CVX - Earnings call transcript Q4 2017

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Operator

Good morning. My name is Jonathan, and I will be your conference facilitator today. Welcome to Chevron's Fourth Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' remarks, there will be a question-and-answer session and instructions will be given at that time. reminder, call a being As Instructions] this is conference recorded. [Operator call now of the turn will over Chevron the Mr. Officer I Executive conference to Chief Chairman Corporation, and Wirth. Mike go Please ahead.

Mike Wirth

call Chevron's quarter to Welcome Jonathan. you, earnings Thank conference and webcast. fourth

the Vice and Yarrington, Mount, Manager Chief are Relations. Frank President of and with Investor today Officer; On call General Pat me Financial

will refer Chevron's on website. to We the available slides that are

review please estimates, We started, get be cautionary you projections, ask other we this contains reminded Slide Before presentation on statements. and forward-looking that X. the statement that

Moving outlining to to and commitments. a score our Slide X. out This get year We do. is We performance a card to accomplished good set balanced. objectives XXXX against we met what our cash had

on below downward high We proceeds from we guidance. fact, We’d operating $X with with In asset ended over value our the sales, budget continued realized we successful our we from capital We the mid-point relying years, year stayed spending and above predicted. billion two trend and in production within asset a consistent debt renew expenses. proceeds were the cash range margin without on year. very was the range more sales. of target XXXX of than balanced

We on XXXX. intend of progress to are proud this and we our build momentum in

see Slide more than grew dividends the to from flow you bar sales can X, before and including from $XX Moving as chart, asset XXXX cash XXXX. billion

in our enter with owns our flow help generation prices. was a prices to from result cash the commitment, earlier rising proceeds, a growth full and expect. was we took stock majority of momentum. Some cash asset we was year And we operations. a positive who XXXX, were And to they specific increase know due what and without of strong sale result, from some this little from but our the actions improve asset an with We in XXXX sales a than

us why and maintain a we increase priority the we number cash sustainably is support with Our grow I’ll Pat, share, this to XXst increase of can That’s annual when announced that, the the call financial the track consecutive one over earlier turn With per to earnings. year week will increased the dividend dividend per and financial share XXXX $X.XX dividend take you payout. to putting of flow Pat? who results. through on make

Pat Yarrington

Alright, In had while diluted $X.X Slide you were per a X, our two overview we related performance. $X.XX billion earnings reform. tax gain with Mike. Starting items. the an XXXX quarter, of We U.S. provisional special share, to financial quarter Fourth $X or billion. $X.X recorded full-year thank were billion earnings of non-cash

former We recognized of also assets. non-cash with associated mining charge $XXX million a remediation the

is this exchange and special exchange to $XX detailed for Foreign reconciliation of foreign million. in losses appendix items presentation. the quarter A the were included

these special or and billion exchange $X.XX earnings per items quarter impacts, $X.X Excluding foreign totaled for share. the

higher realizations. from quarter earnings in For a and were third on the upstream moment. just more same billion, production for was than Downstream basis flow the lower say flow results Cash in $X.X reflecting full-year, and the operations from $X Full-year was operations cash $XX.X billion. the I’ll totaled that billion. strong noticeably on quarter

we dividends $X around meaning changes have Excluding less flow working three $X tax taxes just to billion aggregated cash billion year to affiliate year. the for deferred the I as and differed then the mentioned, out earnings, provision items headwinds called in all capital,

capital because represented of the tailwind working For taxes approximately effects. in had the increase noticeable of international million, quarter, large these income components a quarter, part we a In in $XXX payable.

XXXX Return on was a capital employed capital working was full-year, For X%. benefit. for the minor

at ratio approximately was debt XX% XX%. ratio Our year-end our net debt was and

fourth $X paid During we dividends. in billion quarter, the

per share, stockholders $X.XX an announced dividend February of We we yield as that of record aware already payable in XX. X.X%. You’re to to quarterly increase currently our

approximately lower refer items to and segments, and results, Slide items under with and Full-year $X lower was with just impacts detailed legislation earnings mainly XXXX. earnings, were X. the I to full-year Higher Slide were costs partially items, billion charges XXXX $X increased $X.X earnings CPChem, realizations, and higher billion earnings X increased benefited by Higher gains and gain tax lower by foreign on periods. other of lower sales than XXXX billion mostly primarily impairments Harvey. increased from XXXX between billion, the XXXX $X.X our XXX line for offset of results U.S. asset which Now were reform XX% billion compares Earnings billion. segmented increased results. reporting appendix again, exchange information. tax foreign Special evident Full-year production. that of in earnings from our swing December The all of exchange, were by Downstream net this $X.X impact and deferred revalue partially X.X with other you new adjustment offset Upstream of A reduced by earnings excluding increased periods tax required liability million. reflect foreign higher special by from exchange passage the were DD&A, Hurricane by we our and the tax of due in between guidance. segment impacts rate. special margins volumes, our $XXX lower will three late excluding associated volumes are reform million. to about in in

at guidance reform. are net million includes for previously of rate worth was billion in net of other that the incremental segment charges. and approximately $XXX tax effects $X.X lower XXXX U.S. is capitalized $XXX million tax Our This expense charges interest deducted post the as

our results segment are in this non-ratable. a reminder, quarterly As

X. Slide to Turning

company aware therefore and additional results like challenges and provide grows of modelling particular are downstream in like did. they fast of in some the prices Chevron, commentary. I We integrated quarter oil the to were as modelling as

XXX three million squeezed abundant on Coast margins even putting X across Industry in about half by be refineries. estimate third our two We greater specifically utilization fourth West PADD adverse second pressure U.S. where downstream refinery feedstock operations, have quarter on very effect costs. between and but Our were rising or quarter, to this main was during and margins. quarter supplies strong the we leading the the of our margin to

experienced the penalty Pascagoula, also plant. these, from impacts We Bayou quarter. a a precautionary I’m referencing million was where third the and to two CPChem’s relative hurricanes. Hurricane from at flooded $XXX estimate adverse taken; which further We both Cedar shutdown Hurricane Harvey, Nate

they While prices chemicals margins have and sizing products XXXX. the positive believe I’d were these supply, note financial known impact quarter the structural, would fundamentals are have transitory and refined facilities, production, fourth been hit and hurricanes we our for not demand, the impacts are around are for difficult. that to

The third charges other sizeable but negative, segment call. the but with I we for the gave the the importantly, very quarter. full-year had aligned lastly, in solid And guidance quarter very results quarter upstream was a in were

operating elements rising both XXXX. favorable and by expected strong was complemented continue prices to Our are in performance

you and prices As cash grows is crude and our in leveraged leverage to our know, as XXXX. earnings grow production highly this flows expected are to

production day, as day. wells net barrels barrels up primarily Mexico in prices Gorgon million Turning Slide increase and XX,XXX now a a such due LNG. the barrels and to XXX,XXX turnaround projects XX,XXX reduced production mainly production up The barrels. Base increased increased by barrels mid-continent we a cost plant Permian. production favorably XXX,XXX a illustrates Gulf growth or day. started those a barrels X.XX in now and Mike. and primarily production and of it Delaware Mexico day XXXX Lower effects projects, XX,XXX of and capital of of PSC a X. by as declines, is to XXXX. including lower a asset basins Shale back effects, as reduced day, Major from and recovery X%, from barrels multiple Slide Angola production an rising day, XX,XXX by sales, of X tight Nigeria Midland day. barrels the new day, Tengiz, in between impacted U.S. a at I’ll reduced spend ramped XX,XXX barrels the Gulf to the periods turn the production were in of impact by

Mike Wirth

Alright, thanks Pat.

X, to story. Turning reserve a Slide real success replacement is

XXX As this divested. we and the five million added barrels shows, over years about we’ve more produced chart than last

five XXXX, replacement reserve in over XXX% the was years. XXX% last Our ratio and

pleased it year. especially of on growing production achieved this with last top was outcome We’re because

Our business. In resources stands our sustainability production at we the XXXX, capital continue ratio cost the a strength in to develop a of largest was our reserves and healthy contributor to our investment, efficient the structure, XX.X additions, and Permian demonstrating where focus our manner. lower reserve to

confident we our up continue rig this pattern continue. to As fleet, ramp we’re should

We Project encouraging. where also adds including Gorgon elsewhere portfolio, from saw well performance been has the across significant the

on the continued Slide to chart Moving shows progress spend made reduction. XX. we’ve This

the full $X.X years XXXX $XX year down lower were operating capital XXXX, expect down expenses $XX.X you compared cost capital more and XXXX year, prior discipline. than production. by to billion. can spending more than and we’re down earlier. this nearly to see, operating from was three $X When than XXXX, $X from billion, this C&E despite on costs maintain higher were billion As again year. I million billion upstream

more more. do. We’re improving all work for that from And efficient even contractors better vendors, in and and offers rates we becoming processes, technology negotiating opportunities

matters. a business. always in commodity matter. cyclical are always discipline We Capital Costs,

above coming last XX, Slide in sale over X.X The billion. $XX proceeds with of chart total shows two our to is $X sales. asset of range the midpoint to guidance $X of the This and Now billion billion two-year XXXX. asset years, billion

proceeds continue will straightforward. returns. where The asset our and divestments to criteria using we to portfolio for optimize appropriate, is shareholder strong forward, Moving support

transaction. strategic We to receive work will that discuss and a compete a until for someone into have assets else, plan value. won’t sell can and we when don't specific We we’re fit to or good assets don't capital more

have and underway. which marketing in Africa business, Southern We refining expected sale these XXXX. The close to one of is of our

strong cash of and Moving per $XX with for running Brent online our four Currently, well. projects $XX are are looks barrel trains cash to Australian Slide becoming than generators both price. more performance at assets XX, Well good. LNG margins

Gorgon's stops X Train was of oil from increase XXX,XXX per X quarter, fourth up and the fourth During improve barrels pit January we a day, quarter XX,XXX basis. on production the average to Gorgon equivalent and reliability barrels XXX% Train completed on production. average

of commissioning oil during started X, Train a successfully standard January average reached shipped During quarter, this XX,XXX X per LNG type a production Wheatstone, is of cargoes. basis. Train equivalent on we plant which part fourth day strainers, was capacity, design design. At commissioning address of XXX% the XXXX, Wheatstone barrels the XXX and Gorgon

quarter. First slated LNG for following Wheatstone Wheatstone for second-quarter for X gas the start-up domestic Train is XXXX. We

production Now, efficiency quarter, fourth the gains we in the exceed expectations Permian averaged on per the from produced drive to barrels up to we performance. the day and barrels let’s period as day, year. XX. XXXX. per XXX,XXX XXXX day, per XXX,XXX In continues well prior XX,XXX the approximately Permian go barrels up Slide Full-year over same further in Production XX% improved approximately

this In and We’re currently Permian operating value six swaps, end progress the various company enabled our in and to These information Analyst longer to the joint at to additional more in in transactions intend And of year's provide our to value create land XX our early added ventures position on development laterals our I’ll our acres We basin long transacting XX,XXX other transactions position continue rigs. efficiency optimize Slide plan optimize our consolidate Last on rigs employing program, by XX XXX improve you inventory. crews. land through enhanced infrastructure of operated and positions Day and currently activity we land the year positions, efficiencies. sales. with support we’re the developments. XX. pumping laterals further value the update by than March. on of pressure to XXXX, well to our and Permian capital be in consolidating allowing future nearly this We’ll farmouts

to overall on move outlook the let’s production XX. Slide Now,

be In Australia, year full associated uncertainties Brent in higher start-up Canada, the anticipate and impacts expected summary, particularly $XX The project range Partially year up, U.S. to X% we year, XXXX reflects base to asset Shale other of and X% decline to at capital offsetting production sales and than forecasted tight ramp base be production production projects. last another growth. rates of of asset Growth by of impact year, this be sales. will events. LNG that decline. and external excluding strong production For expected timing, and the any in is the XXXX driven is with

oil and like of I’d Moving to this had of number This to major to in that we’ve Slide pay XX, Ballymore. developments it’s a discovery year week, discovery net Faith fluid platform. existing announced a importantly, reservoir excellent Earlier Mexico U.S. XXX at of close acknowledge. with recent Blind characteristics. has Deepwater the feet our we Gulf And

further both we infrastructure, underway to Deepwater possibility exciting existing were resource. XX bidders XX% their sidetrack Mexico on along Whale their which for Mexico, resource currently partners Gulf week, approximately a week, US potential is offers in drilling block to We’re in efficient confirmed we where prospect Also, evaluate successful and major a and more of this installation for Perdido to position our proximity This faster this of discovery development. the An our large Also, capital the are a extent the with adding is the at miles discoveries the Bigfoot. platform. from there. we’re find at the partner. These well

Ingleside, facility tendons. Tuesday, XX the We’re platform installed seven in On dock from tension-leg the mooring sale dry the Texas. of

Coast downstream, begun process year. in mechanical of completion Gulf CPChem is the forecast reached In and December production this has of commissioning. for cracker First late the

start second up quarter reach and the XXXX. quarter later in to full expect of this production We

first derivative September recall that You'll the units last in of year. production achieved

Finally, new Mexico, tax reform, better. opportunities Permian, on of our for in Gulf downstream business, in positive even business attractive and good consumers. we US It and a making and chemicals the is believe Chevron investment legislation for is for the look the

Our over is $X up the US expected capital billion billion this to and $XX years. and year, three exploratory some next be spend approximately

few XX, would Slide to to Moving closing I share like a thoughts.

and my input role. plus, decade I’m many been to convictions. lead I background, of I’ve as beliefs. need get intend by sports new the last a like been and to listening to I to move the I helpful into in experience win. have win few my core up playing had your any environment. Over grew to I win, guided and you. know Chevron to opportunity clear you To I’ve has

be must capital some Here returns We driven of mine. in allocation. in are disciplined

them more high-grade entire Costs, reliably. build the matter. to can not more optimize more And can across assets further. Our our as continue value our can We We to we to cost and today chain yesterday. portfolio improve win value. structure better of have tomorrow, needs To we always assets operate we to the base. get and capture the need to resource out that and

For those I look to months know, years. of and you forward the more in you coming seeing I

you. we That grow value to will For to flow, lines. I’m those of to you continuing to and and to remarks, I improve, committed forward don't, be prepared returns, I meeting our deliver questions. take cash happy shareholders. Jonathan, concludes look the our your please open

Operator

line JPMorgan. [Operator you. comes Instructions] of from Thank the Phil Gresh from Our first question

Your question, please?

Phil Gresh

and morning Mike. good Hi, congratulations

Mike Wirth

Thank you.

Phil Gresh

start have Mike. I’ll and I for with, one Pat one for

talked that deferred transitory So, be anyway? throughout Pat, XXXX, about those just does you to curious dissipate continue on the been CFO these factors, XXXX it pieces know affiliates, with moving about these a capital, was factors you going how I around have in tax, equity that headwind, you working does items, think and

Pat Yarrington

a difference to some we component factors. continue extent what’s there that price I component single well. predict, always that activity side and there. continuing of That be relatively of and there at on will end course year, the as is harder working levels the answer the of dividends. largest prices in working or one But affiliate to if affiliate The same very expect dependent, assume are clearly change beginning would hard short be, is there So, earnings flattish. assume things will is just of our between very the will at year capital, and capital be the the would to that the be a then no I large tax The deferred be that be happening would think will

So, two I working the and capital together. put no from impact components other

and to number are, the as $X.X tell but So, versus as billion say of $X.X any where earnings say, significantly distributions affiliate I come worth to to than time well they taxes, be estimate different of somewhere headwinds I of would back different prices today. estimate, component, best on an would around I reserve at order deferred the right are you the as billion the have

Phil Gresh

I for a levels, on XXXX seems in my profile deploying final room nice into is initial there would about flow of $X.XX dividend, think the that price us heading we could any prices buybacks, Mike, and at that. but lot be, you to are? how share follow-up that guess so the is those like current you it think company have you about a for holding as hike excess I cash, and where understand, they thoughts cash, you with about remarks I saw made, appreciate that just appreciate your cash the we

Mike Wirth

is, Well consistent some no say for Phil, expectations first the have and change. been quite will I thing have time, those would priorities I our that

first the we’ve confident future you’ve come seen and program saw. willing dividends and budget saw, and has that, increase our outlined underway the about business, a Reinvestment that just talked I’m and good this board view and pleased of was that our we’ve the in So, a got authorize year. to you

those gone Third cash range and down one us we’ve to the lower within is, course, balance had sheet back bought we’ve higher historically debt having then indicated and of of we further to levels shares. relatively needs, range have surplus a that from for we’d

and of declining seen three It’s be So, encouraging we months been in to priorities. and a those we’ll really prices, all balance think ones. consistent commodity unexciting where across always years period continue of or in I a of those we’ve three

and have but those environment, cash get think constructive good a positioned we if to obviously we premature certainly priorities. ahead was the where of business we’ll that our the I of to be a balance, this, that little about to is feel across to balance we’re on sales signal it’s in all increase a cash fact continue dividend

follow. to more So,

Phil Gresh

Okay. Thanks Mike.

Frank Mount

Thanks, Phil.

Operator

you. Thank

Doug America the of comes question next line from Bank from Leggate Merrill Our Lynch. of

question Your please.

Doug Leggate

Thanks.

it’s morning. questions. the think have Permian. and guess it officially of this morning, the two on the relates is, everybody on taking still strong kind the I reins a good I to and I getting congrats to Phil’s really morning in follow-up Mike call performance and one

asset kind become Permian to the growth positioned a your something of offset for capital a it’s pretty of about sustaining own we the of more company? You’ve resetting basically right. can think how the obviously a there the of should in about means that a its past but we bit should or an in base strong decline, think Permian, growth something topline actually Is is engine as that in

Mike Wirth

wells Well, if a I aligned is it The traditionally is nature look business, at think you its It it growth clearly the think with a kind would what engine. it’s flex on activity is that low base own, of it of our of quick you and individually ongoing of relatively to or right. over execute that thing more can are with carry that you on down. that profile can the time drilling Flex you up risk

So, the useful really I cycle profile. I the that one major people common with tight time, Shale capital have and the and putting projects reasons risk together been operational base base to had. is the than our of does think flexibility, we’ve their characteristics, for think their about it’s business more in large

on job mitigating actually We’ve growth you and our the done them can Slide you greater base with do base than see you decline think the add there it tight I it, is and Shale So, together. the when and its X, then think own, of really decline on is. can a of nice

foundation profile predictable a has very bang a we big we’ve capital but forward and as major risk a period. controllable got the just base end, that a cycle is move a there offsetting that long at so, than and greater project where is latency risk, very growth decline, strong giving And a different there us very, low flexible

we certainly it’s our about more outlook I of So, March, shifts but the will in company. talk the one this in think fundamental for

and variability we move in around think it fundamental as risk and our I good really profile, story cash frankly forward. flows, a the underpins it’s really a shift

Doug Leggate

and you I is hosted really made hadn't put cost reduction you your really, mouth, back parts appreciate relates about to, the the business to think the it of hadn't really the I My in words other a harking translated in E&P. culture from comment into follow-up and but December, of full-answer. to not breakfast

sales the of And are of in forward? guess period structure in the business, and a maturity we during way expect program it I’m is it will another portfolio, go another Thanks. growth, I of cost curious, profile you the so underlying leave rest I just the saying, happy should obviously there. as So, asset with we E&P and the

Mike Wirth

All there things. couple a Well of is right.

our I looking of need times portfolio. in be in life to at be a cost so be spent into to time you periods went the a long are and The external entire stayed grew that. less there when to conscious and I so. and that you time as result a been for surge of my think the culture part industry cost no doubt are commodity of business on the that cost has Most a duration, of industry incentives that, try short and you period cost very conditions and the had then to structure prices particular, incenting have where of within strong always as frequent and in is to working mindset at capitalize come in those from

being I that of And is to that there. the keys I the on cycle remarks make in throughout think point focused one to success. tried so, efficiency closing my

getting spend $X so has what’s upstream has been progress our seen, been billion Our done there cost what down, years. and I’m I job in mentioned in reduction the a with fantastic business pleased last and over really few and I’ve great accomplished,

cross ask, of and tight of And how look leverage some that the then parts I momentum, efficiency other supplier a more this do there focus to our we everything unlock Permian that lot think technology, can an the sustain to shale activity, to forward, we’re challenge in is, things do and I and cost our to for business. which think on going opportunity activity how of challenge reduction. does continuously the is we the and for learning

yes, that to to So, I the the do important ones the it’s on tomorrow, invest be and expect those in as past a allow a I that forward. move comment that are answer may focusing or things to test and long to things on we and compete costs, made When work are portfolio, not and our moved to about those may be to assets saying, win environment. really us us the to continue a external I on of assets as today think expect I the that will go competitive have future, and into we been in we ourselves highly that as may still irrespective be

of part been last said, has years as the are the So, least driven intent transaction get by activity balance. to at cash couple in

it’s by ensure that’s a strong portfolio returns we’ve in highly move and future. the intent more that driven the As compete competitive to set we deliver up forward, got is to

Frank Mount

Doug. Thanks

Doug Leggate

guys. Day wait Analyst on I Thanks [ph]. guess the we'll

Operator

you. Thank

of Mehta, Our the next line Neil Sachs. comes from Goldman question

Your please. question

Neil Mehta

through you follow-up our of divestiture divestitures? new Hi, so program, thanks the we and congrats is on You’ve what wanted two-year it seems any about to fewer thoughts I there pretty Mike. like in how been docket sales things early XXXX? for actually where a substantial left should program, asset XXXX, a on think normal the on the

Mike Wirth

they to are have to us through expect And should you to we fair us. lot. and else think I than where Neil, more monetize assets to value they’re a we get can someone continue gone worth Yes,

ahead one and those those Shelf capital of assets for in capital they’ll was investments Mexico some else's to Gulf exit compete running portfolio, create somebody them. close. Within company. where of draw You’ve in they’ll that value The have for continue our portfolio, to life struggle seen

fit probably have we so, could that that profile. would, And assets other

I that probably when in that fall with the be get less your my you in assets love it highly you in but that be that future, whether into make we redeploy view compete So, to this will and the able to our to have in not more, strengthen things and have you cash constantly moves fund the willing March, likely to we’ll bit willing can't invest challenge is, your or and you Analyst a you Day think to to are portfolio, are to may and to things speak be face believe to realities position. competitive that competitive, you little

and we more that have It an we and other done served will us business discussed, of in you be publicly. optimization it of as talk about ready well, things are to have So, philosophy. the we to very parts more what is that

Neil Mehta

to Mike is still to in appreciate range about that you base received, slides that think could XXXX, you range? the the have, generally you can some to or production those I I lower growth talk is and the well then, relative wide production X X% in drive upper the of the of that end uncertainties relatively the end of

Mike Wirth

Yes.

try we then as project have to is a things the ramp range be What done that start-ups can to that in and deliver those, reflect plans, got you’ve then some and there. you a is variability got to well. realities we’ve there hard bit ups realize there I but of So, work are start-ups

that thing We’ve and have final challenging world the you you. and work the get partition so, is is, environments I was that have the was that unexpected events and happen. do sabotage, anticipated. would parts I can zone that know you still of not guess We down necessarily say in something And that experienced things

there, growth we’re within So, clearly, there a working to to and is range. deliver expect we’d be that range strong

think, Chart, up when ended gotten have of out Sankey's our I we've little bit. Porcupine on we Mr. years, the skis a Over

be year, and gave So, sure squarely I have that to may in landed we’re be that. of this liked, that try little was that wider middle we we we you a you can the would a you in range confident, give but range than

not just but And trying know to you that the good strong they’re forecastable, we’re a got that show precisely things we’ve again to realities this to so, commitment are, we're trying reflect year. growth these deliver you production

Frank Mount

Thanks, Neil.

Neil Mehta

you. Thank

Operator

you. Thank

the Research. Our comes from next of line Paul Wolfe question Sankey from

please. question Your

Paul Sankey

Sunday on guys quarterly I a come I'm Mike. thanks firstly every previous quarter. And as I second that appreciate to but time do Well guess the greatly would that that comments on congratulations going call you know the I and we to publishing what be for to like chart, take

So, thanks for that.

Mike Wirth

welcome. You're

Paul Sankey

said given having all by that Mike, to balance, about number, flow we that’s to when cash quarter-ish, CapEx would and what going did company? are at given is we were look Thank oil cash low and totally cash the guess that, for breakeven see there go you you’ve the flows of at you. prices and so where oil a flows, are ex-working guys you flows versus is why which persist, we're and in mention the the to if expect I XX perplexed next talk theme cash from whether, cash Could you flows capital an why generating year, for day move oil?

Mike Wirth

you outlook wants in with she optimistic I’m too Yes, so have and given some to go the her very for you to Paul, pleased to given if Pat the cash has and a I’ll invite a try flow. I you tell little of deeper, pieces, got second.

January production year, price improved that they not don't ebb business You the significantly the of already Wheatstone. year, stronger hurricanes I fourth downstream not in the described. every production quarter a tend and this quarter Permian, and at which margins XXXX. cash issues we downstream all. at are know, stronger to the but operations The just stronger faced our happen, can evident are during things are at have this not They every in in same the already that flow structural issues structural. you’ve repeating, We that places the few flow. production is in hit Significantly significantly from year sighted in environment Gorgon, in a

downstream cash for Our been a contributor many flow many, our earnings strong years. returns of has and

momentum the So, we have remarks, couple used do and in in times in a word I flow. of fact my cash momentum

So, got in is accretive. have line we production. The bringing flow cash production growing we're

$XX LNG of at price. You know, I above mentioned that Obviously, we’re a that Australia our Brent $XX cash is margin out today.

what I headwinds, am very flow drivers Pat There on, moving those on. and of right So, the all fundamentals here fundamental are the but are a is focused are direction. few strong are cash the which in touched

good So, XXXX. I feel about

Paul Sankey

could for Yes, balance just were versus reiterate XXXX CapEx? Mike, excess the to they quickly of aspirations, think I flow you follow cash just sales up,

Mike Wirth

we than on XXXX Brent, we Clearly, sales have we without above Paul, be that that. sales. also there you mentioned Brent. touch without a capital just cash balance $XX in Yes, would asset balance said, will is me asset let we be And if better so cash $XX at in year

of results driven know, the budget we’ve capital that the deliver budget program We day. You don’t that a got and oil budget by will just spoke is the capital to. price based on I a

got views a and have oil view based our not on plans longer-term commodity those prices price. set the We we on current then

our So, the capital that here we or plans our bit as a is fact something change that today sit going not environment little better capital we’re price budget. commodity enjoying is to

Frank Mount

Thanks, Paul.

Operator

Thank you.

from comes the question next Our Gammel line from Jason Jefferies. of

Your question please.

Jason Gammel

and everyone me as congratulations Hi, Mike let well. add my

Mike Wirth

Jason. Thanks

Jason Gammel

is going production production, going want to and the excuse to you're chart conscious type to that to graph actual and out, XX me depicts that’s and ahead laid the the you I for of be that XX. on, chart rigs, the curves XX just got go clearly way the Permian on

of change So, tell was and other curves that well-deserved than necessarily promotion, at be a some up I the Bruce with might are this realize come that to getting not and have led that outperformance, March? to least you able to you the Niemeyer factors hoping going

Mike Wirth

and Well, a We’ve what attributes the say resource. has technology just do seismic I been better fundamentals. assessment better is, would focus on to it used understand the of

petrophysical continues modeling Our to improve.

our are stages. increased number new design basis control technologies a sand concentration where the have per new drill lateral bits the We of well stage, we There our is we change to of spacing, placement. of optimize precision improve using and

see tighter There have process are and would and just from not are we have reiterated applying got partners doing, what you is place optimization a from We the rapidly continual in perforation. same others to learn those performance. and others and thing only that but venture Bruce that we learnings improve brining joint we we I tell is,

So, our down. going costs are

Our is going productivity up.

we’ve improvement here. of Our the seen don't the and I curve to recoveries continue think grow end

We’re development lower our target finding than our this more efficiencies, costs are year was.

it our see in for, is XXXX, target were, year for than so expect continual we or last lower they was XXXX and improvement. to target Our

think to heard we For those perfect year, describe the goods continue you of they you like, our and I the Permian redefine what well Frankenwell, redefine last like. what what looks where the that visited people that call looks

when asset it efficient I midstream to the get inventory and to deeper building to better. for continue us long a story margin. top put that match and and downstream position, which position. this we’re lateral large value a acreage is create of ability that you highly after and to This of add that So, And an land up with is through our that I the expect get a royalty about on optimizing. more you talked

We when update we that the March given we’ve will to talk you and guidance more in on see we what of some that about will expect.

Jason Gammel

allocation excludes as looking tight allocation just We'll decline and business for by the allocations. on is have really look XXXX, the base upstream about my doesn't to the curve It business look second to your like that question Base assumptions forward and at however. Mike, relative this down base changed, and the XX% XXXX capital to year-over-year. shale

could capital the similar with to base that business factors the of expected talk allocation the you’re about is leading you a in lower result? some that So, seeing

Mike Wirth

lower year. this capital Yes, into you’re business right. We do the going have base

said, assets a like producing and Some set of I decline opportunity in by what in levels. nice job We’ve, done really the base a opportunity simply holding the across flattish that like is of lot Permian. pretty driven the what like looks set looks there, our at we’ve

and and the the be the the of efficiency things I infield things of Permian across are of business. tends at the talked times the deepwater little cost And have improved base We’ve dollar. taken a kinds base operations we’re so, can about out productivity the some in of bigger chain. seeing supply bit that be the that drilling, in We’ve to entire efficiencies which

those a relatively but in well, little we cycle we’re a that bit as as says flat can capital so, spend. at it pretty look base that our keep base it, manageable programs business flow And and can ebb range here you as

of can Permian you base combination that or capital a production those and you keep top base okay, two You that load look of that flat say a have put elements hold of flatter. at growing production just our can capital load even of the and slightly we on

a and see talk I March. so relatively sustainability So, it capital when think modest you relative is our we’ll what about we company, can more that expect to in the and on size of the

Frank Mount

Jason. you, Thank

Jason Gammel

Great, looking it. Mike. forward Thanks

Operator

Thank you.

line from from the Cheng comes Paul of question next Barclays. Our

please. question Your

Paul Cheng

morning. good guys, Hi

Mike Wirth

Paul. Hi,

Pat Yarrington

Hi, Paul.

Paul Cheng

my Hi. also, want congratulations I add you. Sankey really appreciate. I Mike, just to said, echo has what may And to

You guys call come will time of competitors I same. at other questions. the Two least the your one on time. major to from to hope do that

months, going Mike, the visit I are the internal coming will and go your people group. First, you to in around all assume

During the is do you those in you certain you want And one two twisting to to or send think need to to where terms whether visits, number sharpen focus. may it's you in where effort culture? message more what that the them number and of practice in [ph], want

Mike Wirth

out hard particularly that start that business is, and think on we’ve I prepared going one few question. forward. have deliver our do in, important for it messages. you oil and asset cash of a the now, I that simply kind that. on to you think to and about have couple in hard upstream need us recovery I been win market not of has do worked With Paul see and the so the cost have we improve. what environment. people storm a touched the that’s the weathered some they’ve is, a We’ve to the to people words taken first little returns a position in sales have focus to be that business rough got of is in that. One years on thank you put over. we particularly mean lot still we’re can't and work And in to we to positive for and to that for We see get a out things already. returns. to we I’ve count price done any do thanks Well, intend And and message as is, where

and to got things keep portfolio, everything our self-help we we’ve So, I’ve talked We and that on do. challenge about. we focusing find means some the of and efficiencies

win improve is got there We’ve a - returns. So, in any we’ve got environment. to to

is and how that around focus We’ve We our third management. the and all We need bring drive cost more do projects. that like performance. the on do areas and business. execute safety execute to we to technology execute, big faster. look things can that the our are matter, technology focused some really is, are I’d few applications technology that of and And some try into lots think, lots happen is companies then, will need see business? up one springing reliability initiatives. and world. really our of on can on I got to that capital the means there need time and that we on to things to You We digital changing over everything,

do that can I is there we with technology. more think

structure. can it further think in our cost drive I efficiencies

drive in further think our can it productivity I assets.

technology operating leverage find performance. can how we to about I it so improve continue talked mitigate think us do ways help to risks. I further And, to them to

some hearing that be of will me. be from those So key they’ll the messages

Paul Cheng

Okay.

second question are U.S. on we onshore the The that, cost market seeing the inflation. clearly is on [indiscernible] basis,

other cost still be whether costs so cost, over? offset want see the - Just contracts unit on maybe I dropping. could your rolling And overall essentially fully assume to believe flat? should outside gain productivity think your that than the you be seem But the or we that may service rate unit will you U.S., doesn't be dropping because is more like have will spot be your in and

Mike Wirth

evidence cost of tell as not are right Yes. Paul, asking, in on cost the That’s will anywhere. around are I of we we are see going a seeing inflation. world people engage lot questions exercises, go strong you are we inflation really as touching important of and the to points. one you we sourcing now

contracts suppliers. been expect before competition look we but know into as the you got you to of to and more the that, the or managed and hold this the philosophy have come you with and around two-thirds talk and protected with that in world. we we Permian in We’ve of negotiated of is right a to a leverage attractive Those our a Permian, continuing now. size Permian. for of there costs even improve is are find base Now, picking load these talk mentioned spend there is I’ll so opportunities Permian really back there of in our in the an activity number lock In went up, can contracts year. kind we’re minute,

locked of fixed index, we’ve portfolio. much pricing good pricing in a the in So, fixed

pricing. indexed Some

our performance some that there and if we are there indices you where certain contracts as then that are have service incentive benchmarks of moved, sharing drive there of lower is that that costs accommodate providers some will So, can well. meet our

input costs. improve focused on activity recent our have ways efficiencies the times position productivity reductions and and we’re in continue to in to seen cost there that in So, amplified we’ve

turn still that. improvements even to productivity further a efficiency bit, start I out input costs you see in If expect level or offset little will and

to on to allow still even driving rate within whole focused So, growing that not are we’ve you to grow overall the but expect Permian, going we portfolio unit so costs is growing, got lower. modest, absolutely could we and and but step increase the production, my our a at production talking we're from some cost back I’m cost single-digit, standpoint, see very can unit that

Frank Mount

Thanks Paul.

Paul Cheng

you. Thank

Operator

Thank you.

question line of Citi. comes Syme from the Alastair from next Our

please. question Your

Alastair Syme

reserves and metric everyone. on has years. you peers Thank becoming hello, the this in And that Mike, a that has Chevron of obviously, recent meaningful very metric less your is SEC a suggested highly scored one are industry. recently for

to you KPI? - there get I management into business, closer on be a the view reserve as E&P running? offer can optimal the So, how think reserve is you you And as you perspective business life look whether how life your you look to for an

Mike Wirth

Yes.

SEC's process. reserve their the and we roles respect So,

companies. We our and we consistent to not the suggest are comply understand, investors anything that with we and to and for in or - internal are, something so that evaluate use going the very sure up regressive they with be checks a I’m diligent benchmark approach to reserves to rules balances, right to setting own SEC think have we I

you like we not, use so, consistent can argue and are or benchmark it. it they things, all many a perfect And is but

So, useful. believe I it’s stability think life reserve is good. I and

either is or it’s production that much. see sign you prematurely growing reserve you your declining, that investing too a life If or are

year the years sustainability If so see reserve contributors, to the would key. our reserve future. and part and and life questions talked reserves, being to in about go resource to here into you raise certainly last life this need ads We’ve money Gorgon. the reserves Permian out, is me as to is the the go Those play for We R-over-P forward. about stable the stability where out see declining, we acquire starts those that extending had I activity. spend primarily many about reserve it a through can are to continue by and big expect a driven organic to ratio the and good we are contributors add

got ours. So, think particular comment has their only and circumstances, set company on I each of own I’ll

in strong sustainable we’re I good think a reserves position. and

Alastair Syme

Brilliant. helpful. very That's Thank you. very,

Frank Mount

Al. Thanks

Operator

Thank you.

Weil. from Howard comes Our next Fernandez from question Blake line of the

please. question, Your

Blake Fernandez

that? to rates you my lower nice fair think that year, well. that have to but DD&A of topic. right question reserves Pat, on a increase Back, good morning, as I congratulations First, and saw you, this it move given for Maybe a the as result guess, is that this potential is

Pat Yarrington

for at that. I Yes. the magnitude have are order you I that. an because do moment believe of just we don’t finalizing

we’re that But the we XX-K do and that now preliminary directionally I out between we’ve numbers February. and in when the that now yes, tying will publish are later note You’ll happen. put

We will have rates. lower DD&A

Blake Fernandez

Perfect.

is I had, like guess track recent second look the, then and The look attractive potential. have on discoveries both you’ve pretty fast they question

at how promising. capital to to And into XX I with you sanctioned Tengiz. the short phasing on cycle, look obviously, just look program. haven't and months the focus trying what guess when there this timing that is XX would guess specifically could you Given I'm the that but of many past projects, so, understand I sanctioning these fall or I'm thinking

make way spending? Tengiz their create kind As off, of total not in hopefully could and a step-change rolls these in

Mike Wirth

Yes.

more other have the and than characterized. discoveries, infrastructure, be developed, appraising very to I be and exactly been infrastructure we’re efficient see done these the and still really and would developments with that but they’re the first would We’re the from, work to but you to distant really does alternatives and if those sure when pleased these fully open proximity proximity to it’s up more were premature capital into you be look jump encouraging how think

just in I important. say C&E above really that get ratable more program we a would is think little a bit, to I that believed

helps I financially. us think it

helps from think standpoint I execution. us it our of

in Mexico in down tight things that. last swings we cost so, will to in order our spend and option And I say how band. of shale seen are how good dampen would out resource interesting deepwater no our that resource ratable stay it great the example Gulf more I is, that compete we’ve The this the portfolio to is matter got a Need significantly is, and a and C&E in think try and to thing great and for looks, you’ve a other get of classes funding.

interesting, our relative to Our need these for they what returns I deliver alternatives. they know portfolio compete within other that’s make is but why and economics and have to funding, and competitive to that’s of brownfield attractive that these the do people think to have to they aspect our

Frank Mount

Blake. Thanks

Blake Fernandez

helpful, Very you. thank

Operator

you. Thank

comes Our question from Deutsche of next Bank. from Ryan the line Todd

Your question please.

Ryan Todd

from capital tax Post impact in does generally next of either the five reform at in investment it or does to allocating look you years? at how on side that flow all you of over about Or associated Maybe will way an thanks. from all how five should of at improved return an tax over that continue from think constraint? - you on rate in err years, U.S. increase guess Great, the capital I in particular next reform, the the allocation. one of the capital projects? - we terms another or think the the terms figure cash

Mike Wirth

and of to tax it’s they ours these rate. lower about are the assets that, have details too more get specific be I investments still are a - going so companies attractive like complex we’re position would positions probably through specific tax and premature. that grinding to say makes Yes, and our it because real attracting U.S.

over for earlier, the said so, economy. And I U.S. good think I time, I think as it’s

I for think U.S. companies. good it’s

I think we and it’s good for invest assets opportunities here to this the country, in future. and already investment significant have in

get So, understanding that through we that we and guidance. grind will and clear sure all make a of

regimes The that the you have US in lens investments frankly. other prices thing those as it changes make, to time about the laws, become in not or it’s the have if you to think response world, whether in assets lower quite changed through the is, some for know some we tax around fiscal tougher

so a options is would will think, time the terms and And like do ours move portfolio, the so, the competitive to to as these allocate a global fiscal the their We over world things I to better governments it’s have. need our we to have acknowledge thing of drive other world returns competitiveness around capital others. around evaluate relative the as across that company that and

Frank Mount

Ryan. Thanks

Ryan Todd

maybe And on Permian. a follow-up then the

the XXXX. sales slide a You've past active been that there few over you expectations and done years on in you've relatively have for acreage and

it your If forward a we an of you valuation, your of asset? kind the How And terms of mix the Or you very guess long the maximization think going to count? of year-end, it more to of about that in extent long-term very, I characterize you I should more pull at monetize the rigs up expectation the resource? you value there. or of look I of some of is tail some the very, accelerating an maximizing as effort about of monetizing kind mean, your have think of rig effort a to clearly core position? the Could program, life XX tail at in both? would do terms given mean, of you philosophy of resource how to value

Mike Wirth

now, resource to we the is a so of in amount the efficiencies continue to by insights sophisticated XX-months driver up the as did coring continue makes of the It’s will understand and our use than can XX-months more significant we we mentioned, that get I position longer ago, much real experience today work. out and largest is we and gain that understand the resource laterals ago, and I to maximize a XX-months operations. more tools more question. value we our it goal from what and the better we The see good better acreage, think and resource into

exit the we okay how in that position it’s of cash we and positions that you do and that to portfolio we’ve, as strategy further to that most would out to get right part the coring today, would knowledge kind have a do value So, of the and of is have land most redeploying what value means to it. the certainly what back the a the and thing drive queue, our the over time. intend got sweetest for is, we create as But driven sweet into and you you’ve spots the believe some to simply up X If it there. it’s say, large that we will describe of are million acres value is a of it

any So, create the sell not to whole it but it tail really value the across by position. intent driven is is alone, to

Frank Mount

Thank you, Ryan.

Ryan Todd

Great. Thanks.

Operator

our you. final And question… Thank

Pat Yarrington

One more question, thanks.

Operator

you. Thank

from line Roger comes of question Fargo. from Read the final Our Wells

Your question please.

Roger Read

the other the everyone or had me are exchanges? we a XXX,XXX people same, easier, XX,XXX are little you to what slowing kind seeing talked of as know in bit exchanges? difficult own In on curious less what it or they I I'm sneaking the so done follow question, some more how it Good everybody. far. progressing. more words, they it just you gets position I there, up end. with is own, could certain comfortable Permian a at that's of down if and do acre, is where the for morning, kind and Thanks about the of here Ryan's swaps Mike,

Mike Wirth

value acreage is down and creation win one is, the ago unique way kind Roger has what laterals position, been XXX with can you both really and because it it’s we’ve drive the technology you parties And the realize today to in to development say the I commercial find a longer those and value. negotiations that sit got where one a Yes, everybody's and table would these over win of the defined tougher deal. a both can was of way do their it to in the held years and incentives time, over improve wins program, places and a where dynamic best create through way at have than interest and to oftentimes ways find can lose that a a

or you would to really of where slow much activity in development I say, a talking of little are there going optimization, And this. So, more a whether it. the as lot on what land you're in talking is approach in basin necessarily deal of we difficult let’s weren't to we’ve engaged been understand go got we may because with, our, have simply heretofore fact to

what like to and we want, we go, deal. there conversations further we the in got future. value is where creating into I position, think to to we this underway we we’re will conclude numerous understand want counterparties, with year strong believe a Now We’ve we reason are really feel that and and that transactions willing and

Roger Read

month. great. next Okay, Thank and you, you I’ll see

Mike Wirth

Okay. touch here. just a we’re I time know over

So, you. few to to interest back participation call. look in seeing everyone's I in the joining I York us truly appreciate over today. want I and in the a of many you Chevron, to call weeks. your thank on everybody for in New Jonathan, forward

Operator

this earnings call. and concludes conference fourth Ladies quarter XXXX gentlemen, Chevron's

You disconnect. may now

Chevron (CVX) 2 Feb 182017 Q4 Earnings call transcript