Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Chevron Corp (CVX, Financial) delivered strong production growth, increasing by more than 11% from the prior year, including a new quarterly record in the Permian.
- Over the past two years, Chevron Corp (CVX) has returned over $50 billion to shareholders, approximately 18% of its market cap.
- The merger with Hess achieved a successful shareholder vote, and the FTC review process is expected to conclude in the third quarter.
- Chevron Corp (CVX) is leveraging deepwater expertise in the Gulf of Mexico with plans for high cash-margin, low carbon intensity production growth.
- Chevron Corp (CVX) reported second-quarter earnings of $4.4 billion, or $2.43 per share, with adjusted earnings of $4.7 billion, or $2.55 per share.
Negative Points
- Second-quarter results were impacted by downtime in Upstream operations, higher exploration expenses, and Downstream turnaround timing.
- Adjusted earnings were lower by $700 million versus the previous quarter, mainly due to lower liftings and higher exploration expenses.
- The third quarter will have heavier than usual maintenance with several turnarounds at Upstream assets, including TCO and Gorgon.
- There will be a one-time payment related to discontinued operations of around $600 million in the third quarter.
- The arbitration panel addressing the Stabroek JOA has set a hearing for next year, delaying the resolution of this matter.
Q & A Highlights
Q: Mike, can you provide an update on the TCO project and the progress of the FGP?
A: At TCO, we're seeing steady and consistent progress. We're pleased with the performance of the equipment and wells flowing at low pressure. For FGP, additional major equipment and systems will be ready for operations later this quarter. We're focused on starting up safely and reliably. Regarding the concession extension, it's nearly a decade away, and we'll discuss it with the government over time to ensure value for both Kazakhstan and Chevron.
Q: Do you feel limited in making other significant portfolio developments during the Hess merger period?
A: We could pursue other opportunities if they were compelling, but our focus is on the Hess transaction. We have a strong queue of organic growth opportunities in multiple regions, including the Eastern Mediterranean and the Gulf of Mexico, poised to deliver growth over the next three years.
Q: Can you talk about the potential for further cost efficiency gains over the next few years?
A: We're focused on improving unit OpEx, which was down about 5% from 2022. Actions include reducing energy usage, optimizing supplier contracts, and implementing a minimum functional objective approach to operations. We also leverage technology to drive efficiency, asset productivity, and safety improvements.
Q: How do you view the optimal use of cash given the expected inflection in free cash flow?
A: Our financial priorities remain consistent: growing the dividend, investing in the business for profitable growth, maintaining a strong balance sheet, and returning surplus cash to shareholders through buybacks. We expect to modestly relever over time while maintaining leadership in capital efficiency.
Q: What are your thoughts on the potential impact of OPEC+ curtailments on the FGP ramp-up in Kazakhstan?
A: We comply with production targets set by the Republic of Kazakhstan and have not received any indication of curtailments. We aim to produce at full capacity to maximize revenue for both the Republic and Chevron.
Q: Can you provide more details on the increase in Permian production outlook for the fourth quarter?
A: The Permian is performing strongly, with improved performance across multiple dimensions. We're seeing lower decline rates, reduced downtime, and increased efficiency from techniques like triple-frac. While some Midland Basin wells underperformed, overall production is exceeding expectations, leading us to raise our full-year guidance.
Q: What are some of the experiences and challenges with the 20,000 PSI development in the Gulf of Mexico?
A: Moving into this pressure regime requires larger, heavier equipment with greater wall thickness and tighter tolerances. We've worked closely with suppliers to develop and qualify the necessary technology. Our partnership with industry leaders and extensive testing have ensured safe and reliable operations.
Q: What are you seeing in the downstream markets post-turnaround, and what's the outlook for renewable diesel economics?
A: Product demand is decent globally, but new refining capacity has led to mid-cycle margins. Renewable diesel markets are influenced by policy and currently oversupplied, leading to lower credit values. We're focused on capital-efficient investments and feedstock flexibility to compete effectively in this market.
Q: What are your drilling plans for Namibia and other exploration areas?
A: We're excited about new exploration acreage in regions like the Gulf of Mexico, Eastern Mediterranean, and West Africa, including Namibia. We have a well in Namibia's Orange Basin that will spud in the fourth quarter. We're also interested in adding to our acreage position in the region.
Q: Can you provide an update on the downtime at Gorgon and Wheatstone in 2Q and the planned work for Gorgon in 3Q?
A: The downtime was due to a blade failure at Gorgon and a gas leak at Wheatstone, both of which were repaired safely and efficiently. The Gorgon turnaround is underway and progressing well. We expect to deliver on the planned production for the combined Australia assets despite the downtime.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
