Speaker 1: Chevron missing profit estimates despite record production in the permium basin.
Speaker 1: The company also announcing plans to move its headquarters from
Speaker 1: California to Texas. Now, the disappointing quarter adding pressure to
Speaker 1: the company's fifty three billion dollar effort to acquire has
Speaker 1: Ploomberg's alex Steel caught up with Chevron CEO Mike Worth.
Speaker 2: We had some high maintenance. We had a couple of
Speaker 2: events at L and G facilities that required maintenance during
Speaker 2: the quarter, which brought liftings down, and so it's a
Speaker 2: little bit hard I think for analysts to anticipate that.
Speaker 2: We've tried to communicate those events, but we had that
Speaker 2: refining margins came off hard in some of our key markets,
Speaker 2: and then there were some one time items well write
Speaker 2: offs and tax items that are very difficult to forecast.
Speaker 2: So these are non recurring items that made the quarter
Speaker 2: a little bit light versus expectations. But the underlying execution
Speaker 2: is good and as I said, the growth remained strong.
Speaker 3: So now you do have to wait till May twenty
Speaker 3: twenty five for the arbitration to work out. When it
Speaker 3: comes to that deal, why is this taking so long
Speaker 3: if it's a simple issue or it's an issue of scheduling.
Speaker 3: What's the problem.
Speaker 2: International arbitration often is a lengthy process. Selecting the arbitrators,
Speaker 2: getting schedules aligned between all the parties and the arbitrators
Speaker 2: is more complex sometimes than one might expect. We do
Speaker 2: continue to see this as a straightforward contract interpretation question,
Speaker 2: and we continue to remain confident that the arbitration will
Speaker 2: affirms and Chevron's interpretation of it. But you're correct, it
Speaker 2: is taking more time than we had originally anticipated in
Speaker 2: and that's unfortunately not unusual when you get into international arbitration.
Speaker 3: Moving to some of the intricacies of the quarter, you
Speaker 3: mentioned it that record production for Chevron and the Permian,
Speaker 3: which kind of leads me to you, guys moving your
Speaker 3: headquarters to Texas is part of that needing to be
Speaker 3: closer to sort of the core business of operations right now.
Speaker 2: Well, it's really to be closer to the core, you know,
Speaker 2: epicenter of our industry. Houston is the energy capital of
Speaker 2: the world. We have key partners that are there, suppliers, vendors,
Speaker 2: the universities that we do a lot of research with
Speaker 2: and recruiting from are there, and so it's a natural
Speaker 2: place for companies in our industry to have their their
Speaker 2: home office and headquarters. And in fact, over the last
Speaker 2: many years, we've seen our Houston based employee population go
Speaker 2: up in our California based employee population come down. And
Speaker 2: this is really concluding a process that has been underway.
Speaker 2: It's it's you know, we know how to work around
Speaker 2: the world in kind of a virtual environment, but there's
Speaker 2: no substitute for being face to face with people in
Speaker 2: terms of collaboration, innovation, mentoring and development, external relations, in engagement,
Speaker 2: and Houston really is the place for our company to
Speaker 2: be for all of those reasons. We do have a
Speaker 2: big business footprint in Texas, which is now larger than
Speaker 2: our business footprint in California. For many many years, that
Speaker 2: was not the case. California was our home, it was
Speaker 2: our birthplace, and it was where our largest business footprint is.
Speaker 2: And so that's certainly a change that has occurred. But
Speaker 2: the primary motivator here is to get our people together
Speaker 2: to increase engagement and collaboration.
Speaker 3: So pro Texas versus anti California.
Speaker 2: I wouldn't necessarily put it that way. I would look,
Speaker 2: we've had some policy differences with California, and certainly California
Speaker 2: and Texas approach energy very differently, and so we speak
Speaker 2: up on that. We advocate for policies that keep prices low,
Speaker 2: that keeps supply reliable, that encourage an investment, and California's
Speaker 2: advanced policies that do the opposite. And so we've certainly
Speaker 2: expressed our views that we don't think that's good for
Speaker 2: the California economy. But this isn't a move about politics.
Speaker 2: It's a move about what's good for our company to
Speaker 2: compete and perform.
Speaker 1: And I'm pleased to say that alex Steel joins US now.
Speaker 1: Great interview, of course, And I have to say I
Speaker 1: didn't know that Chevron was headquartered in California. It seems
Speaker 1: like Texas would be the natural home here.
Speaker 3: It does, But remember the Premium wasn't always the Permian.
Speaker 3: The Permium was just some rock that no one drilled.
Speaker 3: So now that that's become so important, whether through Exon
Speaker 3: and the Pioneer acquisition or through Noble and a PDC
Speaker 3: acquisition for Chevron, it does make sense from that aspect. Also,
Speaker 3: now the US is a huge exporter of energy, right,
Speaker 3: so it also kind of makes sense for you'd be
Speaker 3: headquartered in the Gulf Coast, which is where so much
Speaker 3: is also being exported. Plus they're starting a Golf of
Speaker 3: Mexico asset, so that's really big for them now as well.
Speaker 3: So from that perspective, it'll be a slow few years
Speaker 3: until this happens.
Speaker 1: But that's not necessarily politics that's driving them there.
Speaker 3: I mean, yes, no, I mean I don't think politics
Speaker 3: helps it either.
Speaker 4: At the end of the day, I want to talk
Speaker 4: a little bit about the pressure here that Chevron is
Speaker 4: under when it comes to HESS. This is a massive
Speaker 4: fifty three billion dollars deal, a lot of delays. How
Speaker 4: did they really respond to that uncertainty?
Speaker 3: I mean, the problem is it keeps getting pushed out,
Speaker 3: and that's really the problem, Like that it went into
Speaker 3: FTC review. Yeah, sure, the arbitration was definitely a surprise,
Speaker 3: but that it keeps getting pushed out and the lack
Speaker 3: of visibility is actually quite difficult. And the problem is
Speaker 3: it just highlights what Exxon has and which Chevron doesn't.
Speaker 3: And if you're an oil investor, can you really own
Speaker 3: both of those stocks in your portfolio? If you can, great,
Speaker 3: If you can't, do you go with the one that
Speaker 3: has Guyana or you go with the one that might
Speaker 3: not have Guyana until May of twenty twenty five, and
Speaker 3: that just kind of delays and pushes it out. Now,
Speaker 3: Mike Worth is going to say, but we have a
Speaker 3: really strong production profile in the Permian, we have really
Speaker 3: strong overseas assets, we have Gulf of Mexico, there are
Speaker 3: ten ten geese operation in Kazakhstan, huge cost overruns. But
Speaker 3: he's going to talk pretty positively about that production profile.
Speaker 3: But you know what, it's still not Guyana, and that's
Speaker 3: really where the growth profile is going to be coming from.
Speaker 1: Well, this gets to what you were saying in the
Speaker 1: commercial break, right, GINALI like, is this a paar trade
Speaker 1: that's developing? How are investors thinking about this?
Speaker 3: I mean, I don't want to say yes, but I
Speaker 3: don't want to say no to that. I mean, I
Speaker 3: don't know.
Speaker 1: If you're doing a very good economist, thank you.
Speaker 3: I don't know if it's easy to be like short Chevron,
Speaker 3: like buy Exon. I don't think it's that clear in
Speaker 3: any way whatsoever, because you know, Chevron isn't just maybe Guyana,
Speaker 3: like they do have a behemoth assets in the Permian.
Speaker 3: They have great stuff going on there as well. But
Speaker 3: that is a tough asset to then live with out
Speaker 3: they're going to say they can live without it, but so.
Speaker 4: Can you explain a little bit more behind the stock
Speaker 4: both today, because ultimately it wasn't just about Hess.
Speaker 3: It wasn't just about Hess, So it was about a
Speaker 3: couple of things, largely about us, but also they had
Speaker 3: a huge perd. They had a huge earnings miss and
Speaker 3: a large part of that is due to some international
Speaker 3: earnings revenue miss and you heard Mike Worth talking about
Speaker 3: that on the tape that some of it was like
Speaker 3: a one off. He doesn't necessarily expect that to continue.
Speaker 3: That's one off tax things like the stuff you wouldn't
Speaker 3: have had already on before. What we do know is
Speaker 3: a Tekzig in a Kazakhstan has had a lot of
Speaker 3: cost overruns over the years. It's supposed to be on track,
Speaker 3: but that's always going to be a question mark. You've
Speaker 3: also had a Chevron be hit really hard with the
Speaker 3: war in Israel and Gaza because they have a natural
Speaker 3: gas deposit over there as well, and the Gorgon Facility
Speaker 3: energy facility over in Australia has also had a lot
Speaker 3: of difficulties. So there are just production stuff that is happening,
Speaker 3: as you do when you're an oil company, you always
Speaker 3: have production stuff that you got to maintain and take
Speaker 3: care of.
Speaker 4: What about renewables, I know that this did come up
Speaker 4: in fits and starts, but I understand that they took
Speaker 4: a little bit of a different approach here in how
Speaker 4: they address the question around.
Speaker 3: Renewables, so particularly when it comes to Xon. Actually, so
Speaker 3: they actually address this on the call and saying the
Speaker 3: complexity of low carbon markets is particularly challenging, and they
Speaker 3: talk about how it involves new technology and new markets
Speaker 3: and not an existing customer base. That is very different
Speaker 3: than the European guys like shel MVP and the approach
Speaker 3: that they've taken. They invested heavily renewables, are now pulling
Speaker 3: back a little bit and sort of not moving away
Speaker 3: from oil and gas in the same way. Chevron is
Speaker 3: somewhere like in the middle. I mean, they have their
Speaker 3: own venture profile where they can put money into new
Speaker 3: cool stuff. They have a hydrogen project that's gonna they're
Speaker 3: working on. So I think that for both chef On
Speaker 3: an Exxon, what they're doing is they're trying to stick
Speaker 3: to their knitting, Like what can I do in an
Speaker 3: energy transition space, that already is stuff that I'm doing,
Speaker 3: like I'm drilling stuff out of rocks, I'm putting stuff
Speaker 3: in rocks, Like how can I keep doing that when
Speaker 3: it comes to the energy transition And that's sort of
Speaker 3: that approach versus like hey, let me go buy this
Speaker 3: wind farm.
Speaker 4: For example, Alex, we thank you so very much for
Speaker 4: your time, for your reporting, for your great interview as well.
Speaker 4: Let us, of course, Bloomberg's Alex Steele