Chevron CEO Mike Wirth Talks Oil Prices, Quarter Report
12:09 Share

When you're with Amex Business Platinum, going the extra mile for your business pays off.

With five times membership rewards points on flights and prepaid hotels booked through amxtravel.com, you can earn more points to help grow your business. And with access to more than 1,400 lounges globally through the American Express Global Lounge Collection, including the Centurion Lounge. Can I get you a refill? You can stay fresh wherever your business travel takes you. That's the powerful backing of American Express. Terms apply. Learn more at americanexpress.com slash amxbusiness.

Bloomberg Audio Studios. Podcasts. Radio. News. Mike, obviously everyone's going to be focused on the buyback and capital shareholder return as well as the HES question marks. But there were a lot of positives in the report, particularly when it comes to the Gulf of America. Can you walk me through some of them? Sure. Well, we had a very strong quarter. You know, our earnings were up 6% versus the prior quarter. Oil prices were relatively flat.

strong shareholder distributions, $7 billion in the quarter, and over the last 12 months, about $15 a share. And we're on track for industry-leading free cash flow growth by 2026, even at lower prices. And a big part of that is the Gulf of America, where we've started up three projects over just the last eight months, the Anchor Project,

whale project and now ballymore most recently our production there will go from 200 000 barrels a day last year to 300 000 barrels a day uh in 2026. in the ballymore project which we just started is very interesting it's got some of the most prolific wells we've ever seen in the gulf of america they're expected to produce 25 000 barrels a day each so three wells

75,000 barrels a day, some of the highest temperature production we've ever seen, 325 degrees Fahrenheit down in the reservoir. So a great example of engineering, technology, and the abundance of American energy. Part of that, though, for especially deep water offshore, it's longer lead time, so more capital investment. Do those decisions get skewed when you have this kind of volatility in oil prices?

Well, we look at long-term views on supply and demand to arrive at our long-term oil price forecasts, and we look at a range of prices. So a project that would take several years to develop, like a Deepwater Gulf of America project, and then would be online for multiple decades

Our decision-making is really not informed by the price of the day. It's informed by our view of prices out over the life of that project, which can be multiple decades. And so the impact of the near-term price is really more around short-term decisions on cash management, the balance sheet, et cetera, but not long-term investment decisions. They're really made on a different set of parameters.

Help me understand this one. RBC Capital Markets had a note out that talked about how oil prices need $95 a barrel for you guys to break even after CapEx dividends and buybacks, and that's really high. What would you say to that kind of number?

Yeah, I haven't seen that report. We're growing production, as I said. We're growing cash flow. As we move into next year, our break even to cover the capital budget and the dividend will be down in the low 50s. We get beyond that, it'll move into the 40s. And so if you pick any given quarter and do some of this math, you might reach a certain conclusion. As we look forward into the next few years, our break even will be low and going lower.

Let's talk about the next few years, and a big part of that will be the purchase of Hess. Finally, you get a date, arbitration hearing, for the end of May. You've had a chance to look at each other's cases. How has your confidence changed? Well, it really is unchanged, Alex. The contract is very clear in the language of the contract that will be applied in the arbitration, and we've

you know, steadily believed that the Hess side of this argument is the proper side of it. And so as we move closer to the date of the arbitration hearing and then a decision three months after that, our view really is unchanged. We feel very, very confident that Hess will prevail here. Obviously, Guyana is a huge asset and would be so great for Chevron. So how quickly could that

be accretive to you guys? Like what would that integration look like? Well, we've had plenty of time to prepare for integration. And so the teams have been working closely and we're ready to move very quickly to integrate the two businesses. So once we get a decision that can happen in a matter of days and weeks, not months or years.

Part of that also was you buying 5% of HESH shares on the open market. Two thoughts, and they're two very different thoughts. One is it just shows how much confidence you do have in the deal. The other thought is that it won't go through and you still want a seat at the table if the deal fails. Help me understand which side.

Well, the shares were trading at a discount to the value that we would exchange our shares for in the transaction. And so it made it economic just on the surface. We do have confidence, as I just expressed. And so that's really what sits behind that decision. It's a good company. Hess's performance has been exceeding expectations previously.

every quarter, really, since we announced this transaction. The business is being run well. Their stock has been, we viewed it as a good investment back then. We view it as a good investment today.

Let's move to another field that has the potential to be a huge growth driver in the future, and that's Tengiz. Obviously, that had a lot of startup issues, but you're finally running at the same time that Saudi Arabia is trying to enforce quotas for OPEC+, which is in Kazakhstan, which is where Tengiz operates. Have you had any talks with the government about having to pare back any production?

Well, we've got a long history in Kazakhstan. And as you say, the project we just completed has been underway for about a decade. It's taken that field's production capacity up to essentially a million barrels a day. We've had it running at those levels or close to those levels here during the first quarter of the year. So I've had a chance to speak to the president of the country about that.

We don't get involved in OPEC Plus discussions, and so I don't know what is going on there. But I can tell you that our long history in the country has been good for the republic. It's been good for the investors in the Tengiz field. And those barrels are very high-value barrels to the republic in terms of the revenue that they generate. And historically, they have not been subject to any cutbacks.

when we're in circumstances where OPEC Plus might be looking to make some of those decisions. And so I'm not aware of anything that would result in us being asked to produce less there. Okay, so the ask has not been asked, if I'm just bearing that down, right, Mike?

That's correct. We haven't had any conversations about that. All right, let's broaden out. You make long-term capital decisions, like you were talking about with Gulf of America, for decades to come, right? So the oil price today means a little less than the oil price in the future. What is your future demand outlook as tariffs seem to rewrite the global economy? Well, the population of the planet continues to grow.

The number of people that live a developed world lifestyle is growing, but it's still relatively less than those who don't yet

have the quality of life that those of us in developed countries can take for granted. And so demand for energy will go up. Demand for all forms of energy will go up over the coming decades. And oil and gas will continue to be a vital part of the global energy system, even as we see other types of energy grow as well. The thing in oil and gas that's always important to bear in mind is oil fields decline over time.

So production decreases every year from existing fields and it requires investments to maintain production even at steady levels, let alone to meet any any incremental growth. And so the opportunities for companies that are capital efficient, that are very disciplined in how they run their business, to continue to supply the energy the world needs.

and create returns for shareholders will exist long, long into the future. And as we've seen, it's more a rig cutting issue with, say, smaller companies rather than larger companies like yourself. Something that I keep hearing, though, a lot about, Mike, is what happens to NGLs, so overall liquids in particular when it comes to global trade. And as the wells in the Permian or in U.S. shale get gassier, are we looking at a potential glut of NGLs in the world and in the U.S.?

So the U.S. has become a very large producer of natural gas liquids. Propane is a big export commodity now. The U.S. exports ethane as well to markets around the world where these tend to be used as feedstocks for petrochemical production. They can also be used in heating and other applications.

And so as trade rules change and trade flows change, that can affect where those flows go. It can affect the netbacks that producers and sellers of these commodities realize. China is certainly a purchaser of both of those commodities. And so reductions in flows to China would need to be met by supply from elsewhere in the world, often the Middle East.

and U.S. exports may go into the markets that the Middle East exports are currently going into. So you'd see some reorientation of flows, and if you have a non-tariff market that's the most efficient distribution of those, you have a slightly less efficient market at work, and that could affect at the margin the realizations that producers see for their exports.

That's some good context, Mike. Just to end sort of on the question that you know you're going to hate, is excluding HESS, you were looking at $9 billion in annual free cash flow growth at 60 Brent, and that's for 2026. Give me perspective as to how long would WTI need to remain below 60 for you to start revamping your outlook in a material way?

Well, it's kind of a hypothetical, Alex, because it would not only take a long period of time, but then it would also depend upon our view for how things play out as there's some sort of a recovery.

And look, we've got a very strong balance sheet right now. We're below our historic average at a 14% net debt. We've got a AA credit rating. We've got costs and capital discipline. We've brought CapEx down coming into this year. We're taking costs structurally out of our business, $2 to $3 billion in costs. And we're going to grow free cash flow $9 billion at a $60 Brent price.

So we've got staying power well into the future. If the future is dramatically changed, we could look at adjustments. But we don't see anything right now that suggests that that's the case. And same for debt. You feel confident in not having to increase any debt if we get those oil prices more sustained below 60%.

Well, we've guided the market to a 20 to 25 percent net debt level through the cycle as something we're very comfortable with for an efficient capital structure. We're at 14 percent today. So we've always maintained that we will gradually increase our debt levels to get back into or close to that 20 to 25 percent range.

And I think you can expect that to happen. But that's not anything that anyone should be overly concerned about. We've indicated that that's what we would expect to do in really any kind of a price environment and through the cycle. So it's very consistent with the guidance we've given the market, how we think about

our business. And look, we've been through cycles before. I've been in the room in 2008, 2014, 2020 with COVID. And again, now we know what to do.

Switch to Verizon Business and get more from your internet without paying more for your internet. Get LTE Business Internet starting at $39 a month when paired with select business mobile plans. That's unlimited data and with it, unlimited possibilities. Start saving today with Verizon Business, ranked number one in small business internet customer satisfaction by J.D. Power.

Starting price for 25 megabits per second LTE internet plan with smartphone plan savings, plus taxes, fees, and economic adjustment charge. Terms apply. For J.D. Power 2024 award information, visit jdpower.com slash awards.