Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Chevron heading to West Texas, where the oil giant will
Speaker 2: build its first AI data center power project. The facility
Speaker 2: expected to be operational in twenty twenty seven as the
Speaker 2: energy company looks to capitalize on the boom in AI.
Speaker 2: Here to discusses the man in charge. His name is
Speaker 2: Mike Worth, the CEO of Chevron. Mike, great to see
Speaker 2: you in person, Katie.
Speaker 3: It's good to be here.
Speaker 2: So let's talk about, of course, this AI Data center
Speaker 2: power project, because I have to imagine this decision wasn't
Speaker 2: taken lightly to enter the energy or the power business.
Speaker 2: That is, so walk us through the decision tree there. Sure. Well.
Speaker 3: First of all, we had an investor date today, our
Speaker 3: first one in almost three years.
Speaker 2: Congratulations, Thank you.
Speaker 3: We had a chance to talk about Chevron being bigger, stronger,
Speaker 3: and better than ever with growing free cash flow and
Speaker 3: earnings over the next five years, free cash flow growing
Speaker 3: it greater than ten percent compound daniel growth rate, driven
Speaker 3: out of our core business and then supplement and by
Speaker 3: opportunities like the one that you refer to. We started
Speaker 3: working on this at least a couple of years ago,
Speaker 3: as we could see the coming boom in AI and
Speaker 3: the need for more power to support the data center
Speaker 3: build out, and anticipated that grid connected power could become
Speaker 3: increasingly problematic as people saw their electricity rates go up.
Speaker 3: And so our project is disconnected from the grid. It
Speaker 3: will serve only a dedicated customer for AI. And of
Speaker 3: course the customers in the sector want large scale, they
Speaker 3: want it soon, and so we've made commitments to several
Speaker 3: large serbans. A lot of engineering work underway, site acquisition
Speaker 3: and permitting work underway, and we shared that with investors today.
Speaker 2: And so this of course will be operational by twenty
Speaker 2: twenty seven. That's the plan. Who knows what the world
Speaker 2: will look like. And you think about Chevron obviously synonymous
Speaker 2: with oil and gas, but should we see this AI
Speaker 2: boom really continue and maintain sort of the trajectory that
Speaker 2: it's on. How big do you think that the power
Speaker 2: business within Chevron could be?
Speaker 3: Yeah, it's hard to say. This is a first step.
Speaker 3: It's not been a core part of our strategy historically,
Speaker 3: and we have great respect for people that generate power,
Speaker 3: that serve utilities and customers. Today, that's not the market
Speaker 3: that we're going into. We're really talking about something that
Speaker 3: we do to support our own business. We have five
Speaker 3: gigawatts of power generation we run twenty four hours a
Speaker 3: day three and sixty five days a year to support
Speaker 3: facilities in remote locations that don't have access to the grid.
Speaker 3: This is a very similar concept where we will set
Speaker 3: up a facility that will have natural gas supply for
Speaker 3: the turbines and data center customers clustered around it that
Speaker 3: it can serve it a high degree of reliability, just
Speaker 3: as we do for our operations around the world, and
Speaker 3: so if it works for us, we would like to
Speaker 3: extend that and see if it can become a larger
Speaker 3: part of our business. This first step one that will
Speaker 3: learn a lot.
Speaker 1: And just to be clear, I mean most of this
Speaker 1: gas you more or less have, right, I mean it's
Speaker 1: there on your own properties. Right.
Speaker 3: This is in West Texas, the heart of the Permium basin,
Speaker 3: where not only is there a lot of oil production,
Speaker 3: pot of gas that comes with that. Often this gas
Speaker 3: can be discounted because it's far away from the market center.
Speaker 3: We need to get into pipelines and move it sort
Speaker 3: of create a demand hub close to where all this
Speaker 3: gas is and will be for many decades. Is a
Speaker 3: way to use that and not need access to all
Speaker 3: that trans.
Speaker 1: The connectivity there though the idea of being able to
Speaker 1: transport that where it needs to go is that there
Speaker 1: or will it be there soon?
Speaker 3: Well, one of the interesting things is it's actually easier
Speaker 3: to build fiber networks than it is pipelines, and so
Speaker 3: you can locate the data centers close to the gas
Speaker 3: and the power, you can connect into the fiber infrastructure,
Speaker 3: and moving electrons is easier than moving molecules, and so
Speaker 3: that is kind of at the heart of this location
Speaker 3: and the reason that we're looking at West Texas.
Speaker 2: And let's talk about where else you're looking at outside
Speaker 2: of West Texas, because I know that you've said that
Speaker 2: you're going to increase exploration spending by about fifty percent.
Speaker 2: I know that you went into a little bit of
Speaker 2: detail in the Investor Day about where in the world
Speaker 2: you're looking. But where do you think that the most
Speaker 2: promising locations are at this point?
Speaker 3: Well, we've acquired a lot of new acreage around the world,
Speaker 3: in South America where there's been a lot of success,
Speaker 3: in Guyana, in Brazil, We've acquired acreage in West Africa
Speaker 3: where there's been success in Namibia, where the largest leaseholder
Speaker 3: in the Gulf of America today, where there's a long
Speaker 3: history of success and we're one of the largest producers.
Speaker 3: And we're also interested in the Mediterranean, where there are
Speaker 3: some areas that remain under explored. So we're exposed to
Speaker 3: a number of interesting basins around the world, and I
Speaker 3: think over the next several years you'll see increased exploration
Speaker 3: activity in all of those. And when it.
Speaker 2: Comes to new countries entry into new countries, you think
Speaker 2: about Iraq, you think about Libya. Does did Trump administration
Speaker 2: play any role or in helping to guide along those negotiations.
Speaker 3: I would say there's a role in guiding the negotiations,
Speaker 3: but there's certainly been a role in opening the door.
Speaker 3: I think we see countries around the world have a
Speaker 3: rendered interest in doing business with the US. That's both
Speaker 3: bringing investment dollars to the US and also opening up
Speaker 3: their countries to investors from the US. And I have
Speaker 3: any number of examples where we have operations around the
Speaker 3: world and we've seen new opportunities that have developed for
Speaker 3: our industry and others to invest in both directions. And
Speaker 3: so I think the Trump administration has played a critical
Speaker 3: role in opening doors and creating an environment where people
Speaker 3: are looking to do these kinds of deals.
Speaker 1: Based on what you can see, how far out you
Speaker 1: can see, our economic condition is going to be supportive
Speaker 1: not only to what you were just talking about there,
Speaker 1: but also some of the projections that you gave investors
Speaker 1: today with reguards to free cash flow, etc.
Speaker 3: Absolutely, demand for energy will only grow into the future.
Speaker 3: In fact, the International Energy Agency today updated their scenariosoting
Speaker 3: laying out a scenario based on current policies that shows
Speaker 3: demand for oil and gas growing to a twenty to
Speaker 3: fifty very different than what some of their prior scenarios
Speaker 3: have indicated. We've long held a view that that is
Speaker 3: more likely than some of these other scenarios. So the
Speaker 3: underlying demand is very strong. Our portfolio was resilient even
Speaker 3: at a lower oil price. We can generate strong free
Speaker 3: cash flow. We've increased our dividend thirty eight years in
Speaker 3: a row. We've repurchased shares twenty two or eighteen of
Speaker 3: the last twenty two years, so we've got a very
Speaker 3: strong track record of distributing free cash to shareholders, and
Speaker 3: at any price, we're well positioned to do that well.
Speaker 1: Not at any price. I mean, I mean we're very reasonables.
Speaker 1: I mean we're at sixty bucks more or less for
Speaker 1: Brent and WTI is the idea that that for some
Speaker 1: reason came down into the fifties or even below. Is
Speaker 1: that still doable?
Speaker 2: Oh?
Speaker 3: Yeah, absolutely. Our dividend. We increased our dividend during COVID
Speaker 3: when prices were in the teams and went negative for
Speaker 3: a while. And so we've got to prepare for the
Speaker 3: volatility of commodity business. That's the business that we're in,
Speaker 3: and we've built a portfolio that will withstand the cycles
Speaker 3: of this business well.
Speaker 2: With that in mind, I mean you talk about demand,
Speaker 2: it looks pretty good there, but then you think about
Speaker 2: the supply side of the equation. I know that you
Speaker 2: said earlier today that LNG spot prices in particular are
Speaker 2: going to be pressured due to high supply. How does
Speaker 2: that sort of dynamic overall look going into twenty twenty six,
Speaker 2: Does it ever come more into balance?
Speaker 3: Well, I think oil prices in twenty twenty six are
Speaker 3: likely to feel more pressure than LNG prices. There's a
Speaker 3: lot of oil supply that's coming back from the OPEC
Speaker 3: plus countries that had been holding supply back, and so
Speaker 3: that has brought crude prices lower than they had been
Speaker 3: for the prior period of time. LNG is a little
Speaker 3: bit of a longer dated story where there are a
Speaker 3: lot of new projects underway in the Middle East and
Speaker 3: in the United States that will add supply in large
Speaker 3: chunks over the second half of this decade, and demand
Speaker 3: tends to grow in a linear fashion and you get
Speaker 3: a step change of new supply, and so there's a
Speaker 3: period of time when it would appear we're going to
Speaker 3: see more supply coming into the market than demand we'll
Speaker 3: be able to absorb. That probably results in lower spot prices.
Speaker 3: That's the commodity business that we're in.
Speaker 1: Are there are there any sort of technological improvements that
Speaker 1: you see that actually makes the supply side of it
Speaker 1: a little bit more efficient.
Speaker 3: Well, one of the things we talk a lot about
Speaker 3: today was not the power demand of AI, but what
Speaker 3: we can do with AI to improve our business, to
Speaker 3: make our business safer, to reduce emissions, to improve asset productivity,
Speaker 3: to improve efficiency, to improve our ability to explore for
Speaker 3: and find resources. And I think the story of technology
Speaker 3: in our industry is it only goes in one direction.
Speaker 3: It helps us do things at lower cost at higher efficiency.
Speaker 3: And I think that story will be rewritten again with
Speaker 3: AI leading the next leg of that journey.
Speaker 1: With regards to leading Chevron. And you've done a great
Speaker 1: job in investors and re rewarding you your plans right
Speaker 1: now to stick around.
Speaker 3: I'm happy. I've got a full plate and my plans
Speaker 3: are to stick around as long as the board will happen.
Speaker 1: Yes,