Chevron Corporation Q2 FY2025 earnings call

• Production was a quarterly record for the company, both in the U.S. and worldwide, with Permian production averaging over 1 million barrels of oil equivalent per day. - Acquired lithium-rich acreage in Texas and Arkansas. - Completed merger with Hess, which adds long-term low-cost growth in Guyana and expands shale portfolio. - Reduced number of reporting units by approximately 70% in upstream to scale best practices. - Engineering hubs drive standardization, efficiency and value, expecting faster innovation and scaling of solutions like AI. - Target to achieve $2 billion to $3 billion in structural cost reductions by the end of 2026.

For the second quarter, Chevron reported earnings of $2.5 billion or $1.45 per share. Adjusted earnings were $3.1 billion or $1.77 per share. Adjusted upstream earnings decreased due to lower realizations, higher DD&A from increased production and unfavorable tax impacts. Adjusted downstream earnings were higher due to improved refining margins and higher volumes. Second quarter oil equivalent production was up over 40,000 barrels per day from last quarter. Due to strong performance in the base business and growth assets, production growth is expected to be closer to the top end of the 6% to 8% guidance range, excluding Hess. Organic CapEx was $3.5 billion, the lowest quarterly total since 2023, while inorganic CapEx was approximately $200 million related to lithium acreage acquisition. Chevron generated cash flow from operations, excluding working capital of $8.3 billion, and adjusted free cash flow was $4.9 billion, a 15% increase quarter-on-quarter despite 10% lower crude prices.

• Expect 2026 additional free cash flow guidance to $12.5 billion. - 2025 capital spend in Permian between $4.5 billion to $5 billion, expected to be at the lower end. - Full $1 billion in annual run-rate synergies from Hess merger to be realized by end of 2025, 6 months faster than original guidance. - Transaction expected to be cash flow accretive per share in the fourth quarter. - Aim to achieve $2 billion to $3 billion in structural cost reductions by end of 2026.

Q: Biraj Borkhataria asked about Permian's 2026, 2027 budget and capital spend.

A: Mark A. Nelson said 2025 capital spend between $4.5 billion to $5 billion, expect to be at lower end of range, and CapEx to drop further in 2026 as free cash flow grows.

Q: Neil Singhvi Mehta asked about derisking of $10 billion in Hess deal.

A: Eimear P. Bonner said TCO is producing at full rates, Permian is producing at milestone rates, Gulf of America projects are ramping up, and cost reduction program is on track.

Q: Devin J. McDermott asked about new organizational structure contrast.

A: Mark A. Nelson said gathering like businesses, standardizing and grouping work, and enabling people to work simpler way, expecting performance improvement.

Q: Stephen I. Richardson asked about tight oil portfolio balancing growth and free cash generation.

A: Michael K. Wirth said shale portfolio is substantial, with focus on free cash flow and balanced mix of investments.

Q: Douglas George Blyth Leggate asked about role of Bakken in portfolio.

A: Mark A. Nelson said excited to add Bakken position, view it generates solid cash flow, and will be value-driven in handling it.

Q: Jean Ann Salisbury asked about Venezuela production levels.

A: Michael K. Wirth said operating in Venezuela as prior, with limited oil flowing to U.S. in line with sanctions.

Q: Ryan M. Todd asked about successful operational ramps.

A: Mark A. Nelson said operational efficiency in production and turnaround management drove improvement, with refinery throughput at record and 14 out of 16 turnarounds top-quartile.

Q: Yim Chuen Cheng asked about exploration fit in portfolio.

A: Michael K. Wirth and Mark A. Nelson said exploration will play important role, with balanced portfolio of mature areas and frontier areas, and increased portfolio by over 20% in recent years.

Q: Arun Jayaram asked about Eastern Med gas strategy.

A: Mark A. Nelson said Tamar and Leviathan to come online late 2025/early 2026, Aphrodite project in progress with FID to come when competitive returns achieved.

Q: Joshua Ian Silverstein asked about TCO performance.

A: Mark A. Nelson said TCO operation performing 18% above nameplate, integrated operation control center allowing optimization, and planning maintenance to continue improvement.

Q: Wei Jiang asked about affiliates distribution.

A: Eimear P. Bonner said TCO ramp-up went well, higher production and prices led to higher distributions, and loan repayment will be included in adjusted free cash flow.

Q: Lucas Oliver Herrmann asked about LNG offtake capacity.

A: Michael K. Wirth and Mark A. Nelson said building globally connected LNG portfolio, offtake arrangements expose to multiple margin sets, and balanced offering serves global system.

Q: Jason Daniel Gabelman asked about buyback outlook.

A: Michael K. Wirth said purchased more than half of shares for Hess transaction, and details will be updated at Investor Day.

Q: Phillip J. Jungwirth asked about Kazakhstan petrochemical investment.

A: Michael K. Wirth said Kazakhstan looks to diversify economy, Chevron engages in discussions, and likely to see investment in domestic infrastructure.

Q: Geoff Jay asked about Chevron's reinvestment in decline rates.

A: Michael K. Wirth said portfolio is mix of near-term growth and longer-dated resource options, will be active in exploration, and focus on delivering strong returns and free cash flow.