Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: We're beginning SAUNT with a look at the energy sector,
Speaker 2: President Donald Trump pledging to expand production and lower prices,
Speaker 2: with the thread of tariffs hanging overhead for the next
Speaker 2: thirty minutes. Some places said it. Joining us now is
Speaker 2: the chefron CEO, Mike Worth. Mike, good morning, It's good
Speaker 2: to see you. I promised the first question earlier on
Speaker 2: this morning. I mentioned it on air. I wanted to
Speaker 2: know whether you've watched Landman on Paramount. Have you seen
Speaker 2: the program?
Speaker 3: I have?
Speaker 2: Okay, how accurate is it? You have to deal with
Speaker 2: cartowns on a daily basis.
Speaker 3: It is. It is wonderful entertainment.
Speaker 4: Billy Bob Thornton is an amazing actor, and it's drama, right,
Speaker 4: and you need a little bit of a storyline, and
Speaker 4: so you know, there are certain aspects of it that
Speaker 4: are accurate, in others that are probably just a touch exaggerated.
Speaker 2: It sets up this conversation quite well. I think for
Speaker 2: one specific reason, I think there's been a vibe shift
Speaker 2: in this country captured by the election in only November,
Speaker 2: and also based and the content that people are consuming
Speaker 2: right now, including Landmark and in Landman, you see a
Speaker 2: much more pragmatic approach to things like fossil fuels, oil
Speaker 2: and energy and the kind of work that your company does.
Speaker 2: Do you think we are seeing that more pragmatic approach
Speaker 2: the energy story now?
Speaker 4: I think there's no question we're seeing that. I mean, you,
Speaker 4: you know, take a look at this administration that has
Speaker 4: come in and rather than criticizing and almost in some
Speaker 4: ways ostracizing oil and gas, it's an It's an administration
Speaker 4: that has talked about American energy abundance and using that
Speaker 4: to the benefit of the American economy, the competitiveness of
Speaker 4: American business and and but but not just oil and gas.
Speaker 4: It's you know, the grid is a big thing for
Speaker 4: the administration, and power generation. And so I think we
Speaker 4: we're seeing a more balanced conversation. Something I've been calling
Speaker 4: for for years is uh in energy, there are three
Speaker 4: things that manage on affordability because that underpins economic prosperity,
Speaker 4: reliable supplying because that relates to security in national security,
Speaker 4: and then environmental impact. And we have to balance those
Speaker 4: three things as we talk about energy. The conversation has
Speaker 4: become very unbalanced and focused on one of the three
Speaker 4: and not the other two. And I think we're seeing
Speaker 4: a move back towards a more balanced and you use
Speaker 4: the word pragmatic, I think that's a very good word
Speaker 4: for the shift that we are seeing.
Speaker 1: We definitely are hearing the shift in the conversation. We
Speaker 1: heard that at Davos, even though you weren't there, we
Speaker 1: missed you. I am curious about how much that translates
Speaker 1: into actual changes that you're making on the ground, with
Speaker 1: how much you're investing, how much you're planning to expand
Speaker 1: your footprint in the United States and elsewhere.
Speaker 4: Yeah, we grew production last year seven percent globally, almost
Speaker 4: twenty percent here in the US, the largest production we've
Speaker 4: ever had in our history, largest cash distribution to our shareholders.
Speaker 3: So we are growing.
Speaker 4: We're also doing it in a more capital efficient way.
Speaker 4: So we've been focused on getting more bang for dollar
Speaker 4: of capital.
Speaker 3: You guys are talking a lot about capital.
Speaker 4: This morning, and in a capital intensive industry, we have
Speaker 4: to always look for ways to be as capital efficient
Speaker 4: as we can be, in as disciplined as we can be,
Speaker 4: and so we're able to bring new energy supplies to
Speaker 4: the market at a lower capital investment rate than ever before.
Speaker 4: We'll go again this year in the United States another
Speaker 4: ten percent or so in the Permian. So demand for
Speaker 4: energy is at an all time high and it's only
Speaker 4: going up.
Speaker 1: Last year, you had a record production, even under an
Speaker 1: administration that had a very different tone toward the oil
Speaker 1: and gas administration, the oil and grass industry. I just
Speaker 1: wonder how the vibe shift will change what your outlook
Speaker 1: is at a time when the rhetoric has shifted to
Speaker 1: the positive. But some of the proposals like tariffs might
Speaker 1: be headwinds in certain places.
Speaker 4: Yeah, so I think your point's a good one, Lisa.
Speaker 4: The rhetoric kind of sets the mood music. But you
Speaker 4: actually have to see policy right, and some of that's
Speaker 4: done through executive order these days. A lot of it
Speaker 4: would be best done through legislation. And we would like
Speaker 4: to work with both sides of the aisle to implement durable, balanced,
Speaker 4: and pragmatic energy policy, things like permitting reform, which you've
Speaker 4: gotten a lot of conversation, but we really haven't seen
Speaker 4: action yet on that. And it's difficult to build anything
Speaker 4: in this country, not just pipelines and infrastructure for our industry,
Speaker 4: but new power generation and grid modernization and other types
Speaker 4: of infrastructure. So we hope and are certainly willing to
Speaker 4: work with parties from across the spectrum to try to
Speaker 4: turn some of this vibe shift or more balanced conversation
Speaker 4: into what we think is good, durable policy.
Speaker 2: Can you talk to us more about the permitting These
Speaker 2: are things we hear about all the time. You're running
Speaker 2: a business. Could you help us understand how much that
Speaker 2: has held back your business?
Speaker 3: Oh, it slows things down. It's very difficult.
Speaker 4: I mean, you know, the Keystone Pipeline is a good
Speaker 4: example that was well documented where a multi billion dollar
Speaker 4: investment that would have been good for Canada, would have
Speaker 4: been good for the United States, ultimately didn't happen because
Speaker 4: the permiting process can be hijacked by interests that are
Speaker 4: opposed to seeing investment in our economy. And so, look,
Speaker 4: everybody wants to see good protection of the environment and
Speaker 4: engagement of communities are impacted by projects. But we need
Speaker 4: lead agencies that can take responsibility for these processes. We
Speaker 4: need timelines that are reasonable timelines to do the work,
Speaker 4: and then we need reasonable boundaries around the way these
Speaker 4: things can be litigated in the quirks and that needs
Speaker 4: to you know, that needs to be done to enable
Speaker 4: more investment in this country.
Speaker 2: This president clearly wants to change that. Users phrases like drill, baby, drill.
Speaker 2: We're certainly drilling, not for thirteen million barwers of all
Speaker 2: the day in this country, which is phenomenal. I often
Speaker 2: sit here Lis it does too, and we'll say things
Speaker 2: like and we'll hear it from Amara as well once
Speaker 2: she's here. How realistic is it to get that number
Speaker 2: much higher than the thirteen million barwers we're out right now,
Speaker 2: you'd know it better than we do. How realistic is it?
Speaker 3: Well?
Speaker 4: I think production in the US is going to grow
Speaker 4: again this year. We certainly see in our business. I said,
Speaker 4: our permaning production will be up ten percent. In the
Speaker 4: deep water Gulf of America, We're going to go from
Speaker 4: two hundred thousand barrels a day to three hundred thousand
Speaker 4: barrels a day by the end of twenty twenty six.
Speaker 4: So there is production growth coming, but it's really driven
Speaker 4: by economics, a long term view on supply demand, technology,
Speaker 4: and policy.
Speaker 2: Just to jump in that last point, a long term
Speaker 2: view on policy. How difficult is it to make these
Speaker 2: investment decisions we talk about this five shift now could
Speaker 2: change again.
Speaker 4: It's very difficult, John, and so one of the things
Speaker 4: our company was criticized for a few years ago is
Speaker 4: we weren't jumping into some of the renewables as fast
Speaker 4: as others because the policy was unclear, and so we
Speaker 4: were doing basic research. We were investing in pilot plants.
Speaker 4: But multi billion dollar investments that are very dependent upon
Speaker 4: policy that could change quickly are something you have to
Speaker 4: think about when you're looking to deliver strong returns to
Speaker 4: your shareholders. And so we would like to see durable,
Speaker 4: long term balance policy because that does make the investment
Speaker 4: decision a little bit easier for companies to make.
Speaker 1: Test case for this is liquefied natural gas. US is
Speaker 1: a massive producer of it. You're one of the biggest
Speaker 1: producers of it.
Speaker 3: There was a ban on.
Speaker 1: Exporting to Europe at a time when Europe is really
Speaker 1: dependent on the US. That has been lifted. Now there's
Speaker 1: the potential of tariffs being placed on some of those exports.
Speaker 1: How much can you start to lean into exports versus
Speaker 1: not due to some of this confusion.
Speaker 4: Yeah, you know, the tariff environment is obviously evolving here
Speaker 4: on a daily basis. Energy is a globally traded commodity,
Speaker 4: and LNG oil petroleum products for the most part. Now
Speaker 4: Canadian oil is a little bit different because it's really
Speaker 4: dependent upon pipelines, but those products can go to different markets.
Speaker 4: We've seen sanctions reorient trade flows. Tariffs are on other
Speaker 4: instruments that can change the economics for producers and for consumers.
Speaker 4: And what you'll typically see, whether it's LNG or oil
Speaker 4: is flows will move to different markets as producers seek
Speaker 4: the highest price for their production and as consumers seek
Speaker 4: the lowest cost for what they're looking to buy. And
Speaker 4: as long as supply remains in the market, you have
Speaker 4: markets well supplied, you generally start to see costs go
Speaker 4: up a little bit because there's increased transportation and some
Speaker 4: kind of friction in the system, But export decisions aren't
Speaker 4: heavily affected by those prospects.
Speaker 2: I would say, speaking of sanctions, just briefly, you have
Speaker 2: a waiver to operate in Venezuela. Is that the case
Speaker 2: we do, Sender Rubio. Now, Secretary Rubio said maybe the
Speaker 2: US should reconsider that waiver. You in contact with them
Speaker 2: on that issue.
Speaker 4: We're in contact with the current administration. We've been in
Speaker 4: contact with the first Trump administration and the Biden administration
Speaker 4: because the sanctions on Venezuela have been in place for
Speaker 4: years and we work closely with the government, understand their objectives,
Speaker 4: to understand the limitations that are being placed through these
Speaker 4: licenses issued by OPHAK, and to stay in full compliance
Speaker 4: with the laws.
Speaker 2: Are you anticipate in any changes in the hill or
Speaker 2: too early to say either.
Speaker 4: Recently was a trip down to Venezuela by a special
Speaker 4: envoy who brought back some Americans from Venezuela and arranged
Speaker 4: terms for I think Venezuelan and immigrants to go back
Speaker 4: to Venezuela that are that are here illegally, and that
Speaker 4: seems to be you know, the latest the general license
Speaker 4: that we operate was unchanged. It has been changed over
Speaker 4: the years in different ways, and that still could happen.
Speaker 4: We try to inform the government of the potential ramifications
Speaker 4: of a change like that, so they're well informed before
Speaker 4: they make changes of what would the ramifications be. Well,
Speaker 4: under the initial Trump sanctions, Venezuelan oil was not allowed
Speaker 4: to come to the US. The Biden administration changed that.
Speaker 4: Gulf Coast refiners actually run a lot of the heavy
Speaker 4: grades that come from Venezuela. If you see sanctions on
Speaker 4: Canadian or tariffs on Canadian or Mexicano oil, that may
Speaker 4: send some of that oil to other countries, and so
Speaker 4: the Venezuelan.
Speaker 3: Oil could be even more important.
Speaker 4: So it's things like that, it's hot, how would this
Speaker 4: work through the system that we really try to help
Speaker 4: the policy makers.
Speaker 2: Understand data center growth. There was a conversation only two
Speaker 2: mondays ago about whether we've been overestimating the extent of
Speaker 2: data center growth we'd see and alongside that the amount
Speaker 2: of energy we might need. Did the Deep Seek story
Speaker 2: if the last week or so change your routdlook at So.
Speaker 3: It really didn't.
Speaker 4: If you look at the incredible capital spending that you've
Speaker 4: been talking about and the huge demand for increased compute
Speaker 4: from all the big hyperscalers, I think they all assume
Speaker 4: you're going to find more efficiency in the development of
Speaker 4: these models, the training and inference techniques that are used,
Speaker 4: and at the same time, we're going to need a
Speaker 4: lot more computer capacity. So the two big constraints are
Speaker 4: GPUs and interestingly electricity. We haven't seen real growth and
Speaker 4: demand for electricity for the last couple of decades in
Speaker 4: this country. We have taken a lot of reliable baseload
Speaker 4: power off the grid. Coal plants have been shut down.
Speaker 4: We've had a lot of wind and solar, which are
Speaker 4: great and very low emissions, but they're also intermittent, and
Speaker 4: so the grid hasn't been modernized. The power generating capacity
Speaker 4: hasn't changed much, and we're poised to see demand from
Speaker 4: data centers, from the electrification of the vehicle fleet and
Speaker 4: other parts of our economy. And so there's a range
Speaker 4: of estimates, but I think nobody would tell you the
Speaker 4: demand for power isn't going to go up and probably
Speaker 4: pretty significantly over the next few years.
Speaker 1: That feels like a year ago by the way deep
Speaker 1: seek what I mean, honestly, it's just sort of amazing
Speaker 1: how quickly this goes. What is how do you sort
Speaker 1: of gut check people's understanding of the energy use that
Speaker 1: is required for this, and how are you planning to
Speaker 1: build out your footprint, what type of energy you want
Speaker 1: to invest in, and what your budget is like for that.
Speaker 4: Yeah, So we talked to the people that are doing
Speaker 4: the work right, and we're a customer of all the
Speaker 4: big tech companies, right, they help us in many different
Speaker 4: parts of our business. We've got relations with them, so
Speaker 4: we're looking to use these tools to improve our business performance.
Speaker 4: And over the last couple of years the conversation has
Speaker 4: flipped and they've said, how can you help us be
Speaker 4: sure we've got enough power at scale in order to
Speaker 4: deliver the products that you're looking for. And one of
Speaker 4: the things that's very clear is the hyperscalers want to
Speaker 4: move fast. There's a bit of a land grab and
Speaker 4: you see it in the way the capital budgets are
Speaker 4: going up, and so things that are at a scale
Speaker 4: of one hundred megawats two hundred mega wants are different
Speaker 4: than gigawants, which is really where their ambition is. What
Speaker 4: we've done recently is announced a venture with GeV Veranova
Speaker 4: and a company called Engine Number one to collaborate and
Speaker 4: bring four giga wants of power to market beginning in
Speaker 4: late twenty twenty seven, so relatively soon. Seven of g
Speaker 4: e Vernova's biggest turbines that we've got delivery slots on,
Speaker 4: and the intent is to cite those in places that
Speaker 4: can meet the need of these hyperscalers reliable gas supply
Speaker 4: so that they can have long term confidence in the
Speaker 4: energy off the grid, so they're not going through the
Speaker 4: grid and dealing with interconnect cues and the reliability issues,
Speaker 4: and ultimately also a desire to try to integrate lower
Speaker 4: carbon energy into this, whether it's through carbon capture, hydrogen, geothermal,
Speaker 4: and other technologies.
Speaker 3: Something we know a lot about.
Speaker 1: You said turbines, and those are natural gas turbines.
Speaker 3: That's right.
Speaker 1: How much do you think that natural gas could potentially
Speaker 1: overtake diesel and some of the gasoline that people use
Speaker 1: to fuel a lot of what currently gets generated.
Speaker 4: In electricity, You're going to see. We've seen historically good
Speaker 4: demand for gas, and you're going to see more of it.
Speaker 4: You're going to see demand gas for exports and lergy.
Speaker 4: As we were discussing earlier.
Speaker 3: In transportation, its use will be more limited.
Speaker 4: It has certain advantages, but certain disadvantages when it comes
Speaker 4: to vehicle transportation. And so I think you're going to
Speaker 4: see conventional gasoline and diesel, along with electric vehicles, really
Speaker 4: power the light duty vehicle fleet and the heavy duty
Speaker 4: vehicle fleet for the foreseeable future. I think you're going
Speaker 4: to see gas more in power generation in other parts
Speaker 4: of the economy.
Speaker 1: Before we let you go I know that the Hest
Speaker 1: thing has been messy. It's going to potentially close later
Speaker 1: this year. I know that there's a lot that it
Speaker 1: needs to get worked through. Once that's gone through, how
Speaker 1: in the market are you to potentially consolidate? So a
Speaker 1: lot of people are saying this is a market in
Speaker 1: the United States, it still has a lot of consolidating
Speaker 1: to be done.
Speaker 4: Well, we're first and foremost focused on the Hest transaction
Speaker 4: and that will conclude later this year. We're always looking.
Speaker 4: We're a resource business. You're always looking to acquire a
Speaker 4: good quality resource that makes your portfolio stronger. We've got
Speaker 4: a great position today, so we don't need to do anything.
Speaker 4: We would only do something if it really fit for
Speaker 4: our company, if the price we're right in it would
Speaker 4: create value for shareholders.
Speaker 1: What type of industry though, you've got natural gas, you've
Speaker 1: got oil, you have other types of forms. What would
Speaker 1: be the area you want to expand in.
Speaker 4: Well, there's a couple of barriers that are always of
Speaker 4: interest to us. One is oil and gas resources because
Speaker 4: every day, as you produce it, you have less in
Speaker 4: your portfolio.
Speaker 3: And so you need to replace that.
Speaker 4: We do it through exploration by finding new fields we
Speaker 4: do it through technology to improve recoveries, and we do
Speaker 4: it through acquisitions. The other sector that's got really robust
Speaker 4: demand growth is petrochemicals, and as we have a larger
Speaker 4: middle class in this world, as we move towards more
Speaker 4: fuel efficient modes of transportation and lighter weight airplanes and vehicles,
Speaker 4: much of that is in the materialty going to that
Speaker 4: or derived from thermoplastic petrochemical products to light they have
Speaker 4: light weight, they have good durability and other rigidity and
Speaker 4: mechanical properties, so demand for petrochemicals will be strong that
Speaker 4: it's another sector that we'd be interested in.
Speaker 2: This was perfect. Appreciate your time, mine worth everybody from
Speaker 2: Chevron