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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: So Chevron beat expectations for a second quarter becoming increasing

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Speaker 2: global production by twelve percent versus a year ago. It's

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Speaker 2: upstream side of the business was super solid. Now going

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Speaker 2: forward though, it's all about it acquisition of Hess and

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Speaker 2: that's mired in arbitration with Exxon. So we spoke to

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Speaker 2: Mike Worth, chairman and CEO of Chevron, and asked him

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Speaker 2: about We started off by talking about the short term

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Speaker 2: Permian production outlook.

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Speaker 3: It was a strong first quarter overall, certainly operationally, financially

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Speaker 3: and from a shareholder return standpoint. I think operational highlights

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Speaker 3: maybe were the key, and first quarter production was up significantly.

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Speaker 3: It was our highest first quarter ever and in the

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Speaker 3: US we were up thirty five percent. Part of that

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Speaker 3: the acquisition of PDC, and then another part, as you say,

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Speaker 3: twelve percent growth year on year in the Permian basin,

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Speaker 3: where we just continue to see productivity and efficiency gains

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Speaker 3: and we're getting more production out of the same inputs,

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Speaker 3: wells completion, you know, rigs, completion crews, et cetera. So

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Speaker 3: we expect to be relatively flatish through the first half

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Speaker 3: of this year. Growth in the second half to exit

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Speaker 3: over nine hundred thousand barrels a day on our way

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Speaker 3: to a million barrels a day in twenty twenty.

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Speaker 2: Five, So that's really back half weighted. Why is it

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Speaker 2: back half weighted? What's going to sort of change?

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Speaker 3: Well, we're bringing another completion crew on in the middle

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Speaker 3: of the year. So right now we're build building up

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Speaker 3: an inventory of drilled wells that are not yet completed,

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Speaker 3: and then when that rig comes in, we'll start to

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Speaker 3: put those wells on production. So it has to do

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Speaker 3: with optimal capital efficiency as we bring equipment in, and

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Speaker 3: nothing unusual. It's really part of the normal program there.

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Speaker 3: It's not a straight line every quarter. Mike.

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Speaker 1: How is demand looking overall across the sector?

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Speaker 3: Yeah, we continue to see pretty good demand remained certainly

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Speaker 3: the economy here in the US, although the first quarter

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Speaker 3: data would suggest it's slowed, We've not really seeing any

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Speaker 3: signs of that. We're seeing good, strong demand growth in

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Speaker 3: the US, We're seeing strong demand growth in Asia. Europe

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Speaker 3: perhaps a little less so, but overall, you know, last

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Speaker 3: year demand was up over two million barrels a day.

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Speaker 3: We expected to be up maybe a million and a

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Speaker 3: half barrels a day this year, and so you know,

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Speaker 3: the demand side of things is very healthy.

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Speaker 1: When we talk about sort of what drove earnings, and

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Speaker 1: not only in this most recent quarter, but in the

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Speaker 1: quarters past, there was a lot of talk about capital efficiencies.

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Speaker 1: There are a lot of people now looking at some

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Speaker 1: of the production outlook, looking at potential acquisitions and some

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Speaker 1: of the other moves that you were making, as well

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Speaker 1: as some of your competitors are making, and really wondering

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Speaker 1: whether that sort of an era of capital efficiency is over.

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Speaker 3: Well. I can only speak for our company and I

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Speaker 3: tell our people capital discipline always matters. It matters during

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Speaker 3: good times, it matters during challenging times. And we're in

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Speaker 3: a long cycle business. So efficient capital investment is fundamental

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Speaker 3: because our investments pay out over a very long period

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Speaker 3: of time, and we don't We try not to swing

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Speaker 3: our capital activity up and down with the oil price

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Speaker 3: of the day, but stay very focused on executing investments

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Speaker 3: that will deliver value over the long term. So our

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Speaker 3: budget is in a very steady range. We don't intend

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Speaker 3: to raise our spending because of market conditions. It's part

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Speaker 3: of a much longer term plan. So capital discipline is

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Speaker 3: as important today as it's ever been.

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Speaker 2: It's interesting, Mike. I feel like the conversation at one

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Speaker 2: point was m and A is capital discipline because it's

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Speaker 2: so expensive to explore and to do new fields. But

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Speaker 2: then at the same time you guys announced potential ambitions

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Speaker 2: there in Nambia, an operating stake there in one of

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Speaker 2: the areas licensed eighty two. What's your outlook for an Ambia?

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Speaker 2: What do you think that's going to look like? How

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Speaker 2: invested you want to be, how aggressive do you want

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Speaker 2: to be there?

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Speaker 3: Well, certainly a basin that has seen some early exploration

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Speaker 3: and success by others. We've got one large block off

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Speaker 3: Namibia that we expect to put an exploration well down

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Speaker 3: in late this year or early next year. We've just

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Speaker 3: acquired a large interest in operatorship in a second block

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Speaker 3: there in a basin that has some of the signs

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Speaker 3: of things like we saw in Guyana a decade ago.

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Speaker 3: So there's a lot of work to be done and

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Speaker 3: there's no guarantees in exploration, but we're always looking to

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Speaker 3: bring resource into our portfolio through exploration, through technology and

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Speaker 3: then also through m and A. In any given period

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Speaker 3: of time, the balance of those may shift around, but fundamentally,

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Speaker 3: we need to be good at all three of those

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Speaker 3: over the long haul in order to continue to create value.

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Speaker 2: Galpa now it's a big discovery in MBA last week

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Speaker 2: and is rumored to potentially be selling some of its position.

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Speaker 2: Would you be interested there?

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Speaker 3: Well, we certainly are always interested in acquiring a position

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Speaker 3: in attractive blocks. I can't comment any particular opportunity. You know,

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Speaker 3: we keep those discussions confidential. But Namibia and the Orange

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Speaker 3: bas based and off shore there is an area that

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Speaker 3: we're quite interested in and very active in.

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Speaker 1: I am curious, Mike about the other big deal that

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Speaker 1: everybody wants to know about, and that's the deal with Hess,

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Speaker 1: the expansion into Guyana and those oil fields there. Where

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Speaker 1: do we stand right now with regards to what you're

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Speaker 1: doing internally to close that deal? And where do we

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Speaker 1: stand in the arbitration with Excellon?

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Speaker 3: Yeah, well, I mean so maybe four points. Number One,

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Speaker 3: integration planning has been ongoing since we announced the transaction

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Speaker 3: and that's gone very very well. Number Two, the proxy

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Speaker 3: will be mailed to HESS shareholders before the end of

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Speaker 3: April and the shareholder vote will occur before the end

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Speaker 3: of May. Number Three, we get a second request from

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Speaker 3: the Federal Trade Commission, and we expect to certify substantial

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Speaker 3: compliance with that in just the next few weeks and

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Speaker 3: be through the antitrust review process. And then that leaves

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Speaker 3: the fourth workstream here, which is to work through this

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Speaker 3: arbitration process relative to the terms of the joint operating agreement.

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Speaker 3: That is likely to take a little bit longer, and

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Speaker 3: we'll have to see how the exact scheduling plays out

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Speaker 3: on that. We don't have those dates pinned down just yet.

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Speaker 1: Do you think, though, that you can get this deal

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Speaker 1: done this year in twenty twenty four.

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Speaker 3: Well, and certainly our expectation. We're working closely with HES

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Speaker 3: in order to do that. The arbitration process has been initiated,

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Speaker 3: and Exonmobile indicated in an investor conference last month that

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Speaker 3: they think five to six months is what this could take.

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Speaker 3: We certainly believe that's a sufficient time frame within which

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Speaker 3: to clarify the specific contract provisions here. And I think

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Speaker 3: hess Is actually in their filings indicated that they've requested

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Speaker 3: a hearing in the third quarter and a decision in

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Speaker 3: the fourth quarter. So that's the timing that we're working

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Speaker 3: toward in a process that is still unfolding.

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Speaker 2: Mike, Are you guys having parallel negotiations aside from arbitration

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Speaker 2: or no.

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Speaker 3: We're always open to conversations. In fact, before the arbitration

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Speaker 3: process was initiated, we had been in conversations and hess

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Speaker 3: had been in conversations with the other members of this

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Speaker 3: joint operating agreement and in an effort to understand their

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Speaker 3: concerns and to address those concerns and seek resolution. The

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Speaker 3: arbitration really ended those discussions at the time, and that's

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Speaker 3: the path that we're on today.

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Speaker 2: Okay, so not talking quote unquote yet dot dot yet Mike. Internally,

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Speaker 2: are there Plan B conversations? Most experts think that you

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Speaker 2: guys are going to win this, but if you don't

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Speaker 2: get Guyana in some capacity, what is a plan be.

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Speaker 3: We had laid out a very strong plan before we

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Speaker 3: announced the hest transaction, increasing our free cash flow at

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Speaker 3: a ten percent compound annual growth rate over the next

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Speaker 3: several years. We've got more resource in our portfolio today

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Speaker 3: by a substantial amount that we had just a decade ago.

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Speaker 3: We've outlined growth plans for the next ten years in

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Speaker 3: our investor conferences, and so we have a very strong

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Speaker 3: foundation going forward. We like the hest transaction. We think

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Speaker 3: it's good for the shareholders of both companies. We think

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Speaker 3: it makes our company even stronger. But it was done

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Speaker 3: because it would make us a better company, and it

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Speaker 3: would create a premier company to compete, to reward shareholders

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Speaker 3: and be positioned for the energy transition over the long haul.

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Speaker 3: But we were in very good shape without that, and

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Speaker 3: so this is you know, we've got a good, strong

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Speaker 3: foundation in either scenario. But we certainly are confident that

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Speaker 3: we do have the right interpretation on this contract and

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Speaker 3: expect the transaction to proceed.

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Speaker 2: All right, Mike, Before I let you go, You know,

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Speaker 2: those questions come in. It's an oil price question. Do

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Speaker 2: you feel like an oil price right now accurately reflects

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Speaker 2: supply and demand versus geopolitics?

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Speaker 3: You know, it's always a difficult one to answer, Alex.

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Speaker 3: It does reflect supply demand and expectations about geopolitical risk.

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Speaker 3: We see the price tend to bounce around a little

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Speaker 3: bit based on what's happening in different parts of the world,

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Speaker 3: the Middle East in particular. But we've had a market

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Speaker 3: that's relatively well balanced. We've got inventories that are a

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Speaker 3: little bit on the low side. And so it's a

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Speaker 3: market that's priced accordingly, and the risk for potential supply

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Speaker 3: interruption exist not only in some of these areas where

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Speaker 3: there's geopolitical risk. You know, we're headed towards summertime in

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Speaker 3: the fall, which in the US means hurricane season, and

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Speaker 3: so there are different ways that supply could be threatened

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Speaker 3: against the backdrop of strong demand that we discussed earlier,

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Speaker 3: and so prices are probably a little higher than we

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Speaker 3: think the long term price is likely to be, and

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Speaker 3: I think it reflects the fundamentals and then these additional

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Speaker 3: risks that exist.

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Speaker 2: That was a conversation with Mike. We're at the CEO

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Speaker 2: and chairman over at Chevron. If you take a look

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Speaker 2: at the equity price over the last year, Chevron is

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Speaker 2: underperformed Exonis in the last couple months, but it has

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Speaker 2: given a run for its money, like it has made

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Speaker 2: up a lot of what it has lost.