Q4 2024 Chevron Corp Earnings Call
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Katie: Good morning. My name is Katie and I will be your conference facilitator today. Welcome to Chevron's fourth quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode.
Katie: After the speaker's remarks, there will be a question and answer session and instructions will be given at that time.
Katie: If anyone should require assistance during the conference call, please press star then zero on your touchtone telephone.
Speaker Change: As a reminder, this conference call is being recorded. I will now turn the conference call over to the Head of Investor Relations of Chevron Corporation, Mr. Jake Spiering. Please go ahead.
Speaker Change: Thank you, Katie, and welcome to Chevron's fourth quarter 2024 earnings conference call and webcast. I'm Jake Spiering, Head of Investor Relations.
Speaker Change: Our Chairman and CEO, Mike Wirth, and CFO, Eimear Bonner, are on the call with me today.
Speaker Change: We will refer to the slides and prepared remarks that are available on Chevron's website.
Thank you, everyone.
Before we begin...
Speaker Change: Please be reminded that this presentation contains estimates, projections, and other forward-looking statements.
Speaker Change: A reconciliation of non-GAAP measures can be found in the appendix to this presentation.
Speaker Change: Please review the cautionary statement and additional information presented on the slide too.
Now I will turn it over to Mike.
Thanks, Jake, and thank you, everyone, for joining us today.
Mike Wirth: Chevron delivered another year of strong results in 2024. We achieved record production both globally and in the United States and reached key milestones that are expected to underpin years of future cash flow.
Mike Wirth: This includes outstanding performance in the permeate, exceeding expectations with production growth of nearly 18% from last year.
delivering key project startups in the Gulf of America.
Mike Wirth: Fully integrating PVC energy, expanding our position in the D.J. Basin.
Mike Wirth: optimizing our portfolio through asset sales and swaps that maximize long-term value, completing WPMP, and achieving first oil at the Future Growth Project at TCO last week.
Mike Wirth: We also returned a record $27 billion in cash to shareholders through dividends and buybacks. Over the past two years, we've repurchased $30 billion and reduced our outstanding share count by 10%.
Mike Wirth: We continue to build our new energies business and complete projects to lower the carbon intensity of our operations.
Mike Wirth: In 2024, we sold over 20 million barrels of bio-based diesel and advanced foundational projects in CCUS and hydrogen.
Mike Wirth: We also completed projects designed to abate over 700,000 tons of CO2 emissions annually.
Mike Wirth: Now I'll turn it over to Eimear to go over the financials.
Thanks, Mike.
Speaker Change: Chevron reported fourth quarter earnings of $3.2 billion or $1.84 per share. Adjusted earnings were $3.6 billion or $2.06 per share.
Speaker Change: Included in the quarter were special items totaling 1.1 billion dollars related to restructuring and impairment charges.
Foreign currency gains were $720 million.
Speaker Change: Full year Organic CapEx is aligned with our announced $16 billion budget.
Speaker Change: in Organic CapEx of $530 million related mostly to lease acquisitions and new energies investments.
Speaker Change: We maintain double-digit returns with adjusted ROCE of 10.5% for the year.
Speaker Change: Compared with last quarter, adjusted earnings were $900 million lower. Adjusted upstream earnings were impacted by revisions to asset retirement obligations and timing effects, including year-end inventory valuation.
Speaker Change: Adjusted downstream earnings were lowered due to softer refining and chemicals, margins and timing effects.
Speaker Change: Chevron's past generation continued to position the company for long-term success while rewarding shareholders.
Speaker Change: In 2024, we invested capital efficiently, growing production by 7%, generated nearly $8 billion in proceeds from asset sales.
Speaker Change: sustained our long track record of dividend increases and repurchased five percent of shares outstanding and maintained a strong balance sheet ending the year with a net debt ratio of 10 percent.
Thank you.
Chevron's long-standing financial priorities have created value for shareholders.
Speaker Change: They have guided our actions through multiple commodity and investment cycles and will continue to govern how we allocate capital.
Speaker Change: Over the past five years, we've grown our dividends faster than the S&P 500 and nearly double the rate of our closest peer.
Speaker Change: Today we announced a 5% increase in the dividend, marking the 30th consecutive year with an annual increase to dividend payment per share.
Speaker Change: We're committed to capital discipline. Only the most competitive projects in our portfolio will get funded.
Speaker Change: Where assets don't compete for capital, we have a history of generating value commercially.
Speaker Change: The balance sheet is in excellent health, with net debt below our historical levels.
Speaker Change: We've repurchased shares, 17 of the last 21 years, and intend to maintain a buyback range of $10 to $20 billion per year, depending on market conditions.
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Speaker Change: Compared to our peers we're delivering growth with less capital and are turning more cash to shareholders.
Speaker Change: In the past three years, we've returned $75 billion in cash to shareholders via dividends and share buybacks.
Speaker Change: Now I'll hand it over to Mike to cover our near-term outlook. Thanks, Eimear. Chevron is in a strong position today, with near-term catalysts that are expected to drive the company to even better performance in 2025 and 2026.
Our objective is unchanged.
to safely deliver higher returns and lower carbon.
Speaker Change: In the next two years, we plan to achieve industry-leading free cash flow growth.
Speaker Change: to further strengthen our portfolio, including the expected completion of the HES transaction of the third quarter.
Speaker Change: advance opportunities in renewable fuels, hydrogen, CCUS and power, while maintaining cost and capital discipline.
Speaker Change: It's important to note that the guidance provided today excludes Hess, we continue to be very confident in essence positioned in the arbitration.
Speaker Change: We plan to host our next Investor day with a longer term outlook. After we close the transaction later this year.
Speaker Change: Chevron is poised for industry, leading free cash flow growth.
Speaker Change: We expect to add $10 billion of annual free cash flow growth and annual free cash flow of 26% led by growth in advantaged upstream assets.
Speaker Change: With additional production from FTP and a further reduction of affiliate Capex, we expect a sustained increase in distributions from Tcl going forward.
Speaker Change: In the Gulf of America, where we produce some of the highest margin barrels in our portfolio. We will have additional growth as anchor and will continue to ramp up and we bring value more online.
Speaker Change: And in the Permian, we're focused on operational efficiency and free cash flow positioning that asset is a core cash generator for the company.
Speaker Change: We're also executing plans to deliver stronger results across the entire portfolio, including.
Speaker Change: Including cash savings from our targeted $2 billion to $3 billion reduction in structural costs and improved returns in our downstream and chemicals businesses.
At <unk>, we achieved first oil at FTP last week.
Speaker Change: This important milestone is a result of consistent disciplined execution by the project and operations teams.
Speaker Change: Our focus remains on safe and reliable ramp up of the plants.
Speaker Change: FTP at 260000 barrels of oil production capacity to the existing plants.
Speaker Change: We expect to achieve full production rates 1 million barrels of oil equivalent per day within the next three months.
Speaker Change: With $70 brands expected free cash flow to Chevron is $5 billion in 2025 and $6 billion in 2026.
Speaker Change: This includes fixed loan repayments and quarterly dividends.
Speaker Change: We're proud to bring this large complex project online for the benefit of our shareholders and the Republic of Kazakhstan and <unk>.
Speaker Change: Look forward to future collaborations to maximize the long term value of the <unk> reservoir.
Speaker Change: In 2020 for execution efficiencies led to strong well and base business performance, helping us achieve another record for Permian production.
Speaker Change: Over the last five years, we've delivered compound annual growth of 16%, while continuing to capture efficiencies.
Speaker Change: Through optimized pad drilling designs and completion improvements electrical frac, we're able to achieve these production levels with 40% fewer company operated rigs that our plans included just a few years ago.
Speaker Change: We expect production to reach 1 million barrels of oil equivalent per day in 2025.
Speaker Change: The moderate growth in Capex to drive predictable and durable free cash flow generation.
Our Permian portfolio deliver superior returns due to royalty advantaged acreage across all of the sub basins, which add to both the top and bottom line.
Speaker Change: We're continuing to develop and deploy technologies to enhance efficiencies and recoveries.
Speaker Change: We're leveraging our strengths in advanced chemicals, and stimulation and scaling them across our shale and tight portfolio.
Our world class upstream assets provide further growth opportunities that are poised to deliver value for decades.
Speaker Change: In the Gulf of America, where we expect to grow production to 300000 barrels a day, we achieved first oil at the anchor in oil projects and belly more is expected to come online around the middle of the year.
Speaker Change: In Western Australia, our discovered resource is the ability to keep our LNG plants full for decades.
Speaker Change: Last month, we announced an asset swap that will increase our equity and wheatstone, which enables long term asset development and monetization.
Speaker Change: In West Africa, we have a queue of low cost developments that are expected to sustain production or many years.
Speaker Change: We recently extended the leases in Nigeria, and had a shelf discovery that will tie back to existing infrastructure.
Speaker Change: In Angola, we achieved first gas at the Sanyo lean gas connection project.
Speaker Change: And we plan to bring online and ourselves and all the development later this year.
Speaker Change: In the eastern Mediterranean, we have a significant resource position, we're continuing to unlock.
Speaker Change: Spansion projects at Leviathan Tomorrow are expected to come online through the end of the decade.
Speaker Change: Turning to our downstream and chemicals businesses, we're focused on operating reliably and efficiently while executing competitive projects that extend our value chains and capture market synergies.
Speaker Change: The recently completed expansion at our Pasadena refinery enhances our integrated value chain by running more Permian crude supply more products to our original marketing business and expanding synergies with the Pascagoula refinery.
Speaker Change: Our petrochemical growth projects in the U S in Qatar, a more than 50% complete and are expected to contribute to further cash flow growth beyond 2026.
Speaker Change: Both projects are feedstock advantaged have competitive cost structures that are well positioned to serve growing demand.
Speaker Change: We have several projects in our new energies business are expected to achieve key milestones in the next two years.
Speaker Change: In renewable fuels were in final commissioning of the Geismar renewable diesel expansion.
Speaker Change: And at our bogie joint venture construction continues at the new Oilseed processing plant in Louisiana, increasing our exposure across the renewable fuels value chain.
Speaker Change: Yes.
Speaker Change: We're working towards startup of the Acis Green hydrogen project in Utah later this year.
Speaker Change: Which will produce hydrogen from water and excess renewable power and stored underground for the special lower carbon power generation.
Speaker Change: The project is one of the world's largest hydrogen storage projects.
Speaker Change: We'll have over 200 megawatts of Electrolyzed our capacity.
Speaker Change: And carbon capture and storage Bayou Bend is working towards a Cid decision for the offshore project and we're also developing plans to capture and store cotwo from our Pascagoula refinery.
Speaker Change: Earlier this week, we announced plans to jointly develop scalable reliable power solutions to support growing energy demand from U S data centers.
Speaker Change: Governance is positioned to participate in this growth and generate competitive returns through integration with our U S natural gas business.
Speaker Change: Experience in building and operating nearly five gigawatts of reliable behind the meter power.
Speaker Change: And expertise and technologies that can help provide a pathway to reduce greenhouse gas emissions over time.
Speaker Change: We've secured slot reservations to purchased seven natural gas fired turbines from GE for Nova with.
Speaker Change: Liveries, beginning late 2026.
Speaker Change: We're advancing site selection and engineering work, while engaging customers.
Speaker Change: We look forward to sharing more as our plans develop.
Speaker Change: I'll hand, it back to <unk> to close out our guidance for 2025% in 2026.
Mike Wirth: Thanks, Mike.
Mike Wirth: In a cyclical commodity business capital and cost discipline always matter chevron's, Capex and affiliate Capex budgets reflect our commitment to capital efficiency, while funding our balanced portfolio of short and long cycle investment.
Organic capex is expected to remain within our 14% to $16 billion guidance range.
Mike Wirth: Our spend in the Permian and Gulf of America, Comstock capital will flow, where within the portfolio to support continued growth.
Mike Wirth: Affiliate Capex is expected to trend down further as investments at <unk> and CP Chem come online.
Mike Wirth: We're targeting $2 billion to $3 billion in structural cost reductions by the end of 2026.
Mike Wirth: Work is underway to deliver these savings through asset sales scaling technology solutions, such as expanding the use of robotics and Tianjin, how do we work to improve efficiencies and <unk>.
Mike Wirth: Executing our plans to lower absolute costs, while delivering growth.
Mike Wirth: Last year worldwide oil equivalent production was the highest in our history.
Mike Wirth: Fitting from a larger position in the D. J basin, following our acquisition of PDC energy and nearly 18% growth in the Permian.
Mike Wirth: Excluding asset sales, we expect production to grow around 6% annually through 2026.
Mike Wirth: In 2025, we expect growth to be weighted towards the second half of the year as key projects in tengiz and the Gulf of America come online and ramp throughout the year.
Mike Wirth: We're excited about the year ahead.
Mike Wirth: We're focused on delivering growth across advantaged assets and value chance by reducing absolute costs.
Mike Wirth: Starting up profitable new energy projects, and it's something you behind the meter power solutions and continuing to reward our shareholders with higher returns and a differentiated value proposition.
Jack: And now I hand, it off to Jack.
Jack: That concludes our prepared remarks additional guidance can be found in the appendix to this presentation and the slides and other information <unk> Chevron Dot com.
Jack: We're now ready to take your questions. We ask that you limit yourself to one question, we will do our best to get all of your questions answered Katy Please open the lines.
Speaker Change: Thank you if you have a question at this time. Please press star one on your Touchtone telephone to allow for questions from all participants we ask that 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 a speaker phone we ask.
Speaker Change: You would you please lift your handset before asking a question to provide optimum sound quality again, if you have a question. Please press star one on your Touchtone telephone we will take our first question from barrage worker with RBC.
Barrage Worker: Hi, Thanks for taking my question and congrats on getting FTP online and that's a big Big project. So.
Speaker Change: I wanted to ask about so underlying cash flow excluding working capital.
Speaker Change: This quarter at esports is all model. The $5 3 billion was was quite a bit way off what we expected. So could you just won't me through.
Speaker Change: How I should think about any one offs in there and help me understand what the sort of underlying basis should be as we as we think about 2025. Thank you.
Speaker Change: Hi, Brian Thanks for the question Youre right cash flow, excluding working capital was impacted by some nonrecurring and accounting items. This past quarter. So let me step you through and the big ones.
Speaker Change: Maybe the first as we recognized some tax charges in earnings related to our recently completed Canadian asset sale and that was around $1 $5 billion and.
Speaker Change: It's important to note that these tax charges are offset in working capital.
Speaker Change: But if you exclude the working capital or when Youre looking at cash flow you are still going to see that tax charge. So that's a big one the main one.
Speaker Change: The second one is we also recorded some charges in the quarter and that for earnings we have identified those as special items, we disclose them back in December and our capital release.
Speaker Change: However, we don't make the same adjustments for.
Speaker Change: For these items and cash flow, so you're seeing some of that flow through to the bottom line and that's about a $500 million headwind.
Speaker Change: And beyond those two items, we did have some other impacts the combination of affiliate distributions.
Speaker Change: <unk> unique commercial activity and that's another $500 million. So when you add up the three elements and that's about two 5 billion and to take into consideration for the cash flow this quarter.
Speaker Change: So if you've got any additional questions on those pieces acknowledging there they're a bit unusual this quarter. I mean, you can follow up with you after the call and show you how everything flows through.
Speaker Change: Thanks.
Speaker Change: We'll take our next question from Paul Cheng with Scotiabank.
Speaker Change: Thank you.
Speaker Change: Yeah, when we know.
Speaker Change: Looking at your next two years that I think it.
Speaker Change: Really good.
Speaker Change: Our line and I think that's a comfortable I think the question has always been talking.
Speaker Change: Talking about longer term say by the turn of the decade, I mean, once you're going to do if we put a half offset assigned.
In here that can you talk about your opportunity set.
Speaker Change: Already huh.
Speaker Change: <unk> talked for example, I believe that's a one off this company you guys have made in Nigeria and Angola.
Speaker Change: We are we in terms of bringing those that.
Speaker Change: Q2.
Speaker Change: To the solution.
Speaker Change: I think the project coming on stream.
What we need in order for that to become a relaunch and how big are those opportunities. Thank you.
Paul: Okay, Paul Thank you.
Speaker Change: Yeah, you're right what we laid out today is a.
Speaker Change: A more detailed look at for the next two years and as you rightly note, there's a lot of significant growth.
Speaker Change: We wanted to provide you more confidence and visibility on that free cash flow growth and frankly, it continues to be de risked everyday here during the month of January with the whales startup and the FTP startup.
Speaker Change: Significant events that that really derisk that and so that was the primary objective is provide transparency and confidence in that.
Speaker Change: And I will set has subsided, but I'll just acknowledge that we look forward to closing Hess, which will make a strong hand, even stronger.
Speaker Change: You look out beyond the end of 2026 are there are a number of things that are going to contribute to continued free cash flow growth.
Speaker Change: Got too big chemicals projects that are under construction that will come online late 'twenty six early 'twenty seven time window.
Speaker Change: We are we've got projects in the eastern Mediterranean in the near term for both Tomorrow Leviathan that will come on towards the end of this year and be ramping into 26 and beyond and then we've got further.
Speaker Change: Work underway, particularly at Leviathan for yet another expansion in the eastern Mediterranean.
Speaker Change: I would expect Argentina over the back half of this decade to begin to grow at a rate thats stronger than what we've seen thus far contingent upon continued progress in policy and kind of a government stability in macro environment stability, there, but the signs there have been.
Speaker Change: Encouraging and positive you mentioned West Africa.
Speaker Change: There's a number of opportunities I talked about a discovery on the Nigeria shelf, Saudi oil and gas South and dollar are we.
Speaker Change: We have a number of other very attractive prospects. There, we haven't really gone below 10000 feet to produce.
Speaker Change: Yet in that region.
Speaker Change: We picked up additional <unk>.
Speaker Change: Akridge offshore Angola, three new blocks that are undergoing seismic.
Speaker Change: Work right now and we haven't talked a lot about West Africa in recent years, given some of the other things within our portfolio, but that has a lot of running room left ahead of us.
Speaker Change: Venezuela partitioned zone huge huge resource positions we've been.
Speaker Change: Moving thoughtfully for particular reasons in each of those locations, but those present long term opportunities that are captured and.
Speaker Change: It can become very attractive.
Speaker Change: And we've got a really nice exploration portfolio and in West Africa.
Speaker Change: South America, the U S Gulf Eastern Mediterranean that we expect to provide further resource opportunities.
Speaker Change: We've got technology that can unlock things and.
Speaker Change: And of course, a large low decline base that we can sustain.
Speaker Change: Very competitive capital investment and.
Speaker Change: And good underlying growth rates. So we've seen outsized growth here in recent times right last year's growth, 7%, we're guiding to a 6% CAGR for the next couple of years, that's probably not a growth rate that anyone would expect to continue but there are plenty of opportunities out there in the 2027 and beyond.
Speaker Change: Q.
Speaker Change: We'll sort through and fund to the best of those within a tight disciplined capital budget.
Speaker Change: Thanks, Paul.
Speaker Change: We will take our next question from Neil Mehta with Goldman Sachs.
Speaker Change: Yes.
Speaker Change: Good morning, Mike Ameren team.
Speaker Change: Just wanted to better understand the power business and the announcement from earlier this week with the with key for Nova.
Speaker Change: Mike and you've talked a lot about.
Speaker Change: Being a tricky business and chevron seen that firsthand over the last 30 years at different points, but wanting to ensure that youre staying true to your core competency. So how do you think about.
Speaker Change: Playing in this ecosystem and ensuring that.
Speaker Change: You de risk it so that you can preserve the upside.
Speaker Change: Yeah. So.
Speaker Change: Neil I would tell you you should think of this as being aligned with what we've said we were looking to do which is leverage our strengths to advance.
Speaker Change: Lower carbon energy solutions to meet demand growth in the world. We operate nearly five gigawatts of reliable and at scale power today at Gorgon at TCE O in refineries, we know how to build and operate large scale power generation and integrate it to a.
Speaker Change: Our core customer.
Speaker Change: We know how to operate these assets very very well, we've got the technical capabilities that.
Speaker Change: Are required to do this.
Speaker Change: In the U S. We've got a very large natural gas position.
Speaker Change: And we've been diversifying some of our gas markets with some LNG offtake.
Speaker Change: This allows us to to backstop.
Speaker Change: Power investments for premium customers. We have said, we didn't envision ourselves as a merchant power player and we still don't building power to sell into the grid and just generate merchant power is probably not going to deliver returns competitive with our portfolio, but a high reliability at scale.
Speaker Change: Offering thats delivered rapidly.
Speaker Change: It's something that's in high demand from customers right now you can see PPA so that have been.
Speaker Change: Done for things like re commissioning nuclear facilities.
Speaker Change: That gives you some sense of the value that these have for customers and we've been engaged in discussions with with the Hyperscale <unk>.
Speaker Change: For a year or more to understand what theyre looking for and understand whether or not that's something.
Speaker Change: That.
Speaker Change: We can.
Speaker Change: We can deliver on it and we think that it really does make good sense for us where we've.
Speaker Change: We've got seven of <unk> largest turbines with reservations.
Speaker Change: Our reservation slots for delivery beginning in late 'twenty, six and then into 'twenty seven.
Speaker Change: And would you expect to be on the front end of what will be a real surge in power demand in this country and importantly, the last thing I'll say is up.
Speaker Change: I think most of the people on the call are familiar with the challenges that the grid in this country faces right now.
Speaker Change: And we keep supply of electricity reliable until the economy as it as it stands today doing this off the grid and behind the meter doesn't further tax and already.
Speaker Change: Taxed.
Speaker Change: Distribution infrastructure and it doesn't.
Speaker Change: It doesn't put this investment costs into the rate base and drive up costs for consumers as well. So we think this is something that's good for America, you know American energy abundance can help.
Speaker Change: Ensure AI leadership.
Speaker Change: Good for the public it'll create jobs and it helped to keep rates from rising and it's good for the big customers that are looking for reliable and.
Speaker Change: <unk> fast solution to deliver this power and eventually lower carbon options to reduce carbon intensity.
Speaker Change: Thanks Neil.
Speaker Change: We'll take our next question from Doug Leggate with Wolfe Research.
Doug Leggate: Thanks, Good morning, guys. Thanks for the opportunity to ask Mike.
Speaker Change: I did warn GE came out of a party and a part b. So it's technically one question, but hopefully can do our simi bluster.
Speaker Change: So the incremental disclosure on the bridge to 2027 is really really helpful. But one there's never enough, obviously, but I wonder if you could just.
Speaker Change: Benchmark against what you gave us.
Speaker Change: February 2023, I guess under similar conditions.
So what is the incremental 10 <unk>.
Speaker Change: Including the debt payback.
Speaker Change: What does that look like in 2027 versus I guess, what you gave us before and the part B is obviously tengiz is the big story here, but a couple of days ago I think.
Speaker Change: It sounds like government put on the wire is actually talking about contract extensions, which is great news for you potentially but but on better terms. So I was just wondering if there was any color you could offer on that.
Speaker Change: Yes so.
Speaker Change: <unk> why don't you talk about free.
Speaker Change: Free cash flow for 2027, and then I'll take the concession.
Speaker Change: Yeah. Thanks, Doug. This is the short answer is it's aligned with the previous guidance. So we're really reaffirming that.
Speaker Change: That guidance, obviously since then there's been some puts and takes on.
Speaker Change: On the portfolio side.
Speaker Change: And out of PDC.
Speaker Change: Our last guidance and we've divested some assets as well you know primarily Canada.
Speaker Change: There's been some.
Speaker Change: Price assumptions changed and but we do have and.
Speaker Change: Gross laid out today I could 2026, and we see a growth beyond that we've got the CP Chem projects that would be online around that time, we will have some eastern med, Brian faith projects in tomorrow, and Leviathan that will come after 2026, and Mike talked earlier about the Argentina at potential there and the <unk>.
Speaker Change: Our potential and then in addition to that we've got the $2 billion to $3 billion of structural cost reductions that are that are underway. So the short answer is yes.
Speaker Change: It's aligned but maybe many of the projects that we talked about a few years ago have also been derisked.
Speaker Change: Since since then so we would expect to provide you know the 2027 outlook later on the year.
Speaker Change: Okay.
Speaker Change: Yeah on the concession Doug we're still focused on ramping up safely and reliable.
Speaker Change: This is a really important milestone and it and it signals moving to the next phase of the life of that of that field and so we're absolutely laser focused on getting that right.
Speaker Change: Early performance has been very stable and very encouraging.
Speaker Change: We get through the ramp up to see the plant and reservoir performance.
Speaker Change: We'll then be able to really turn our focus to the future.
Speaker Change: This is a world class asset we've got a long proud history in Kazakhstan, and with the with the Tcl partnership.
Speaker Change: And we certainly would like to extend the concession, but it has to work for everyone has to work for the Republican has to work for our company and our shareholders is to be competitive these things take time.
Speaker Change: Complex <unk>.
Speaker Change: Contrast complex negotiations and.
Speaker Change: And we will keep you posted as as that evolves over time.
Mike Wirth: Okay and that was a clever way to get two completely unrelated questions Doug.
Speaker Change: So Jack Black stone, rather than have to talk to Jake about the ground rules in the future now lets go to the next question.
Speaker Change: We'll go next to Devin Mcdermott with Morgan Stanley.
Devin Mcdermott: Hey, good morning, Thanks for taking my question and for the detailed update today.
Devin Mcdermott: Mike I wanted to ask you about policy and there has been in the U S. Now a series of energy related executive orders over the past week I was wondering if you could talk through how this might impact some of your oil and gas operations, especially given our large presence you have in the golf and then new energies opportunities and do you think through the <unk>.
Speaker Change: Lori of news flow over the last week. There's also been some headlines on your Venezuela license. So if you could address that as part of the response I'd. Appreciate it I know a lot to unpack there, but would love your thoughts thanks.
Devin Mcdermott: Yeah that is that is a lot.
Devin Mcdermott: Devin.
Devin Mcdermott: Following up with you off Doug.
Devin Mcdermott: Yeah.
Devin Mcdermott: But theyre all related for you.
Devin Mcdermott: So let me start kind of at the at the highest level.
Devin Mcdermott: For years now.
Devin Mcdermott: I have been calling for a more balanced discussion about about energy. We're finally beginning to see it.
Devin Mcdermott: We're seeing economic prosperity energy security and environmental protection are all being brought together and in the past.
Devin Mcdermott: Really the dialogue skewed.
Devin Mcdermott: Toward environmental protection and much less towards the others and I think it's a welcome.
Devin Mcdermott: Change to see this reflected it's a conversation that now recognizes the oil and gas are a vital part of the energy mix in this country and in the World, which is a reality that that we all need to acknowledge and it's good to see it.
Devin Mcdermott: An administration that is.
Devin Mcdermott: Intent on leveraging an encouraging American energy abundance for the benefit of our economy for the benefit of our security for the benefit of our allies and intends to do that in a way that also provides.
Devin Mcdermott: Our mental protection. So I think it's a more balanced approach I think it's a welcome approach and the specifics.
Devin Mcdermott: Still remains to play out in many of these executive orders direct agencies to review things too.
Devin Mcdermott: To look at actions that can be taken and so actual actions I think for the most part still remain ahead of us, but I would expect them to.
Devin Mcdermott: Encourage more access for instance, more regular lease sales.
Devin Mcdermott: There is building bipartisan support for permit reform, which is very necessary not just for our industry, but for many other industries.
Devin Mcdermott: It's become so difficult.
Devin Mcdermott: To build things here in the United States and so I think.
Devin Mcdermott: It's a welcome it's a welcome reset and one that our country will benefit from.
Devin Mcdermott: I can't say much more about anything you know Venezuela is an issue that has been.
Devin Mcdermott: Around for quite some time during the first Trump administration during the by the administration and now again in the second Trump term.
Devin Mcdermott: Sanctions exist on Venezuela, where the only U S company on the ground. There we're focused on keeping our people safe ensuring that assets operate in a way that protects the environment and complying with our you know with with all the laws we don't.
Devin Mcdermott: That policy, we comply with laws when we engage with the government to help inform them of the.
Devin Mcdermott: Potential impacts of policy choices, and we'll continue to do so.
Devin Mcdermott: Thanks for the question Devin.
Devin Mcdermott: We'll take our next question from Stephen Richardson with Evercore ISI.
Stephen Richardson: Hi, good morning.
Speaker Change: Mike I Wonder if you can talk about the position of the Permian in the portfolio.
Stephen Richardson: You've got this.
Stephen Richardson: Barrel a day target out there that it looks like Youre going to hit if you haven't already hit it pretty pretty soon.
Stephen Richardson: And I know there was a previous target in the last analyst day that was a little higher than that could you maybe just talk about the right amount of unconventional in the portfolio when do we think about that.
Stephen Richardson: The Permian and the DJ do we think about it relative to the total is it.
Stephen Richardson: Production is a decline curve, how do you think about the right amount of unconventional or the size of the corporation for the next couple of years.
Yeah.
Stephen Richardson: So let me start.
Stephen Richardson: Really pleased with our team in the Permian.
Stephen Richardson: The performance again in the fourth quarter.
Stephen Richardson: We delivered 992000 barrels a day.
Stephen Richardson: In the fourth quarter, we were over 1 million barrels a day in December.
Stephen Richardson: For the full year, we saw a growth of 18%.
Stephen Richardson: And really really strong performance across all aspects of the Permian.
Stephen Richardson: And we expect to continue to grow even as we've we've now.
Stephen Richardson: Past, our peak investment and we've started to bring capital investment down.
Stephen Richardson: We still expect to see.
Stephen Richardson: Nine or 10% production growth in 2025.
Stephen Richardson: A little bit less than that probably in 2026.
Stephen Richardson: And where were headed towards a a lower rate of growth.
Stephen Richardson: And at some point you can't grow a position like this infinitely that.
Stephen Richardson: That was the criticism of the industry.
Stephen Richardson: The last decade is companies only focused on growing and they never focused on generating.
Stephen Richardson: Free cash flow and returning to shareholders and that's always been our plan to do just that so we'll have an asset that will produce something over a million barrels a day for many many years into the future and as we can maintain that with a lower rate of capital investment and we are required to get to where we are.
Stephen Richardson: That really opens up the free cash flow.
Stephen Richardson: Off of that asset so.
Stephen Richardson: We are.
Stephen Richardson: Very pleased with that so we've got 400000 barrels a day give or take now in the D. J basin, which is kind of in that plateau phase where we can.
Stephen Richardson: Can draw free cash flow off of that we close Hess Theres. Another couple hundred thousand barrels a day in.
Stephen Richardson: In the Bakken.
Stephen Richardson: You bring Argentina in and now you're talking a 1.7 million.
Stephen Richardson: A million barrels a day or so and you know this year, we produced three three and change and so it's kind of 50% of the portfolio and the nice thing about that is at very modest Capex you can hold that production flat for quite some time and use that as a big cash generator so that.
Stephen Richardson: It is the that is the intent there is always the prospects that we see technology breakthroughs, we're working on improved recoveries.
Stephen Richardson: That is economic could open a new phase of growth and I don't want to predict that but I certainly wouldn't want to rule that out and so as we continue to get better and better at this and and developed technologies to improve recoveries. We can extend the plateau, we can raise we could raise.
Stephen Richardson: Plateaus, but this is a highly economic asset that is.
Stephen Richardson: Our core position that will generate production in cash long into the future and of course in the Permian. The royalty advantage that we have is is kind of icing on top of that kick in so that's that's.
That's how we think about it I can't give you a magic.
Stephen Richardson: Formula a percentage, but it's.
Stephen Richardson: Like I say its approaching 50% of our overall production, which is which is a significant piece.
Speaker Change: Thanks, Steve.
Speaker Change: We'll take our next question from Jason <unk> with TD Cowen.
Speaker Change: Okay.
Speaker Change: Thanks for taking my questions.
Speaker Change: Wanted to ask about the TCR distribution and I appreciate the detail between first half and second half of this year.
Speaker Change: The $5 billion 6 billion for 25, and 26 is that similar to the four and $5 billion, respectively that you guided to previously just at a higher price deck and further to the distribution.
Speaker Change: <unk>.
Speaker Change: It looks like based on <unk> own filings out there operating expenses from 2022 to 2023 have gone up about $5 a barrel I am not sure if that's related to the Russian more or something else, but I wonder if that increase in opex is contemplated in your free cash.
Speaker Change: LOE guidance for <unk> or is that something you expect to come back down.
Speaker Change: Yeah. Thanks, I can I can talk to that.
Speaker Change: The free cash flow and inflection that's coming with that which is actually upon us now that the asset is it started up so we shared in the slide 5 billion for $2025 6 billion for 2026.
Speaker Change: And what's contributing there is obviously that production and but also the affiliate Capex is coming down so and with the project completing and the affiliate Capex is reducing.
Speaker Change: Significantly until that.
Speaker Change: That resulted in the free cash flow.
Speaker Change: We also anticipate that as the plant gets she's guide in the safe and reliable startup and complete that there'll be focused as well on and operational opex and optimizing that given the new business of 1 million barrels a day that day.
They will have so that can move around a little bit during the year, but generally we have opex coming down there. So those are two things that are contributing to the free cash flow. In addition to the production.
Speaker Change: Thanks, Jason.
Speaker Change: We'll take our next question from Alastair Syme with Citi.
Speaker Change: Thanks, Mark I, just want to ask about in Namibia.
Speaker Change: Got a good sense of why that's so.
Speaker Change: Exploration will fold and whether you've seen them off.
Speaker Change: Do you want to go again in a different location.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: Or.
Speaker Change: The first well.
Speaker Change: The first well and.
Speaker Change: In exploration.
Speaker Change: You learn that oftentimes.
Speaker Change: <unk>, particularly in a new relatively new basin.
Speaker Change: You need a lot of information and so each well is.
Speaker Change: It is actually while you're targeting hydrocarbons the real objective.
Speaker Change: Is is to learn and.
Speaker Change: Yeah.
Speaker Change: Failure to learn would be a failure of the well.
Speaker Change: Failure to find oil and gas happens more often than not and so are we.
Speaker Change: Uh huh.
Speaker Change: A very large position on two different blocks.
Speaker Change: And the Orange and the wall of those basins.
Speaker Change: As people are well aware others have found.
Speaker Change: Found some encouraging.
Speaker Change: Things in on their blocks and so there's a working petroleum system that.
Speaker Change: That exists there.
Speaker Change: And we're very pleased with the information that we learned and it does inform future.
Speaker Change: Future activity.
Speaker Change: And it helps us understand the geologic history of that part of the basin, which is fundamental to understanding how the how the depositional.
Speaker Change: <unk>.
Speaker Change: Structures and in geology evolved and we'll use that to inform future activity.
Speaker Change: Or it's not enough if I heard your question correctly, it's not enough to say.
Speaker Change: Not interested it is enough to say we continue to be interested the other thing I'll. Just tell you is the well went down very fast.
Speaker Change: Cost was.
Speaker Change: It was much lower than some of the other wells we've seen in that area and so I think the other encouraging thing that we learned is that.
Speaker Change: The drilling environment. There is one that we can we can execute very well in and and keep the future exploration wells and are in a very cost effective manner. So we'll talk to you more as we are.
Speaker Change: Evaluate the next steps in both of those basins and continue to evolve our program.
Speaker Change: We'll take our next question from Betty Chen with Barclays.
Speaker Change: Good morning Betty.
Betty Chen: Good morning, Thanks for taking my question.
Speaker Change: To go back to the power venture.
Speaker Change: I wanted to ask about how do you think about the capital commitment for Chevron related to debenture. It is really impressive that you were able to secure these high demand turbine spot so have all the deposits for them.
Speaker Change: And just how much equity capital would you be willing to put into it.
Betty Chen: Yes, Thank you Betty.
Betty Chen: It's still early days and we're not providing public details on some of the specifics of the joint development is as we move into the next phase of our site selection and.
Betty Chen: And engineering and the like we have secured the slot reservations with payments and and those are.
Betty Chen: Again terms that are that are confidential.
Betty Chen: We won't have 100% of this.
Betty Chen: It will be funded through our partners and other investors and.
Betty Chen: We'll.
Betty Chen: We will provide more detailed at a time that's appropriate on that.
Betty Chen: The one thing that I do just want to call out is we haven't changed our capex guidance.
Betty Chen: And so this will be done within the Capex guidance that we've issued.
Betty Chen: We intend to develop.
Betty Chen: <unk> that are competitive with other things in our portfolio and and here you've got the benefit of scale. We've got an early position in the queue.
Betty Chen: Gas turbine generators are seeing upward price pressure and so it's better to be early in the Q. Then later in the queue.
Betty Chen: And so we'll be focused on capital efficiency here and developing a project that delivers.
Betty Chen: For customers and delivers value for shareholders. So stay tuned for more details as things evolve later this year.
Speaker Change: We will take our next question from Ryan Todd with Piper Sandler.
Ryan Todd: Good Thanks, maybe if I could ask one on the.
Speaker Change: Gulf of Mexico Gulf of America.
Ryan Todd: Whenever we're calling it now.
Speaker Change: You've you've now got two of the three projects online for the 2025 and 2026 time period with valley more concerned I mean, what what are you seeing in terms of reservoir performance. So far what have you learned in terms of you know from these developments both on the <unk>.
Speaker Change: I guess on the subsurface and on the on the facilities side and how does it inform kind of future potential for you in the basin.
Speaker Change: Yeah. Thanks, Thanks, Brian.
Speaker Change: <unk>.
Speaker Change: The short story is the wells are performing very well.
Speaker Change: We've got two wells on line at anchor a we've got a third well that.
Speaker Change: We expect to come online in the second quarter.
Speaker Change: The fourth and fifth wells, we've got top holes drilled and the top whole section drilled.
Speaker Change: And we had remaining drilling and completion work ahead of us.
Speaker Change: Fifth well in early 2026.
Speaker Change: No.
Speaker Change: We are able to drill and complete in this pressure and temperature regime, which is a new one for the industry.
Speaker Change: Reservoir performance frankly is at or above expectations and so we're quite encouraged on the whaler I would refer you to the operator for specifics and let them update you on that and and valley more as I mentioned, you know online here mid year and so we'll update you.
Speaker Change: As we see performance out of that but it's very encouraging.
Speaker Change: The Gulf of we're calling a Gulf of America is the that's the position of the U S government no.
Speaker Change: And.
Speaker Change: There's a lot of running room out there were a large lease holder.
Speaker Change: There's a lot of acreage that is prospective for tie backs Theres also acreage that is prospective for greenfield developments, we've brought costs down significantly we've advanced technology to operate in.
Speaker Change: And different pressure regimes, and I think theres going to be an important producing.
Speaker Change: Producing basin for our country for many many years to come.
Ryan Todd: Thanks Ryan.
Speaker Change: We will take our next question from John Royall with Jpmorgan.
John Royall: Hi, good morning, Thanks for taking my question.
John Royall: So I was wondering if you can just talk about your operations in the eastern Med today, and just an update there.
John Royall: We've obviously seen a significant improvement in the political situation in that part of the world and there are no guarantees that forever, but.
John Royall: As Mike mentioned, you do have some project growth that you're working through there. So maybe just an operational update on how you're feeling about your position there and the risks as you see it today.
John Royall: Yeah. So first of all we're really pleased to see tensions.
John Royall: Diminishing in the region and hopefully a lasting peace for the people there.
John Royall: The headline is there's no real change to our plans John.
John Royall: We expect projects that are in execution at both tomorrow in Leviathan to come online by the end of the year or into early 2026. There was a pipe lay vessel that was demobilized during kind of the height of the conflict that vessel will be re mobilized here during the first half of this year to complete.
John Royall: The work that it had underway.
John Royall: So the next leg of growth after those two projects.
John Royall: Would be a leviathan expansion. We're currently in feed for that.
John Royall: Would be a significant growth.
John Royall: Growth in production.
John Royall: For Leviathan still work to be done, but you know that.
John Royall: It's a project that would come online towards the end of this decade.
John Royall: And continue to step up the production on that asset significantly so.
John Royall: Despite despite all the.
John Royall: The activity, we've seen in that region will see production up by 25% over the next two years and something closer to 50% by 2030.
Speaker Change: Thank you we will take our next question from Jan Jean Ann Salisbury with Bank of America.
John Royall: Yeah.
John Royall: The ramp is basically tracking to your expectations or even exceeding them and when you might have any more to share about potential debottlenecking potential.
Speaker Change: Julian you came off mute partway into your question and Youre talking I caught the part about ramp and Debottlenecking were you asking about FTP.
John Royall: Yes, yeah.
John Royall: Oh, okay. Good.
Speaker Change: So.
Speaker Change: Look we're a little bit.
Speaker Change: You know more than a week into this at this point and so it's you know it's very early days, but I will tell you the.
Speaker Change: Operations have been very stable.
Speaker Change: Is a big complex process operation with a crude stabilization.
Speaker Change: Some fractionation, obviously, the high pressure sour gas injection and.
Speaker Change: Temperatures and pressures that are significantly so.
Speaker Change: Seeing stable operations is very encouraging we have seen production step up.
Speaker Change: Well.
Speaker Change: Well deliverability has been very strong and.
Speaker Change: We've completed all of that work last year, but the field performance has met or exceeded expectations.
Speaker Change: And we feel good about what we see to this point in terms of a stable and reliable operations will step things up gradually to be sure that we maintain that stability and reliability, we still have.
Speaker Change: Very significant exclusion zones in place for instance to minimize the number of people that are in a plant that is just beginning to operate with the HOS concentrations that we see there.
Speaker Change: And so it will be methodical and.
Speaker Change: And very deliberate and raising the.
Speaker Change: The production levels up to full capacity, but.
Speaker Change: Early early indications I would say are all positive.
Speaker Change: Any things we've encountered are well within the range of what would be normal startup.
Things that you see in a plant like this so more to follow.
Speaker Change: Debottlenecking is probably a question for the future we're really focused on getting the most we can out of this plant right now.
Speaker Change: And so we will update you on that certainly.
Speaker Change: Certainly on the next next quarter call, we'll have a lot to say about performance at FTP.
Speaker Change: Yeah.
Speaker Change: We'll take our next question from Lucas Herrmann with BNP Paribas Exane.
Speaker Change: Yes.
Lucas Herrmann: Yeah. Thanks, Mike.
Lucas Herrmann: Thanks for the opportunity.
Speaker Change: Just a point of clarification, Mike you talked about the.
Speaker Change: The transaction with wheatstone or round Wheatstone with with Woodside, you mentioned that you talked about some better positioned to monetize.
Speaker Change: You talked monetize do you mean monetize the resource that you have or do you also imply monetize the facility.
Speaker Change: To take capital out of it in some way with.
Speaker Change: Yeah Central insurance pension fund.
Speaker Change: And if I might just ask one other question.
Speaker Change: In essence, when you talk about returns in the power business do you think about returns volatility adjusted all.
Speaker Change: Now you could go into a a better price thanks very much.
Speaker Change: Yeah. Thanks, Thanks Lucas.
Speaker Change: Wheatstone, we're really talking about monetizing resource overtime and.
Speaker Change: We're going to acquire not only would sides interest in the Wheatstone project, but also in the gym Omar Brunello.
Speaker Change: And we will.
Speaker Change: We'll hand over to them, our interest and in northwest shelf.
Speaker Change: And some other smaller related things.
Speaker Change: We've got high expectations for the Carnarvon basin for many decades to come we have had a strong exploration track record out there we've got a tremendous amount of resource and optimizing that resource through both.
Speaker Change: Wheatstone and Gorgon in a way thats economic that keeps the plants full thats. Good for Australia are good for customers.
Speaker Change: It is important and this gives us more more control over that.
Speaker Change: <unk>.
Speaker Change: And a bigger stake in that and so that's really the primary driver of where we're not.
Speaker Change: Contemplating.
Speaker Change: Bringing in the edge.
Speaker Change: <unk> funds or anything like that too.
Speaker Change: Sell down our position there.
Speaker Change: <unk>.
Speaker Change: The second question or the second part of your question was about Oh part returns empower yeah.
Speaker Change: Yeah, you know look we have a volatility in R. R.
Speaker Change: Oil and gas business where volatility.
Speaker Change: Mining and marketing business.
Speaker Change: We would look to put in place ppas that work for customers and work for us and is a large.
Speaker Change: Natural gas producer and we obviously have a natural gas supply.
Speaker Change: We've got natural gas commercial.
Speaker Change: Capability.
Speaker Change: Across the value chain and so we can use that to help manage exposure and volatility for our investment potentially for customers. If that's what they're looking for but it's very similar to how we.
Speaker Change: Encounter volatility and other aspects of our business and we'll look at it in a way that is.
Speaker Change: Consistent with with how we look at other things that have associated volatility.
Speaker Change: Lucas.
Josh Silverstein: We'll go next to Josh Silverstein with UBS.
Josh Silverstein: Hey, good morning, guys, maybe just into the refining and chemical business.
Speaker Change: We're clearly in a weak price environment and margin environment right now.
Speaker Change: I wasn't maybe improving the product slate and doing some cost reductions.
Speaker Change: Things that you guys did you counter cyclically to improve.
Speaker Change: Prove your Leverages the recovery maybe.
Speaker Change: Maybe bring forward some projects or turnaround the fire some other assets that might be financially challenged any anything like that.
Speaker Change: Yeah.
Speaker Change: Having spent a good part of my career in that business.
Speaker Change: Margin pressure is a familiar friends, I guess, I would say and and and it does spark innovation and.
Speaker Change: There's nothing like feeling kind of the sharp end of the stick to make people continuing to find ways to.
Speaker Change: Find a little more flexibility on your feedstocks.
Speaker Change: Move your operating reliability your.
Speaker Change: Our cost structure.
Speaker Change: Sure you've got all the right handles for product optimization into the market via different products.
Speaker Change: Via different channels to go to market and customer relationships and the like and so I think we will be looking to do all of those things, but we should be looking to do all of those things when margins are good.
Speaker Change: And we certainly are looking to do those win win margins are difficult.
Speaker Change: I would point to the fact that we're now.
Speaker Change: Increased capacity to run light oil at our Pasadena refinery. This is a good example of that.
Speaker Change: So we can integrate some of our upstream production that we may get a better netback on it versus exports for instance.
Speaker Change: We'll produce products that can move out into our marketing channels, where we might otherwise be reliant on others to supply some of our market needs.
Speaker Change: And we can integrate intermediates with the Pascagoula refinery, we can optimize during turnarounds and storms and other market conditions.
Speaker Change: By thinking of those two is as a system.
Speaker Change: We'll continue to look for opportunities like that which are capital efficient ways to increase your flexibility and the ability to control your own margin outcomes in the downstream.
Speaker Change: Thank you we'll take our next question from Paul Sankey with Thank you research.
Speaker Change: Hi, Mike Thanks, a lot.
Speaker Change: Everyone Nice to hear you back on the call Paul.
Speaker Change: Pleasure to be back and when it gets to be full.
Speaker Change: That's a very quick one just about some potential corporate actions.
Speaker Change: But you know the big idea was I was looking at your Capex in that 14 to 16 range I was just wondering what the chances are if you.
Speaker Change: Getting towards the lower end of that range, because you know it strikes me that you could differentiate yourselves with.
Speaker Change: With lowering capex and falling capex over the coming years and.
Speaker Change: Further to that.
Speaker Change: I was wondering do you think there is potential for example for you to cut upstream Capex. Once that is completed how would that work out.
Speaker Change: Lee the volatility of yourselves I was wondering you underinvested in refining do you think that's been an issue.
Speaker Change: And then the wildcard was the potential for some mega deals the exact opposite.
Speaker Change: And whether or not it might be a good idea to go really big as opposed to continuing to sort of try and shrink and then the final element to the Capex question was if you're doing this AI.
Speaker Change: Guests wide power does it deep cut back what are the areas that you're cutting back capex.
Speaker Change: Presumably in a less attractive under the Trump guidance such as it is.
Speaker Change: Alright, well you have clearly pips, Doug Leggate in terms of getting the most questions into one.
Speaker Change: So making up for some lost time Paul.
Speaker Change: Okay.
Speaker Change: Okay. So let me tick through those quickly.
Speaker Change: 14 to 16 is a range.
Speaker Change: Last year, we were at the top end of the range. This year with the middle end of the range, yes could we be at the at the low end of the range we could.
Speaker Change: And we'll we'll make that call based on the opportunity set the competitiveness of those our view on the.
Speaker Change: The market outlook there the real message here is I think you can depend on us to remain very disciplined and we're getting more for every dollar we're spending.
Speaker Change: I mentioned earlier, the Permian is growing with 40% fewer rigs and our plans contain just a few years ago.
Speaker Change: We're growing at a 7% rate last year, a 6% CAGR over the next couple of years.
Speaker Change: The.
Speaker Change: Infamous Porcupine chart show that at the time, where we're spending a lot more capital we are delivering that kind of growth. So we become more capital efficient.
Speaker Change: And we have to continue to look for ways to deliver energy at lower and lower.
Speaker Change: Capital investments.
Speaker Change: Are we underweight in refining we've always been.
Speaker Change: More skewed to the upstream.
Speaker Change: If there are if the right opportunity were to come along in downstream and chemicals, you would always look at it.
Speaker Change: Those segments one of the ways you Derisk your position is by not overpaying and so.
Speaker Change: We're always attuned to opportunities out there would have to fit.
Speaker Change: Our criteria, which really are assets that have scale flexibility can operate very efficiently with integrated into good market positions.
Speaker Change: So there's a set of criteria that we would apply to that.
Speaker Change: I am not going to speculate on mega deals whatever that whatever that means.
Speaker Change: And then.
Speaker Change: Okay. The AI investment is.
Speaker Change: Or the power for AI is going to fit into the portfolio like other things the capex on that is manageable for sure.
Speaker Change: It's spread out over time.
Not all of them.
Speaker Change: 100%.
Speaker Change: Equity on our parts and it will have to deliver competitive returns and so will it displace something will it.
Speaker Change: Cause something else to maybe be pushed out in time, how we prioritize those things as part of running our business each and every day and so we've got a queue of investments that we're constantly working on and we should not fun to all of them. We should only fund the best of them and this will go into that same process and and be optimized within the overall.
Speaker Change: Set of investments that we're advancing.
Kumar: Thank you we'll take our next question from <unk> Kumar with Mizuho.
Speaker Change: Yes.
Kumar: Good morning, everyone and thanks, Mike for taking my questions. Congrats on starting T C L.
Speaker Change: I just wanted to touch on the cost structural cost reductions you've talked about.
Speaker Change: Could you break out break that $2 billion to $3 billion between your upstream and downstream a little bit you were talking earlier about the margin pressure in downstream.
Speaker Change: And as I look at slide 10 in the trajectory of those savings it seems like there's a little bit weighted towards 2025. So.
Speaker Change: Are they more related to asset sales or are there other things kind of in the.
Speaker Change: Remaining businesses that are helping.
Speaker Change: Hi, Matt and I'll take that one yeah, the $2 billion to $3 billion structural cost reductions, you'll see them across all segments. So let me kind of breakdown and the focus areas for you a little bit.
Speaker Change: The first focus area is around asset sales, so you're right, we'd expect to see some reductions.
Speaker Change: And this year given the asset sales last year in Canada. For example, so you will see some of those portfolio impacts in 2025, and the second focus area that we have looked at kind of changing how we how do we work so well.
Speaker Change: We're looking at standardizing work that we do and then thinking differently about where we do that work.
Speaker Change: And that will impact the downstream segment that will impact the upstream.
Speaker Change: Segment. So we're looking across all the businesses I mean, an example, there would be you know how we design world for certain asset classes, there a way to do that.
Or any more standardized fashion in a more centralized fashion so thats the second.
Speaker Change: And focus sorry, I'm work is underway on that so I think you should expect to see savings come through 'twenty five 'twenty six and then the last one maybe you know the one that I'm very excited about is the technology focus area. So this is where we're looking at using technology to do we're completely differently. So we mentioned in the press.
Speaker Change: <unk> Robotics example, but.
Speaker Change: There is a lot of long list of examples that we're deploying today, whether that's drones.
Speaker Change: To inspect our facilities digital twin upon our turnaround AI to look at reducing cycle times for exploration subsurface work the technology focus area and well also deliver savings. So in terms of the profile at 2025 and between one and a half to $2 billion.
Speaker Change: And then 26 you should see.
Speaker Change: The $2 3 billion.
Speaker Change: Come off and so you know and until two to 3 billion structural cost out for 2024.
Speaker Change: Yes.
Speaker Change: Thanks.
Speaker Change: We will take our next question from Bob Brackett with Bernstein Research.
Bob Brackett: Good morning, a question about the Permian clearly you've laid out a disciplined model there to release cash flow, but you're uniquely positioned in that you have JV partners plus the royalty interest you probably have the best view of the landscape. What are you seeing there in terms of discipline from the other operators.
Speaker Change: Is that a trend that's going to continue.
Speaker Change: Yes, Bob.
Bob Brackett: Interesting because of our large mineral rights position, we not only get the financial advantage of that.
Bob Brackett: Cruise through that but we also get the information advantage, we have a position in one out of every five wells in the Permian and so we see a lot we see a lot from our JV partners and most of that activity is really through five.
Bob Brackett: Good companies companies that you all know and cover.
Bob Brackett: And.
Bob Brackett: And so.
Bob Brackett: <unk> got visibility into what they're doing what they say, we do from seeing fees for funding and the like and.
Bob Brackett: I would say.
Bob Brackett: People are sticking with their.
Bob Brackett: Their plans and I think everybody is seeing the kinds of things, we are which is productivity and efficiency gains.
Bob Brackett: And continuing to look for innovation in lateral length and completion.
Bob Brackett: Techniques and proppant loading in proppant to water ratios and all the rest of it.
Bob Brackett: And I don't see anybody that is as kind of heading back to what.
Bob Brackett: The industry was doing a decade ago, which is kind of throw out all the cash right back into growth and in stepping away from what they've now established which is.
Bob Brackett: A more balanced return oriented strategy and so.
Bob Brackett: I can't speak for others are you know you'll have to ask that question specifically to other companies, but at least what I see would be a continuation.
Bob Brackett: Of what we have been seeing is the way I would describe it.
Speaker Change: We'll take our next question from Neal Dingmann with tourists.
Neal Dingmann: Hi, Good morning, Thanks for getting me in guys. My question really just on the downstream segment picked up a little bit weak last quarter sequentially and year over year and I'm just wondering was that more.
Neal Dingmann: Driven by I know you had more turnarounds and you talked about having about 25% less of those this year or is it just continuing to see more I'd call it macro pressures there.
Neal Dingmann:
Neal Dingmann: It was a weak.
Neal Dingmann: Fourth quarter, there's no doubt about it.
Neal Dingmann: Margins were off there were some turnaround effects.
Neal Dingmann: We also had some significant inventory accounting effects that rolled through.
The the downstream segments and some of the impairments that we took.
Neal Dingmann: Took charges for.
Neal Dingmann: Downstream.
Neal Dingmann: On a proportional basis youll see them much more than you would see anything in the upstream and so I'm.
I'm not going to call. It a perfect storm, but it was a quarter, where there were a lot of things that all of it in.
Neal Dingmann: In one direction and it was it was.
Neal Dingmann: Ergative direction, and so you know.
Neal Dingmann: You can't can't affect margins, we can certainly affect turnarounds you've already seen that next year is a lighter turnaround schedule. The impairments are one off charges in the inventory accounting as a function of.
Neal Dingmann: LIFO layers and prices and inventory levels, it's a complex.
Neal Dingmann: Equation, so I wouldn't assume theres anything structurally in.
Neal Dingmann: That business that says it's deteriorating but.
Neal Dingmann: You have these quarters every now and again in that business.
Neil Mehta: Thanks Neil.
Speaker Change: We will take our last question from Jeff J with Daniel Energy partners.
Jeff J: Hey, Mike I was just kind of curious about Argentina.
Jeff J: Clearly with the delay in office it seems like a much friendlier place to do business you mentioned it earlier.
Jeff J: How do you see the politics and the opportunity set changing down there.
Jeff J: Yes, thanks for asking it it's an area that I am encouraged by.
Jeff J: We've got a.
A very strong position in the Bakken where to both in Loma Campana in the south and they'll trap yellow in the north.
Jeff J: The geology works very well, we're very pleased with what we've seen and we've had a a I would say a moderate pace of activity.
Jeff J: More history down in the south at lower companion, but encouraging.
Jeff J: Over the last couple of years at it.
Jeff J: I'll try to be all of the north.
Jeff J: I'm also really pleased to see the you know the.
Speaker Change: The situation of the country, improving we've seen inflation come down significantly the banking system has stabilized theres progress towards reducing and removing capital controls precedent Malay as a reformer and and he's got a serious agenda that would make the cut.
Speaker Change: More investable for foreign investors and and we're very encouraged by by.
Speaker Change: By what he says and we're encouraged by what he's done thus far.
Speaker Change: I think theres more to come and certainly he has made great progress thus far.
Speaker Change: So we are we are hopeful that he'll continue to do so and that we will see an environment that increases our confidence in and putting more capital to work there. So.
Speaker Change: We're engaged on the ground and.
Speaker Change: Right now, we're taking a look at our midstream opportunity on a pipeline that could help us with exports.
Speaker Change: So a good deepwater export terminals. So we will continue to update you on developments, there, but you're right.
Speaker Change: We've seen encouraging signs I guess in Argentina.
Speaker Change: In years gone by and then things kind of.
Speaker Change: Move to the other direction.
Speaker Change: So we'll be watching to see if this seems to be a more durable set of reforms that would certainly be an important sign post for us.
Speaker Change: Thanks for the question Jeff.
Speaker Change: 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 Gary back to you.
Speaker Change: Thank you. This concludes chevron's fourth quarter 2024 earnings Conference call you may now disconnect.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].