CVX - Earnings call transcript Q2 2019

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Operator

Good morning. My name is Jonathan, and I will be your conference facilitator today. Welcome to Chevron’s Second Quarter 2019 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

Borduin. call now of the Wayne turn would over Chevron go the Mr. Relations I Investor conference to ahead. of General Corporation, Please Manager

Wayne Borduin

Jonathan, webcast. and you earnings and second Chevron's Thank quarter to call welcome

Breber, with are Pierre available website. We'll the on Upstream; call Johnson, of the today Chevron's me On refer Jay to are EVP and CFO. that slides

that the this forward-looking Before statement presentation estimates, we be get for other review started, projections, on information statements. important reminded Please stockholders slide cautionary please and and and contains investors X.

slide Pierre? X. Turning to And

Pierre Breber

Thanks, Wayne. in record the solid provide in The strength production, and Basin company will at Wheatstone We delivered had another Permian Australia. continued shortly. led detail by Jay quarter. more

our or The financial include $X.X third the from Alberta. fee and of gains, This is a quarter were Earnings over Anadarko totaling $X.XX termination barrel. $XXX quarter's was reported Brent share. rate $XXX overview in quarterly since change billion highest tax results. a XXXX results an result the lighting the per First, special million when

for the gains $XX were exchange Foreign million. quarter

special gains and were $X.X items or per share. Excluding $X.XX earnings billion FX

flow in $X A measures non-GAAP can presentation. be was billion operations appendix reconciliation to this found Cash excluding working of changes. from almost the capital

a maintained a low debt sheet also strong We with balance ratio.

significant to Importantly our our continued strong shareholders. cash to deliver cash to return flow our commitment allowed on us

after $X with terminating During the billion agreement And quarter. during quarter, and we shares the our dividends. $X paid we in of resumed over Anadarko, billion buybacks repurchased

in per our billion $X.XX buybacks expect run we $X quarter, updated May. rate line billion share forward in Going with annual guidance stated the or at

CapEx, a organic $X.X totaled capital on which $XX a as maintain includes focus that half billion. unbudgeted Total of costs $XX increasing such with Pasadena the billion, returns. than CapEx Year-to-date are the We less our budget. purchase refinery, of also acquisition billion continued to was little discipline

is growing due Cash as the from in the flow higher working quarter guidance. realizations and was termination line with volumes strong excluding slide year trend received to Cash flow production and as full fee this from Anadarko. operations to X. well liquids Turning increased capital

excluding flow, the capital breakeven share a low $X.X company's XXs and debt The buybacks. remains supported billion dividend, Brent flow reduction basis and cash in cash Free to working the increased on year-to-date.

to high-grading and proceeds divest the billion our while flow beginning sale $X proceeds Asset XXXX, sale assets lowered $XX breakeven added of track on asset our the remain portfolio. to XXXX. billion further Since billion by cash totaled of have and $X.X we to

quarter million second billion XXXX prior of earnings about X, Slide increased to $XXX year. $X.X Turning versus the

other offset the earnings the earnings special as timing was Excluding in flat lower lower higher also items margins. effects FX, corporate by result Downstream The and production as variance were was lower of relatively by relatively offset upstream flat were were primarily charges. realizations. segment

to Turning increased quarter second quarter, Slide first earnings X, billion. $X.X by the compared to about

gas other and Excluding in were and special realizations liftings upstream items FX, higher were roughly higher DD&A, flat lower offset by expenses. as results realizations, crude

reflects variance effects, to and million by and in margins stronger a The corporate planned West and reflected FX were partly Coast lower to Hub of marketing improved gas spot U.S. downtime. other lower due pricing. impact due Australia lower prices the ratio Waha spot sales, $XXX about higher refining excluding realizations earnings timing the U.S. largely while gas charges. and realizations Downstream primarily Henry of by LNG offset LNG weaker segment

it Jay. I'll now pass to

Jay Johnson

at from compared year with and X% Pierre. increasing oil Big equivalent production major Basin Slide and X, ramp-ups shale in the a with projects and to tight Thanks Midland ago increasing quarter Hebron, production Foot. On production increased Delaware second Wheatstone, capital and

offset as production business natural developments than deepwater other portfolio. more Mexico and increased brownfield the of Gulf base declines Our across

quarter than was Year-to-date second consistent is a production X, X% than Slide by asset the excluding with X% day higher straight third at sales Turning quarter. about million bar. XXXX strong X% middle more for to shown as X our the barrels production of growth to guidance

was together almost had which planned production by impact turnarounds a and impacted barrels asset quarter XX,XXX Second sales of day. an

in Looking to half continued Foot as expect the assets of year, quarter. be partially by to will forward we and the second offset of primarily be tight as growth our shale well turnaround Big This production driven by higher Hebron. the the growth and activity third ramp-up

outlook adjusting Our prices. even to this before expected be guidance full in line impacts the is higher year for of with entitlement

record I'll this three oil-equivalent of barrels to we relatively asset. to demonstrates over The day of guidance expect the production second and relative provided barrels information execution XX% about the quarter the an count. Security XXXX the Permian. year. shale Permian XXX,XXX to performance Meeting. slides, our provide additional some In regarding barrels day, or per and and with to increase track track the the strong performance attractive of day, rig In consistent XXX,XXX quarter, per at in deliver the a turn XXXX a Analyst we tight steady last continues XXX,XXX our was Let's of same next potential production

liquids Moving to production NGLs is and oil. Permian half of three-quarters the and our mix production gas of natural oil, crude of crude about is our

period. these expect continue throughout to forecasted the proportions We

across distinct the the two royalty of position an it's Permian, As discussed components. comprised and past, in advantaged we have

we is dotted First, benefit standard a have rate. our the blue shown royalty wedge lower actual than rate royalty royalty the as on

producers. by to comes which component shown the we've the the wedge, we barrels second the hashed The are blue barrels royalty leased from that received from other acreage

Chevron capital. these the delivering profile. five-year course, about no throughout expected production our up production barrels our period In and XX% make contributions of royalty to contribute Of total, these require

slide to XX. Let's turn

factory shows to reduce XXXX. delivering optimizing This made maintaining work progress, We're Our we've continues. productivity cost and since industry-leading unit focus our returns. on slide increase the our and Permian

average is to completions. length XX,XXX our As we on execute feet to and our as and EURs drive our core-up areas. higher year development wells we left, of landing next The shown lateral the spacing, approach well strategy for expected continues optimizing zones, to continue by increase

production sustained in the comparable the returns unit to a leads efforts benefit reduction development As to are shows higher upper chart royalty alone that into right in translate about illustrated and the costs. lower that subject well the points XX than royalty right, The a on percentage these standard burden.

the strategy royalty we to advantaged before, the be As Permian to leverage competitive in clear execution, said our use make is leader our and in our financial capability in returns. our midstream position us highly

Slide on way. we're XX shows well that our

March, thereafter. year, we expect billion in free expected expect strengthen next to cash positive we flow exceeding $X are XXXX. stated and As to cash grow be to in each year Earnings free flow

assumes Analyst prices this Meeting. of same our All at the communicated reference XXXX Security

level expect As the optimized ratable factory of risk. with increases, flow Permian execution we return of C&E production see by a capital nearly and XXXX low about XX% by employed twice relatively operational the on cash all an to delivered

free volume opportunity company while production, free XX% double why of positive, every focused than building on year and investment is We're returns. more attractive this our with not in for business growing our year, sustainable success way, and To is excess being along flow an shows flow and of and starting next cash returns strong the shareholders. on measure true cash capital its generate value

stage value have the Gulf opportunities that's XX. and at Let's attractive each development. portfolio turn robust of investment we of generates slide has performing Mexico, to In good a well,

evaluating we're prospects queue We have a exploration strong maturing. that of actively and

assess distance. Blacktip and we and this in which the appraisal Earlier further Ballymore near Whale is size net year, Perdido XXX encountered tieback to participated Whale. exploration discovery the than and well, within in more pay the the well of progressing resulted the resource. of are through The feet phase

mentioned a for March, of Gulf unit As to new $XX Mexico. targeting barrel in development development the of in we're cost $XX

Gulf towards deliver resource early The next FID, to project oil to developing these in as expected to by drilling expected which target progress us and Dog is is in year. reservoirs X, technology planned opportunities higher-pressure of and Mexico. other to Mad continues XXXX. first fabrication we're At the is progressing will allow exploit the Anchor

highly on continuing add existing experienced brownfield and Jack/St. such We're value increase Perdido. as Mexico. of we economic expect the Foot portfolio, in we're at bring developments and And Big Malo we Gulf wells. technology, assets leading our to also broad Stampede additional With to pursuing workforce production and as

to Management track project Pressure had opportunity Kazakhstan visit to in The continue we Wellhead to the Tengiz. XX. for and Turning XXXX. June Growth now make the slide remains good at oil XX% again on in Future I and project's progress with complete first

project, with the full the analyst critical for at transportation engaged module and mechanical, and fully this work our first at discussed installation site. as year we implementation As and electrical year we're is meeting, of that's another March fabrication,

at The restacked work set fabrication foundations. on the We're is and Detailed close year. system yards working of activities. engineering out are to are complete, fabrication and of impact and reducing on this risk procurement delivered, being and construction modules the four schedule almost further on well logistics three

affected As reported With that our FGP on And relatively just incident. at expected event the site construction, suspension XX% site project operations for the in at interpersonal respect June on minor in under and we're other media XX, one days. not to construction sites conflict several by is the the the to resulted of progress. contractors were activity a overall, impact have an complete. experienced XGP the Production of

and we're seeing in steady to site our Looking to where our continues from focus shift ahead, productivity at workforce performance improvement productivity. good

to over back With that, turn Pierre. I'll it

Pierre Breber

Slide highlights recent some XX Jay. Thanks, developments. commercial

Phillips of world-class U.S. advantaged First, returns one these Qatar by through technology. new in Chevron are and the venture, fundamentals leading joint venture Each Chemical underpinned chemicals the in petrochemical strong. Company, and is joint Gulf our announced The offer We long-term with Coast believe in investments, feedstocks, scale Petroleum. projects Qatar. two attractive we one

interest fields executed close closed the North later and this we U.K. to the Central, in which of our year. Also our we Denmark Sea sell sale quarter, an expect agreement in to

domestic refinery acquisition enable Pasadena more our of completed market the light we the retail in us and region of more supply Additionally, to our will process oil. which

In renewable our the energy alternative to Permian. This renewable we to in agreed current space, cost-effective operations. wind a purchase to supply supply the power is electricity our Permian recently

an an be would CalBioGas, the market, venture that to capture fuel partner vehicle as The equity end will into project methane joint atmosphere gas. into vented Also process a otherwise in natural be biomethane agreement in it to and Chevron renewable produce dairy a executed California.

Turning to slide XX.

from heard four performance us you've messages in this key reinforces quarter past. the Our

portfolio do First, we is the and positioned today Tengiz. of Permian to and highlighted at Gulf so Mexico in delivering that the long-term as over Jay advantaged an is have

cash strongest in cash and if free low resilience the positive this prices continued have a with year the Second, fall. industry, breakeven we flow balance sheet

disciplined Third, with increasing capital we and returns. our to with committed on-track spending budget are

for cash we superior many years share buybacks. to our total of the a had line financial of we consistently fourth, deliver our yield performance Bottom to resumption positioned X% come. with to And shareholders about are

we ahead, looking expect…. Now continue to

[Technical Difficulty].

Ladies will momentarily. on line. gentlemen, The please conference the remain and will resume conference Operator: the please line. momentarily. call remain on again, call resume Once The

I our if Hello? see speakers? can to Checking hear

Wayne Borduin

We’re here. Thanks, Jonathan.

Operator

you to this Would take Thank questions you. like time? at

Wayne Borduin

I begin believe we so with actually off we'll were cut slide XX. prematurely,

Operator

All right.

You may resume.

Pierre Breber

to as turnarounds to XXXX West at and X% are off Jonathan. the the to Planned Kazakhstan in I'm expected of you, Australia to we Thank that we're slide This expect well ahead. Okay. there early production sales. as impact Mexico cut we Nigeria Gulf quarter. XX, third X%, hurricane be we July the and to going so Shelf and understand in continue look and to In is the Pierre resume in XXXX Upstream, growth and excluding going asset production North

guidance billion guides its impact of dividends. year earnings price, the co-lending than third quarter TCO of In high to an in profile, activity and refinery more investment which $X full level we unchanged after-tax estimated upon $XXX expect Our downstream, for turnaround million. is depending at

at -- billion For to $X.X expect a repurchase the quarter. of quarter, third we per a shares rate repurchase we expect

I'll With to call over hand the back Wayne. that

Wayne Borduin

ready our do all questions. answered. now get concludes your take one mind to our please have your the please prepared open Thanks questions follow-up. to one to limit yourself in do Keep Pierre. that That best We’ll queue, remarks. Jonathan, lines. we so a full of and We're question

Operator

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

please. question Your

Phil Gresh

me Yes, hi all Can right? you good hear morning.

Wayne Borduin

Phil. Good morning

Phil Gresh

Yes.

here guess So, cash and I implying just Permian to you're this CapEx that grow the up. looking it can keeps and is like ratio your you flow cash flow first and earnings going additional flow cash question of at expectations, disclosure seems what

talked pretty flattish rig seems is I which trajectory consistent fairly imply you with it to Analyst think CapEx Day. the So, at profile, count about

maybe was I just So, could that you wondering detail. kind walk of if through

was about Thanks. And takeaway this made you that all just then -- best secondarily Permian. wondering recently get talking feeds for to I announcement realizations you out to with the had the your related how production. know I into enterprise of that with an ability ensure you that

Jay Johnson

want looking take a as that's to Okay. have Pierre may From essentially some profile rig at to CapEx it the and a to fleet capital are Phil, and I'll maintain we're flat we looking add in we steady forward. a go because standpoint, end. very relatively

XX company-operated rigs. on our are because we licenses. own XXX% have We basis basically a Those operate

XX seven XX for equates to roughly then gross non-operated rigs to And look which rigs. about about we net non-operated

developments. move that that activity increase the to to we to relatively building we are out of we as and us out We're recovery to exploration ensure So, we of always pilot front work course see in efficiency our constant. also forward, drive infrastructure and expect capital continuing do have and we of some

I'll break as and capacity for on year, will XXXX, length of we domestic Basin, covered for in that the ability the we periods executed takeaway but capacity, crude capacity supply In an our takeaway year. the also of only the internationally. lengthen recently are enterprise move we're start streams. oil. to not for There agreement terms takeaway In for of basically crude not also with well XXXX, only through different it covered into out Permian tightness oil but three be crude capacity we with export may but U.S., our the for in the I'll

gas we two look ways. at for to really and this we full in liquids, When next And year. takeaway think gas, of gas as we capacity year have we natural turn

The just having of avoidance any to in able of flow without the We need basic first gas to threat production flare to be or is assurance. have move mitigating flaring. our

this for next balance So we year. have XXX% year up set flow the of assurance and

at In us the we end by gas to we rather we're Waha. gas from of of for what look XX% just XX% XX%. about of our gives more terms exported can our year of the exposure exported other the the at should basin. to more By of takeaway outward be from than is structures expect like we next of gas price this export, year, the being from be end be basin this And the basin year about

Wayne Borduin

Thanks, Phil.

Phil Gresh

helpful. Okay, great. That’s

then question balance would follow-up Pierre just your my some Just for commentary. be sheet of

for had a know Your net increased bit. that where debt-to-cap, since you a sicne but from, keep mid-XXXX. an is Thanks. that about guess themselves? of that there low the where how level you I leverage? the might think away believe I There's And do want I it’s situation you financial been walked you to buyback opportunities that you balance present sheet M&A considerations

Pierre Breber

Phil. returning to cash and generation and this been we our has we've early year. increased dividend strong Well, our cash Yeah. thanks shareholders been Look X%

organic capital, in As per being billion budget in mentioned May we billion guidance $XX you disciplined buyback the $X our rate to on XXXX. year. raised share We're with to very our managing

even to balance dividends share this time form the the cash be will That's short-term, So returned generation doubt strong shareholders stronger. the higher program. no of in gets sustained strong sheet the way and works, a in our math buyback Over okay.

into M&A. obviously, more delivering. Analyst we're strong focused -- way some then that the for provided I I we're think about that's That's March Jay same won't on would our a time elements position, insight we at a it. financially We, shareholders Day got and very today have great in communicated we've what our proposition and on value comment key

Wayne Borduin

Thanks, Phil.

Phil Gresh

Thank you.

Operator

Thank you.

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

please. Your question

Neil Mehta

out? is track from budget you of There's terms just questions relates well achieving some as Good labor targets like. on just the the around just confirm then there question confidence everything – it Tengiz. I guess, sounds as have productivity in back that and Can the morning first to level you capital set Jay, your team. Kazakhstan I came was in you

Jay Johnson

Yes. the on We site focus June and to Last transition and year now the previous Security at on we talked primarily lot in Analyst and this year and is We've as come at electrical just a did Meeting This of back focused big come making mechanical, to got in productivity. undergrounds. or about set on the modules A instrumentation. calls. do foundations. we're labor in work civils we're

we As commissioning the we have activities. get through and forward then to look start-up all

put place really only we've are can gaps, that but to us, specific we what productivity close drive tools understand in the where not expectations drivers So we those. to have help where the and what are, do from need

effective, roughly early about couple the good man-hours complete the be across go at and improving seen on it's lot widespread days. actually now to are over a steadily very pretty feeling XX%, are we've we've proving productivity point. and where to of execution tools of the Those But and across next workforce We're is headed so this the are construction got years. site

we overall $XX about program, guidance. right mid-year you on a the $XX should right to next middle, that of we billion Chevron to maintain to in terms We're you've In still through our be pretty continue good capital seen our XX% so expect for idea billion the where of give sit. and C&E guidance things on of expanded year, our

Neil Mehta

Appreciate this a you question, be Pierre. follow-up might And this. for just

of away to capital materially opening the credit from discipline. You've again. the seems deal transaction a stock XOP ratio and for be closed, and showing price that others, multiple lot the or share Since E&Ps of the Anadarko the investors gotten from independent and XLE outperformed stepping potential other arbitrage or up constituents has arbitrage

opportunity felt opening on your get opportunistic, another thoughts it up to here? M&A. Again, want Just but potentially is

Pierre Breber

just shareholders. XXXX, our honestly March capital a Neil. communicated speculate M&A. restate X% strong production the have very Thanks we can can I value No. is disciplined that some to through guidance X% program. of growth we I key very And Look, in elements is if on for What -- Yeah. can't I proposition a

Jay XXXX. from the guidance guidance to billion of $XX longer-term billion XXXX of $XX billion to and $XX provided $XX billion XXXX to

upstream leading flow return on earnings capital margins, employed more by and We leading cash margins X%. have than improving cash we're

do a clearly to do deal. we not So, need

we we growing the would good past if we've delivering on and value. you see recent refinery flows fit That for price, in shareholder. have said, and as cash And good been moved Anadarko. said, on a at be But the opportunistic two focused examples good and a a our strategic earnings we're Pasadena at

Neil Mehta

Pierre. Thanks

Pierre Breber

Neil. Thanks,

Operator

you. Thank

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

question, Your please.

Alastair Syme

And of on a Good couple about asset talk you're bit talk What sales, Anchor, the which the One, to it's questions. the afternoon. happens Because little of just in to you just think what hoping of decommissioning you that there follow-up, can I with please? assets, can the move you technological are year? FID forward? challenges. to significant little those U.K. you liabilities sales on still some just quarter. that associated understanding bit, announced about is, you do question, the a a happen if a had do next sort just quite has my asset talk Can

Jay Johnson

Yeah.

FEED also that so all two for So be preliminary developing to to opportunities we'll the work detailed the And are technologies to there engineering have engineering. the these developed Anchor. with this foresee. available Anchor, we Anchor, is other we doing prior are for support in would primary in process, I say

just higher wells this like developments see shift. seal. really is of first and the the also It's -- qualification working the getting thicker just just comes deeper we to high-pressured support and Ballymore. and don't major potential the process. The That's to through we And will loads the We're in really matter for a is it XX,XXX-psi. really as stages a well that that technology, down hook technology along second

regard we neither one advance, an technological So but important to particularly challenging do as get a finished. of those

for be do expect path FID year. Anchor next early on in So we with to the

forward the of of an comfortable that, been we too move as terms really the its North the working of In transactions. into to on constructed package say, other very can't as get with deal, we're I are overall close. the it with and buyer to transaction to much any our Sea really don't details than commercial comment

Pierre Breber

imagine comments that, considered we're of obligations importance And Yes. to with. And something we financial its can specific that's transact -- to commercially can embedded exposed be you the terms be won't with we that of in-tune parties and I sensitive, think that again but the to time. the point as or partners fully intend negotiation I of over add the carefully it's we of as the in and Jay's don't strength

Alastair Syme

Thanks very much.

Pierre Breber

Thanks Alastair.

Operator

Thank you.

Borkhataria from comes question from Markets. RBC next Biraj Our the line Capital of

please. question Your

Biraj Borkhataria

Hi, have apologies, question. for thanks And my LNG. on question the if miss on a this I I call but, taking

LNG talk not about just was of a in your sales that? I else their payers that quarter. you. of Thank what mentioned there's spot something wondering ratio if Could their the through talked for full contracts the has You was higher buyers driving issue you or One there. nominations. was taking

James Johnson

planned general as thanks have going are talk I'll be prices. had that to we -- is Yes, is Biraj. in spot gain above facilities we and we reliability in our because there's coming all up, an exposed to extra first performing production element what and well, production so very over of performance, the

an that's going to so ongoing thing. And be

Wheatstone. the In performance certainly we at quarter both and had Gorgon second excellent specifically,

a a second the And turnaround so that. the quarter fourth. production so the at that's had been scheduled also same deferred had we we we in coming But turnaround, moved time to from extra

to that extra were we So had cargoes exposed there spot.

element. also linked have months in shoulder element downward X downward there's some was in about month oil in movement in they're exercised to purchasers contracts then our flex even and pricing quarter. We an by the our we we occurred to that so that finally, delay saw that do had fixed-term X And that and where the the some second in a

realizations gain confidence closer But been facilities. production what continued our really for all goal production reliability as our we going in second the reliabilities the quarter expected to as together our term to is to be see as would and LNG. forward, get say higher I we So of expect and overall our increased up drive in the those the do that

Biraj Borkhataria

the just us maybe you follow-up. in And nameplate? just capacity At or I XX% you to on That's past increased and now the the debottlenecking in project original we a particular great about relative update where buy think Gorgon to talked Could color. are quick XX%.

James Johnson

out on of increase. Yes I giving guidance specific don't percentages us recall

is Our focus couple doing of right now a things.

is still reliability. just facilities future seen good learning of as the learnings We're very we've accomplished we and ones. First turnarounds these we getting we've to high increasingly that some reliability operate continue shutdowns and from the and already in the built

forward, As we is look we what us collecting through the ambient we looking from move the we're as are performance at conditions keep production. as level look We the plan. the an where well data next as to the going literally daily to of cycle the of for of restructuring annual

At But in on I'd probably infrastructure. it's above out Gorgon to existing and an of we X% we're say be more around we time, ongoing effort above production, where our X% expect forward it as Wheatstone. investments to on this point get move

Wayne Borduin

Biraj. Thanks,

Biraj Borkhataria

much. very you Thank

Operator

you. Thank

of Rigby Our the next line Jon UBS. comes from from question

Your please. question

Jon Rigby

Okay, thank you. Yeah.

globally that The enthusiastically the capacity cetera. first process, your you indicated deepen deepwater willingness creating you a and to extra felt I spoke that global participation position transaction portfolio, LNG during your had is adding you quite about the et and to Anadarko that

we should is be So outside appearing they move looking? where and is new opportunities you that of arise, U. with you the to S. -- as expect forward or when thematically

plans the the got that you've then it? what for just second, Thanks. of asset, ownership the very new now And with are specifically, refinery

Pierre Breber

was moved there but Pierre out is little synergies start. there an of the look was that we’ll are we earlier go of at the Anadarko was good And it to there of Gulf the attractive do This and a transaction get was the good there Jon. back ability on, here. I our for the in I'll said Mexico bit transaction we shareholders FID their and and it, Permian, the Thanks Look there elements and in shareholders. to several for the was FID LNG. the thought price Yeah.

LNG company we’re where is talked -- of absolutely interested lot that into over classes -- thinking and add we are time. want the to of expect we that space. that's you'd our and we're opportunities our something one generating shareholders. position asset that And is opportunities that working about we'll Jay that We've and doing. in get are in debottleneck and LNG pursue portfolio just we So That -- we're cash potentially the have makes a the great adding always sense got interested to to you a that that in Australia in if for

In provide terms into three in network was objectives we've clear to product One Pasadena, strategic very our Texas. had equity of some retail on it.

oil. flows the optimize coordinate increasingly bit The domestic Mississippi. and more to and to retool feedstocks Permian process in was Texas was refinery second other position third light and and and between to refinery the a our try Pascagoula, take more And oil little to more and

everything with say -- track really, very aligned is the strategic on days, early rationale. I'd and I So it's there but mean

in objectives. of with wins. can no terms been them we We there's three the early So acquisition. feel those We've had surprise some meet

to we expected as That's actually there's XX,XXX had we of on than next do crude oil. in at Permian In point months of few little we this barrels know to Also time. up fact expect a the day over maintenance more a to thought and reliability work the run facility.

everything feel early Jon. is it's days. track about it So but good on and Thanks, we

Operator

you. Thank

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

please. question Your

Jason Gammel

a decreasing Hello Permian, up say on production increasing an much. and I very development number guess would had obviously, industry be, absolute stack How slide XX. absolute cost performance do now? in against EUR I in some guys. couple fairly I a Thanks benchmarking. impressive areas you know one you basis. the first those would the on of lot

James Johnson

Jason. good a it's question, Yes

we -- benchmarking the story. think an I to of be and evolving a this do, do lot continues

So say, these we're I on areas. would competitive

particularly We terms the very in type across good have a the entire of basin. understanding curves

generating actually competitors the how overall terms run are the from actually but well as recoveries, very in performance only only we're curves that capability our not of so we're across the with own, we decline understand the economics our the and We comfortable work. but have not that execution wells performing and

And to us, our then really our leading up I capability royalty overall. coupled financial midstream that's when and giving our position, would it's say ability use with performance

look Meeting some the slides, So our competitor and showed of went if you you we Security back at Analyst data.

We actual coupled. our also very performing showed you, expectations and how type they're tightly to are our relative curves

we that understanding, as but continued we're So I we think forward. a good seeing move have improvement

Pierre Breber

would Pierre. thing only Jay's to The is Yes. add this I comments,

You can there We've lot what pretty you how shown. with data out of to cherry pick consistent been position a we've look.

benchmarking, behalf, but done a lot, comparisons our on have the we've also where apples-to-apples operators our just we general know good data. not very And or partners we to non-op

So is it compete we area focus feel of and we well. very an

Jason Gammel

And maybe I the just starting of fairly lateral just up yeah, frequently That's swapping for about a another past length block is kind XX,XXX average In approach to had planned to positioning the slides that's noticed feet. – your quick XXXX great. you've follow-up. acreage.

feet, moving you suspecting about ways XX,XXX getting a kind but long of that, you're just there? if towards opportunity towards you're can doing I'm And there's talk further whether

James Johnson

XX,XXX Those acres getting we our that foot length we've we enabled and higher existing -- as In the average transacted, had about laterals. about XX,XXX on continue development we're XXXX. XX,XXX -- and longer the approaching X,XXX mark. Well in higher that XXXX we and lateral acres areas in in transacted that areas

in us really development it's helped So areas. our core-up

our we we development continue new to continue up open As have though this land going optimize positions. to we're activity land to as areas,

very we our we development use and consider to or to highly areas farm-out, productive do swaps of up our half acquisitions to is and continue areas. core to continue a about So want out swap be sales, acreage what to overall,

sure to to area. timely of but do drilling a that efficiently too try want we we're each make do ahead We start we want and manner. in far as don't that get ourselves, We

or not our As activity returns delivering is many just focus times, a level. we said certain on chasing production chasing

Jason Gammel

Thanks guys.

Operator

Thank you.

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

Your question please.

Doug Leggate

assumptions of Thanks, the at on no the on I take of wondering Permian made margins, if was everyone. things a just been call of the and you fall you little your, Jay, terms in have could you the in NGLs good deteriorated bit do obviously terms cash I morning in gas. advantage,

you versus were the were making about do flow? cash What prognosis see how -- So you there? when if you CapEx talking assumptions

is the follow-up X.X, within in last suggests across that margin that of And thoughts in past. from please. cash curious if you I day just a a your can got XXX,XXX kind you've XXXX this the away piece could a any I'm level the I've that. at had sort of portfolio barrels of on guess question sector offer move X.X

Jay Johnson

is, you given oil, of the access mentioned earlier continue already that and to on to cash that Analyst call, we trying the deck, make outside have captured And move Security well we're reference Crude as to Well, those. assurance basin. provided and the -- we to are markets in can sure reaching. Meeting go flow immediate gas markets We back all have so the assumptions crude and I the our it ahead not the basin other that do the out in and we move what optimize we’re can that. we're our

information. locations. world. that we feel with other strong. you There's a but pretty given different also we've going very the around But again overall, always and have in markets about there's to that margin tightness in cash production is we’re where overall, the production we the strong fluctuations We heading base as see of as the length this be terms In

Doug Leggate

is large kind Okay. thereof. related was prices and been and routinely parts capital base that. that I when -- your of of and very in lot the -- base portfolio. it's guys reset of you what LNG lot got like the oil the historically it's those there's kind And weaker, about understand, decline sustaining talked a has moving in obviously, the a My by projects favorably follow-up dominate

what of how high again, proportion to asset level the a unconventional as underlying production larger decline billion and about capital that versus, evolve you that significantly move of move plan. a to you your a $XX does funding base, this used five-year towards, does think, towards like we As I sustaining talk number, do the

Pierre Breber

capital $XX add to to is never to given I'll Doug, We've $XX next talked billion billion, year. $XX year Jay talked $XX about and And We've ask comments. dollars -- some about that billion we guidance capital. really budget XXXX we $XX XXXX. sustaining Pierre a have This billion yeah. then to this billion and start

to of pretty pretty So it's X% through clear, that's X% the guidance margin. XXXX production tight. That growing enterprise results is in cash leading growth with

base investing XX%. we've to doubling, that year, we unconventional, is it's decline, going are than next free Permian the the returns times, about in more you eight the production talked cash are that in from starting prior as the the saw, being XX% at So it's -- while every flow year,

focused that outcome translating in on It's We're But high flow. higher really earnings on nature increasing position. referred resulting we the production. We're our a flat of good returns. about decline keeping a higher of is, capital. to it's So cash business. to not focused the base an and feel you That's

than time, we're out But and keep very it a the that, economic for reinvestment very the can offsetting we investing is manner. facilities decline in of in see facilities that And filled more a when fill capital as doing to we're we're it, you and attractive over use continue shareholders.

Jay Johnson

what I absolute said, he's might because just build on Pierre right.

high production a larger ability a does while be the well And same relatively our stable overall production. decline in percentage applies approach the have of to curve. facilities, rate, have means in we Permian, very our actually constrained may As by have individual some an it any respects we asymptotic on the that

initial But we takes by of areas, is to the full, development development to activity the keep can less of we maintain it in for drilling campaigns going and after just but area, that Permian drilling for that, advantages each then install those infill and subsequent the the the one and keep facilities up, to subsequent the goal of amount back facilities programs through of our facilities go benches those is full. And area. rig drilling fill production given continue we a the is given a those in in development much the

where worried individual actually what has some portfolio wells. really I as see I'm good a people about Permian problem these and pretty feel the too not moved whole with about So

Doug Leggate

answer my great taking Thanks a for guys. It’s questions.

Wayne Borduin

Thanks, Doug…

Operator

Thank you.

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

please. question Your

Roger Read

Yeah. Thank you. Good morning.

Wayne Borduin

Roger. Morning

Roger Read

seeing some questions, your the E&Ps, your those those who the Let position of just bounds of from from to developments and developing some Kind Permian? on have Permian in with following-up we're of overstepped were outlook and of their dive might risk any they of problems royalty with me way others the in some here. terms the

Pierre Breber

Well, the is is we operated Roger those or no operator's right right. flipside we doing either we're and mean is if costs. showing the own But an it no that's been. I Pierre. Jay that certainly you're you're so interests are. dependent barrels this levels with mean, we go barrels I capital, outlook could there working the others development, said, don't we're as what by landowner we're control we don't could the what receive based it operating being royalty and the because who had bigger than some that. on way. But know on risk of It activity It that go an expectation, lower control what actual those

Roger Read

the year. high you'd was from then turnaround And the impression the under turnaround and a refinery activity in hiring the great. fairly on first for earlier I Okay, had the guidance of activity, standpoint this quarter third half downstream,

high there's this I that specific on any if geographic the was quarter. curious the So maybe exposure just at and right TARs was interpretation,

Pierre Breber

guidance have clear we characterize a or of medium now downstream pretty so turnaround as the high. it in Roger, practice we and low, on a adopted planned giving a either activity Yeah

So you're right.

lost earnings opportunity higher And of after impacts cost produced. from Second volume million that's quarter to $XXX if the tax, was related high. is and profit both from not

low, $XXX actually which of to effects. was up quarter million is First

third So set provide not on quarter the locations. It's unusual, planned turnarounds high in quarter it just on another commercially specifics are sensitive. how that's with won't the the up. We depends

And to won't talk time, just happy we're so it's ahead we something that of do about it.

turnaround Pascagoula some in in had we quarter, second Asia. the and on activity planned backs Looking

clear we So we're afterwards, think but giving pretty guidance. we can explain

you're planned the earnings view turnarounds should that So you earnings same -- to in after or tax XQ the to similar be right of impact XQ.

Roger Read

Pierre, there. Thanks. I'll leave it

Wayne Borduin

Roger. Thanks

Operator

you. Thank

next the question from of from comes Our Weil. Howard Cheng line Paul

Your question please.

Paul Cheng

people it Jay, different and your update never contractor Tengiz the foreign contractor prepared more Hi remarks you and had initiative at here seems me problem about least the local agenda. on the what the between may talking does Can serious be been been there? you little incident to even since with think your good that resolve and in bit that media, in trying I taken a there's morning. any more are about -- the to in give you mentioned -- us and

Jay Johnson

that When is really of was there and of was some to particular shut bit of operation, site site site one workers company. and impact problem Paul, management I mitigated XGP on the the Yes, their not around site, some and entire production wanted sure a that we you root understood the was the was it. XGP centered give can other and contained make any -- we contractor didn't that little but down what this more. happened, the between -- the issue have at disagreements the the We that at we obviously

deal ramp-up, see strength they're that's with with normal that we the only had by is some extended so their contractor. to that strength place expect they normal end back That actions them They're worked that an August. to sure working that of there. the contractor make We and in of putting corrective to the were concerns

we ahead material in one time, don't be month their it the progress on this of we the That a impact as of where workflow. point them about contractor work. expected So, at on having overall see was to

we used float to up that we've to going able built us. unfortunately have So, of mitigate but some the believe up, be we're to that impact

you continues and make with is with any are on. very site that to focused other concerns. workforce shift worker The workforce trying to important deal important It's us stay and our we anticipate always this our the as sure now and that one focused I continue to we'll stay assure to and relations to focus to we're

Paul Cheng

And the second question Jay.

that think expiration think XXXX. Angola you guys XXXX. the think the is on And those? XX, process the Nigeria When is I in I in I start renegotiation for will Block Agbami

Jay Johnson

to something talk Well, and publicly, normally much our are we about that's That's and government. partners going between us not the Paul.

much this go that and be detail but So, for to tell the is can well at into really on I those able those won't time. I you in that discussions hand, planning

Paul Cheng

you. Understand. Okay. Thank

Wayne Borduin

Thanks Paul.

Operator

you. Thank

Our the Wolfe from comes Research. next of Sam Margolin question line from

Your question please.

Sam Margolin

Hi. morning. Good

Wayne Borduin

Hey Sam.

Sam Margolin

stack things you of building of vintage you're that supporting staying flat the performance got the to in talked that some wells nice rig your production the So, Permian and count wells. about of new a contributing one legacy you've relatively up is that's

and vintage they can Jay on It those tooth? meeting but as long wells wells doing wells? light older as up sounds leading are you're quickly really your you get expectations, the shed Just are the they are edge as of holding far the little how how performance some like in a

Jay Johnson

quite they're Actually doing well.

from in from we our day returns that get Permian. one has the the been investments focus can maximize Our to

So, lot our industry reality be there now questions I increase more of we don't lot to we've forward rig of as moves think been off. fleet, why is we aggressive? a to as in a made are everyone the stay move to we returns don't why continue has the and focused the But on paying learn

we're months looking six high initial can what rates the damage cause production their aggregated are how at Many curves. people but and that about first talk decline in wells really rates, actually

base well over looking our such life. make its at our very in or those months seeing that, in we the add wells, We're we economics So, in expected perform top. at continuing that's production. don't that we're We're new drill can wellbore that total of we're we cause already sure when to early careful the in rates When damage put the recovery. production formation. online looking drawdown the to we is that the these together, on That all the

able chart, how profile and are our production right page And nine, to from our good been wells continue it we've was performing. believe as very you on saw I on we about feel deliver the probably to

Sam Margolin

in candidate throughout deepening relationship that the of see see into CPChem and Chevron one you good to is do you And siloed things in. should Qatar, participate Do this a relatively that side strategic Chems? that chemical you Qatar's then kind portfolio Chevron of much. to reference - and just partnership Or advance between you the on the a so as got be quick Thank probably other organization?

James Johnson

right; ourselves. do and sure look XX have a Petroleum they No. CPChem for look Chevron the three No. Look, Phillips, with good Qatar Qataris we it at CPChem. so Phillips as at relationship companies, and And when

a so, them. And with we have relationship good

U.S. – their at there's I are stand again Qatar I will Coast Gulf trend on other the own, bid the was mean, say out in alternatives deals considered. the that project that

other So proud work-off speculate, not a that But that each this I to leads own. to its of. or transaction we're very stands we won’t base opportunities whether have we platform have on and good within but certainly

Sam Margolin

Thanks so much.

Operator

comes question from the Thank Pavel our you. final And James. from line of Molchanov Raymond

question Your please.

Pavel Molchanov

taking for Thanks the question.

the your you're takeaway to trying the possible. gas alluded course of to Permian was realized avoid in issues You QX. that and flaring as gas $X.XX price But in as much

So point happens a no I'm to if choose? you in curious would wells. it gas if where or might get you that And either flare choice, have shut which to practical but

James Johnson

We flare. don't

flaring not and we haven't flared. are We

the as flow we've that. I doing priority is Our assurance flow we've find we been is And that, that assurance said got covered. that our gas move and so can we policy first

see us forced choices don't the into presented. I So that being just you

Permian. better and we're that's part strategy achieve be try said from capacity investments the we going realizations the out the I of our and to export the do overall earlier, -- of in I that get amount of to basins our can to as maximize increasing returns

Pavel Molchanov

Okay. And based broader just on taking on a I then what much asked, perspective. but

emissions. carbon reducing You're talking about

producers sure said policy I'm U.S. that talking other every the on saw to be stage what's community. about the about on you this Just listen same, oil to week debates, we the being point gas seems at lost when and

the that this is has the not -- to to has what the is believing? policymakers And seem saying think what what dynamic and disconnect led be you're communicated that what you industry curious or I'm between

Pierre Breber

in is Well depends right. here question it energy United mean, last Look call on the revolution, here. a Sam that's the midst of big the policymaker States. a I which in We're renaissance

generates Marcellus President a natural the and to but We our was and exports talk of a we Utica implications and the and geopolitical what's renewable that, can that to and takes so At which electricity we intensity renewable the the For Methane in in Permian the climate our vented benefits in puts if natural solar so are and production, grid. on California, sure, shared the that see that, production, capital. fuel big call the be Basin, on of the and the we with an trucking something couple in the gas, our believe what's attractive standards it, intensity all It environment of guess gas part it's in carbon for crude to is earns is oil shareholders. growing would -- of low the on modest the happened that. agreements our atmosphere about going earnings wind growing it for which Regime. there, under world concerns same investments our off-take have carbon return, It time, Permian, California change. I It the company. good electricity consumer is lower good a the Regulatory wind operations. carbon we PPA otherwise that processes using referred of It's operations lower you lot markets

more and part do conversation. So the big balanced, to it's question, of We'll very a we'll of – we look be be but that.

Jay Johnson

Thanks Pavel.

Pavel Molchanov

All it. right. Appreciate

Wayne Borduin

you. do back time your Well, everyone's for appreciate Chevron We and in interest I'd today's your thank on to to today. Jonathan, participation like everyone call.

Operator

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

disconnect. now may You

Chevron (CVX) 2 Aug 192019 Q2 Earnings call transcript