Chevron Corp. Q3 FY2024 earnings call

Permian Performance

• Strong in company-operated New Mexico; expected to finish top end of 4%-7% production growth guidance. Efficiency and productivity gains, with peak Permian CapEx likely this year, moving to free cash flow focus.

TCO and Gorgon Turnarounds

• Completed major turnarounds ahead of schedule; TCO has all four Pressure Boost facilities online, complex commissioning ongoing for future growth project.

Portfolio Optimization

• Announced asset sales in Canada, Alaska, Congo, expected to close in Q4 with ~$8B pre-tax proceeds; successful integration of PDC Energia, exceeding $500M capital and cost synergy guidance by over 30%.

Carbon Intensity

• Operations in Colorado have lowest carbon intensity, using tankless production facilities and grid-powered rigs to lower greenhouse gas emissions.

Third-quarter earnings were $4.5 billion or $2.48 per share, adjusted earnings $4.5 billion or $2.51 per share. Upstream: Adjusted upstream earnings flat, lower liquids realizations and higher DD&A mostly offset by higher liftings and timing effects. Downstream: Adjusted downstream earnings increased primarily due to favorable timing effects and higher US volumes, partially offset by lower US refining margins. Oil equivalent production up ~75,000 barrels per day from last quarter; full-year average production growth expected at top end of 4%-7% guidance range.

• Full-year production growth expected at top end of 4%-7% range.
• Fourth-quarter: Upstream downtime, divestments impact ~45,000 bopd; Downstream planned maintenance at El Segundo, Pasadena; share repurchases expected $4-$4.75B; asset sale proceeds ~$8B pre-tax.
• TCO startup expected in Q1 2025, cost and schedule guidance unchanged.

• Uncertainties related to Hess merger arbitration.
• Regulatory and operational risks in Eastern Mediterranean projects.
• Volatility in commodity markets affecting financial performance.

Q: At what point should investors consider TCO startup largely derisked?

A: Michael Wirth and Eimear Bonner discussed progress but noted remaining complex commissioning work ongoing, with startup expected in Q1 2025 but no magic threshold yet.

Q: Sustainability of Permian strength?

A: Michael Wirth talked about efficiency gains, peak CapEx this year, moving to free cash flow focus, with continued improvement in well performance and execution.

Q: Hess deal and divestments?

A: Michael Wirth discussed Hess merger arbitration condition and portfolio optimization, including asset sales as part of high-grading portfolio.

Q: Canada sales decision?

A: Michael Wirth explained attractive offer for Kaybob Duvernay shale and Athabasca Oil Sands, citing better fit for counterparty and fair value.

Q: $2 to $3B cost savings?

A: Eimear Bonner detailed portfolio actions like asset sales and improvement initiatives leveraging technology and global capability centers.

Q: Balance sheet and shareholder returns?

A: Michael Wirth and Eimear Bonner discussed strong balance sheet, net debt under 12%, and consistent share repurchases through commodity cycles.

Q: Gulf of Mexico technology?

A: Michael Wirth highlighted Anchor project and technology advancements opening new resource opportunities in Gulf of Mexico.

Q: Turnarounds execution?

A: Eimear Bonner and Michael Wirth discussed standardized approach, digital tools, benchmarking, and expert cross-pollination driving improved turnaround performance.

Q: California relocation and cost reductions?

A: Michael Wirth said relocation is thoughtful, not a threat, with work migration to technology platforms and global centers.

Q: LNG markets?

A: Michael Wirth discussed LNG demand, healthy inventories, and Chevron's 80%+ contracted long-term contracts tied to crude price.

Q: Eastern Mediterranean status?

A: Michael Wirth provided status on Tamar and Leviathan projects, with demobilization but short-term projects on track for late 2024 and larger expansions in late decade.

Q: Permian non-op royalty?

A: Michael Wirth said no significant two-speed system, with strong performance across all components including royalty.