and reliable we have a a clean start up
A full court press on it to make sure that the commissioning of safe and reliable and we have a clean startup.
Speaker 3: transcript
And the lessons from that will be applied in every other project that we'd
And in the lessons from that will be applied in every other project that we do.
Speaker 8: transcript
And I'll just refa- Thank you, Jonathan. The impact that- Going to- That's Mike. Yeah, thanks, Doug. I'll just refa- The impact that Mike talked about. It's two and a half.
And I'll just refinancing the impact that Mike, yes, Thanks, Doug I'll, just restate the impact that Mike talked about $2 $5 billion. That's at 60, that's less than $1 50, a share. So clearly were down a lot more than that we talked about in earning an earnings Miss we know that ways also on the chairs at the same time noncash items timing effects.
Speaker 8: transcript
billion dollars that's at 60 that's less than a dollar 50 shares so clearly we're down a lot more than that We talked about the earning earnings miss we know that ways also on the shares at the same time non cash items timing effects that reverse
Reverse discrete items that are nonrecurring. So we feel good about the companys performance in the quarter in terms of how we operated safely and reliably how we captured margin. We know as Mike said earlier, we had these quarters, where it can be messy can be noisy. It's one of them, but the underlying company is very strong and healthy.
Speaker 8: transcript
discrete items that are not occurring. So we feel good about the company's performance in the quarter in terms of how we operated safely reliably, how we captured margin we know, as Mike said earlier, we have these quarters where, it can be messy, it can be noisy, it's one of them, but the underlying company is very strong and healthy. I agree, it looks.
I agree it looks overdone tier thanks, so much.
Yeah.
Speaker 1: transcript
We'll go next to Irene Gimona with Society General.
Well go next to Irene homeowner with Society Generale.
Speaker 13: transcript
Thank you very much. Good morning. You referring your comments to higher OPEX and TDNA from the PDC legacy assets, having impacted Q3 upstream. Now that you own that business fully and you can sort of look under the bonnet,
Thank you very much. Good morning, you referred in your comments to higher Opex in DNA from the BDC legacy assets.
Pierre Breber: Not a lot of change, I guess I would say, from our point of view, hear maybe you want to comment on the cash and production. Yeah, consistent with what Mike just said, we're continuing to do cost affiliate accounting, which means we are not, we don't record production or reserves, so that's not reflected in our numbers and we only record earnings when we receive cash, so we're not recording a proportionate share of equity earnings, but only what we actually receive in cash.
Having impacted QC upstream now that you own that business fully and you can sort of look at the abundant.
Speaker 13: transcript
How are you thinking about your original synergy estimates on CDC, OPEX and COPEX and how long would you expect it takes for those to start accruing to you and the results? Thank you.
How are you thinking about your original synergy estimates and PDC Opex and Capex and how long would you expect it takes to those.
Start accruing to you the results. Thank you.
Speaker 3: transcript
Yeah, I mean, you know, the, so I think that the reference was simply these are additive to, you know, versus prior periods. And so I wouldn't want anybody interpret that somehow they were different than what we expected because the op-x and the DDA are not different.
Yes.
So I think that the reference was simply these are additive to versus prior periods and so.
Pierre Breber: That's something that we'll continue to look at. As Mike said, depending on all those potential triggers down the road elections and such, we could go back to equity accounting at some point in time, but we have not made that decision yet. In terms of cash flow, it's about 1% of our cash flow, so it's modest, of course, but it's more than it was before. As Mike said, operations there are continuing well and we're getting a little bit of cash and we'll just see where it Great. Thank you.
I wouldn't want anybody to interpret that somehow they were different than what we expected because the opex and the DD&A are not different than what we expected synergy capture is good.
Speaker 3: transcript
than what we expected. Synergy capture is good. You know, we're right on track to capture all of the synergies. No change to the guidance. We're confident that there's upside and we'll realize that over time as we have on other transactions. We think there's additional operational, midstream and procurement synergies that we didn't build into our initial target and the CAPEX synergy has been captured as well. So you know the nice thing about this.
We're right on track to capture.
All of the synergies no change to the guidance, we're confident that theres upside and will realize that over time as we have on other transactions.
We think there's additional operational midstream and procurement synergies that we didn't build into our our initial target and.
And then the Capex synergy has been captured as well so the nice thing about this.
Biraj Borkhataria: Thank you, Devin. We'll go next to Biraj Borkettaria with RBC. Hi, thanks for taking my question. I'm sure you got a few more on PCI. I just want to ask about the Permian. Last quarter, you get some very helpful data points on well productivity this year. I was wondering, particularly for the new Mexico side, if you had any incremental comments for, you know, well driven on the third quarter, because it was a pretty small sample size of pops in the first half of the year. Any comments there would be helpful. Thank you.
Speaker 3: transcript
in a quarter where, you know, I appreciate Doug's view that maybe the reaction here has been a little over. We closed the transaction five months ahead of guidance. We pick up additional production for a bigger part of the year, the earnings and cash flow that go along with that. We've already paid off some high-cost debt. And so we're integrating that into our business now. And it's a, you know, it's a very sound transaction that is going to deliver, I think, everything that we expected and then some. Thank you very much. Thanks, Irene.
Quarter, where.
Sure Doug.
Doug's view that maybe the reaction there has been a little over <unk>. We closed the transaction five months ahead of guidance, we pick up additional production for a bigger part of the year the earnings and cash flow that go along with that we've already paid off some high cost debt.
And so we're integrating that into our business now and it's a it's a very sound transaction that is going to deliver I think everything that we expected.
Michael Wirth: Yeah, it might give you some kind of broader commentary on Permian performance as well. Overall production was down just a little bit, about 2% in the quarter. That was entirely by non-operated joint ventures, and primarily a couple of the operators had delays in putting wells online due to frackets and some other factors. There was also some takeaway capacity on Permian highway that constraints that resulted in some unplanned downtime. So, co-op production in the third quarter was essentially flat from the prior quarter, which is what we had guided to.
And then some.
Thank you very much.
Thanks Irene.
We will go next to Jason gave Aman with TD Cowen.
Okay.
Oh.
Okay.
Speaker 14: transcript
Hello? Morning, Jason. Yeah, we're here. Hey, sorry, sorry about that morning. Sorry to waste you up. I wanted to ask. Yeah, hey, can you can you hear me?
Hello, Good morning, Jason Yes, we're here.
Alright, sorry about that morning.
Starting with you I wanted to ask.
Yeah, Hey can you hear me.
I can.
Speaker 14: transcript
Okay, good. I wanted to ask about what's going on in your Middle East footprint. You've obviously had to take Tamar offline. I believe that's a fixed price asset that you're receiving, so probably not a large cash impact, but if you could remind us.
Okay. Good I wanted to ask about what's going on in your middle East footprint, you've obviously had to take tomorrow or offline.
I believe that's a fixed price asset that youre, receiving so probably are not a large cash impacts, but if you could remind us.
Michael Wirth: And that's despite having some wells that were choked back due to some surface constraints. In one development area we're seeing higher than expected CO2 content in the gas, and others in the area are as well. So, we've got third party handling and process facilities that are constrained by that and can't handle all the CO2, so we're choking a wells back. There's a new federal regulation that won't get into the details, but it affects how we meter production and it prevents co-mingling.
Speaker 14: transcript
Um, what the cash impact is, and the ability to maybe reroute that gas somewhere else, um, or offset those losses. And then how you think about. Uh, the Eastern Mediterranean growth profile overall, if there's any change how you're thinking about it in light, um, of the, uh, of the recent, um.
What the cash impact is and the ability to maybe reroute that gas somewhere else.
Our our offset those losses and then how you think about.
The eastern Mediterranean growth profile overall, if theres any change how youre thinking about it in light.
Of the of the recent.
Speaker 3: transcript
of the recent events over there. Thanks. I'll take the second part of that and then ask Pierre to address the cash and production impact. You know, it doesn't change our view on the development opportunities really at all, Jason. You know, this is a long-term.
The recent events over there thanks.
I'll take the second part of that and then ask <unk> to address the cash and production impact.
Michael Wirth: And so, we've got wells choked back until we can get some new meters in place, and then we've got some produced water limits that have come into effect in some areas. So, there's a number of things that are not indicative of well performance, but other surface realities that we're working our way through that are impacting co-op production a little bit. In New Mexico, you're right, we've got more pops in the second half of the year.
It doesn't change our view on the development opportunities really at all Jason.
This is a long term.
Speaker 3: transcript
play. It's a very, very large gas resource. We like some of the follow on exploration opportunities in the region. We're working on the Aphrodite field in the Water's Offshore Cypress to develop working expansion projects that have been sanctioned on both tomorrow and LeBioffan and further expansion ideas on LeBioffan. And so we've got to take a long-term view, which is measured in years and decades.
Play.
It's a very very large gas resource we like some of the follow on exploration opportunities in the region.
We're working.
Aphrodite field in the waters offshore Cyprus to develop we are working on expansion projects that have been sanctioned on both tomorrow Leviathan and further expansion ideas on Leviathan and so we've got to take a long term view, which is measured in years and decades.
Michael Wirth: We've popped about 60% of the planned wells in New Mexico, so the balance almost half come on in the fourth quarter. Pop performances generally have been strong. Some of those wells are hit by the facility constraints that I've talked about, but overall well performances aligned with our type curve expectations. I think when we get to the fourth quarter call barrage, we'll come back with some more detail on type curves. We'll have enough of them online, we'll have enough months that we can start to give you some of the same kind of evidence that we did last quarter to show you the performance. Okay, understood. Thank you very much. Thank you.
Speaker 3: transcript
and when you have things in the short term that create the circumstances that we see right now we have to be prepared to mitigate those risks and to keep people safe and maintain the integrity of our operations. But it doesn't change our long-term view on the attractiveness of the asset and the development opportunities. I'll appear at risk.
And when you have things in the in the short term that create the circumstances that we see right now we have to be prepared to mitigate those risks and to keep people safe and maintain the integrity of our operations but.
It doesn't change our long term view on the attractiveness of the asset and the development opportunities that will appear address the cash question. Yes, we don't talk about specific contracts and theres numbers on them, but I think in fact, youre right Theres. Some escalators tied to inflation. There is some oil price sensitivity, but it's within.
Speaker 8: transcript
Yeah, we don't, you know, talk about our specific contracts and there's numbers of them, but I think in effect, you're right, there's some escalators tied to inflation, there's some oil price sensitivity, but it's, you know, within sort of a floor and a ceiling. And these are regional gas prices that are well below, you know, international prices. So we don't know how long we gave the guide on the production and the impact on cash flow is, you know, very modest. It's tens of millions of dollars in terms of, you know, doing, doing the calculation. And so we'll just see where we end up in the quarter and how long it is shut in.
Sam Margolin: We'll go next to Sam Margoland with Wolf Research. Thanks. Good morning. Thanks for taking the question. Maybe we'll stick with the U.S, and ask about just the U.S, upstream capex number. There's a lot of moving parts in here. You've got incorporation of PDC, you have kind of gum projects and balamork coming into play, inflation, and then timing effects that you alluded to. I guess when you think about this quarter's U.S, upstream capital, how would you characterize it just overall?
A floor and a ceiling and these are regional gas prices that are well below <unk>.
International prices. So we don't know how long we gave the guide on the production.
<unk>.
The impact on cash flow is very modest tens of millions of dollars in terms of.
Doing the calculation and so we'll just see where we end up in the quarter and how long it is shut in for.
Speaker 7: transcript
Thanks Jason. Thanks guys. Open it.
Thanks, Jason.
Thanks, guys.
Sam Margolin: Would you say it's sort of on plan or like overly influenced by any one of these factors that may or may not be mitigated over time? Thank you. Yeah, Sam, you're right. I mean, we are seeing pressure in the U.S., and I think we're going to probably end up higher than our budget as we end the year. You know, PTC is being integrated into the factory pretty much as we expected. And so it's an increment because it wasn't in our original plan, but you know, it's really not a driver of this.
We'll go next to Ryan Todd with Piper Sandler.
Speaker 8: transcript
But thanks maybe, I think it's a little bit to the, to the Gulf of Mexico, maybe provide any.
Okay. Thanks, maybe.
Switch gears, a little bit to the Gulf of Mexico could you maybe provide any.
Speaker 8: transcript
Any update on an overall basis, do you anticipate the addition of the has assets on the Gulf to have any impact on?
Any update on that.
Overall basis do you anticipate the addition of the Hess assets in the Gulf that have any impact on.
Speaker 8: transcript
on your approach to the basin and the coming years. And then you're scheduled to have three separate projects. I think at Anchor St. Mollle and Will come on stream during 2024. Could you maybe update us on the progress of those projects and maybe the timing, whether we should expect those in the first half of the second half of the year?
On your approach to the basin in the coming years and then.
You are scheduled to have three separate projects and anchors that mile long well come on stream. During 2024 could you maybe update us on the progress.
Sam Margolin: The big thing is, you know, we're seeing actually, you know, more feet drilled per rig. And more completion feet than we had planned. And so the productivity of the primary development activity has continued to improve, but that means we spend more money on tubulars, on sand, on water. Then we had anticipated. So it's kind of a good news, but it brings with us some costs. We've got some long lead items where we're seeing supply chain realities that say we need to place long lead orders earlier.
Those projects and maybe the timing and whether and when we should expect those in the first half of the second half of the year.
Sure so.
Speaker 3: transcript
On the combination with HES, I think we'll come back to you as we close the transaction and we integrate those. We're partners in a couple of projects that they operate.
On the.
The combination with Hess I think will come back to you is as we close the transaction then we integrate those we're partners and a couple of projects that they operate we both have lease positions out there I think you would expect us to high grade the exploration program as we look across our larger combined.
Speaker 3: transcript
We both have lease positions out there. I think you had expected us to high grade the exploration program. As we look across a larger combined lease position and
Sam Margolin: So some things we otherwise would have ordered next year that we've actually moved ordering and initial payments on into this year. So some long lead dynamics going on. And then I mentioned earlier, produced waters becoming an issue, you know, the re-injection of that and doing that in a way that minimizes the incidences of induced seismicity. So we've got some more produced water handling infrastructure spend. So I would say those are kind of the primary drivers.
Lease position.
Speaker 3: transcript
But we'll talk to you more about that as we go forward. In terms of specific projects, yeah, you're right. We've, you know, Mad Dog 2 actually, you know, saw first oil this year. And we expect a peak next year on Mad Dog 2. You can refer to the operator for more on that. Anchor and Whale are both expected for first oil next year.
But we'll talk to you more about that as we go forward in terms of specific projects, Yeah, you're right we've mad.
Mad dog two actually.
So first oil this year and we expect peak next year on Mad Dog two you can refer to the operator for more on that anchor.
Tanker and whale are both expected for first oil next year.
Speaker 3: transcript
Anchor is you know seven wells in total two that'll be online in 24 3 and 25 or no 2 and 25 2 and 26 and 1 then in 27
<unk> is a.
The seven wells in total two that'll be online and 24, 3% and 25% and 25% and 26 in one than in 'twenty seven.
Sam Margolin: And that's pushing the Permian to be a little hot. Gulf of Mexico is pretty well right on plan. And so what you're seeing there is really a function of PDC, which is just an increment that's been added. And then some additional costs in the Permian program that we really hadn't anticipated as we went into the year. Hey, how's this at? So if you take out in organic, which is 600 million year-to-date or 400 million in the third quarter for primarily for ACEs and the 200 million that we had for PDC in the third quarter through third quarter year-to-date, we're about 200 million above the rateable budget. Of course, you know, fourth quarter tends to be higher. So as Mike says, we'll likely end the year a little bit above budget. Thanks, Sam. Understood. Thank you.
Speaker 3: transcript
FPU is safely moored out there in the field right now.
F. P U is safely moored out there in the field right now.
Speaker 3: transcript
Manifold and pump systems and subsea manifolds are all fabricated We've we've landed and tested the 20,000 PSI Blowout preventer so that project is is is moving along nicely production in 24 is
Medical then pump systems and subsea manifolds are all fabricated.
We've landed and test the 20000.
Psi blowout.
Blow out preventer, so that project is moving along nicely production in 'twenty four is.
Speaker 3: transcript
is, you know, modest because there's only a couple of wells online. Think of it mid-year.
As you know.
Modest because there's only a couple of wells online think of it mid year.
Speaker 3: transcript
uh... in terms of uh... general timing uh... i'd refer to you you know shall on the whale project uh... you know first oil probably the latter part of uh... of twenty twenty four
In terms of general timing.
Refer to.
Shell on the whale project first.
First oil probably the latter part of 2024 and a similar kind of a.
Speaker 3: transcript
Paul Chang: We'll go next to Paul Chang with Scotia Bank. Thank you. Good morning. Mike, can I get back? Can I go back to PCO? It's a little bit of the main stage for the course increase and everything.
Profile, where you've got.
Speaker 3: transcript
a smaller number of wells online initially and then over the subsequent couple of years you're going to see additional wells
A smaller number of wells online initially and then over the subsequent couple of years Youre going to see additional wells come online and so the the production impact of that starts to show up in 'twenty five and 26.
Speaker 3: transcript
come online and so the production impact of that starts to show up in 25 and 20.
Michael Wirth: I guess the question is that I mean, what have we learned from this process and to ensure that your future project execution will become better and not facing the kind of problem that I mean, it has been a challenging project that all along that due to a number of different reasons. But quite frankly, that this is a bit disappointing at this very last stage for the fit of the sleep in the schedule and also the course increase.
Speaker 3: transcript
in a greater wave than it does in 2024. And then Ballymore is actually first oil in 2025.
Greater.
Way than it does in 2024, and then valley more is actually first oil in 2025.
Speaker 3: transcript
not 2024 but that'll come online in 2025. A simpler development, tie backs to blind faith.
Not 2024, but that will come online.
In 2025.
Simpler development tie back so blind faith.
Speaker 3: transcript
three wells, two of which would be online in 2025. The third one would come online in 2026. And so again, the production on that a little bit in 25 and then you'll see more of it in 26 and 20.
Three wells two of which would be online in 2025.
The third one would come online in 2026 and so.
The production on that a little bit in 'twenty, five and then youll see more of it in 'twenty six 'twenty seven.
Michael Wirth: Thank you. Yeah, Paul. Thank you. And look, I share the sentiment. So I understand where you're coming from. You know, big complex project you've been along for the whole ride. So you know, early on, there were some engineering issues that we confronted and addressed. You know, in the middle of it, the big thing was the pandemic and demobilizing, remobilizing building medical facilities and a whole bunch of stuff that, you know, that we had to manage our way through and was complex and difficult.
Speaker 2: transcript
Hey, Ryan, just more broadly on HES, you know, we are not planning to hold our Investor Day at our usual timing. We'll likely either have just closed or we'll be in the antitrust review process. This is a big transaction, impacts in Gulf of Mexico, but transforms the portfolio overall. We gave some guidance on potential asset sales also. So you should expect us to do an Investor Day, you know, several months after we close and when we have time to really put together a combined business plan for our investors.
Hey, Ryan just more broadly on Hess.
Planning to hold our Investor day at our usual timing will likely either have just closed or it will be in the antitrust review process. This is a big transaction impacts in Gulf of Mexico that transforms the portfolio overall, we gave some guidance on <unk>.
So asset sales also so you should expect us to do an Investor day, you know several months after we close and when we have time to really put together a combined business plan for our investors.
Michael Wirth: And our folks did a great job, but it clearly impacted costs and schedule. And, you know, the big thing here, Paul, is as we've gotten into, and you have to remember, you know, this is, you know, we're redoing the power infrastructure for the entire field, which is geographically speaking. I think it's an enormous... Space, and this is infrastructure, frankly, it goes back a lot of it to kind of Soviet days. So there's an entire new power distribution system.
Alright. Thank you thanks, Ryan Thanks Ray.
Speaker 1: transcript
So, the next Bob bracket with Bernstein.
We'll go next to Bob Brackett with Bernstein research.
Speaker 15: transcript
Good morning. You've spent part of the week engaging with your shareholder base and making the case for the acquisition of Hess. Can you talk to, not in details obviously, but perhaps the tone of those conversations, the enthusiasm, anything that surprised you?
Good morning, you've spent part of the week engaging with your shareholder base and making the case for the acquisition of <unk> can you talk to not the details obviously, but perhaps the tone of those conversations the enthusiasm anything that surprised you.
Speaker 3: transcript
you know i'd say overall and of course we met with uh... i was out here was a you know uh... uh... in some separate meetings and i was but uh... i was out you know in in a number of meetings with John has sometimes a larger has shareholders sometimes with larger seven shareholders i would say in general people see the long-term uh... value proposition very clearly
I'd say overall of course, we met with I was out here was as you know.
Michael Wirth: We're taking the entire field and taking it from high pressure production to lower pressure in the WPMP process and then building the really large sour gas injection and incremental production facilities. And it's almost a field wide refurbishment of a lot of it and then this big incremental production. And the commissioning of that is incredibly complex. And as we went in and did this cost and schedule review early in the relatively early commission process, based on what we were seeing, what became evident is that we need to account for that complexity in our schedule.
Some separate meetings and I was but I was out in a number of meetings with John has sometimes with larger has shareholder sometimes with larger chevron shareholders I would say in general people see the long term value proposition very clearly here and and I think they see it as a combined company that is.
Speaker 3: transcript
and uh... and i think they see it as a combined company that is uh... stronger and uh... one that is set up to uh... be stronger for longer
Stronger and one that is set up to be stronger for longer.
Speaker 3: transcript
with the ability to really sustain cash distributions to shareholders in a very consistent, predictable and durable fashion long into the future. And so that is, there's no doubt about that. Some of the questions on the one side, did you? Did you?
With the ability to really sustain.
Cash distributions to shareholders in a in a very consistent predictable and durable fashion long into the future and so that is.
There's no doubt about that some of the questions on the one side did you did you.
Michael Wirth: And I don't think it was fully reflected in the schedule and in a big complex project like this, you find things and early on, we found challenges in the utility system and it cost us some time and it, you know, that ripples through. And so the guidance we're giving you now is really what I would say is it's more conservative because it assumes that those kinds of things are going to be encountered for the balance of the project.
Speaker 3: transcript
You had a high enough price on the other side, did you pay too much, right? So there was tension in that, to be honest, during the negotiation, it was, as we mentioned, has been going on for some time. And John and I have been looking for a way to do a deal that is actually one that's good for both sets of shareholders and not easy, because a great asset and the market recognizes that value.
You had a high enough price on the other side did you pay too much right. So there was tension in the in that to be honest during the negotiation that was of <unk>.
We've mentioned this has been going on for some time and John and I have been looking for.
A way to do a deal that is actually one that is good for both sets of shareholders and not easy because a great asset in the market recognizes that value.
Speaker 3: transcript
And so I think you can find nuances from people who either held one of those stocks or the other for certain reasons, and maybe this wasn't.
And so I think you can find nuances.
People, who either held one of the stocks or the other for certain reasons and maybe this wasn't.
Michael Wirth: And we need to set expectations that those are the realities that we're going to be dealing with. And so that's why the schedule lights all in commissioning. It's, you know, both construction is completed. Every all the equipment is there. And this really is the final commissioning process. You know, if we, if we do well, we, you know, we could end up on the front end of those windows that I gave you, but we've given you those because our experience says we should not plan for that way to plan for the reality of these things. And as I mentioned in response to the earlier question by Neil, we've added incremental resources in multiple areas now to be to anticipate and be prepared for these kinds of challenges.
Speaker 3: transcript
exactly what they expected but broadly speaking i would say people see the long-term value creation they see the transparency to uh... resource depth to production growth the fact that you now have uh... with us you've got a much more diversified set of assets attach
Exactly what they expected, but broadly speaking I would say.
People see the long term value creation, they see the transparency to resource depth to production growth. The fact that you now have with Hess, you've got a much more diversified set of assets attached to their portfolio, which de risks any one of those assets and it brings forward cash distributions to their shareholders meaningfully.
Speaker 3: transcript
to their portfolio which derives any one of those assets and it brings forward cash distributions to their shareholders meaningfully
Speaker 3: transcript
that would have still been several years into the future. For the Chevron shareholders who were wondering what comes next after what they can currently see over the next several years in our portfolio, rather than us pointing to a range of potential answers to that and say we'll do the best of these. And we've got plenty of organic investment opportunities we're working on. I think it gives some confidence and certainty of what underpins that for the future. And so broadly speaking, those are the kinds of discussions that we've had. Very clear, thanks.
That would have still been several years into the future for the chevron's shareholders, who are wondering what comes next after what they can currently see over the next several years and our portfolio rather than us pointing to a range of potential answers to that and say we will do the best of these and we've got plenty of organic investment opportunities we're working on.
Michael Wirth: And so, you know, I think the lesson is on the projects like this of which there are few in the future, our commissioning plans will reflect that complexity more completely than the commissioning plans did on this one.
I think it gives some confidence and certainty of what underpins that for the future and so broadly speaking those are the kinds of discussions that we've had.
Pierre Breber: Hey, and I'll just add some comments on affiliate dividends. So we've given a guide on fourth quarter affiliate dividends, which falls short of the full year guide that we did at the start of the year. That short haul is not from TCO. That's from CPCAM. Sherman Phillips Chemical Company on lower pet Ken margins. It's also from Angola LNG on lower TTF prices. And we had assumed we've also had some of the Angola LNG cash has come back to us at return a capital in terms of TCO.
Very clear thanks.
We'll go next to Neal Dingmann with true Securities.
Speaker 16: transcript
Morning guys, thanks for the time. My question, Mike, is more on your shareholder return. I, you know, continue to have great financials and the shareholder return both on the dividend and the buyback time continues to be quite high, paying out a bit over 100% of your free cash. Well, I'm just wondering, as you continue to have the growth opportunities ahead, you do, you see any change in that shareholder return, particularly on the share buyback, or you continue to try to balance kind of the growth and buyback programs you have now.
Good morning, guys. Thanks for the time My question, Mike is more on your shareholder return I E.
Have a great financials and shareholder return both on the dividend and the buyback side continues to be quite high paying out a bit.
Over 100% of your free cash flow I'm, just wondering as you continue to have the growth opportunities ahead, you do you see any change in that shareholder return, particularly on the share buyback or you continue to try to balance it.
Pierre Breber: So we had a $600 million dividend Chevron share in the second quarter. We can't get ahead of the TCO board on the fourth quarter, but 90% or so of the fourth quarter guide is related to TCO. I'll remind you last year that TCO dividend was 1.6 billion Chevron share. All these numbers are before the withholding tax. So we'll see a pretty significant increase in the total year TCO dividend. Now some of that was getting some of the excess cash off the balance sheet like we were talking about.
The growth in buyback programs you have now.
Speaker 3: transcript
Yeah, we've had a very consistent set of financial priorities for many, many years.
Yeah, we've had a very consistent.
Set of financial priorities for many many years.
Speaker 3: transcript
You know, the first of which is to sustain and grow the dividend.
The first of which is to sustain and grow the dividend.
36 consecutive years of per share dividend payouts in the last five years has been a 6% CAGR actually I think the last 15 years have been a 6% CAGR and announcement of 8% early next year subject to board approval.
Speaker 3: transcript
consecutive years now of per share dividend payouts. The last five years has been a 6% CAGR, actually I think the last 15 years have been a 6% CAGR and an announcement of 8% early next year subject to board approval.
Speaker 3: transcript
I think there's a strong track record there you can expect to continue.
Pierre Breber: But he go back to the period prior to the start of this construction. So the period into 2015, we're seeing dividends now, or this year's dividend will be similar to what we saw from that time period. So the inflection is happening after five years of either not receiving dividends are in fact putting cash out essentially happening negative free cash low. So we know production is going to be down next year. We showed that.
I think theres a strong track record. There you can expect to continue second is to be disciplined inorganic reinvestment into the business to grow those cash flows you can be confident that we will continue to be disciplined in that reinvestment to drive returns and value number three has a strong balance sheet. Pierre mentioned were single digit net debt ratio today, that's lower than.
Speaker 3: transcript
Second is to be disciplined in organic reinvestment into the business to grow those cash flows.
Speaker 3: transcript
you can be confident that we will continue to be disciplined in that reinvestment to drive returns and value. Number three is a strong balance sheet. Pierre mentioned we're single digit net debt ratio today. That's lower than we have guided to over time. And so, you know, over time, you can expect the balance sheet to move back towards the 20 to 25 percent gearing range that we've
We have guided to over time and so over time, you can expect the balance sheet to move back towards the 20% to 25% gearing range that we have.
Pierre Breber: So you'd expect dividends to reflect that a little bit. We have a little bit of increasing cap ex. And then we'll be heading to this more than $4 billion in 25 and all of that is that that guidance is at 60.
Speaker 3: transcript
identified as where we're comfortable through the cycle and then you know the fourth are the sharey purchases in we've
Identified as where were comfortable through the cycle and then the fourth or are the share repurchases and we've got a range of 10% to $20 billion were at the high end of that range. When we close the transaction with Hess. We're at 17 $5 billion annually. Today, that's you know, 5% to 6% of our float each and every year.
Speaker 3: transcript
You know, got a range now of $10 to $20 billion. We're at the high end of that range when we close the transaction with Hess. We're at $17.5 billion annually today. That's, you know, 5 to 6% of our float each and every year. And we've, you know, I won't go through the details, but we've indicated, you know, we can sustain that in a lower-priced environment, and that's where the lower end of that range would apply, and certainly in a higher-priced environment, which is where we find ourselves today. We're at the high end of that range.
Paul Chang: So we're seeing some positive news in terms of the cash low coming out, clearly disappointing news on the revised schedule, but we're going to work hard to deliver it in the front end of the range. Thanks, Paul.
John Royall: Thank you.
And we've.
I won't go through the details, but we've indicated we can sustain that at a lower price environment, and that's where the lower end of that range would apply and certainly at a higher price environment, which is where we find ourselves today. We're at the high end of that range and so we would expect to be consistent predictable and and to sustain that consistent.
John Royall: We'll go next to John Royall with JP Morgan. Hi, good morning, thanks for taking my question. So, I have a follow-up on the Permian XPDC. You were down 2% and 3Q, including the non-op piece, and really helpful color there from Mike on Barrage's question. But it does leave a pretty big jump to hit guidance in 4Q, around 10% if I calculate it right. So, are you sticking with that 770 guide for the legacy piece, and if not, is there a good way to think about 4Q production in general?
Speaker 3: transcript
And so we would expect to be consistent, predictable, and to sustain that. I mean, consistent and durable being the key words here. So I think that the broad framework is likely to remain unchanged. And I think our behavior will be very consistent with what you've come to see from us historically. Thank you.
And durable being the key words here. So I think the broad framework is likely to remain unchanged and I think our behavior will be very consistent with what you've come to see from us historically.
Perfect. Thanks, Mike.
Thank you Neil.
John Royall: Yeah, John, we're not, we're not changing the guidance, overall on production, excluding PDC, which would be the lower end of overall guidance. Permian production is expected to ramp up in the 4th quarter, full your production expected around 770. 780 or so if you include PDC. So, yeah, the guidance is still intact for the Permian.
Speaker 1: transcript
We'll take our final question from Alistair Sim with City.
We will take our final question from Alastair Syme with Citi.
Speaker 17: transcript
I thank so high-mic bear and Jake. Mike, go back to Hess. For several years, Chevron has looked a bit different to the other integrated oil companies in terms of the low downstream exposure. And of course, now you're re-weighting even further to the upstream. Does that balance bother you at all, or maybe how do you think about what an integrated oil company is?
Thanks, Hi, Mike.
They're in my talk.
Go back to Hess.
For several years Chevron was a little bit different together integrated oil companies in terms of.
The low downstream exposure and of course now you re weighting even further to the upstream. So this does that bother you at all or maybe how do you think about what an integrated oil companies.
Speaker 3: transcript
Yeah, Alistair, the short answer is no, it doesn't bother me. We actually have been becoming a more downstream weighted company the last several years.
Yeah Alastair.
Pierre Breber: Go ahead, Pierre. Yeah, Mike talked about the 2% shortfall on non-op, which averages about 0.5%. He talked about also some of these surface constraints. So, we have worked to overcome the shortfall we saw on non-op, and they're recorded to deliver that. So, no changing guidance, but clearly we have a little more work to do in the 4th quarter to achieve it. We do expect the 4th quarter more pops and more production in line with the plan that we laid out earlier this year.
The short answer is no it doesn't it doesn't bother me.
Pierre Breber: Thank you.
We actually have been becoming a more downstream weighted company the last several years.
Speaker 3: transcript
uh... and that that may not be obvious to most people but uh... we've been unders you know our our capex into the upstream has been below our depreciation
That may not be obvious to most people, but we've been under our <unk>.
Capex into the upstream has been below our depreciation so our upstream business has been declining as a percentage of capital employed in the downstream. We've made some invest big investments we acquired a refinery in Texas, we have acquired a renewable energy company we've invested in.
Speaker 3: transcript
So our upstream business has been declining as a percentage of capital employed. In the downstream, we've made some big investments. We acquired a refinery in Texas. We acquired a renewable energy company. We've invested in new petrochemical facilities. We have two more of those petrochemical expansion projects underway right now. And so we had gone from 80-20 waiting.
Doug Leggate: Well, next to Doug Leggett with Bank of America. Thanks.
The new petrochemical facilities, we've got two more of those petrochemical expansion projects underway right now and so we had gone from 80 20.
Michael Wirth: Good morning, everyone. Mike, I know you've been traveling around, so thank you for making the time for us this morning. I want to try and defend you a little bit here this morning, because if you look at the remaining life of Tangies, about half of that value has been taken out of your stock this morning. I can't imagine you're happy about announcing another series of challenges. So, my question is this. At a philosophical level, how would you characterize what you and your management team and the organization are doing to avoid these kind of issues on major projects going forward?
Waiting.
Speaker 3: transcript
85-15 weighting upstream to downstream in chemicals to 80-20 over the last few years. When we close this transaction, we'll be back at 85-15, which is where we've historically been.
Oh, 80, 515 waiting upstream to downstream and chemicals to 80 20 over the last few years. When we close this transaction we will be back at $8 20, which is 80 515, I'm, sorry, which is where we've historically been and and that reflects a fundamental view that we.
Speaker 3: transcript
And that reflects a fundamental view that we believe that over the cycle returns in the upstream are likely to be structurally higher than in the downstream. Primarily because refineries are hard to close. They get built for reasons other than just pure economics.
Believes that over the cycle returns in the upstream are likely to be structurally higher than in the downstream.
Primarily because refineries are hard to close they get built for reasons other than just pure economics and in governments tend to intervene in transportation fuels markets in particular when prices are high which kind of takes you out of full cycle economics, and they kind of clip tend to the peaks off of those whereas in the upstream you got the declining.
Speaker 3: transcript
and governments tend to intervene in transportation fuels markets in particular when prices are high uh... which kind of takes you out of full-cycle economics and they kind of clip can tend to put the peaks
Michael Wirth: You've got a lot of things in the queue through 2027. Why should the market be comfortable that you can execute on that timeline with what you have in your portfolio? Well, Doug, you're right. I think there has been a reaction apparently in the market this morning to this. We've spent a lot of time, you know, I'll go back to Jake Hansen, spending, you know, time not only in these calls, but on traveling around, talking about what we're doing on capital project execution.
Speaker 3: transcript
Where as in the upstream you've got declining resource base and you've got growing demand.
Our resource base, and you've got growing demand and so the fundamentals rebalanced more quickly you remove a little bit of investment and you see decline takeover and Youll see demand continue to grow and so markets to get imbalanced in the upstream rebalanced more quickly.
Speaker 3: transcript
And so the fundamentals rebalance more quickly. You remove a little bit of investment and you see decline takeover and you see demand continue to grow. And so markets are getting imbalance in the upstream rebalance more quickly. We also have been more oil-weight than some of our peers.
Also had been more oil weighted.
Michael Wirth: This is a unique project, and I won't repeat the things that I went through earlier with Paul, but this is a large multi-year effort that had supply chains coming in from all the way around the world through the Russian and London waterway system through the pandemic. And we've had our challenges with it. There are not projects in our queue that are remotely similar to this. The kind of things that we're talking about now are factory development projects across multiple shale basins, their deep water developments that I think the track record on those is quite different.
Then some of our peers and fundamentally that reflects the view that there are more alternatives to substitute for gas, particularly in power generation than there are for our liquids in transportation and.
Speaker 3: transcript
And fundamentally that reflects a view that there are more alternatives to substitute for gas, particularly in power generation than there are for liquids in transportation. And so those are kind of high level drivers of why our portfolio has been constructed the way that it is.
And so those are kind of high level.
Drivers of why our portfolio has been constructed the way that it is we want to be an integrated company. We think there are real opportunities to capture.
Speaker 3: transcript
Economic value through integration to build the capabilities to run our entire business by bringing capabilities technology skills to bear across those different segments.
Speaker 3: transcript
But you know our peers are all weighted more to the up than the downstream the ratios are a little bit different
Our peers are all weighted more to the up in the downstream the ratios are a little bit different.
Speaker 3: transcript
And we've long held those views and constructed a portfolio that reflects them.
Michael Wirth: I think the lessons on these really complex capital projects are that despite employing the best engineering and construction firms in the world, bringing in partners that have strong capability, they're really complex and challenging. Part of the way we mitigate that is we be very selective about the ones we do. We walked away from the Kidamat LNG project because we despite a lot of efforts to make that project better, we had concerns about execution in that kind of an environment and ultimately said we're not going to take on a project like that, particularly at this point in time.
And we have long held those views and constructed a portfolio that reflects.
Thanks for the question and thank you Mike.
Speaker 2: transcript
You bet. I would like to thank everyone for your time today. We appreciate your interest in Chevron and your participation on today's call. Please stay safe and healthy. Katie, back to you.
You bet.
I would like to thank everyone for your time today. We appreciate your interest in Chevron and your participation on today's call.
Stay safe and healthy Katie back to you.
Speaker 1: transcript
Thank you. This concludes Chevron's third quarter 2023 earnings conference call. You may now disconnect.
Thank you. This concludes chevron's third quarter 2023 earnings Conference call you may now disconnect.
[music].
Michael Wirth: Part of it is the way you choose what you do, part of it is continuing to learn and apply those learnings, many of which from a decade ago have been implemented in to the TCO project, but some of which from the TCO project will be implemented and integrated into other projects that go forward of similar complexity. Look, we're close to the finish line on this thing and we've got a full court press on it to make sure that the commissioning is safe and reliable and we have a clean start-up and the lessons from that will be applied in every other project that we do.
Michael Wirth: And I'll just re-fade the impact that Mike, yeah thanks Doug, I'll just re-fade the impact that Mike talked about. It's two and a half billion dollars, that's at 60, that's less than a dollar 50 shares, so clearly we're down a lot more than that. We talked about the earning and earnings miss. We know that ways also on the shares at the same time, non-cash items, timing effects that reverse discrete items that are not occurring.
Michael Wirth: So we feel good about the company's performance in the corridor in terms of how we operated safely reliably, how we captured margin we know as Mike said earlier, we have these quarters where it can be messy, it can be noisy, it's one of them, but the underlying company is very strong and healthy.
Thank you.
Okay.
[music].
Pierre Breber: I agree it looks forward on the PR, thanks so much.
Irene Himona: We'll go next to Irene Hamona with society general. Thank you very much, good morning. You referring your comments to higher OPEX and DDANA from the PDC legacy assets, having impacted Q3 upstream.
Pierre Breber: Now that you own that business fully and you can sort of look under the bonnet, how are you thinking about your original synergy estimates on PDC OPEX and COPEX and how long would you expect it takes for those to start accruing to you and the results? Thank you. Yeah, Irene, so I think that the reference was simply these are additive to versus prior periods, and so I wouldn't want anybody to interpret that somehow they were different than what we expected because the OPEX and the DDANA are not different than what we expected.
Pierre Breber: Synergy capture is good. We're right on track to capture all of the synergies, no change to the guidance, we're confident that there's upside and we'll realize that over time as we have on other transactions, we think there's additional operational midstream and procurement synergies that we didn't build into our initial target and the CAPEX synergy has been captured as well. So you know the nice thing about this in a quarter where I appreciate Doug's view that maybe the reaction has been a little over.
Pierre Breber: We close the transaction five months ahead of guidance, we pick up additional production for a bigger part of the year, the earnings and cash flow that go along with that. We've already paid off some high cost debt and so we're integrating that into our business now and it's a very sound transaction that is going to deliver I think everything that we expected and then So, thank you very much. Thanks, Irene.
Jason Gabelman: We'll go next to Jason Gabelman with TD Cowan. Hey, hello. Morning, Jason. Yeah, we're here. Hey, sorry, sorry about that morning. Sorry to waste you. I wanted to ask. Yeah, hey, can you can you hear me? I can. Okay, good.
Michael Wirth: I wanted to ask about what's going on in your Middle East footprint. You've obviously had to take tomorrow off line. I believe that's a fixed price asset that you're receiving. So, probably and not a large cash impact, but if you could remind us what the cash impact is and the ability to maybe reroute that gas somewhere else or offset those losses. And then how you think about the Eastern Mediterranean growth profile overall, if there's any change that you're thinking about, thinking about it in light of the recent recent events over there. Thanks.
Michael Wirth: Yeah, I'll take the second part of that and then SPR to address the cash and production impact. You know, it doesn't change our view on the development opportunities really at all. Jason, you know, this is a long term play. It's a very, very large gas resource. We like some of the follow on exploration opportunities in the region. We're working on the Aphrodite field in the waters offshore cypress to develop working expansion projects that have been sanctioned on both tomorrow and Leviathan and further expansion ideas on Leviathan.
Michael Wirth: And so we've got to take a long term view, which is measured in years and decades. And when you have things in the short term that create the circumstances that we see right now. We have to be prepared to mitigate those risks and to keep people safe and maintain the integrity of our operations. But it doesn't change our long term view on the attractiveness of the asset and the development opportunities.
Pierre Breber: I'll appear addressed the cash question. Yeah, we don't talk about our specific contracts and there's numbers of them. But I think in effect, you're right. There's some escalators tied to inflation. There's some oil price sensitivity. But it's within sort of a floor and a ceiling. And these are regional gas prices that are well below international prices. So we don't know how long we gave the guide on the production. And the impact on cash flow is very modest. It's tens of millions of dollars in terms of doing the calculation. And so we'll just see where we end up in the quarter and how long it is shut in for.
Jason Gabelman: Thanks Jason. Thanks.
Ryan Todd: We'll go next to Ryan Todd with Piper Samler. Thanks, maybe. I think it's a little bit to the goal of Mexico. Can you maybe provide any any update on an overall basis to anticipate the addition of the assets and the goal to have any impact on your approach to the basin and the coming years. And then you're scheduled to have three separate projects. I think it ain't for St. Malone. Well, come on streamer in 2024.
Michael Wirth: Could you maybe update us on the progress of those projects and maybe the timing, whether we should expect those in the first half of the second half of the year. Sure, so, you know, on the, you know, the combination with Hess, I think we'll, we'll come back to you as, as we, you know, close the transaction and we integrate those, you know, we're partners in a couple of projects that they operate.
Michael Wirth: We both have least positions out there. I think you had expect us to high grade the exploration program as we look across a larger combined, least position and, but we'll talk to you more about that. As we go forward in terms of specific projects. Yeah, you're right. We've, you know, Mad Dog 2 actually, you know, saw first oil this year and we expect peak next year on Mad Dog 2. You can refer to the operator for more on that anchor and whale are both expected for first oil next year.
Michael Wirth: Anchor is, you know, seven wells in total, two that will be online in 24, three and 25, or no, two and 25, two and 26 and one, then in 27, the FPU is safely mort out there in the field right now. The manifold and pump systems and subsea manifolds are all fabricated. We've landed and tested the 20,000 PSI blowout preventer. So that project is moving along nicely. Production in 24 is, is, you know, modest because there's only a couple of wells online.
Michael Wirth: Think of it mid-year in terms of general timing. I'd refer to, you know, Shell on the whale project, you know, first oil, probably the latter part of of 2024 and a similar kind of a profile where you've got a smaller number of wells online initially and then over the subsequent couple of years, you're going to see additional wells come online. And so the, you know, the production impact of that starts to show up in 25 and 26 in a greater way than it does in 2024.
Michael Wirth: And then Valleymore is actually first oil in 2025, not 2024, but that will come online in 2025. Simpler development tie backs to blind faith, three wells, two of which would be online in 2025. The third one would come online in 2026. And so, again, the production on that a little bit in 25 and then you'll see more of it in 26 and 27.
Michael Wirth: Hey, Ryan, more, just more broadly on Hess. You know, we are not planning to hold our investor day at our, at our usual timing. We'll likely either have just closed or will be in the antitrust review process. This is a big transaction impacts in Gulf of Mexico, but transformers the portfolio overall. We gave some guidance on potential asset sales also.
Ryan Todd: So, so you should expect us to do an investor day, you know, several months after we close and when we have time to really put together a combined business plan for our investors. Great. Thank you.
Bob Brockett: Thanks, Ryan.
Michael Wirth: We'll go next to Bob Brockett with Bernstein Research. Good morning. You've spent part of the week engaging with your shareholder base and making the case for the acquisition of Hess.
Michael Wirth: Can you talk to not in details, obviously, but perhaps the tone of those conversations, the enthusiasm, anything that surprised you? You know, I'd say overall, and of course we met with, I was out, Pierre was, you know, in some separate meetings than I was, but I was out, you know, in a number of meetings with John Hess, sometimes with larger, has shareholders, sometimes with larger, seven shareholders. I would say in general, people see the long-term value of proposition very clearly here, and I think they see it as a combined company that is stronger, and one that is set up to be stronger for longer, with the ability to really sustain cash distributions to shareholders in a very consistent, predictable and durable fashion, long into the future.
Michael Wirth: And so that is, there's no doubt about that. You know, some of the questions, you know, on the one side, did you, did you get a high enough price on the other side, did you pay too much, right? So there was tension in the, in that, you know, to be honest, during the negotiate, that was, you know, as we mentioned, has been going on for some time, and John and I have been looking for a way to do a deal that is actually one that's good for both sets of shareholders, and not easy, because a great asset and the market recognizes that value.
Michael Wirth: And so I think, you know, you can find nuances from people who either held one of the stocks or the other for certain reasons, and maybe this wasn't exactly what they expected. But broadly speaking, I would say, people see the long-term value creation, they see the transparency to resource depth, to production growth, the fact that you now have with Hess, you've got a much more diversified set of assets attached to their portfolio, which de-risk any one of those assets, and it brings forward cash distributions to their shareholders, meaningfully, that would have still been, you know, several years into the future.
Michael Wirth: For the Chevron shareholders who were wondering what comes next after what they can currently see over the next several years in our portfolio, rather than us pointing to a range of potential answers to that and say, we'll do the best of these, and we've got, you know, plenty of organic investment opportunities we're working on. I think it gives some confidence and certainty of what underpins that for the future. And so broadly speaking, those are the kinds of discussions that we've had. Very clear, thanks.
Neil Dingmann: We'll go next to Neil Dingman with true securities. Morning guys, thanks for the time. My question, Mike, is more on your shareholder return? I, you know, you continue to have great financials and the shareholder return, both on the dividend and the buyback side continues to be quite high paying out a bit.
Michael Wirth: Over 100% of your free cash, well, I'm just wondering, as you continue to have the growth opportunities ahead, you do, you see any change in that shareholder return particular on the share buyback, or you continue to try to balance kind of the growth and buyback programs you have now. Yeah, you know, we've had a very consistent, you know, set of financial priorities for many, many years, you know, the first of which is to sustain and grow the dividend.
Michael Wirth: 36 consecutive years now of per share dividend payouts. The last five years has been a 6% Kager. Actually, I think the last 15 years have been a 6% Kager and an announcement of 8% early next year subject to board approval. I think there's a strong crack record there you can expect to continue. Second is to be disciplined in organic reinvestment into the business to grow those cash flows. You can be confident that we will continue to be disciplined in that reinvestment to drive returns and value.
Michael Wirth: Number three is a strong balance sheet. Pierre mentioned were single digit net debt ratio today. That's lower than we have guided to over time. And so, you know, over time, you can expect the balance sheet to move back towards the 20 to 25% gearing range that we've identified as where we're comfortable through the cycle. And then, you know, the fourth are the share repurchases and we've, you know, got a range of 10 to 20 billion worth of high end of that range when we close the transaction with his worth 17 and a half billion annually today.
Michael Wirth: That's, you know, five to 6% of our float each and every year. And we've, you know, I won't go through the details, but we've indicated, you know, we can sustain that in a lower price environment. And that's where the lower end of that range would apply and certainly in a higher price environment, which is where we find ourselves today worth the high end of that range. And so, we would expect to be consistent, predictable and to sustain that.
Michael Wirth: I mean, consistent and durable being the key words here. So, I think the broad framework is likely to remain unchanged. And I think our behavior will be very consistent with what you've come to see from us historic. Harvey, thanks, Mike.
Alastair Syme: Thank you, Neil. We'll take our final question from Alastair Syme with City. Thanks, so I'm Mike Behran, Jake.
Michael Wirth: Mike, go back to Hess. You know, for several years, Chevron has looked a bit different to the other integrated oil companies in terms of, you know, the low downstream exposure. And of course, now you're re-weighting even further to the upstream. So, you know, does that balance the volume at all, or maybe how do you think about what an integrated oil company is? Yeah, Alastair, the short answer is no, it doesn't bother me.
Michael Wirth: We actually have been becoming a more downstream weighted company the last several years. And that may not be obvious to most people, but we've been under, you know, our capex into the upstream has been below our depreciation. So, our upstream business has been declining as a percentage of capital employed. In the downstream, we've made some big investments. We acquired a refinery in Texas. We acquired a renewable energy company. We've invested in new petrochemical facilities.
Michael Wirth: We got two more of those petrochemical expansion projects underway right now. And so, we had gone from 80-20 weighting, or 85-15 weighting upstream to downstream and chemicals to 80-20 over the last few years. When we close this transaction, we'll be back at 80-20, which is, or 85-15, I'm sorry, which is where it historically been. And that reflects a fundamental view that we believe that over the cycle returns in the upstream are likely to be structurally higher than in the downstream.
Michael Wirth: Primarily because refineries are hard to close. They get built for reasons other than just pure economics. And governments tend to intervene in transportation fuels markets, in particular when prices are high, which kind of takes you out of full cycle economics, and they kind of tend to pull the peaks off of those. Whereas in the upstream, you've got declining resource spacing, you've got growing demand. And so, the fundamentals rebalance more quickly. You remove a little bit of investment, and you see decline takeover, and you see demand continue to grow.
Michael Wirth: And so markets are getting imbalanced in the upstream rebalance more quickly. We also have been more oil-weight than some of our peers. And fundamentally, that reflects a view that there are more alternatives to substitute for gas, particularly in power generation, than there are for liquids in transportation. And so those are kind of high-level drivers of why our portfolio has been constructed the way that it is. We want to be an integrated company.
Michael Wirth: We think there are real opportunities to capture economic value through integration, to build the capabilities, to run our entire business by bringing capabilities, technology, skills, to bear across those different segments. But our peers are all weighted more to the up than the downstream. The ratios are a little bit different. And we've long held those views and constructed a portfolio that reflects them.
Michael Wirth: Thank you, Mark. You bet.
Katie: I would like to thank everyone for your time today. We appreciate your interest in Chevron and your participation on today's call.
Katie: Please stay safe and healthy. Katie, back to you. Thank you.
Katie: This concludes Chevron's third quarter, 2023 earnings conference call.
Katie: You may now disconnect.