Chevron Corporation (CVX) 2024 Q2 Earnings Call Summary

Optimistic Highlights

• Strong Production and Shareholder Returns: Chevron reported an 11% increase in production from the previous year, setting a new quarterly record in the Permian. Over the past two years, Chevron returned over $50 billion to shareholders, approximately 18% of its market cap.

• Advancements in Growth Opportunities: Chevron is advancing in both traditional and new energies businesses, with new exploration plays in West Africa and South America, key milestones in the ACES green hydrogen project, and the commissioning of the Geismar renewable diesel plant expansion.

• Merger with Hess: The merger received a successful shareholder vote, with expectations for the FTC review process to conclude in the third quarter.

• Gulf of Mexico Developments: Chevron is leveraging its deepwater expertise in the Gulf of Mexico, with the first oil at Anchor being imminent and plans for production to grow to 300,000 barrels a day by 2026.

• Permian Basin Performance: The Permian base business performance continues to improve, with development activity becoming more efficient and full-year production growth expected to be about 15%.

Pessimistic Highlights

• Operational and Discrete Items Impact: The quarter was impacted by operational and other discrete items, although the company remains confident in its long-term earnings and cash flow growth.

• Downstream Turnaround Timing: Results in the quarter were impacted by downtime in Upstream that weighed on realizations, higher exploration expense, and Downstream turnaround timing.

• Adjusted Earnings Decrease: Adjusted earnings were lower by $700 million versus the last quarter, with adjusted Upstream earnings down mainly due to lower liftings and higher exploration expense.

Company Outlook

• Near-Term Maintenance and Payments: The third quarter will see heavier than usual maintenance with several turnarounds at Upstream assets. There will also be a one-time payment related to discontinued operations of around $600 million.

• Headquarters Move and Executive Retirements: Chevron announced moving its headquarters from San Ramon to Houston and announced the retirements of three executives.

• Continued Cash Return to Shareholders: Chevron plans to continue returning cash to shareholders with $6 billion of dividends and share repurchases, targeting the $17.5 billion annual guidance rate.

Q & A Highlights

• Q: Can you provide thoughts on how FGP is progressing in TCO? (Neil Mehta, Goldman Sachs)

  A: Chevron is seeing steady and consistent progress in TCO, with work being planned and liquidated in sequence. The concession exploration is nearly a decade away, focusing on project execution and strong production. (Michael K. Wirth)

• Q: Do you feel limited to do any other significant portfolio development during the interim period around Hess? (Alastair Syme, Citi)

  A: Chevron could pursue other opportunities if compelling, but the focus remains on the Hess transaction. Chevron has a strong queue of organic growth opportunities. (Michael K. Wirth)

• Q: Can you talk about the potential for further cost efficiency gain? (Paul Cheng, Scotiabank)

  A: Chevron continues to focus on improving unit OpEx and expects further unit cost reductions, leveraging technology for efficiency and improved safety. (Michael K. Wirth)

• Q: Could you provide details around the increase in the fourth quarter outlook for the Permian? (Josh Silverstein, UBS)

  A: The Permian is performing strongly, with improved performance across multiple dimensions of the business. Early well results in the Midland Basin are lower versus last year, but the program in the second half of the year is expected to perform better. (Michael K. Wirth)

• Q: What are the experiences and comfort level with the technology side in terms of bringing forward developments in the Gulf of Mexico? (Roger Read, Wells Fargo)

  A: Chevron has worked closely with suppliers to develop specific equipment for high-pressure regimes in the Gulf of Mexico, ensuring safety and reliability through technology qualification and testing. (Michael K. Wirth and Eimear P. Bonner)

• Q: How are you thinking about the trade-off between further dividend growth or more buybacks as cash flow rises over the next few years? (Devin McDermott, Morgan Stanley)

  A: Chevron's financial priorities remain consistent: growing the dividend, investing in the business, maintaining a strong balance sheet, and returning surplus cash to shareholders through buybacks. (Eimear P. Bonner)

• Q: What's the outlook for economics of biofuels and the impact of recent fall in oil prices on OFS costs? (Nitin Kumar, Mizuho and Neal Dingmann, Truist)

  A: Chevron is seeing some softening of pressure in the onshore and declining prices for certain services, while in the offshore, rig rates are firming. The renewable fuels market is influenced by policy, with periods of tough margins expected. (Michael K. Wirth)

• Q: Could you update us on what you think the potential could be in Uruguay and the timeline of exploration? (Geoff Jay, Daniel Energy Partners)

  A: Chevron is intrigued by the prospect in Uruguay and intends to do geotechnical and seismic work to understand the prospectivity. It's very early days for this particular prospect. (Michael K. Wirth)

• Q: Can you give some color on the downtime seen at Gorgon and Wheatstone in 2Q and the planned work for Gorgon in 3Q? (John Royall, JPMorgan)

  A: The downtime was associated with unplanned events, including a blade failure at Gorgon and a gas leak at Wheatstone. Repairs were executed safely, and both assets are expected to run with good reliability this year. (Eimear P. Bonner)