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Speaker 1: Join us now for more is Mike Worth. He is

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Speaker 1: the CEO of Chevron. Mike, it's great to speak to

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Speaker 1: you today, and I want to talk about the fact that,

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Speaker 1: of course you did beat estimates the premium basin obviously

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Speaker 1: a bright spot there. But then there's the fact that

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Speaker 1: what's Texas crewed, for example, can't seem to reliably break

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Speaker 1: above seventy dollars per barrel as we read. Of course

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Speaker 1: you are planning cost cuts, but how do you thread

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Speaker 1: the needle between bringing those costs down without sacrificing margins

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Speaker 1: too much.

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Speaker 2: Well, Katie is good to be with you this morning,

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Speaker 2: and we did report a good quarter. We had strong

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Speaker 2: operational and financial results. We started up some key projects

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Speaker 2: in the Golf of Mexico, and we returned record cash

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Speaker 2: to shareholders. In fact, production was the highest third quarter

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Speaker 2: ever in the history of our company. Was the highest

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Speaker 2: US production we've ever seen, and highest production in the Permian.

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Speaker 2: And we started a big new project in the deep

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Speaker 2: water Golf of Mexico.

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Speaker 3: And have more to follow.

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Speaker 2: We're going to increase production there from two hundred thousand

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Speaker 2: barrels a day to three hundred thousand barrels a day

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Speaker 2: by twenty twenty six and over seven and a half

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Speaker 2: billion dollars return to shareholders through our dividend and share

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Speaker 2: repurchase program. In a commodity business, we need to be

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Speaker 2: prepared for cycles, and so capital discipline always matters. Cost

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Speaker 2: discipline always matters, and we can't control commodity price, and

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Speaker 2: it's very difficult to anticipate commodity price, so we have

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Speaker 2: to prepare for down cycles. WTI and frankly, all the

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Speaker 2: different commodities across our sector right now are seeing some pressure.

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Speaker 2: But that's you know, that's inherent in our business and

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Speaker 2: we're ready for that. We're built to win in any

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Speaker 2: price environment with downside resilience and upside leverage, all.

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Speaker 1: Right, built to win. Let's talk a little bit more

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Speaker 1: about the Permian basin. It was interesting to see that

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Speaker 1: your production there hit a new quarterly record. I know

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Speaker 1: that you have a target for a million barrels per

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Speaker 1: day from the Permian. When next year do you anticipate

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Speaker 1: that you could hit that?

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Speaker 2: Well, we've you know, any monthly or quarterly production is

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Speaker 2: a function of drilling activity and when you bring you

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Speaker 2: bring wells online.

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Speaker 3: We've got a strong track record here.

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Speaker 2: We've grown the Permian production at a fifteen percent compound

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Speaker 2: annual growth rate over the last three full years. I

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Speaker 2: expect will be up even more than that. Here in

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Speaker 2: twenty twenty four. In the quarter we just completed, we

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Speaker 2: were at nine hundred and fifty thousand barrels a day,

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Speaker 2: and so it's very very clear that we'll reach a

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Speaker 2: million barrels a day. It doesn't matter that much which

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Speaker 2: month that occurs in or which quarter. We're on a

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Speaker 2: strong ramp towards that. And the key thing is we're

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Speaker 2: getting more efficient in everything that we do. We get

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Speaker 2: better growth and better response for every dollar of capital

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Speaker 2: that we spend.

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Speaker 3: We're investing in new technologies.

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Speaker 2: That allow us to produce more out of every well

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Speaker 2: that we drill, and so all of that accruis stronger

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Speaker 2: margins irrespective of the price environment than we otherwise would

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Speaker 2: have had. And one differentiating thing about the portfolio that

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Speaker 2: we have in the Permian is across most of our acreage,

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Speaker 2: we have zero or very low royalties that are payable

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Speaker 2: to others because we own most of that property, which

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Speaker 2: is a bit unique. And so you put all that together,

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Speaker 2: and the Permians a critical asset for our company and

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Speaker 2: drive strong returns and a big part of the free

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Speaker 2: cash flow growth story.

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Speaker 4: I also want to go to efficiency a little more.

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Speaker 4: I know you've told analysts that cost efficiency is near

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Speaker 4: to your heart, and you have a flagged possible job

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Speaker 4: cuts in the latest plan to reduce costs as well.

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Speaker 4: I know that there could be asset sales as well.

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Speaker 4: You mentioned new technology, But as it pertains to jobs

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Speaker 4: in particular, how should investors employees be thinking about how

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Speaker 4: many jobs could be reduced in the United States.

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Speaker 2: Well, I think it's premature to speculate that. What we've

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Speaker 2: talked about is two to three billion dollars in structural

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Speaker 2: cost reductions over.

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Speaker 3: The next couple of years.

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Speaker 2: Some of that will come from portfolio actions where we

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Speaker 2: take cost out and move some assets out of the portfolio.

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Speaker 2: A good portion of that will come from productivity improveds

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Speaker 2: and the application of technology to do things at lower cost,

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Speaker 2: so it will come out of our supply chains. And

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Speaker 2: then some of it will come from changes in how

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Speaker 2: and where we execute work. That is where it could

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Speaker 2: impact people. But it's early for us to be very

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Speaker 2: definitive about that. We've got work underway to define that

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Speaker 2: as those projects in network is further along, we'll speak

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Speaker 2: more about that first and most importantly to our workforce

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Speaker 2: and then to investors. So I would say stay tuned,

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Speaker 2: but don't read the intent to continue to become more

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Speaker 2: cost efficient, which is inherent in a commodity business and

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Speaker 2: something you can never step away from as only being

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Speaker 2: about jobs.

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Speaker 3: It's about much, much more than that, and jobs are

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Speaker 3: a small part of the total.

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Speaker 4: I want to also ask you about the capital return

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Speaker 4: plans here, because the decision to tap into debt to

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Speaker 4: return money to investors through the form of buybacks. How

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Speaker 4: long can you maintain the current buyback schedule and what's

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Speaker 4: the optimum debt level for you to take on in

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Speaker 4: order to do so, especially in the face of volatile

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Speaker 4: oil prices.

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Speaker 2: Sure, so we can sustain the current level of distributions

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Speaker 2: for a long time. We've got a discipline set of

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Speaker 2: financial priorities that we've had for decades. First and foremost,

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Speaker 2: to grow the dividend, and we've done that for thirty

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Speaker 2: seven consecutive years.

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Speaker 3: We don't cut our dividends since the Great Depression.

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Speaker 2: The second is to reinvest cash flows to grow future

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Speaker 2: cash flows. The third is to maintain a strong balance sheet,

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Speaker 2: which I'll come back to, and the fourth is to

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Speaker 2: return access cash to shareholders once we've satisfied those first

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Speaker 2: three needs. Sixteen of the last twenty one years we've

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Speaker 2: returned cash through share repurchases, a very consistent and rtable program,

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Speaker 2: not only when times are good, but through the cycle,

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Speaker 2: and we're very under levered at this point. Our net

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Speaker 2: debt ratio right now is less than twelve percent. In

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Speaker 2: the fourth quarter, it's likely to go down even further

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Speaker 2: as we complete some asset sales and continue to see

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Speaker 2: strong cash flow generation in our core business, could be

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Speaker 2: back down into the single digits through the cycle.

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Speaker 3: We've guided to.

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Speaker 2: A range of twenty to twenty five percent net debt

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Speaker 2: as something that we think is appropriate to maintain the

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Speaker 2: strong double A credit rating that we currently have. And

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Speaker 2: so in a commodity business, there are times when your

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Speaker 2: cash flow is in excess of your dividends, your capital

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Speaker 2: and your shary purchase needs. There's other times when it

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Speaker 2: doesn't meet those which is why you have a very

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Speaker 2: strong balanceing and a lot of capacity so that you

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Speaker 2: can stay consistent through these cycles, which is what our

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Speaker 2: track record has demonstrated and certainly what our commitment to

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Speaker 2: our shareholders is.

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Speaker 1: And Mike, I just counted again, we're four days away

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Speaker 1: from the presidential election. So of course I have to

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Speaker 1: ask you a little bit about policy here, because when

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Speaker 1: Americans head to the polls, I'm curious what's at stake

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Speaker 1: for the US energy industry, what's at stake specifically for Chevron,

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Speaker 1: especially when you think about long term investment decisions that

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Speaker 1: you might be made.

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Speaker 2: Well, the most important thing for a long cycle business

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Speaker 2: like ours, where we allocate capital over years and decades

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Speaker 2: and have assets that operate for many decades, is to

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Speaker 2: try to seek some consistency in energy policy and to

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Speaker 2: try to help shape policy that balances economic competitiveness and

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Speaker 2: prosperity with energy security.

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Speaker 3: And with environmental protection, and not to.

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Speaker 2: Over index on any one of those at the expense

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Speaker 2: of the others. And so good policy is balanced, It

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Speaker 2: encourages investment to keep our economy strong, to keep our economy.

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Speaker 3: Secure, and to protect the environment.

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Speaker 2: And so whatever the outcome of the election, those are

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Speaker 2: the messages that we will take to the new administration,

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Speaker 2: and we'll sit down and engage on things that we

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Speaker 2: think are good for the US economy and allow us

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Speaker 2: to continue to invest in this country.

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Speaker 1: Appreciate the context there. I do also want to talk

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Speaker 1: about your share price. I mean it's not just Chevron,

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Speaker 1: like the entire energy industry really trades at a discount

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Speaker 1: relative to some of the other sectors in the S

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Speaker 1: and P five hundred, such as big tech. And that's

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Speaker 1: on the cusp of of course, record oil production in

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Speaker 1: a lot of cases, of course, the progress that you're

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Speaker 1: making in the Permian, for example, What do you think

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Speaker 1: investors are missing about the energy story or not appreciating.

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Speaker 3: Well? I think your points are very good. One.

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Speaker 2: Our weighting in the S and P is roughly half

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Speaker 2: of our earnings or cash contribution to the S and P,

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Speaker 2: and so multiples and valuations in the sector are low.

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Speaker 2: I think a decade ago that was a function of

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Speaker 2: the fact that there wasn't a lot of cash being

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Speaker 2: returned to shareholders by many companies. Most of the cash

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Speaker 2: or all of the cash was being reinvested in growth.

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Speaker 2: I think the industry has changed. We don't see that

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Speaker 2: condition today. We see companies that have become much more disciplined,

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Speaker 2: that have robust dividend and.

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Speaker 3: Share repurchase histories.

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Speaker 2: Now they're building ours has gone back over many decades,

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Speaker 2: but the industry has, I think now begun to exhibit

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Speaker 2: those same characteristics, and I think shareholders are beginning to

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Speaker 2: take another look. The other question I think that has

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Speaker 2: weighed on the market has been the duration.

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Speaker 3: Of future cash flows.

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Speaker 2: A lot of talk and a lot of interest and

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Speaker 2: commitment to evolving the energy system to one that's a

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Speaker 2: lower carbon energy system, but what I think investors haven't

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Speaker 2: fully grasped is that that doesn't mean that the age

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Speaker 2: of oil and gas is ending anytime soon. Hydrocarbons represent

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Speaker 2: more than eighty percent of global energy supply today, roughly

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Speaker 2: the same number that they did twenty years ago, and

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Speaker 2: as you look out many decades into the future, that

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Speaker 2: mix may change, but it will change slowly, and that's

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Speaker 2: against the backdrop of an energy demand that will continue

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Speaker 2: to grow.

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Speaker 3: And so the duration of these cash.

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Speaker 2: Flows are much longer than I think they're being discounted

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Speaker 2: into the valuations of the stock, and it's a real

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Speaker 2: opportunity for investors to rewait into the sector with the

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Speaker 2: strongest companies, and we're beginning to see some of that,

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Speaker 2: but I think there's a long way to go.

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Speaker 1: All right, Mike, that feels like a good place to

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Speaker 1: leave it. Really appreciate you taking the time to speak

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Speaker 1: to us this morning. That is Chevron CEO Mike Worth