1 00:00:02,520 --> 00:00:08,000 Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News Mike. 2 00:00:08,080 --> 00:00:11,280 Speaker 2: Obviously, everyone's going to be focused on the buy back 3 00:00:11,320 --> 00:00:14,320 Speaker 2: and capital shareholder return as well as the hess question marks. 4 00:00:14,720 --> 00:00:16,400 Speaker 2: But there were a lot of positives in the report, 5 00:00:16,480 --> 00:00:18,760 Speaker 2: particularly when it comes to the Gulf of America. Can 6 00:00:18,800 --> 00:00:21,280 Speaker 2: you walk me through some of them? 7 00:00:21,600 --> 00:00:21,920 Speaker 3: Sure? 8 00:00:21,960 --> 00:00:24,440 Speaker 1: Well, we had a very strong quarter, you know, our 9 00:00:24,480 --> 00:00:28,040 Speaker 1: earnings were up six percent versus the prior quarter, oil 10 00:00:28,080 --> 00:00:33,240 Speaker 1: prices were relatively flat, strong shareholder distributions seven billion dollars 11 00:00:33,240 --> 00:00:35,320 Speaker 1: in the quarter and over the last twelve months. 12 00:00:35,159 --> 00:00:36,560 Speaker 3: About fifteen dollars a share. 13 00:00:36,600 --> 00:00:39,239 Speaker 1: And we're on track for industry leading free cash low 14 00:00:39,280 --> 00:00:42,120 Speaker 1: growth by twenty twenty six, even at lower prices. And 15 00:00:42,159 --> 00:00:44,960 Speaker 1: a big part of that is the Gulf of America, 16 00:00:45,000 --> 00:00:48,200 Speaker 1: where we've started up three projects over just the last 17 00:00:48,240 --> 00:00:51,960 Speaker 1: eight months, the Anchor Project, the Whale Project, and now 18 00:00:52,000 --> 00:00:55,440 Speaker 1: bally Moore most recently. Our production there will go from 19 00:00:55,440 --> 00:00:57,480 Speaker 1: two hundred thousand barrels a day last year to three 20 00:00:57,600 --> 00:00:59,720 Speaker 1: hundred thousand barrels a day in. 21 00:00:59,680 --> 00:01:02,840 Speaker 3: Twenty twenty six. And the Ballymore project, which we just 22 00:01:02,840 --> 00:01:03,960 Speaker 3: started is very interesting. 23 00:01:04,000 --> 00:01:06,600 Speaker 1: It's got some of the most prolific wells we've ever 24 00:01:06,640 --> 00:01:09,440 Speaker 1: seen in the Gulf of America. They're expected to produce 25 00:01:09,440 --> 00:01:13,080 Speaker 1: twenty five thousand barrels a day each, so three wells 26 00:01:13,120 --> 00:01:15,560 Speaker 1: seventy five thousand barrels a day. Some of the highest 27 00:01:15,560 --> 00:01:18,679 Speaker 1: temperature production we've ever seen, three hundred and twenty five 28 00:01:18,720 --> 00:01:22,399 Speaker 1: degrees fahrenheit down in the reservoir. So a great example 29 00:01:22,480 --> 00:01:28,600 Speaker 1: of engineering technology and the abundance of American energy part. 30 00:01:28,360 --> 00:01:31,520 Speaker 2: Of that, though for especially deep water offshore, it's longer 31 00:01:31,600 --> 00:01:35,119 Speaker 2: lead time, so more capital investment. Do those decisions get 32 00:01:35,160 --> 00:01:37,840 Speaker 2: skewed when you have this kind of volatility. 33 00:01:37,280 --> 00:01:40,039 Speaker 3: And oil prices? Yell. 34 00:01:40,120 --> 00:01:43,440 Speaker 1: We look at long term views on supply and demand 35 00:01:43,600 --> 00:01:47,240 Speaker 1: to arrive at our long term oil price forecasts, and 36 00:01:47,280 --> 00:01:50,960 Speaker 1: we look at a range of prices. So a project 37 00:01:51,040 --> 00:01:53,640 Speaker 1: that would take several years to develop, like a deep 38 00:01:53,720 --> 00:01:56,680 Speaker 1: water Gulf of America project, and then would be online 39 00:01:56,720 --> 00:02:01,240 Speaker 1: for multiple decades, our decision making is really not informed 40 00:02:01,280 --> 00:02:04,760 Speaker 1: by the price of the day. It's informed by our 41 00:02:04,880 --> 00:02:08,120 Speaker 1: view prices out over the life of that project, which 42 00:02:08,120 --> 00:02:12,320 Speaker 1: can be multiple decades. And so the impact of the 43 00:02:12,360 --> 00:02:15,600 Speaker 1: near term price is really more around short term decisions 44 00:02:15,600 --> 00:02:19,600 Speaker 1: on cash management, the balance sheet, etc. But not long 45 00:02:19,720 --> 00:02:21,960 Speaker 1: term investment decisions, they're really made out a different set 46 00:02:22,000 --> 00:02:22,840 Speaker 1: of parameters. 47 00:02:23,440 --> 00:02:26,000 Speaker 2: Help me understand this one. RBC Capital Marc has had 48 00:02:26,000 --> 00:02:28,080 Speaker 2: a note doubt that talked about how oil prices need 49 00:02:28,760 --> 00:02:30,920 Speaker 2: ninety five dollars a barrel for you guys to break 50 00:02:30,960 --> 00:02:34,280 Speaker 2: even after capex, dividends and buybacks, and that's really high. 51 00:02:34,639 --> 00:02:36,520 Speaker 2: What would you say to that kind of number. 52 00:02:38,000 --> 00:02:42,600 Speaker 1: Yeah, haven't seen that report. We're growing production, as I said, 53 00:02:42,639 --> 00:02:44,000 Speaker 1: we're growing cash flow. 54 00:02:44,360 --> 00:02:45,280 Speaker 3: As we move into. 55 00:02:45,080 --> 00:02:48,200 Speaker 1: Next year, our break even to cover the capital budget 56 00:02:48,240 --> 00:02:50,320 Speaker 1: and the dividend will be down in the low fifties. 57 00:02:50,560 --> 00:02:53,240 Speaker 1: We get beyond that, it'll move into the forties. And 58 00:02:53,320 --> 00:02:55,920 Speaker 1: so if you pick any given quarter and do some 59 00:02:55,960 --> 00:02:58,480 Speaker 1: of this math, you might reach a certain conclusion. As 60 00:02:58,520 --> 00:03:01,920 Speaker 1: we look forward into the next few years, our break 61 00:03:01,960 --> 00:03:03,640 Speaker 1: even will be low and going lower. 62 00:03:04,000 --> 00:03:05,960 Speaker 2: Let's talk about the next few years, and a big 63 00:03:06,040 --> 00:03:09,760 Speaker 2: part of that will be the purchase of Hess. Finally, 64 00:03:09,800 --> 00:03:13,840 Speaker 2: you get a date arbitration hearing for the end of May. 65 00:03:14,160 --> 00:03:16,639 Speaker 2: You've had a chance to look at each other's cases. 66 00:03:16,720 --> 00:03:18,360 Speaker 2: How has your confidence changed? 67 00:03:19,960 --> 00:03:22,160 Speaker 3: Well, it really is unchanged, Alex. 68 00:03:24,120 --> 00:03:26,400 Speaker 1: The contract is very clear in the language of the 69 00:03:26,440 --> 00:03:30,880 Speaker 1: contract that will be applied in the arbitration, and we've 70 00:03:32,280 --> 00:03:36,080 Speaker 1: you know, steadily believed that the HESS side of this 71 00:03:36,240 --> 00:03:38,400 Speaker 1: argument is the is the proper side of it. And 72 00:03:38,480 --> 00:03:41,320 Speaker 1: so as we move closer to the date of the 73 00:03:41,440 --> 00:03:45,640 Speaker 1: arbitration hearing and then a decision three months after that. 74 00:03:46,400 --> 00:03:48,000 Speaker 3: Our view really is unchanged. 75 00:03:48,000 --> 00:03:51,000 Speaker 1: We feel very very confident that HESS will prevail here. 76 00:03:51,240 --> 00:03:54,200 Speaker 2: Obviously, Guyana is a huge asset and would be so 77 00:03:54,320 --> 00:03:57,760 Speaker 2: great for Chevron, So how quickly could that be a 78 00:03:57,840 --> 00:04:00,120 Speaker 2: creative to you guys, like what would that integrate and 79 00:04:00,200 --> 00:04:00,560 Speaker 2: look like? 80 00:04:01,880 --> 00:04:04,480 Speaker 1: Well, we've had plenty of time to prepare for reaction 81 00:04:04,880 --> 00:04:09,960 Speaker 1: and and so the teams have been working closely and 82 00:04:10,120 --> 00:04:15,000 Speaker 1: we're ready to move very quickly to integrate the two businesses. 83 00:04:15,600 --> 00:04:17,640 Speaker 1: So once we get a decision that that can happen 84 00:04:17,800 --> 00:04:20,640 Speaker 1: in you know, a matter of days and weeks, not 85 00:04:20,800 --> 00:04:21,839 Speaker 1: months or years. 86 00:04:22,920 --> 00:04:26,080 Speaker 2: Part of that also was you buying five percent of 87 00:04:26,120 --> 00:04:28,839 Speaker 2: HESH shares on the open market. Two thoughts, and there 88 00:04:28,839 --> 00:04:30,960 Speaker 2: are two very different thoughts. One is it just shows 89 00:04:30,960 --> 00:04:33,080 Speaker 2: how much confidence you do have in the deal. The 90 00:04:33,200 --> 00:04:35,320 Speaker 2: other thought is that it won't go through and you 91 00:04:35,360 --> 00:04:37,760 Speaker 2: still want to seat at the table if the deal fails. 92 00:04:37,880 --> 00:04:39,120 Speaker 2: Help me understand which side. 93 00:04:41,000 --> 00:04:44,599 Speaker 1: Well, the shares we're trading at a discount to you know, 94 00:04:44,680 --> 00:04:47,560 Speaker 1: the value that we would exchange our shares for in 95 00:04:47,680 --> 00:04:51,080 Speaker 1: the transaction, and so it made it economic just on 96 00:04:51,160 --> 00:04:54,200 Speaker 1: the on the surface, we do have confidence as I 97 00:04:54,360 --> 00:04:57,960 Speaker 1: just as I just expressed, and and so that's really 98 00:04:58,000 --> 00:05:01,279 Speaker 1: what what sits behind that it's a good company has 99 00:05:01,279 --> 00:05:05,799 Speaker 1: his performance has been exceeding expectations every quarter really since 100 00:05:06,040 --> 00:05:09,440 Speaker 1: we announced this transaction. The business is being run well, 101 00:05:09,960 --> 00:05:13,600 Speaker 1: their stock has. We viewed it as a good investment 102 00:05:13,640 --> 00:05:15,159 Speaker 1: back then, we viewed as a good investment. 103 00:05:15,200 --> 00:05:19,400 Speaker 2: Today, Let's move to another field that has the potential 104 00:05:19,400 --> 00:05:21,120 Speaker 2: to be a huge growth driver in the future, and 105 00:05:21,160 --> 00:05:24,400 Speaker 2: that's ten Gee's. Obviously that had a lot of startup issues, 106 00:05:24,400 --> 00:05:28,080 Speaker 2: but you're finally running at the same time that Saudi 107 00:05:28,080 --> 00:05:31,159 Speaker 2: Arabia is trying to enforce quotas for Opek Plus, which 108 00:05:31,200 --> 00:05:34,599 Speaker 2: is in Kazakhstan, which is where Tengi's operates. Have you 109 00:05:34,680 --> 00:05:36,839 Speaker 2: had any talks with the government about having to pair 110 00:05:36,920 --> 00:05:37,760 Speaker 2: back any production. 111 00:05:39,480 --> 00:05:41,800 Speaker 1: Well, we've got a long history in Kazakhstan and as 112 00:05:41,800 --> 00:05:44,240 Speaker 1: you say, the project we just completed has been under 113 00:05:44,279 --> 00:05:47,359 Speaker 1: way for about a decade. It's taken that field's production 114 00:05:47,480 --> 00:05:51,680 Speaker 1: capacity up to essentially a million barrels a day. We've 115 00:05:51,680 --> 00:05:54,680 Speaker 1: had it running at those levels or close to those 116 00:05:54,800 --> 00:05:58,120 Speaker 1: levels here during the first quarter of the year. So 117 00:05:59,120 --> 00:06:00,880 Speaker 1: I've had a chance speak to the President of the 118 00:06:00,880 --> 00:06:05,680 Speaker 1: country about that. We don't get involved in OPEC plus discussions, 119 00:06:05,680 --> 00:06:09,159 Speaker 1: and so I don't know what is going on there, 120 00:06:09,520 --> 00:06:12,159 Speaker 1: but I can tell you that our long history in 121 00:06:12,160 --> 00:06:15,480 Speaker 1: the country has been good for the Republic. It's been 122 00:06:15,480 --> 00:06:19,200 Speaker 1: good for the investors in the ten Geese field, and 123 00:06:19,279 --> 00:06:23,200 Speaker 1: those barrels are very high value barrels to the Republic 124 00:06:23,200 --> 00:06:26,159 Speaker 1: in terms of the revenue that they generate, and historically 125 00:06:26,760 --> 00:06:31,479 Speaker 1: they have not been subject to any cutbacks when we're 126 00:06:31,520 --> 00:06:35,040 Speaker 1: in circumstances where OPEC plus might be looking to make 127 00:06:35,080 --> 00:06:38,039 Speaker 1: some of those decisions. And so I'm not aware of 128 00:06:38,080 --> 00:06:41,800 Speaker 1: anything that would result in us being asked to produce 129 00:06:41,920 --> 00:06:42,400 Speaker 1: less there. 130 00:06:42,520 --> 00:06:45,200 Speaker 2: Okay, so the ask has not been asked, if I'm 131 00:06:45,240 --> 00:06:48,880 Speaker 2: just bearing that down right, Mike, That's correct. 132 00:06:48,880 --> 00:06:50,560 Speaker 3: We haven't had any conversations about that. 133 00:06:51,080 --> 00:06:54,080 Speaker 2: All right, let's broad out. You make long term capital 134 00:06:54,120 --> 00:06:56,680 Speaker 2: decisions like you were talking about with Gulf of America 135 00:06:57,200 --> 00:06:59,599 Speaker 2: for decades to come, right, So the oil price today 136 00:06:59,640 --> 00:07:02,359 Speaker 2: means less than the oil price in the future. What 137 00:07:02,520 --> 00:07:05,760 Speaker 2: is your future demand outlook? As tariffs seem to rewrite 138 00:07:06,120 --> 00:07:07,560 Speaker 2: the global economy. 139 00:07:09,360 --> 00:07:13,040 Speaker 1: Well, the population of the planet continues to grow. The 140 00:07:13,720 --> 00:07:18,679 Speaker 1: number of people that live a developed world lifestyle is growing, 141 00:07:18,760 --> 00:07:23,280 Speaker 1: but is still relatively less than those who don't yet 142 00:07:24,480 --> 00:07:27,680 Speaker 1: have the quality of life that those of us in 143 00:07:27,720 --> 00:07:30,640 Speaker 1: developed countries can take for granted. And so demand for 144 00:07:30,800 --> 00:07:33,600 Speaker 1: energy will go up. Demand for all forms of energy 145 00:07:33,600 --> 00:07:36,320 Speaker 1: will go up over the coming decades, and oil and 146 00:07:36,360 --> 00:07:38,880 Speaker 1: gas will continue to be a vital part of the 147 00:07:38,880 --> 00:07:41,239 Speaker 1: global energy system, even as we see other. 148 00:07:41,120 --> 00:07:43,240 Speaker 3: Types of energy grow as well. 149 00:07:43,720 --> 00:07:45,880 Speaker 1: The thing in oil and gas that's always important to 150 00:07:45,920 --> 00:07:49,560 Speaker 1: bear in mind is oil fields decline over time, so 151 00:07:49,640 --> 00:07:53,920 Speaker 1: production decreases every year from existing fields, and it requires 152 00:07:54,000 --> 00:07:58,600 Speaker 1: investments to maintain production even at steady levels, let alone 153 00:07:58,720 --> 00:08:02,400 Speaker 1: to meet any incremental growth. And so the opportunities for 154 00:08:02,520 --> 00:08:05,840 Speaker 1: companies that are capital efficient, that are very disciplined in 155 00:08:05,880 --> 00:08:08,400 Speaker 1: how do they run their business to continue to supply 156 00:08:08,520 --> 00:08:11,960 Speaker 1: the energy the world needs and create returns for shareholders 157 00:08:12,200 --> 00:08:14,160 Speaker 1: will exist long long into the future. 158 00:08:14,280 --> 00:08:16,840 Speaker 2: And as we've seen, it's more a rig cutting issue 159 00:08:16,880 --> 00:08:20,200 Speaker 2: with say smaller companies rather than larger companies like yourself. 160 00:08:20,600 --> 00:08:22,680 Speaker 2: Something that I keep hearing though a lot about Mike 161 00:08:22,840 --> 00:08:27,400 Speaker 2: is what happens to NGLs, So overall liquids in particular 162 00:08:27,440 --> 00:08:30,280 Speaker 2: when it comes to global trade, and as the wells 163 00:08:30,320 --> 00:08:32,920 Speaker 2: and the Permian or in US shale get gass eer 164 00:08:33,240 --> 00:08:36,280 Speaker 2: are we looking at a potential glut of NGLs in 165 00:08:36,320 --> 00:08:36,720 Speaker 2: the world. 166 00:08:36,760 --> 00:08:41,200 Speaker 1: In the US, so, the US has become a very 167 00:08:41,280 --> 00:08:46,200 Speaker 1: large producer of natural gas liquids. Propane is a big 168 00:08:46,240 --> 00:08:50,199 Speaker 1: export commodity now. The US exports ethane as well to 169 00:08:50,440 --> 00:08:53,880 Speaker 1: markets around the world where these tend to be used 170 00:08:53,920 --> 00:08:58,080 Speaker 1: as feedstocks for petrochemical production. They can also be used 171 00:08:58,160 --> 00:09:03,880 Speaker 1: in heating and other applications, and so as trade rules 172 00:09:04,040 --> 00:09:08,240 Speaker 1: change and trade flows change, that can affect where those 173 00:09:08,280 --> 00:09:12,840 Speaker 1: flows go. It can affect the netbacks that producers and 174 00:09:12,920 --> 00:09:17,240 Speaker 1: sellers of these commodities realize. China is certainly a purture 175 00:09:17,360 --> 00:09:20,079 Speaker 1: of both purchaser of both of those commodities, and so 176 00:09:20,760 --> 00:09:26,079 Speaker 1: reductions in flows to China would need to be met. 177 00:09:25,920 --> 00:09:27,600 Speaker 3: By supply from elsewhere in the world. 178 00:09:27,720 --> 00:09:31,840 Speaker 1: Often the Middle East and US exports may go into 179 00:09:31,880 --> 00:09:34,640 Speaker 1: the markets that the Middle East exports are currently going 180 00:09:34,640 --> 00:09:39,040 Speaker 1: into so you'd see some reorientation of flows. And if 181 00:09:39,080 --> 00:09:41,800 Speaker 1: you have a non tariff market that's the most efficient 182 00:09:42,480 --> 00:09:46,320 Speaker 1: distribution of those, you have a slightly less efficient market 183 00:09:46,400 --> 00:09:49,719 Speaker 1: at work, and that could affect at the margin the 184 00:09:50,120 --> 00:09:52,840 Speaker 1: realizations that producers see for their exports. 185 00:09:53,320 --> 00:09:56,240 Speaker 2: Had some good context, Mike, just to end sort of 186 00:09:56,280 --> 00:09:57,920 Speaker 2: on the question that you know you're going to hate, 187 00:09:58,160 --> 00:10:01,640 Speaker 2: is excluding has your looking at nine billion dollars an 188 00:10:01,679 --> 00:10:04,040 Speaker 2: annual free cash flow growth at sixty brent and that's 189 00:10:04,080 --> 00:10:07,760 Speaker 2: for twenty twenty six. Give me perspective as to how 190 00:10:09,280 --> 00:10:12,600 Speaker 2: long would WTI need to remain below sixty for you 191 00:10:12,679 --> 00:10:15,520 Speaker 2: to start revamping your outlook in a material way. 192 00:10:17,400 --> 00:10:20,640 Speaker 1: Well, it's it's kind of a hypothetical alex because it 193 00:10:20,720 --> 00:10:24,000 Speaker 1: would not only take a long period of time, but 194 00:10:24,040 --> 00:10:27,200 Speaker 1: then it would also depend upon our view for how 195 00:10:27,240 --> 00:10:30,559 Speaker 1: things play out as there's some sort of a recovery. 196 00:10:31,160 --> 00:10:35,600 Speaker 1: And look, we've got a very strong balance sheet right now. 197 00:10:35,640 --> 00:10:39,600 Speaker 1: We're below our historic average at a fourteen percent in 198 00:10:39,600 --> 00:10:42,560 Speaker 1: that debt. We've got a double A credit rating, We've 199 00:10:42,600 --> 00:10:45,839 Speaker 1: got costs and capital discipline. We've brought capex down coming 200 00:10:45,880 --> 00:10:48,640 Speaker 1: into this year. We're taking costs structurally out of our 201 00:10:48,679 --> 00:10:51,559 Speaker 1: business two to three billion dollars in costs, and we're 202 00:10:51,559 --> 00:10:53,920 Speaker 1: going to grow free cash flow nine billion dollars at 203 00:10:53,920 --> 00:10:57,560 Speaker 1: a sixty dollars rent price, so we've got staying power 204 00:10:58,280 --> 00:11:01,920 Speaker 1: well into the future. If the future is dramatically changed, 205 00:11:02,880 --> 00:11:05,760 Speaker 1: we could look at adjustments, but we don't see anything 206 00:11:05,840 --> 00:11:07,720 Speaker 1: right now that suggests that that's the case. 207 00:11:08,240 --> 00:11:10,640 Speaker 2: And same for debt. You feel confident in not having 208 00:11:10,640 --> 00:11:13,720 Speaker 2: to increase any debt if we get those oil prices 209 00:11:13,720 --> 00:11:15,040 Speaker 2: more sustained below sixty. 210 00:11:16,640 --> 00:11:19,959 Speaker 1: Well, we've guided the market to a twenty to twenty 211 00:11:19,960 --> 00:11:24,199 Speaker 1: five percent net debt level through the cycle as something 212 00:11:24,200 --> 00:11:27,040 Speaker 1: we're very comfortable with for an efficient capital structure. 213 00:11:27,080 --> 00:11:28,240 Speaker 3: We're at fourteen. 214 00:11:27,840 --> 00:11:32,359 Speaker 1: Percent today, so we've always maintained that we will gradually 215 00:11:32,960 --> 00:11:35,920 Speaker 1: increase our debt levels to get back into or close 216 00:11:35,960 --> 00:11:38,680 Speaker 1: to that twenty to twenty five percent range. And I 217 00:11:38,679 --> 00:11:41,720 Speaker 1: think you can expect that to happen, but that's not 218 00:11:41,760 --> 00:11:46,200 Speaker 1: anything that anyone should be overly concerned about. We've indicated 219 00:11:46,240 --> 00:11:49,320 Speaker 1: that that's what we would expect to do in really 220 00:11:49,880 --> 00:11:51,960 Speaker 1: any kind of a price environment and through the cycle, 221 00:11:52,080 --> 00:11:55,080 Speaker 1: so it's very consistent with the guidance We've given the 222 00:11:55,120 --> 00:12:00,240 Speaker 1: market how we think about our business and look been 223 00:12:00,240 --> 00:12:04,120 Speaker 1: through cycles before. I've been in the room in two 224 00:12:04,120 --> 00:12:07,520 Speaker 1: thousand and eight, twenty fourteen, twenty twenty with Covid and again. 225 00:12:07,600 --> 00:12:08,959 Speaker 3: Now we know what to do.