Chevron Stock

All right. I think I will start a minute early and just welcome everyone to the 40th Barclays Energy and Power Conference. My name is Betty Jiang. I'm covering the integrated majors and E&P space at Barclays.

Now the theme of this year's conference is the global race for energy. I think given all the disruptions that we see, we realize that all energy of all sources are needed. So have a pretty exciting 3 days of meetings ahead of us. So welcome again, and thank you for being here.

This year, we are trying something a bit new. We have an audience polling questions where we'll be asking you to participate in answering some questions that I will be putting on the board on some of the sessions that you will be seeing in this conference.

And -- but before I start, I do want to introduce Eimear from Chevron. And Chevron, thank you so much for kicking us off for this track on the majors and E&Ps. And please join me on stage, and we will start on some questions before we get into the fireside conversation.

Let's see if this is going to work. So we'll have 3 questions from audience polling, and you will have clickers on every one of your seats. And all you have to do is click the number corresponding to your view. Sorry, this is not the first question for this session. It should be about mid-cycle, what mid-cycle Brent oil price are you using for your equity valuation? Can we get to the right questions?

All right. Well, clearly, that -- we'll try to figure that out for the next session. But Eimear, thank you so much for being here.

I think I want to kick off the conversation with Venezuela because that's clearly the big news from this summer over the last month about Chevron's increasing investment in the country. So I want to start off the conversation there. Why now? And why do you -- what do you see that's so exciting about going into that country now?

Well, thanks, Betty, for having me here this afternoon. Good afternoon, everyone. Well, we're excited because the new terms unlock competitive low-cost growth in Venezuela. And so that's why we're excited. We've got new terms. We've got new legal provisions, and we're building on 100 years of history in Venezuela and 3 joint ventures that are operating really well. So that's what excites us.

Why now? We were able to negotiate new terms. In addition to that, we've been able -- we were able to get additional acreage as well. That started back in April when we executed a swap and got some contiguous acreage and more working interest. And then as part of the deal that we announced last week, we also got 2 other blocks, Carabobo 1 and 2. And so we're just really excited. This is an enormous resource base, low cost, total cost less than $20 a barrel, lots of run room. And so that's why we're excited, and that's why we're growing.

Great. And that's a pretty big growth and you're talking about doubling production to over 600,000 barrels per day by 2031. Can you just talk about the ramp-up cadence? Is there a plateau level? And how do you think about the cash flow contribution from that asset over time?

Yes. Well, the production will grow and the cash flow will grow with the production. That's really the punchline. If I put it in the context of the production today, we're producing about 100 -- sorry, 280,000 barrels of oil per day. And so we anticipate growing that to 600,000 barrels a day. So there's obviously a ramp over time. We intend to increase the number of rigs, so more than double the number of rigs with that.

And in terms of investment, we intend to invest on a gross basis, $7 billion over that 5-year period. So that will take us into the early 2030s, 2031 is when we'll likely hit 600,000 barrels a day, and that will be close to plateau levels. We anticipate plateau will be between 600,000 and 700,000. And the large resource base gives us the opportunity to extend that plateau from 5 to 10 years. And that's just primary recovery. So that's just the initial recovery from the reservoirs. There's a lot more upside there. So I mean, this is growth at low cost and very attractive returns.

And so the ramp will happen over the next 5 years. And then from the next decade, we'll be moving into plateau. I think the best way to think about this is we are developing or intend to develop this like the way we develop the Permian. It really is just another factory-type development. There will be a period of investment and a period of plateau. And so we're looking forward to adopting and scaling and implementing all the lessons learned from the factory experience that we have.

Right. No, that makes sense. I think the -- another area that we think about getting into this asset is it will require a lot of infrastructure, and there are still questions around like, is the infrastructure ready for this type of growth. So can you just speak to the availability of the infrastructure in the asset now? And how much investment that's needed in order to enable this level of growth?

The infrastructure is in great shape. And so the equipment has been maintained over the last few years. So almost 3 years ago, when we implemented a capital-efficient model for investment into our JVs, we have been dedicating -- since that time, we've been dedicating OpEx and CapEx to the fields. That's allowed us to drill and grow production, but it's also allowed us to do maintenance programs and take care of the infrastructure and ensure that all our asset integrity programs are in place, process safety programs are in place that -- where we've been doing turnarounds.

And so our infrastructure is in good shape. So we don't need a new infrastructure to -- or significant infrastructure to be built to deliver the growth that we've guided to. Again, think of this as a factory where the infrastructure expansions will be more like small tie-ins of pipelines and utilities just as you would build out in the Permian. So no major capital projects required for us to deliver the doubling of production in the next 5 years.

Got it. And then last one on Venezuela before we move on is the terms. So clearly, you have to negotiate with the government to get to the point in order to move forward to invest -- but how do you -- how confident do you feel about the sustainability of the terms that you have and the ability to maintain these fiscal terms in the long run so that the asset can compete within the portfolio for a long time?

Yes. Well, the new terms obviously unlock the competitiveness and that gives us the assurance to grow. But Venezuela took a large step when they implemented the hydrocarbon reform law. And what that did early in the year was provide the opportunity then to negotiate on the terms, the terms that ultimately made the difference for us in terms of growing production and increasing investment. Terms such as royalty, terms such as taxes, think of it overall how much is split between the government and the investor.

And so through that negotiation, we were able to get to a very competitive place and the Venezuelan team and government was open to looking at the global benchmarks, and they realized that for investment to occur in their country, the investments had to compete for capital along with all other options in our portfolio and all other options around the world. And so it was -- they worked with us actively, and we've got to a great place where this is a win for Venezuela, and this is a win for the investor. And then overall, it's a win for the U.S. in terms of energy security. So a win-win-win is how Mike described it. And I think it really points to that.

But in addition to the new terms, there was a lot more to the announcement last week as well. We also got more provisions. Think of them as strengthening our legal provisions so that we have stability clauses in those contracts that protect the royalty and taxes and terms that we have negotiated. And so those protections will enable those terms to endure across administrations. And in our business, we think about the long term. So we see administrations change in this country and all around the world, and we have to ensure they endure. These type of provisions that are as strong as what we have in other parts of the world in this country help protect that. And so that should give the investor assurance that these investments are solid.

In addition, we also got the right to international arbitration, which is a provision that we typically see in oil and gas contracts around the world. So those things really came together, the improved returns, the strengthened legal provisions and then obviously, the competitive positioning of this large resource base in our portfolio. And when those 3 things came together, that's what got us excited about leaning in.

No, that makes sense. And certainly, given it's -- Chevron would not be stepping in without checking all these boxes. So really look forward to how much this asset is going to contribute to the portfolio going forward.

Now talking about the rest of the portfolio, there's been a big balance sheet improvement since the Hess acquisition, while you guys continue to deliver buyback. As the balance sheet getting -- at the current state, given the much improved levels, how do you think about balancing the continued debt reduction and buyback going forward and sort of how you think about the priority use on the free cash flow from here on?

We use our long-standing financial priorities to guide all of those decisions. And those financial priorities have been around for decades. One is to grow the dividend; two is to invest capital efficiently; three is to strengthen the balance sheet; and four is to return excess cash to shareholders through buybacks.

So we always look at it with those priorities in mind. The first priority, the dividend, has been set. So there's no change. We've already grown the dividend this year, and so that is consistent with the last 39 years. Our capital efficiency, we're funding all the projects to enable 7% to 10% growth in the portfolio. And so everything that we have put in a plan, we are delivering on that plan, and we're growing. So there's no allocation for incremental investments. Venezuela obviously changes that, but that will be eventually affiliate capital because we'll change to equity accounting.

Third is the balance sheet. And so the excess cash that we have been generating has been going to the balance sheet, and that's strengthening the balance sheet for the long term. And so that's where it's going right now. There's been so much volatility over the last few months. In fact, in the last month, we've seen oil prices move, I think, $35. And so we generally don't like to move the buyback rate during times of volatility. We like to have a better view of what -- where prices are trending and then we adjust. So we have a range of $10 billion to $20 billion, and we will be buying back shares consistent with that range. But ultimately, excess cash will go back to the shareholders. It's not a matter of if, it's a matter of when, when we've got a clear path on what the outlook on price looks like.

No, that makes sense. And that's what the range is for to predict the...

Give that flexibility.

Exactly. I want to -- shifting gear to the shale integration and the really strong capital efficiency improvements that you have been able to deliver in the Permian. And you have guided to 25% lower CapEx intensity in '26 versus '25. So that's a big drop as you're getting to this maintenance free cash flow harvesting mode. So maybe talk about what's been the key drivers of efficiency in U.S. -- in onshore -- the shale and tight business? And what should we expect for investors going forward of what you can deliver on continued efficiencies in U.S. shale?

The shale and tight business, we pulled all the assets together last year as part of the reorganization. They have found their sweet spot. They're learning from each other, implementing each other's best practices. And that's really what we're seeing in terms of the significant reduction in capital because they're all benefiting from the best of all of the assets.

So the reorganization was a big trigger in terms of bringing all of that learning together at a fast pace. But Permian, for example, Permian had been growing for the last 5 years. In 2019, we were producing about 450,000 barrels a day. We grew that to 1 million. And what we find as we have plateaued around 1 million is that there's just -- there's different mode of operation. It's a mode not of growth in production, but it's a mode of growth in free cash flow. And so every aspect of the factory is being interrogated with benchmarking, with opportunities to take waste out, to do things differently, and they're all benefiting from each other.

I would say the main examples, I'd point to reliability. The reliability in the shale and tight asset class has never been as high as what we reported in the second quarter. That is benefiting from the learnings with all of the assets together. It's also benefiting from a real focus on base business, the blocking and tackling every day. So maintenance programs, artificial lift optimization, real-time detection of anomalies, all of those base business blocking and tackling lessons learned that we've gleaned from all the assets have been put into effect, and that's why we're seeing the highest reliability.

We've also been able to improve drilling efficiency. I mean we thought we had improved drilling efficiency. We're seeing even more. And so we're drilling twice as fast as what we were drilling 2 years ago. So when you have these efficiencies at every stage of the factory, the results follow. We've also seen, as we've scaled up our technology programs that include chemicals and stimulation, we've also seen production uplift from those programs.

So when you put them all together, we're getting more with less and the reduction in CapEx has really been terrific. So the team has found their sweet spot at 1 million barrels a day. And my expectation is they'll continue to find ways to take capital even further.

It's just amazing that people think -- a lot of people think shale has matured and yet we just continue to find new technologies to make that plateau, generate more free cash flow, doing more with less. So and even on the technology side, you guys are leading on the advanced chemical treatment and whatnot, so which is new things that we can all look forward to.

So on the -- on the cost side of things, Chevron is already ahead on your structural cost savings. Maybe just speak to like where you're tracking on the cost saving optimization program? How much have you done so far? Where is it coming from? And how much more do you expect to come? And does all the technologies that you guys are talking about could potentially bring some upside to these cost savings?

We delivered our $3 billion of structural cost reduction 6 months early, and we reported that in the second quarter earnings call. That's been the result of an enormous amount of work across the organization. So every team has played a role in delivering on this cost reduction program.

It's coming from a few places. The first is portfolio. So taking the costs out of the system as we have high-graded the portfolio. So divestments play a role there. So there's a portion coming from divestments. The second, the operating model. So we fundamentally and significantly changed our organization last year, and we brought a standardized, simplified and centralized approach to how we organize and it impacted the business. So we brought all the shale and tight assets together would be an example of how we centralized like teams together, but we also brought a lot of functions together. So capital projects, all reporting into one functional group was another example of that. So that was another portion of the cost reduction.

And then the third part of the cost reduction was technology. So where we have used technology to actually do work completely differently. So where we're using robotics and drones to do work in facilities that we normally would have had people doing, where we are using real-time monitoring to detect reliability events before they happen, where we're using our technical center, ENGINE, in India, where we're now standardizing and streamlining how we do maintenance work and turnaround work across the entire company. We're standardizing how we do workovers. We're standardizing how we do reliability programs. We're standardizing how we scope turnarounds. And we do them as one rather than doing them in individual teams and assets.

So those things have come together in a way that has delivered results faster than we anticipated. And 70% of those are efficiency gains. And so that just speaks to the sustainability of what's been implemented. We're never satisfied. So we're still working on additional opportunities to reduce costs, especially where we have some operational footprint that overlaps from our merger with Hess, and we've still got some opportunity on contract optimization and operational cost reduction. And I expect we'll continue to see more and more cost reductions with time. But that target that we set in 2024, we delivered it early.

Yes. And we can definitely see that in the results and in both in the OpEx side and the CapEx side. So it's good to see that flowing through. Maybe shifting gear to the TCO update. I think that's an asset that once it's up and running, has really -- start to deliver outsized free cash flow and having a meaningful cash flow impact to the company. This year certainly helps with the higher oil price. I think the asset has also been outperforming with the debottlenecking opportunities there. Can you maybe just give us an update on what you're seeing there? How is the asset performing? And where is maybe some other optimization opportunities that's left to do?

Sure. The asset is performing extremely well. So as we mentioned in the second quarter call, when we started up the third-generation plant last year, we always knew that there was the opportunity to debottleneck the facility. But we needed some time to ramp up and pinpoint exactly where some of the constraints were the technical limits.

And so we identified a column within that facility that had some technical limits. And so at the back end of last year, we performed a pit stop turnaround and changed out the internals. So that changed kind of how the column performed. And what we were able to see with 6 months of performance testing after that turnaround was that we had increased the capacity, the oil capacity of that plant from 260,000 to 320,000. So that was a significant increase, more than 20% increase in a very short period of time.

We are continuing to look for where our next constraint and technical limit is. It's part of the routine that our operations team goes through on an asset of that size, scale and complexity. And as part of the project, we installed an integrated operations center that has state-of-the-art advanced process control, AI workflows, machine monitoring, performance monitoring around equipment and modeling actually not only of the reservoir, but how the reservoir feeds the gathering system of the plant. And that is where the debottlenecking is now focused so that we can optimize more out in the field versus in the big facility that we just -- that we started up a year ago.

So I wouldn't expect massive step change, plus 20% from those efforts. I would expect to see over time, incremental gains because that has been the history of the asset, that capacity creep through time, and that's been the history in many of the assets around the world in refining and in the Gulf of America even in the last year. So that's an area where Chevron has a lot of expertise, and that's my expectation that we would see more over time.

Yes. Looking forward to some of the more production beats coming from the TCO. While we're on that, maybe how is the contract renegotiation conversation progressing? If you could -- is there a possibility to get a time line update on that?

The negotiations are moving at pace. So both teams, Chevron and Exxon and Lukoil and KMG team that represent TCO and the government. Those teams are assembled. They're working together. They're working through the key points, the technical points, the commercial points right now. So there's no showstoppers. So things are moving at pace. These negotiations for an asset this size will take a long time. So I can't provide an update on the time line, but we'll certainly provide updates on the earnings calls like we've been doing over the last few.

Right. No, makes sense. The one is -- shifting to the exploration portfolio. There's -- Chevron has been entering many new regions with a growing list of exploration opportunities in the portfolio. So can you just give us an update on the focus area on exploration? And specifically in the Middle East, there is some conversation on that as well for Chevron. So how does your view on the Middle East have changed given whether or not it's driven by the ongoing disruptions?

The Middle East is one area where we have a lot of interest. It's part of a portfolio of options that's never been stronger or higher quality. So over the last 2 years, we've had a real focus on this. As you know, we've changed a few things. One, we changed the organization. We pulled as part of the reorganization, exploration into a team, and they run it more like a business than being decentralized. So we changed that.

Two, we changed the strategic focus. A lot of our exploration was focused in areas that were close to installed facilities that had available haulage. We've now changed that balance. So 50% of our exploration is focused near infrastructure. So think of like Nigeria, having installed infrastructure and a quick tieback. So 50% is that type of exploration opportunity and then 50% is more in frontier. So where there's the opportunity of higher risk, but the potential to discover a material low-cost resource that would eventually be a material asset in the portfolio. So we changed that.

And then the third thing that we changed is we changed the technology that we're using. We had the benefit of the tech stack from Hess, the tech stack from Chevron layered on top of that is some AI and technology and all of those things we're putting into the portfolio. So let me give you some of the green shoots.

I'd say, first of all, in the last 2 years, we've had 6 discoveries. So our efforts are yielding better results. Two, we have continued to add to the front end of the factory. So you can't have an exploration result without having acreage at the front end that then you sift through and prioritize and work to a prospect. We have increased our acreage by 35% last year alone and added 10 million acres this year. So our acreage position is much higher quality than it was before.

So where are we -- where do we have presence? We have presence and activity in Guyana. We have West Africa in Nigeria, Angola and Namibia. We also have an Eastern Mediterranean, a growing portfolio in Eastern Mediterranean with Israel and Egypt and Cyprus and Greece and Malta. So the Mediterranean and Eastern Mediterranean is an area of focus for us as well.

And then we have the area that you talked about, the Middle East. So the Middle East is -- it's interesting for us, not just because of the exploration, it's interesting because there's also a producing asset. So the progress update there is we have been negotiating with the Iraqis on an exclusive basis, and we're talking and discussing what competitive commercial terms would look like for 3 opportunities. The first one is the operating asset, West Qurna 2, which is a large asset of material production. The second is a field adjacent to that called the Nassiriya field, which has exceptional exploration acreage. And then the third opportunity is a pipeline where we may participate in a pipeline, consider that an alternative route to get the oil to market.

So we have heads of agreement addendums on all of those items. And so over the course of the next year, we hope to be able to advance the pace and figure out a way to commercially and competitively create some strategic options for the next decade there. So that's where we are with both exploration and our growth options. So our portfolio has never really been as strong as it is.

A lot to digest there, but it seems like we'll hear more on the -- across a lot of regions going forward. The other growth area is obviously power. You guys announced a big gigawatt -- first gigawatt scale power plant in the Permian. We are also hearing a lot more of these projects start to advance and many integrated -- your integrated peers are also sort of speaking to their capabilities on the power side. So in your view, what really differentiates Chevron in the power business? And how much do you think that business could really meaningfully scale for Chevron in the long run?

Chevron has unique capabilities that few can match. One, we have an abundance of gas in Texas. Two, we have turbines that are coming off the conveyor belt. Three, we have experience in designing, maintaining, operating at high reliability power generation facilities. In fact, today, we operate 5 gigawatts around the world because we have to -- we have to generate power where our oil and gas facilities are. So we're bringing that too. And four, we have experience in West Texas. We have deep relationships with stakeholders.

And when you put all of those things together, they're unique capabilities that we brought to the table. And then we had a high-quality customer that was willing to commit 20 years in a PPA for that power. And so all of those things came together, and that's why I think we've got a unique position.

Great. Well, I think we are running short on time, but one quick one, if I may. There's -- you talked about the investment case for -- the portfolio opportunity is better than ever for Chevron. So where do you think investors might be most underappreciated about the Chevron story from here?

Maybe that we're bigger, better and stronger than we've ever been. I mean the consistency of our strategy, our financial priorities, our commitment to cost and capital discipline, our superior shareholder returns. I think sometimes those things get overlooked. We're delivering on our plan. We're firing all cylinders this year in terms of all the operational momentum, the cost delivery that we've had, the synergy delivery that we've had.

Our growth plans through the end of the decade are on track. We're actually working on upside to that, whether it's chemicals or Venezuela that we just talked about. And then we've got many strategic options for the future for the next decade. So when I look at that, the outlook has never been stronger, and I want investors to see that.

Perfect. Well, that's a good wrap. But thank you so much, Eimear, for being here and speaking on the panel. Thanks.

Thanks, Betty.

Good morning. My name is Katie, and I will be your conference facilitator today. Welcome to Chevron's Second Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I will now turn the conference call over to Head of Investor Relations of Chevron Corporation, Jeanine Wai. Please go ahead.

Thank you, Katie. Welcome to Chevron's Second Quarter 2026 Earnings Conference Call and Webcast. I'm Jeanine Wai, Head of Investor Relations. Our Chairman and CEO, Mike Wirth; CFO, Eimear Bonner; and President, New Energy, Jeff Gustavson, are on the call with me today. We'll refer to the slides and prepared remarks that are available on Chevron's website.

Before we begin, please be reminded that this presentation contains estimates, projections and other forward-looking statements. A reconciliation of non-GAAP measures can be found in the appendix of this presentation. Please review the cautionary statement and additional information presented on Slide 2.

Now I'll turn it over to Mike.

Thanks, Jeanine. Amid geopolitical uncertainty and market volatility, Chevron delivered a strong second quarter, driven by our consistent strategy, capital discipline and strong execution. Global Upstream production grew more than 5% quarter-over-quarter, underpinned by exceptional reliability across key assets. In the U.S., we achieved a new upstream production record of nearly 2.1 million barrels of oil equivalent per day and record refinery throughput of over 1 million barrels per day. At the same time, we maintained financial and capital discipline, achieving our structural cost reduction target 6 months early, with $3 billion of annual run rate savings since 2024.

Hess synergy benefits have also been delivered also 6 months early. We continue to capture strong capital efficiencies in U.S. shale and tight, and expect to spend 25% less CapEx per barrel of oil equivalent in 2026 compared to last year. And we strengthened our balance sheet. to underpin long-term investments to deliver reliable energy the world will need for decades to come.

This month also marks the 1-year anniversary of the Hess acquisition. We pulled value forward, capturing 50% more synergies than initially targeted, with $1.5 billion realized 6 months ahead of schedule. The Hess assets are generating strong free cash flow, which has been roughly double the incremental dividends and accretive to shareholders on a per share basis. This reflects the quality of the combined portfolio.

Guyana is a world-class asset with significant resource depth that is expected to extend high-margin oil growth into the 2030s. In the Bakken, we're leveraging best practices from our shale and tight business to drive performance improvement, drilling laterals that are on average 28% longer, optimizing workovers and applying advanced chemicals. And we're also maintaining similar production with 1 less rig. Further, we're benefiting from the talented Hess employees who bring deep expertise in offshore, unconventional and exploration. The entire organization is stronger because of this combination.

I'll now hand it over to Jeff, who will share an update on power.

Thanks, Mike. The U.S. is undergoing a structural shift in electricity demand as AI accelerates, and reliable power is becoming the critical constraint. Chevron is well positioned to address this challenge. We bring a combination of assets and capabilities we believe few can match. A leading U.S. natural gas portfolio, extensive experience with large-scale behind-the-meter power, proven project execution capabilities, and strong partnerships that provide access to critical equipment and leading customers.

This reflects Chevron's strategy in action. We're leveraging advantaged assets, customer relationships, execution capabilities and partnerships to deliver reliable, affordable energy while creating long-term shareholder value. While many data center power projects have been announced, few have secured long-term customer commitments for behind-the-meter power and only 1 is at multi-gigawatt scale, Project Kilby. This demonstrates our ability to execute at speed and scale.

We recently signed a 20-year take-or-pay power purchase agreement with Microsoft for 2.67 gigawatts of firm behind-the-meter capacity, supporting its co-located data center complex. We're now focused on execution, with permitting and EPC activities progressing towards a final investment decision later this year. Kilby is expected to deliver mid-teens returns and long-duration contracted cash flows that are independent of commodity price cycles.

Importantly, Kilby provides a repeatable model. We're already in advanced discussions on additional opportunities with existing and potential customers for future projects. We've engaged closely with local stakeholders throughout development and have been encouraged by the strong support we've received in West Texas.

I'll now turn it over to Eimear to discuss the financial results.

Thanks, Jeff. For the second quarter, Chevron reported earnings of $12.1 billion or $6.11 per share. Adjusted earnings were $12 billion or $6.06 per share. Cash flow from operations, excluding working capital, was nearly $20 billion. Organic CapEx was $4.4 billion for the quarter. We now expect to finish the year at the lower end of our guidance range of $18 billion to $19 billion. And our net debt coverage ratio improved, reflecting a strong cash generation in the quarter.

Adjusted second quarter earnings were $9.2 billion higher versus last quarter. Adjusted upstream earnings increased due to higher realizations, higher liftings and favorable timing effects and were partly offset by higher DD&A and tax-related expenses. Adjusted downstream earnings increased primarily due to higher refining margins and favorable timing effects.

Chevron generated $19.7 billion of cash flow from operations, excluding working capital and $15.4 billion of adjusted free cash flow in the quarter. We reduced debt by more than $8 billion, further strengthening our balance sheet and financial flexibility. Net debt to CFFO at the end of the second quarter was 0.6x. Following the large build in the first quarter, working capital unwound by $2.9 billion as commodity prices decreased through the quarter.

On production, we had our second highest quarter ever, maintaining strong operating momentum across all our key assets and growing production by over 200,000 barrels of oil equivalent per day. Reliable operations defined the quarter. In the U.S., we achieved records for total production, Permian production and throughput at multiple facilities in the Gulf of America. International production was also strong at nearly 2 million barrels of oil equivalent per day. And TCO and Australia operated at or near full rates and the impact from the Middle East conflict remained isolated to the Partitioned Zone, representing about 1% of second quarter total production.

Costs always matter, and they always will. We achieved $3 billion of structural cost reductions over the past 12 months, reaching our target 6 months ahead of schedule. Thanks to the hard work and relentless focus across the organization, more than 70% of the savings came from efficiency gains, underscoring the quality of the improvements delivered. Through these reductions, we have largely offset inflationary effects while we continued to grow across key assets like the Permian, Gulf of America and Guyana. We're never satisfied and never done. And we will continue to look for ways to lower costs to drive lasting value.

Our plan is clear, execute safely and reliably, deliver on our objectives and continue to expand our opportunity set for the future. Our second quarter performance demonstrates strong execution and results that can be seen in our bottom line. We remain confident in the 2030 objectives we outlined last November, including annual production growth of 2% to 3%, adjusted free cash flow growth averaging greater than 10% per year and more than 3% improvement on return on capital employed, all at flat commodity prices that are lower than today.

We also continue to develop robust growth options for the next decade, building new resource options across regions and asset classes. Achieving the power milestone, stacking multiple exploration successes and securing strategic exploration agreements and MOUs in the Mediterranean, Africa and the Middle East are examples of the strong set of opportunities we have for the future.

We're focused on executing with excellence in the near term, meeting or exceeding our guidance through the end of the decade and creating even more value in the decades that follow. Consistent with our long-standing financial priorities, we intend to reward our shareholders today, tomorrow and long into the future.

I'll now hand it over to Jeanine.

All right. Thank you, Eimear. This concludes our prepared remarks. Additional guidance can be found in the appendix to this presentation as well as on the slides and other information posted on chevron.com. We're now ready to take your questions. [Operator Instructions]

Katie, please open the lines.

[Operator Instructions] Our first question comes from Devin McDermott with Morgan Stanley.

So Mike, Eimear, the goals you laid out with the corporate reorganization plan last year was more than just cost. It was also to support best-in-class operations. And I think the strong results this quarter clearly show that's paying off. So on the theme of operations, I wanted to start on TCO, which looks like it was one of the key drivers of higher production quarter-over-quarter. I was wondering if you could talk about performance there. Any learnings as far as it relates to quantifying or derisking the debottlenecking opportunity. And while we're on the topic, Mike, maybe you can just address the current situation at the CPC pipeline and any levers that Chevron has to mitigate, any disruption there?

Sure, Devin. Thanks for the comments about our reorganization. And you're right. It wasn't just about efficiency. It was also about performance. I'll speak to TCO performance and the pipeline. And Eimear, maybe you can cover the debottlenecking question.

It was a strong quarter. You'll see in the production waterfall, we're up 170,000 barrels a day versus first quarter, really stellar operating performance in the second quarter. Each month was among the highest months we've ever seen at TCO. The affiliate distributions in the quarter of roughly $3 billion, most of that is coming from TCO and I want to affirm our $6 billion guidance at $70 Brent, obviously, we're likely to have a higher number for Brent this year, which would translate into even higher affiliate distributions.

The team has been working incredibly hard on recovering from some of the first quarter issues. But really the most exciting thing is the ability to optimize across the entire field now. The low-pressure production performance of field has been strong and through this integrated control center to take each generation of topside facilities and look at the way to best optimize those, not only individually, but collectively across the capabilities we have in all of the kit. The pipeline question, you've seen the media reports, there has been some activity in the Black Sea, that we've seen primarily related to the Ukraine-Russia conflict, it has had over the last number of quarters intermittently some impact on activity in and around overseas.

I can tell you that, today, both of our SPMs are in service there. The third SPM has been down for a while, undergoing some refurbishment activities, will be open here in the third quarter. So all 3 will be available later in the third quarter. But the pipeline is flowing the -- we've been loading ships this week. And mitigation is the usual things. We can ship some across the Caspian. We can ship some on rail. We've got storage that we can use to buffer some of these ups and downs. But as you know, CPC is the primary route to market for that production for us and others on the pipeline. We're clearly a big shipper on it, but not the only shipper. And we work with governments in the region, the U.S. government, Kazakh government, obviously, other governments to be sure that, that pipeline stays flowing. It's critical to the world at a time when we need the energy.

Eimear, maybe you can talk about -- specifically about the debottlenecking of FGP and the third-generation plant.

Sure. So Devin, the debottlenecking efforts, as Mike said, we're focused on the third-generation plant that we started up last year. And its original oil capacity is 260,000 barrels of oil per day. So the teams are -- they conducted a turnaround in the fourth quarter of 2025. And during the turnaround, they changed out some of the internals in a major column in that system. It was a very low capital job or modification. And since the fourth quarter last year, they have been testing the performance of that unit and its interaction with the rest of the utilities in the system in 3GP very extensively. So testing different operating conditions.

And we are very comfortable to say today that we have successfully increased the nameplate oil capacity from 3GP or the third generation plant from the original 260,000 barrels of oil per day to 320 million oil -- 320,000 barrels of oil per day, sorry. So -- and what that means for the overall total feed processing capacity, it now takes the total state processing capacity to slightly above 1 million barrels of oil per day. And so we're really encouraged by that. I'm confident that we can sustain that level of performance.

The efforts by the team are consistent with our track record of looking for the technical limits in plant and increasing the capacity. So they'll continue to focus on safely and reliably optimizing the plant and the production, optimizing through the integrated operations center from the reservoir through to the market. So we're really, really pleased with that.

We'll go next to Neil Mehta with Goldman Sachs.

Yes. Thanks, Mike and Eimear. I just want to spend some time on the shale and tight part of the portfolio. And Mike, maybe you can give us how you're thinking about the different components there. The 25% less CapEx per barrel oil equivalent in '26 compared to last year is a good data point. It sounds like capital efficiency is moving in the right direction. Spend a little bit of time in the Bakken as you evaluate whether this is core or noncore and then spend some time in Vaca Muerta. Maybe a quick tour around the world would be great on shale and tight.

Okay. Well, let me give you a couple of comments, and then I have Eimear talk about capital efficiency in the Permian in particular. We're producing on the order of 1.7 million barrels a day out of our shale and tight portfolio. One of the things I'm really pleased with in the new operating model is we brought all these assets together under common management. Previously, we had them reporting in geographically, and we attempted to coordinate across those assets, but it's not the same as having one organization responsible for operating all of them for applying technology to all of them to optimize activity across all the shale and tight portfolio.

And as you know, we've got multiple large assets in there, 1 million barrels a day in the Permian, 400 in the DJ, 200 in the Bakken. Argentina, smaller than that, but growing. And really, out of the largest piece, the U.S. piece, we've got assets that we're working at plateau to generate free cash flow, which is the lesson, I think, that the industry learned over the prior decade when it generated no free cash flow essentially and all the cash went back into growth. At the scale that we operate at now, we could grow these assets further, particularly in the Permian, if we chose but we are working for efficiency, productivity and to generate free cash out of them.

In the Bakken, we're getting to know the asset better. Actually, the person who runs all of our shale and tight came from Hess and is very familiar with the Bakken. And I cited some of the things that we're doing in the Bakken differently already in terms of lateral length and drilling efficiencies, same production with 1 fewer rig. So we're getting to know that asset better as was the case with the DJ when we integrated it. It turns out that oftentimes the things you don't know, you can't underestimate. And we like what we see in the Bakken. We've got to sort through this midstream thing that we get asked about on every one of these calls, and we'll let you know as we've got our thinking and plans together for that.

But it's really been great to see the benefits across the entire portfolio that have -- we've been able to drive by bringing them under common management. One of those being continued capital efficiencies, just when you think there won't be much more and you might have climbed the improvement curve and started to level out, we continue to be surprised yet again that there is more there. And I think some of that is a result of being able to really focus on the performance of these assets as opposed to be driven by growth.

So Eimear, maybe you can talk a little bit more about the capital efficiency, particularly.

Yes. Thanks, Mike. So I mean, the Permian has been operating for the last 5 quarters at over 1 million barrels per day. So they are seeing huge efficiencies with this focus on sweating the assets. So not growing production. Growing free cash flow. Our capital is now, we expect it to be below $3.5 billion this year. So that's a 25% improvement in capital efficiency. So CapEx per barrel of oil over 2025.

It's one of the reasons why we feel confident today to say that we expect to finish the year at the low end of our capital budget range of $18 billion to $19 billion. Maybe a few examples. We have talked before about the drilling efficiencies and the completion efficiencies. But Permian is also seeing the highest reliability it's seen since 2024. And so there's a lot of new initiatives, including optimizing artificial lift, real-time facility optimization, a new approach to ops and maintenance through an asset tiering lens. All of those things are delivering really stellar reliability at surface as well as all of the drilling efficiencies and collection efficiencies that we've talked to you about before.

So we're really encouraged by what we've achieved. And by bringing all of the shale and tight assets together to run them all as one, and we couldn't -- we really couldn't do it without bringing all these assets together because they're all learning from each other.

We'll take our next question from [ John Royall ] with Piper Sandler.

So my question is on the power business, and I appreciate the update and the detail on Kilby. My question is more about how you view the long term for Chevron in the power business. It sounds to me from Jeff's commentary that you're uniquely positioned to serve this market and you mentioned a potential future projects beyond Kilby. Can you talk about how much power could contribute to your business mix longer term? And how should we think about how it fits into the next decade plus of Chevron's growth story?

Yes. Sure, John. Thanks for the question. We're very happy with the milestone that we achieved in June with Microsoft, high-quality customer, a 20-year firm PPA. It really serves more than just that project though. We do see a larger business potential here. Kilby is a good proof point. It demonstrates that there's durable, very high customer demand. It demonstrates that the -- this model, this behind-the-meter power model works for customers. And it also shows that we bring capabilities which are differentiated in this market.

In my comments, I spoke about the structural shift in power demand. A demand far exceeds supply. The grid cannot keep up with the demand from hyperscalers and others. And we see that persisting for years. Our capabilities are deep. Our large natural gas portfolio, our experience in natural gas markets across the country are behind-the-meter power experience around the world in very remote areas where you don't have grid options. You must be behind the meter and you must do so at a very high reliability.

Our complex project development and execution capabilities, these are very large-scale projects. Our customer relationships, partner relationships and other stakeholders to put all of that together takes a long list of capabilities, and we bring those here. When we look to the future, turbine availability is tight. We have some deep relationships with GE Vernova and other manufacturers. We're already talking to them about their cues. I think the Kilby announcement strengthens our position in these discussions, and demonstrates that we're not just talking about potential projects, but we've converted an opportunity into an executable project.

So we'll pursue additional opportunities. We already have some of those discussions well underway with existing and new customers and partners, but we'll also be disciplined as we move this forward. And we'll always focus on value over growth.

We'll take our next question from Doug Leggate with Wolfe Research.

Mike, I wonder if I could take a little bit of a longer term view. The U.S. has perhaps become -- it's back in everybody's focus as a safe source of energy supply. And you paused your growth trajectory in the Permian some years ago to inflect to free cash flow. My question is, you've got a lot of things going on in the portfolio today. Guyana is inflecting to free cash flow. You've put a lot of stuff in the portfolio beyond your current plan. Where does the Permian fit? Could we see that go back to growth in the post 2030 outlook?

Yes, Doug, thank you. Listen, Actually, it was just last year that we took the Permian to plateau, not years ago. And if you look at it, it has continued to grow. And we can -- I can have Jeanine to follow up with you off-line, but it actually has crept up and is still growing. But the point here is we really want to turn the organization to focusing on the efficiencies and productivity that Eimear talked about earlier, and we're seeing that in the Permian, we're seeing that in other assets as well.

Could the Permian grow? 100%. But we've learned the lessons that at some point, you want to see free cash out of these assets and we're seeing that in significant quantums. We're working hard on technologies that can change the equation. And we've talked in the past about advanced chemicals. We can talk about it more. We've talked about AI, and there's a lot of interesting things going on with AI. We maybe haven't talked much about simulation technologies, but we're working on both incremental and potentially novel improvements to stimulation. We're leaving 90% of the molecules in the ground, there's a huge incentive to figure out how to unlock all of that.

And so as we work these technology levers and see performance improvements, it changes your options. You can extend the plateau and hold to plateau. You can create more value in a plate. You can create more value in growth. We have thousands of well locations today as we use technology to unlock horizons or benches that may not be economic using today's technology, that inventory of drillable locations goes up. And so this is an asset that is incredibly advantaged given our long history there, given our royalty position there. And we are going to work it to create value, not for a year or 2, not growth for a year or 2, but value long, long, long into the future. And I expect we will unlock options like those I've described over the coming years.

Let me just talk a little bit about growth because that's really what kind of your question gets at, and I get this from others. There's kind of 3 buckets that I think about our growth opportunities in. One are the things that are enhanced. So our massive shale portfolio and the ability to further improve that. Guyana, which we've talked about. The Eastern Med, where we've got a project underway to expand Leviathan, we're moving towards FID on another project at Aphrodite. Argentina, where we're continuing to see policy move in a good direction and there's enormous resource potential there. West Africa, we've got a lot of captured opportunity today that creates growth options, not just for the next few years, but well into the next decade.

The second bucket are announced business development advancements in some of our exploration. So new entries into Libya, Suriname, Namibia, our continued leadership position in terms of acreage in the Gulf of America, all the new exploration acreage that we've added over the last few years. And then the third bucket are what I'll describe as special situations that we have some control over. Venezuela is one of those. We're in negotiations right now to try to improve the fiscal terms and enable more investment in Venezuela. A second one of those would be the Iraq situation where due to the circumstances Lukoil found itself in, it has stepped away from West Qurna 2.

The Iraqi Prime Minister who was here recently, we've signed some agreements with them. And there is significant potential at West Qurna 2, Nasiriyah and in Iraq. And then the TCO concession, which I didn't address in my response to Devin, but we're into our -- well into the negotiations on that. Obviously, massive resource potential there, a field we know well. And so broadly speaking, we have a lot of growth options in hand. And we will pursue those that are the strongest. We will remain capital disciplined and the Permian is one of many options we've got out over into the next decade for growth.

We'll take our next question from Arun Jayaram with JPMorgan.

Mike, I wanted to get your perspective on Iraq. You look to be close to an entry to operate West Qurna 2 and Nasiriyah. I'd love to see how you think that this Iraqi opportunity could compete for capital in your portfolio, how you view overall commercial terms, cost of supply and how you think about managing some of the aboveground risk?

Sure. So obviously, potentially huge resources, third-party data on West Qurna 2 alone is gross oil potential well into the billions of barrels. It's one of the largest oil fields in the world. We're advancing discussions to align on the key commercial and economic principles for future contracts. It's a new form of contract. This month, we signed some follow-on agreements that significantly advanced the commercial discussions at both West Qurna 2 and Nasiriyah. And so we see a very encouraging set of signs from the Iraqi government. The terms look like they will be competitive within our portfolio. We still have work to be done to nail down all of the details.

And then there's a cross-border pipeline concept that would allow alternative routes to market, north through Iraq and potentially either through Syria or Turkey or perhaps even both to get to the Mediterranean. We've got a framework established to evaluate that. We've talked to a number of interested parties that would participate in that. We would have a share in it, but many others would also have a share in what we're talking about.

All this needs to get to final agreements, but it's advancing at pace. The Prime Minister, in particular, has been personally engaged and very supportive. We appreciate the leadership from him that's made this progress possible. And we look forward to continuing the discussions in the coming months as we reach any final determinations, of course, you'll hear about it when we do.

We will take our next question from Steve Richardson with Evercore.

This is probably a good one for Eimear, but I'd love to just dig in a little bit on the achievement of the $3 billion of cost savings of schedule and the 70% kind of from efficiency gains. I was wondering if you could maybe just give us a sense of where you're seeing outperformance versus the plan? What have been some of the surprises? And what are maybe some of the chunkier elements of what you're seeing as you're attacking these costs and then your confidence level on kind of, as you mentioned, sticking these costs and not falling back into a kind of inflationary trap, if you will.

Yes. Thanks, Stephen. So yes, we're absolutely thrilled to be able to share today that we achieved the $3 billion of structural cost reduction ahead of schedule. It's a testament to all the teams around the organization. They've been relentlessly focused on this, so achieved great results. 70% of the results are associated with efficiency gains. And maybe what I'd point to there is we went through a massive restructuring, rewiring of the organization last year. So that is impacting the results by 35% of the 70% that I referenced. And then the balance is associated with a combination of technology achievements, improvement initiatives across the organization and other things.

So maybe a couple of examples to demonstrate our confidence in the sustainability of these savings. The first thing I would maybe point to in the new ways of working or rewiring. We've pulled a lot of our work in to centralize functions and we have a technical center that allows us to do things across the organization like centralized and standardized engineering work orders, for example. And so that is something new, and we're seeing results there.

Another good example would be the way that we are looking at maintenance reliability. We talked earlier about the shale and tight business. They're running as one all together, learning from each other, and they have predictive maintenance that they haven't place in all of the assets that is delivering results, much more proactive in detecting anomalies and ensuring minimum loss production. And then maybe a final one that I would talk to is around one of the improvement initiatives that's inspired by benchmarking and rigorous benchmarking, and that is turnaround optimization and what the teams are doing to tighter control scope, prioritize sequence, learn from each other. Those are the examples.

So I call out these examples because there are things that are now built into the business we're very confident that we'll continue just with this focus that we have. Costs always matter. They always will. We're never satisfied, and we're never done. And we have a very strong culture across the organization and paying attention to this always. So thanks for the question.

We will take our next question from Biraj Borkhataria with RBC.

I just wanted to follow up on CPC again. This is obviously a very significant pipeline that serves your asset, also a number of your peers. So I suspect there's a number of governments involved trying to solve this issue. But could you just kind of clarify if CPC pipeline is closed for an extended period of time, how much of that 1 million barrels a day of liquids could be evacuated by the alternative routes? And then related to that, in the Middle East, there's a lot of discussion at the moment around building alternative evacuation to reduce the risk from the Strait. I'm just wondering if anything incremental is being discussed here. I know the geography is obviously very challenging, but any thoughts on that would be helpful.

Yes. Braj, clearly, with the CPC being the primary evacuation route, if it were to be shut down for an extended period of time, that will create issues for all the shippers on that line. And that's number of different projects in Kazakhstan, a little bit that comes in from Russia as well.

I mentioned our alternatives before. I don't think we've quantified those and I don't intend to. But you've seen creativity in the Strait of Hormuz over the years, we've had to use some creativity at times with CPC. But I will say the commitment to keeping it open from all the parties that rely on and all the governments that rely on it is very, very high. And I have a great degree of confidence that, that commitment is real and that we'll see the CPC. I won't say never interrupted, but I don't think that the scenario that you pose is a highly likely scenario that they'd be intended and extended shut-in.

On your second question about the Strait, I'm not sure I've fully understood it. I mean, I think you're probably aware of the kinds of things that have been done, the shuttling through the Strait, the loading outside the Strait, the pipelines, there are a number of different workarounds that have helped continue to establish some degree of flow through the Strait, those are the short-term actions and then the kind of the medium-term actions I talked about. One of them with the pipeline that we're evaluating to move to the Mediterranean. There are other ideas like that, that are being advanced by others.

We'll take our next question from James West with Melius Research.

Wanted to -- you're very eloquently shifted a question on the Permian earlier to really walking around world, demonstrating the optionality that you've put in place in various markets that are now turning into signed agreements and action. I wanted to dig in a little bit deeper, I wouldn't ask you to walk back around, but on exploration in particular, that I'm thinking, Libya, Namibia, Greece, where are you kind of most excited? Or do you think you have the best upside potential? And where do you think maybe we as the market are kind of missing? What you're up to?

Yes. Thanks, James. I'll start by saying that this is the largest and highest quality opportunity set that we've had in years, probably in my time in this role. We haven't had this deep inventory of opportunity. We're building quality through choice. We increased our acreage by 35% and over the last year or so. We've closed on 10 million net acres just this year in South America, in the Mediterranean and the Gulf of America primarily. We've got a strong presence in Guyana, which I won't spend any time on because I think that's pretty well understood, but there's still exploration potential there.

West Africa, the deepwater of both Nigeria and Angola is relatively underexplored. And we're actively working with that. I'm very optimistic that large basins like that, that have a proven petroleum system offer more opportunity for us. We've got another well. We intend to put that in Namibia, where we've seen success. So West Africa is a place I'm very excited about.

The Mediterranean is interesting. We've got some success we've had off Egypt. We're a partner in a well that one of the operator has talked about on their call this week where there's been a working petroleum system that's been established, which is important in exploration to understand that. So there are opportunities there in the Eastern Med that we like. The Middle East, again, I think, kind of speaks for itself.

In Iraq, we've got both operating fields and associated exploration prospects that come with them that our exploration team, I would just say their eyes get wide open when you start to look at some of these structures and the analogs that are in the area around them. And so we're going to be disciplined in the way that we advance through that portfolio. We're going to be using these new tools. And this is an area where AI will definitely change. Cycle time, it will change our ability to see things that previously we may not have been able to see, and I expect that it will change outcomes.

And the last thing I'll just say is we're already seeing some results. Over the last 5 years or so, we've had 5 different discoveries or successful appraisal wells in the Gulf of America, in the Partitioned Zone, in West Africa. And I mentioned the well of Egypt that we're a partner in recently. And so we're already seeing the early signs of this portfolio yielding different outcomes. We'll be talking about this a lot more in the years to come.

We'll take our next question from Sam Margolin with Wells Fargo.

Maybe switching gears to natural gas, the gas market in Europe is exceptionally tight right now. Chevron in Australia typically has a volume ramp Gorgon and Wheatstone typically have a little bit of a volume uplift in the second half of years starting in the third quarter. Can you just talk about your available LNG position right now and optimization opportunities that are put to you to kind of solve this European shortage?

Yes, Sam, we do see some seasonality in Australia. And so cooler weather is better for LNG facilities than hot weather. Most of our Australian LNG is termed up with customers in Asia. We do have some spot cargoes that we move, but it's far and away the smaller portion of our production there. West Africa, we moved LNG up into Europe more steadily on some shorter-term contracts and a fair amount of spot out of West Africa. And then we've got a growing position here in North America, where we've got 4 million tons per annum that will come in over the next few years, and that is primarily going into Europe.

And so I would say Australia is probably the longest pot, if you will, it's the furthest away. We've got it pretty termed up. And Asian spot markets have been very strong as well. And so you see JKM and TTF both are -- have been firming. And I think the demand in both North Asia and Europe is likely to continue to be pretty strong here over this next period of time. And so we'll do the -- we'll make the best sales into each market and continue to operate at a high reliability, which I'm really pleased to say our Australian assets are operating at.

We will take our next question from Manav Gupta with UBS.

A lot of questions on CPC. I was hoping I can talk a little bit about CPChem. A big jump in earnings. Obviously, global product inventory, everybody talks about refined products is depleted, but so is the polyethylene side depleted. Multiple global crackers are also struggling, and you have a very unique portfolio, but most of it is in North America. So if you could talk about the leverage that CPChem has in this environment of elevated polyethylene margins.

Yes. I mean, I think you've mostly answered the question yourself there. CPChem's primary footprint is in North America. There's some production in the Middle East, which obviously is constrained right now given the circumstances with the Strait. But CPChem cracks ethane primarily and primarily in North America. Those margins have been under a lot of pressure over the last few years. They've been buoyant to say the least, over the last few months as we've seen naphtha out of the Middle East constrained, which mostly flows into North Asia for naphtha crackers, which are normally the price setting mechanism out there in the marketplace. And ethane crackers are lower cost, the margins tend to be better and in an environment where you get production tightening up the way that it has, CPChem is advantaged in this kind of an environment.

We'll see how long it lasts. I can't predict when things in the Strait will settle down, and we'll start to see those flows again. But very pleased with the performance in CPChem right now.

We'll take our next question from Jean Ann Salisbury with Bank of America.

Can you discuss your decision to license your surfactant technology versus keeping it in-house? How did you view the pros and cons there? And how large could this revenue stream be?

Jean Ann, I'll take this one. Yes. No, we're really excited about this. Look, the rationale was really just to explore another pathway for innovation. Advanced chcemicals is such a focus for us with regards to improving recoveries, as Mike talked earlier, for our entire shale and tight asset class. And we have a lot of work underway deploying pilots, trying different chemicals and an opportunity to work with a partner that has manufacturing capability, distribution capability and pumping service, quite frankly, allows us to co-innovate with them and accelerate scaling this technology with speed.

So I mean, that's overall the rationale. We have a lot of NOJV volumes. And therefore, having a partner like ZL allows us to benefit from those volumes, offer this to our NOJV partners, and it's a win win-win. And overall, we see it as a way to accelerate our progress on doubling shale and tight recovery across the shale and tight basin. So that's the rationale.

And Jean Ann, you asked about the materiality. The contribution from recoveries will be much larger, I think, than the licensing revenue. We'll get licensing revenue from it, but in a company our size. The real opportunity is on the application of the chemicals.

We'll take our next question from Betty Jiang with Barclays.

Probably a question for Eimear on the long-term CapEx. You mentioned earlier that Permian is falling below 3.5 and a lot of that is in driven by capital efficiencies, which I would imagine will also put downward pressure on that Permian CapEx going forward. But at the same time, you have power that's folding in as well. So could you just remind us what's driving the range for that long-term CapEx and whether we could be seeing that number trending lower as well?

Yes. In terms of the long-term range that we shared last year at our Investor Day, so we provide a range of $18 billion to $21 billion. Obviously, this year, our budget is $18 billion to $19 billion. But that range represents the opportunities that we have over the course of the next 5 years. Within that, we had expected to have a power project within that capital range. And so the one that Jeff talked about, product Kilby, is reflected in both the organic capital outlook and range and the affiliate capital outlook and range.

And so at the end of the day, we're going to be capital disciplined. Mike talked about all the growth options that we're stacking up around the world, both power and on the upstream side. And so we'll continue to be disciplined, but we believe that, that range gives us enough for the options that we have on the table today.

We will take our next question from Nitin Kumar with Mizuho Securities.

I want to shift gears a little bit. Obviously, refining had a good quarter given the macro environment. Mike, I was wondering if you guys would be willing to talk about what do you see as the outlook post the war? Are you seeing any evidence of demand destruction as things remain tight. What's your view on the cracks here?

Yes. So I'll be brief here because I want to give everybody a chance on the call. Middle distillates are really the tight spot right now. Initially, it looked like jet, now diesel. European diesel demand was weaker in the second quarter, which I think is what really kept global inventories from drawing further than they did. That may not hold up as we get into the third quarter. You've got restocking of heating oil ahead of winter that is kind of upon us or soon to be upon us. That lands on top of the export ban from Russia, refinery outages in Russia, the obvious constraints that exist in the Strait.

And then mogas inventories are low as well. And so products are tighter than crude around the world. And that's why cracks have widened out. I think the question is, when does -- when do we get crude flows reestablished? And when do those cracks come back in? Hard to say. So I think we're going to see some upward pressure on product pricing here into the third quarter and perhaps beyond that.

Demand destruction is not obvious to me at any significant scale. China is a black box. And so that's the big question is what's really going on in China? It's difficult to shift demand as rapidly as their crude purchases have come off. I think they've got some flexibility to do so. Other Asian markets that have seen actual physical constraints, there's likely some demand destruction in some of those markets, at least in the short term. But in terms of longer-term structural demand destruction, I would say it's hard to find evidence of that at this point.

We will take our next question from [ Bob Brackett ] with Bernstein.

If I think about Project Kilby, you've talked about expected mid-teens returns, and that's really a ring fence around the take-or-pay and standing up that power gen. Are there additional opportunities to create value given that you're sitting there in county with plenty of acres and plenty of wells. Is that additional add-on value potentially?

Yes. Thanks, Bob. There could be. There could be expansion potential on the Kilby site after the first phase after we ramp up to this 2.67 gigawatts. None of that has been agreed or negotiated yet with Microsoft. But obviously, their demand needs continue to increase, and we'll work with them to see if we can supply those while meeting our return thresholds. I talked about the potential to scale this business further. We don't see Kilby as a one-off. This is a very durable macro demand environment. Really, the depth of our capabilities are unique and differentiated here.

Microsoft certainly saw that with Kilby, and there are others who are interested in where can we grow beyond this, both in West Texas and perhaps other parts of the U.S. But look, as we go forward, we're always going to be disciplined with this. We were very disciplined on Kilby. We had a firm requirement for what we needed to do for our shareholders, both returns and value. We're going to hold to those going forward, and we'll provide additional information as new growth opportunities emerge.

We'll take our next question from Jason Gabelman with TD Cowen.

I wanted to ask on Venezuela. I imagine you're getting to the point where the amount that they owe you is going to be fully repaid. And I wonder if that point do your contractual terms shift to the new fiscal framework that they're developing? Or is there something in place right now that you would lift under? And then more broadly, how are the contract negotiations going to unlock additional volumes there? And how do you think about both incremental investments and incremental production growth over the medium term?

Okay, Jason, I'll maybe try and hit this one. On debt recovery, we are continuing to recover our debt. We expect that by early 2027, that will be fully recovered. In terms of our JVs, today, we are operating 3 JVs very successfully. We've grown production over the last few years from 40,000 to 250,000. With the existing model that we have in place, we have grown the production from those 3 JVs, 15% over the last 6 months to 280,000 barrels of oil per day, and we're anticipating that we will be able to grow up to 50% between now and the end of 2028. So everything with Venezuela operationally is going well and consistent with what we had communicated.

With regards to the opportunities, obviously, we've been in Venezuela for 100 years. We stayed there because of the potential in the country and the assets. We love the assets, heavy oil that's there. We have a lot of experience in this space. So we are actively working with the government to look at other opportunities. We'll be disciplined. At the end of the day, the terms that we're discussing are confidential, but they have to be competitive, and they have to compete in our portfolio for capital. But I want to leave you with, we're very encouraged with where we are with Venezuela on the additional opportunities.

Our final question comes from Phillip Jungwirth with BMO.

Can you update us on your latest thoughts just around future investment across Argentina in the Vaca Muerta, Eimear? I think you were down there in May, and we saw some reports around over $10 billion development. It's always been a large contributor to other shale and tight. So just hoping you could update us on the potential here and what gives you the confidence now to push forward.

Yes. Thanks, Phillip. Well, we are really excited about the opportunity in Argentina. And we've obviously got history there, 3 development areas that we are an operator in or in a nonoperated position. We are producing 80,000 barrels a day from Argentina, 70% -- 75% oil cuts. So we like the products from Vaca Muerta. And we're leveraging the lessons from the shale and tight asset business that now includes Bakken and DJ and Permian to really look at how to deliver on the growth that we shared in our Investor Day, which is 3x -- to grow at 3x by 2035.

I think the engagement that you might be referring to was with the Minister of Economy, and we had a discussion around the rig framework that has recently been extended to oil and gas. And so we have applied for the El Trapial, an application for that asset. And this framework gives us 30 years of fiscal stability, incentives like accelerated depreciation and tax incentives. And so that makes Argentina look much more competitive from a growth option for us. So again, we'll continue to be disciplined, no change in the near term, but obviously, a lot of opportunity to grow.

Okay. I think that's the last question we have. We'd like to thank everyone for your time today. We appreciate your interest in Chevron and your participation in today's call. Please stay safe and healthy.

Katie, back to you.

Thank you. This concludes Chevron's Second Quarter 2026 Earnings Conference Call. You may now disconnect.

Good morning, again. This is Arun Jayaram from JPMorgan B&P OFS and Integrated Oils Research team. We're thrilled to have Chevron as one of our keynote and most important presentations at this year's 11th Annual Natural Resources Conference. Everyone knows Chevron -- Chevron is one of the world's leading integrated oil companies with operations spanning upstream, downstream, and chemicals globally.

We have Jeff Gustavson, who leads the Chevron's New Energies team, which is building a lower carbon business through hydrogen, carbon capture, renewable fuels and more. He's President of Chevron New Energy. He leads, again, the lower carbon efforts, hydrogen, carbon capture, renewable fuels and more recently, he oversees Chevron's enterprise-wide AI initiatives. Jeff joined Chevron in 1999 and has broad career in finance, strategy, trading, Investor Relations and upstream. So you've done a lot, Jeff. So welcome to joining us today at the conference.

Thanks for having me.

Well, Jeff, just to set the stage, we've seen a lot of volatility in 2026 with the Iran conflict. Can you talk to Chevron's positioning in this moment? And how does the company respond to a rapidly changing macro environment?

Yes. Thanks, and thanks for having me. Thanks for the introduction. It's good to see everybody. I think one word to sum that up in this environment is consistency. We really pride ourselves on consistency. This is a long-term business. There's lots of ups and downs. We're seeing that more than ever right now in this environment, consistency really, really matters to us. I think there are kind of 3 lenses. First for us is execution. Everything goes to safe, reliable execution for us. Sometimes taken for granted. It's not taken for granted by us, especially when you're in volatile macro environments, up or down. You have to be able to execute with excellence and something we work very hard to do every day.

Second is strategy. We really pride ourselves on a consistent, durable strategy. We do think when something happens, is it something that's temporary? Or is it -- does it represent a structural shift in the market? It's very important to make that distinction. And you mentioned when I started with the company in my 27 years, there's at least a dozen, if not more, very disruptive events, which have occurred. Very few of those were structural shifts in the market, which would lead to potentially shifting a part of our strategy. But absent that, consistency is the key. If I think back the demand growth from 2005 to 2014, driven by China, increasing price environment, there was a shift in our strategy and industry invested into that shift.

From 2014 to today, and you just had -- you had Clay up here who we're partners with in the Permian, you had the -- we're living in the shale and tight era. There was a shift in our strategy around that. And now recently, there is a shift, which we see, which is not temporal, but more structural around AI and power. And I know we'll talk about that. The third area for us, Arun, is the financial priorities. regardless of what environment we find ourselves in our financial priorities are always unchanged, and we've been very consistent in that regard as well. So consistency is the name of the game for us.

Great. Jeff, let's zero in on your part of the portfolio, very broad mandate as the President of New Energies. Could you talk about some of the core businesses within your preview -- in your purview, pardon me? And how do those fall within the broader Chevron strategy?

Yes. So we started Chevron New Energies 5 years ago. It is consistent with our strategy, leveraging our strengths to deliver lower carbon energy to a growing world. We think about 3 things when you look at these new businesses. Is it a business or an opportunity that can scale? Is there a customer that will pay for a lower carbon product or a solution that will increase demand over time. That's #1. #2, it has to fit our capabilities. There's -- we say Chevron can do anything. Chevron shouldn't necessarily do everything. There are some things that we're very, very good at. And there are some things that we need to rely on partners to be better at.

And the third is can we drive -- will these investments drive value for our shareholders. If those 3 aren't true, we don't invest. We started with a portfolio of -- you mentioned them in my introduction, renewable fuels, renewable natural gas, carbon capture and storage, hydrogen offsets, lithium more recently and even more recently, power, large-scale power for data centers. All of those, we thought leading into them fit those 3 categories. Can they scale? Do they fit? And can they drive value? Look, some of those have been slower. The market has developed more slowly than what we initially anticipated. We recognize that. We have taken a very pragmatic disciplined approach to investment in this space. If you don't have large-scale hydrogen customers for a project, you're not going to invest large sums of capital in the hydrogen project. It's not a good answer for investors.

Others have moved much more quickly, power, lithium, and we're investing more heavily in those areas. We'll always take that approach. It goes back to the consistency. We're not going to overreact to a lot of words that are being said in the market. And now when you're not hearing as much about some of these lower carbon solutions, we're not going to overreact and wipe all of these away. We'll stay consistent with our priorities here. Okay?

Well, let's dive into the breaking news and hot topic, power. Congratulations on your news yesterday. I know it's something you've been really working on for some time now, where you've entered into a behind-the-meter power project with Microsoft in West Texas. Before we get into the details of that kind of landmark agreement, can you talk a little bit about what makes Chevron differentiated in this space?

Sure. And thank you for that. It was a big -- very big announcement yesterday. We're very happy to have made that announcement with Microsoft. It did take a lot of work to get to that point. Just for context, -- and everyone is aware of this. Demand for electricity in this country and globally is far exceeding supply. This is an issue for consumers with higher electricity prices, we're already seeing that. It's an issue for companies who need and want to scale AI, including our company. And it is an issue for our country, which is in an AI race. So we saw this demand -- supply-demand disconnect, and we think the project we announced yesterday, which is called Kilby is a part of the solution for this. I'm very happy to have made that announcement.

Look, what we bring in this space, there's 3 big things. One, we're one of the largest natural gas producers in the United States. A lot of this problem, this energy shortage will be solved with natural gas. It's the most reliable, most affordable product that we have is available today, and we're a large player. Second, we have a lot of behind-the-meter experience around the world. We have experience in parts of the world where there is no electricity grid of size, Kazakhstan, Northwest Australia with our large LNG facilities, where we have to bring our own power and operate that power at a very high level of reliability to meet our needs. This was a conversation we've been having with multiple hyperscalers for well over a year and explaining kind of how this worked. This was a new concept for them. It's something that we excel at.

And third is partnerships. And I know that sounds a little softer, but that's really what made this happen. Our partnership with GE Vernova to be able to secure equipment early, which is a bottleneck in this space, our partnership with Caterpillar, which is also supplying equipment, our partnership with Microsoft. We've been a customer of Microsoft for 10 years. They know us. We know them. They were comfortable working with us. Our partnerships in the EPC space to be able to now build this facility for them. All of those came to bear to really drive the announcement that you saw yesterday. I couldn't be more excited about it.

And what do you think makes this market so attractive to Chevron?

Several factors. I mean, one, I go back to that scale fit and value. The macro is not going to change. I said this is a structural shift around power demand. It's a structural technological shift with AI. So this is an attractive market for us to invest in. We bring deep capabilities that differentiate us with other market participants. I could not pick a better customer than Microsoft, AAA credit, long-term power purchase agreement, now giving the company access to a diversified revenue stream that's not tied to our traditional oil and gas revenue stream. That opens up all sorts of possibilities with project financing, bringing other partners in over time.

So this is a high-quality project. It differentiates us in our peer set. And we are very excited to work on this. I think you asked about the returns. We said early on, we have very firm return thresholds to enter into this new business. It has to compete with other capital that we can put to work in the company. This project does that. We were targeting mid-teens returns, and we think we can deliver that on this development.

Jeff, can you provide maybe a little bit more details on the project, some of the kit required, but just a little bit of details on this power project with Microsoft.

Yes, 2.7 gigawatts or just under 2.7 gigawatts. Obviously, West Texas, just south of the town of Pecos in West Texas in the heart of the Permian Basin. We selected this site, obviously, to use the very abundant natural gas resource, very low-cost natural gas resource. We'll use a mix of large GE Vernova turbines and smaller Caterpillar turbines. I mentioned Microsoft as the counterparty on a 20-year PPA, really provides a foundation or a platform for future growth.

And then maybe the steps from FID to initial power in West Texas?

Yes. So yesterday, we announced the formalization or finalization of the power purchase agreement. That is the foundational commercial agreement to make any of this happen. It's a little different than some of our traditional projects. The best analogy are our LNG developments where you tend to presell the molecules before you take an FID decision. That's what's happening here. So we now have the commercial framework. We'll now finalize some of the permits. We'll finalize some of the cost estimates with EPCs and other contractors. We have a little bit of work to do on the gas supply, although we don't expect that to be an issue sitting less than 20 miles from the Waha hub. And we plan to make an FID decision before the end of the year to move forward on the project.

Yes. Maybe could you talk a little bit about the decision to go ahead and secure the GE Vernova turbines because you had to think ahead to get ahead of the market kind of bottleneck.

We did. And that was a move we made really 2 years ago. We started to think about this about 3 years ago and really started -- really leaned into that commitment 2 years ago, which gave us an advantage on this project. And that couldn't have been done without a deep long-standing relationship with GE Vernova. That's not something that you can create overnight. That comes after years and decades of working together all over the world. But look, it goes back to my earlier points. We saw how this macro was developing. We were going to be short on power. Natural gas was the solution for meeting customer needs. You had a set of -- you have a set of customers on the hyperscaler side that need large-scale power on a very short time line at a competitive cost.

And by the way, they're interested in lower carbon solutions over time. That's a really good market environment for us. We pair that with those capabilities I mentioned earlier, gas supply, our behind-the-meter power experience, other partnerships that we can bring to bear gave us the confidence to lean in and actually reserve the equipment before we had a project and before we had a power purchase agreement. But it's great to reach the milestone that we reached yesterday.

Yes. Chevron has talked about being uniquely positioned to serve the AI-driven power demand market. How should we think about this Microsoft agreement? Could this be the first of what could be a scalable, durable business for the company?

It could be. I mentioned a few points earlier, high-quality project with Microsoft long term meets our returns thresholds. That's the starting point for us. We talked a lot about that at our Investor Day when we kind of unveiled the West Texas development. We didn't announce who the partner was at that time or who the customer was at that time, but we talked a lot about it at that conference. We see this as a differentiator for us in our specific peer group, but broadly, there have been, I think, at last count, 60 or so projects of this size and type announced around the country. Very few of them have reached the milestone that we reached yesterday.

So we've now proven that we can do this, and we feel like we're ahead of the market and potentially doing more of these. And that's the third point. This does represent a platform for growth for us. I talked a lot about the macro. This macro is not going away anytime soon. We will be disciplined as we move this ahead, but you can bet we are already looking at other options with Microsoft, with other companies that are in this space. So if we can get to a returns equation that works for our company and our shareholders, you can expect to hear more from us going forward.

Can you maybe tease us what you see as the potential of this business at Chevron longer term?

Yes. I mean this -- look, Chevron is a very large business. We have a very large oil and gas business. We made that business even larger and better last year with our acquisition of Hess, bringing us Guyana and the Bakken and some Gulf of America assets. So it takes a lot to become material in this size of a business. But look, these are attractive returns for us. I really like the revenue stream here, which is differentiated from our oil and gas revenue stream, allows us to project finance this to minimize the capital commitment we're making in this.

And by the way, what we announced yesterday had already been factored into our existing capital guidance. So none of that changes with the announcement yesterday. You could see this being a business over time that could be in the billions of dollars in terms of free cash flow. We're not there yet, but that's what you could see. Now this is a company that generates later this decade, close to $30 billion in cash flow. So it will take a while to become a real material part of the portfolio, but a very exciting announcement for us yesterday that potentially gets us on that path.

Okay. Great. Naturally, from the investment community, there's going to be more demand on specifics, capital spend, milestones, returns, cash flow from projects such as this. When can we expect to hear more details around this project plus the longer-term opportunity set here?

So we're going to dedicate some time on the next earnings call to talk more about this, our 2Q earnings call in late July. Expect to hear more then. And then expect to hear more as we approach the FID decision later this year where we'll talk even more about this project. So that's what's to come.

Okay. Shifting gears a little bit. AI is creating demand growth in power, which you've mentioned, but it's also changing how companies operate. As the leader of Chevron's enterprise-wide AI program, can you maybe start with the company's AI strategy?

Sure. And this is something I assumed responsibility for about a year ago, very exciting space. And there's a connection with what we're doing here with Microsoft. We're now building power for Microsoft's large-scale data center, which we will then use some of that compute to actually power AI inside of our company. So there's a symbiotic synergistic relationship between the 2 companies. Very high priority for us because of the value potential. For a company of our size and the use cases we have across the company, this could be very, very, very, very big. We're running it like a business. This isn't free. We all have some of the LLMs on our phones, and we pay a small amount every month. Some of that's increasing to kind of do -- have some functionality with these tools. When you're looking to scale this across a very large enterprise, it's not free. There's an investment that comes with that. We're really looking at this like a business investment. That business has to generate a positive return.

There are 3 focus areas for us; individual productivity, transforming workflows, connected workflows across the company, think some of the larger workflows. I can talk more about that in a little bit. And then some business-specific opportunities, businesses that can be almost supercharged with large-scale deployment of artificial intelligence. On the strategy, maybe more broadly, we have to prioritize where we deploy some of these. We can't just do AI everywhere all over the company. So we're spending a lot of time really focusing in on the bigger value opportunities to drive value sooner. We'll leverage partnerships. I mentioned the partnership with Microsoft. That's a big one, but there will be many other partnerships, companies that we work with outside -- outside of ours to help us scale this.

And then the last one is folks are focused on the tools and the technology, and that's certainly a part of this. But the culture, the change management, the impact on our employees, the impact on organizations, that's really what will drive sustainable competitive advantage here. And so we're spending a lot of time working on that as well. That gives you a little sense of our strategy.

Yes. Can you maybe dig a little bit deeper and talk about some of the use cases you're seeing thus far and some of the most compelling opportunities to leverage AI?

Yes. And we've been at this with a dedicated group, central group for about 3.5 years. Our digital strategy goes back a decade or more. It's always been a real focal point of the company. We really see this year as an inflection point for us internally on artificial intelligence. We've expanded the group significantly. We're running this centrally so we can prioritize. We're seeing a lot of progress on workflows. So as that middle bucket that I talked about earlier. When we looked across the company and looked at everything that had kind of an AI tag associated with it, we had almost 1,000 different opportunities that were happening in different parts of the company. We pulled all of those together. We narrowed it to about 500, and then we narrowed it further to about 50 real needle-moving opportunities, things where we could deploy AI in a matter of months, drive shorter cycle times and just better business and other decisions across our business.

Some of the areas, there's a lot of areas that I'm excited about, but some that come to mind, supply chain, a big opportunity in our supply chain, the amount of money that we spend, the amount of leakage that's there, the help AI can provide in negotiating contracts. That's one. Our drilling operations, particularly in the Permian, big, big use case there, capital projects, including the one that we just announced with Microsoft yesterday. And then production optimization, the thousands of wells we have operating all over the world at any given time, being able to optimize the output in all of those wells at the lowest possible cost.

I mentioned the big business opportunities earlier, a different pillar that we're focused on there, our shale and tight business is just ripe for AI enablement from the subsurface in the Permian, where we have a real data advantage over our peers, visibility into 1 in 5 of every well that's drilled in the Permian, we have access to imagine putting all of that data into a foundational model that can drive just differentiated decision-making across the basin. We're doing the same thing in our exploration business, 100 years plus of data oftentimes unstructured data, think maps sitting in warehouses, digitizing that, again, building a foundational model to see things that could have been missed in the past. How we manage our commercial and trading operations is another really exciting use cases. Those are some of those big, big business use cases, which you should expect to hear a lot more about in the months and years to come.

One of the questions I get from investors is really on the exploration side of the business, how can AI help companies find resources. I know Chevron is committed to increasing your mix of exploration spend a little bit. Could you talk a little bit about how you're leveraging that a little bit more in terms of subsurface?

Yes. We have made a deliberate, I wouldn't call it a shift, but we're really deliberately leaning into our exploration space. We made some organizational changes here recently. We've really expanded our footprint globally. AI is a fundamental part of what that group is doing. So part of this is having all of that data at a, say, geologist, geophysicists fingertips to dramatically reduce the cycle time required to assess a new exploration frontier area. I mean some of these areas, it can take months, even years to do the seismic and other interpretation to get to the confidence of drilling that first exploration well. You can reduce that by 50%, 60%, 70%. There's significant kind of G&A and speed benefits to that.

But we want to take it a step further. It's not just about reducing the cost of exploration, it's about improving the probability of success. So again, using those tools to see things, using these tools to interpret seismic in a different way to use new technologies like spatial high-grading, full waveform inversion, things that I'm not an expert on, but you see the potential of AI married with some of these really deep technical computational tools, improving the probability of success is really will be the secret of our success here. That's really the needle mover for us in exploration and AI.

We're happy to entertain questions from the audience. While we wait for the roster, maybe just give us a little bit of an update on what you're doing in hydrogen and carbon capture?

Yes, I called -- I referred to these as more in the optional category right now. They are important lower carbon solutions. They have moved more slowly than maybe what was anticipated several years ago. For CCUS, we already have one of the largest CCUS projects anywhere in the world associated with our Gorgon LNG facility in Australia. We're looking at some Gulf Coast hubs, capturing our emissions or third-party emissions. This power announcement yesterday, this is something that we've talked to hyperscalers about. Could you put carbon capture on the back end of one of these facilities? More difficult to do that in West Texas and the Permian, not impossible, but more difficult than it would be in the Gulf Coast. So that could be a part of our future CCS plans.

In hydrogen, we have started up and commissioned one of the largest green hydrogen projects anywhere in the world. It's called ACES in Utah. It's a very unique project that has on-site geologic salt dome storage of hydrogen. So there, you can use renewable electricity. The cost is low with water to produce green hydrogen, store it and then actually sell it to a power plant that sits next door and generates electrons that are exported into the California market. Sounds complicated. It is a complex project, but one that works -- one of the few projects that really works at scale, which we are involved in. So those are a couple of examples for CCS and hydrogen.

Okay. Well, Jeff, we're at an investor conference. I'd love to see if you could end maybe on the value proposition of owning Chevron stock today, which we find very compelling from a valuation opportunity set.

This is an easy one for me. Our free cash flow and production growth trajectory today is very exciting. We've talked a lot about that. It's underpinned by a very strong portfolio, which we made even stronger last year with the acquisition of Hess. Our capital discipline, which is always lasting and cost management, we went through a lot of hard work last year to really transform our organization, how work gets done. We're seeing early benefits of that, but there are many more benefits to come, and we expect to generate $3 billion to $4 billion of cost savings by the end of this year, each and every year.

I think third, what I talked about with technology, AI in particular, but putting other technologies, bringing other technologies to bear in our base business and some of these new growth businesses. I think this investment in power and entering into the power space is something that is differentiated and excited. And then finally, it goes back to something that may seem a little more boring. It's not boring to us. It's this consistency in our financial priorities. It starts with the dividend, a disciplined capital investment program, a strong balance sheet, which is getting stronger by the day and then returning excess value or excess returns, excess cash to shareholders through a consistent buyback program. In all honesty, I've been at the company for 27 years. I have never been more excited and confident in the outlook than I am today, and I really mean that.

It sounds like a winning formula. Thanks, Jeff. Really appreciate it.

Thanks, Arun.

Good morning again. Welcome again to Bernstein's 42nd Annual Strategic Decisions Conference. My name is Bob Brackett. I am Co-Head of Energy and Transition here at Bernstein, along with Global Metals and Mining. We are not expecting a fire drill. So if the alarm rings, please take it seriously. Your primary path of exit is out the door to the right, down to the escalator area where you came up this morning, down those out to the street to wait further instructions.

If for whatever reason, that path is blocked, you'll choose one of the internal stairways just outside of the room, go down 1 floor and follow the lighted path. This is ultimately a fireside chat up on the stage, but it is your fireside chat. We have scattered around the room, the QR codes on blue sheets of paper, use that to enter your questions into the Q&A and ultimately drive this conversation.

While we wait for your questions to come in, what we'll do is we'll start our conversation very much shaped like a pyramid. We'll talk about macro because along with faces I recognize in the room, I'm sure there's some generalists that want to know the latest of what's happening in this world. We'll move on and say, how does that macro inform strategy.

And ultimately, we'll drop into the portfolio and down into operations. With that, I'd like to welcome Mike Wirth, Chairman and CEO of Chevron. He'll spend a couple of minutes here at the stage with a few slides and then adjourn for our conversation.

Okay. Thank you, Bob, and thank you, everybody, for joining today. I'll ask you to quickly peruse the cautionary statement up there on the screen, and we'll be done with that. So look, I've got just three opening slides to kind of frame things up, and then we'll drop into the discussion. Bob just teed up. The first quarter of 2026 was a good example of how Chevron can deliver solid performance in an uncertain and volatile world driven by disciplined execution and a very resilient global portfolio.

I think our company is best known for our consistency, which is why we've got that up on the screen. We maintain capital and cost discipline no matter what the environment. We generate strong free cash flow and deliver superior shareholder returns in a through-the-cycle approach. We are accustomed to the vagaries of commodity markets, and we build our business to ride through the cycle to be robust during the good times and to be very resilient during the challenging times.

We'll get into the details with Bob, but the core message here is our fundamentals are strong. We've got a deep world-class portfolio. Our upstream assets stand out for peer-leading cash margins and strong gearing to oil. Second slide here is underpinning that consistency are four long-standing financial priorities. In order, they are to grow the dividend consistently to invest capital efficiently, to maintain a strong balance sheet and to buy back shares steadily through the cycle.

I'll zoom in on the dividend because we know our shareholders rely on that. Most of our shareholders put a real value on the dividend. We don't cut the dividend in difficult times, and we're committed to growing it through commodity cycles. We've increased our dividend payout for 39 consecutive years, 6% compound annual growth rate over the last 15 years. We increased our dividend during COVID when some of our peers cut their dividends, and there was never a question as to whether or not we would be able to sustain the dividend.

And as you can see from the graph on the right, we've got a track record, whether you look at the 5-, 10-, 15-, 20- or 25-year period of doing just that the highest average dividend growth rate of our peers over the last 25 years and consistency that is represented by a set of bars there that are pretty darn stable when you compare them to those that sit to the right of them. Final slide, just laying out what we believe is the winning combination for investing in our company.

First, -- we have strong free cash flow. And importantly, it's not a promise for the future. It's here today. We expect to generate more cash and keep growing free cash flow at a rate of 10% per year at what seems like a very quaint $60 Brent price in today's world. It grows at a 14% CAGR at a $70 oil price, and it grows at a higher rate if you assume a higher price than that.

Along the way, we intend to reward shareholders, as I said, through steady growth in the dividend and through-the-cycle-buybacks. We bought shares back 19 of the last 23 years. We bought shares back in 2020 during COVID when our peers all shut down their programs. We actually repurchased shares during COVID.

And we expect to meaningfully increase earnings and return underpinned by more than 20 years of high-quality resource ahead of us and strong execution. Finally, we remain focused on cost and capital discipline. During our Investor Day in November, we lowered our CapEx guidance, and we increased our structural cost reduction target. So with that, Bob, we can get started.

Fantastic. Appreciate that. And please join me here. It's May 28. The first of the major attacks in this crisis were February 28. Right? We're 3 months in. We just lapped the Memorial Day weekend, which is traditionally the start of the summer driving season. Summer is coming to the Northern Hemisphere where most of us live. And in the summer, we burn oil-derived products for power.

And WTI just checked, at $89 a barrel. What is -- to start with the physics of what has happened to the Strait of Hormuz. Give us a story there, and then we'll come back and talk to why physics doesn't seem to connect to price.

Yes. So I'll try to give you this in a simple form. You've all been following this. The world uses in round numbers, about 100 million barrels of oil a day. 20% of that typically flows through the Strait of Hormuz. 20% of the world's liquefied natural gas typically flows through the Strait of Hormuz. So those flows have been cut off for the most part, there's a ship or two sneaking through every day. But for the most part, those flows have been halted.

There is the ability for a couple of countries in the Middle East to get production around the strait, either over to the Red Sea or to Fujairah, which is a port that sits outside of the strait. And so the world hasn't lost all 20 million barrels a day, but it's probably lost 12 million, 13 million barrels a day. Also lost refined product. Europe is a big customer of refined products that come out of refineries in the Gulf States.

And so we had a big subtraction of supply from the global energy system. That has resulted in prices going up to some degree. But as you say, Bob, not as much as some might have expected. And there's a couple of reasons for that. Number one, we came into this year with above normal levels of inventory globally. In fact, most people's outlook was for some downward pressure on oil prices as a result of that.

And so that was a bit of an insurance policy that we've been able to draw against during the first 3 months of this. The second is we had more than the normal amount of oil on the water. And the U.S. government and Europeans have had sanctions on Russia, Iran and Venezuela that have not resulted in that production not getting into the market, but it gets into the market via what is known as the dark fleet. In fact, for those of you that read the Wall Street Journal, they got a good piece today on how the dark fleet actually works, ship-to-ship transfers.

And there's an entire industry out there that works around the fringes of the oil sector because the incentives to move oil are so strong. There was a lot of oil on the water that was being moved in these types of movements more than normal. And the U.S. has relaxed sanctions on some of that activity, which has allowed those barrels to flow to the market as well. And then you've had releases from strategic reserves.

And so the net deficit in oil production versus supply has been somewhat offset by those three mechanisms. And prices have gone up, but not as much as they could or as much as they may go up. The other two things, which are kind of next order mitigations that have bought us a little more time is in the early days, Asian refiners really loaded up on oil. They bought further into the future than they typically do. That drove near-term prices even stronger, particularly for certain grades out of the Middle East.

They then quickly reversed that and stopped buying because they had secured some more supplies and they saw a forward curve that said, look, prices are going to be lower in the future than they are today. They can't stay out of the market forever, but they've taken a little bit of near-term buying pressure off the market.

And the last thing is the Chinese had been building their strategic stocks at a very aggressive rate over the last 18 months. That has slowed, and that's taken a little bit of buying pressure off the market. And so I'm a chemical engineer. We learned to do mass balances and things that have come in eventually come out.

And what's happened is you've got all this inventory that sits in between the ins and the outs, and that has been able to buffer the pressure -- the buffers and the shock absorbers are being steadily drawn down and the ability for the market to absorb this imbalance is drastically diminished today versus where we started.

And over the next few weeks, we are likely to see those pressures flow through more directly to physical prices and there's more upward pressure that I would expect as we get into June and certainly into July.

It's the old leaky bathtub problem, right? You've got the bath tub, you got oil flowing in. We started with a full bathtub, and we're approaching bath tub bottoms or tank bottoms. And again, and you sort of highlight Chevron historically thinks out 5, 10 years and you're using units of 2 to 3 weeks.

We think and allocate capital over the long term, and this is a short-term phenomenon today, which could end up having a longer-term implications. It likely will have longer-term implications. It's a little hard to say definitively exactly what those are today.

Broken mass balance and $89 crude doesn't sound completely rational. Eventually, if we're going to fix the situation, right, economics is the allocation of scarce resource and economics can work in a free market with a price signal or economics can work in a planned economy with government choices. Talk to those choices, talk to what policymakers might be tempted to do and what they could do to be helpful and what they can do that would not be helpful.

Yes. So look, the price signal is an incredibly efficient way to allocate resources, to your point, Bob. And I think to really curtail demand to incentivize supply, the market is what needs to work. Policies that allow the market to work are the ones that are most helpful. And the market needs supply and it needs flexibility today.

And so policies that encourage supply and increase flexibility are helpful. So releases from strategic reserves put supply into the market. That's a good move. The Jones Act, which you may be somewhat familiar with, it's a law that constrains shipping in the U.S. between two U.S. ports to be done on U.S. built crewed and flagged vessels only, of which in our industry, there's a finite number that are constantly in service.

And so a waiver of the Jones Act -- and they cost about 4x what a non-U.S. flagged ship costs. And so a relaxation or a waiver of the Jones Act allows us to bring a non-U.S. flagship into service to move crude or products from the Gulf Coast to the West Coast. California needs some help. And so that gives the system flexibility. We've seen the Defense Production Act used in California to bring production in that was being fought with lawsuits and other measures and that have brought more supply to the market.

We've seen specification waivers that allow us to sell products that have a higher vapor pressure at a time you'd normally not be able to do. It keeps more molecules in the product pool. And so a number of measures that are taken to either increase supply or increase flexibility have been taken, and those are good. The things that are not as helpful are things that interfere with the market functioning.

And an export ban is one that has been talked about. And it may feel on the surface like, okay, to keep the U.S. well supplied, banning exports from the U.S., which is a product exporter now, would be a good thing. It actually would constrain the market from working. The U.S. is a net exporter, but it's also an importer. We import a lot of oil from Canada. We export a lot of products to Europe and import products to the West Coast from Asia.

Shutting off all of those routes will -- in the short term, could reduce prices in the U.S. In the long term, what they'll do is they'll reduce production. The refinery runs in the U.S., not the long term, the medium term after just the first few weeks of feel good effects. They'll actually take supply out of the market, and they will reduce flexibility in the market, which will only drive prices higher make things worse.

A tax on profits that would discourage investment at a time when the market signal should be encouraging investment would also be something that's been tried before, didn't -- hasn't worked in the U.S., hasn't worked in other places as it was advertised to would be the kind of measure that would not be helpful. We've not seen governments take those actions by and large. There have been some export constraints imposed in some countries in Asia.

But for the most part, in large consumers and producers, we haven't seen these kinds of policies come in yet. It doesn't mean they won't be talked about. It doesn't mean they couldn't be considered.

But I think the key point is things that help markets function well are the right actions for governments to take things that impede markets might have political appeal, but they ultimately can make the situation worse, not better.

And ultimately, this too shall pass, which is actually an old Persian proverb, right? Eventually, the strait will reopen. And eventually, we'll get back to some sort of normal, but it won't be the old normal. It will be some new normal. How do you think about things like what is the right ability to refill global inventories that have been drained over what period of time does that happen? Have we increased the discount rate, the risk factor for global oil and gas investments?

Well, I think it's early to -- 90 days can seem like a long time in the scheme of how we look at things. It's a relatively short period of time. But I agree with you that we will have some sort of a new equilibrium on the other side of this. And I think it will be -- there are some things that you'd argue are we going to use more coal? Are we going to use more renewables? Are we going to go back to oil and gas in the same measures that we're using it today?

You can debate those things. I think the world is going to want a more resilient energy system as a result of this. And already after the Ukraine situation, there have been moves towards that. I think the world is going to be very concerned about chokepoints where large flows of energy are prone to being cut off. Hormuz is not the only one of those in the global system. And I think the world is going to be more focused on an insurance policy or reserves, which has been very, very useful.

There are some countries like Australia, which had almost no reserve. They've shut down most of the refining capacity and are highly dependent on just-in-time product imports, which are at great risk, and they've seen price increases and the risk of supply outages in a country like that is much greater than it would be in a country like the United States. And so I think every country in the world is going to take a look at their own supply situation, their demand situation, where they have the ability to create resilience in their energy system, what they can afford because nothing is free.

Every one of these measures or policies will come with some economic cost that will be required. And I think you're going to see countries on the other side of this reassess their energy policies. And one thing that I do believe is pretty critical is you're going to want to rebuild strategic stocks that will have been drawn down. Because in the short term, you can't switch very easily to something else, and so you need to rebuild that.

That's going to put more demand into the market, which is going to put a bit of an additional tension on the price. I think you're probably going to see some people want to have higher stocks than they had before. You're going to see a lot of investment required to repair damage in the Middle East, oilfields, LNG facilities, refineries, all of which have suffered, in some cases, pretty significant damage that will require investment that's going to run into the billions, maybe tens of billions of dollars.

It's going to take time. And that will put some inflationary pressure into the cost side of the business. And I think that all tends to suggest the floor under prices is likely to be a little firmer and higher than it otherwise would have been. With the caveat that if you -- if this goes on so long, it tip us into an economic slowdown or a recession, you might have an offset on the demand side, which you can't rule out at this point.

Yes. If you go back to 2025, it felt like there was a put on Brent between $55 and $60, right? Even you looked at the balances and you looked at the glut, somebody, and I think Chinese SPR is a good candidate, saw that as a huge opportunity. It's not clear to me when people get such a great opportunity as a put for -- to go out and refill inventories, maybe the floor has come up.

I think that's right. And I think countries are going to have to ask, can they afford to wait for a better time to refill or not. We're in a world that has seen shocks increasingly -- with increasing frequency, right?

COVID is kind of a very unexpected thing. Russia-Ukraine, maybe less unexpected. This one, the likelihood that another shock is around the corner is something policymakers are going to have to bear in mind. And how long they can wait, how long they want to roll the dice before they refill inventories is a question that I think we're going to see policymakers have to grapple with.

And then on the LNG side, right, if 20% of oil exits the trade, comparable amount of LNG exits the trade, your LNG assets are global, certainly in Western Australia. What's happening to LNG markets? And there, we've seen some increase in global LNG price, but again, not what we saw, for example, Russia-Ukraine.

Yes. So LNG has a certain seasonality to it. And this happened as we're coming out of the winter in the Northern Hemisphere. So that's typically a time when demand comes off. Inventories have been relied on to get through the winter. There's a general inventory refill that happens as we go through the season and then demand really amps up again later in the year.

And so you've got a bit of an offset just through the normal seasonal demand cycle. There is some new capacity that's come online. The U.S. is sending out LNG at record rates and as fast as it possibly can with some new export facilities coming into the market over the coming quarters. Australia, West Africa, where we operate, sending out LNG at full rates right now.

And we are seeing some switching in the market. And so coal-fired generation is up. People that can burn coal are burning coal. And it's on an increase around the world. And I think one of the things on the other side of this is we're likely to see coal consumption is -- has been kind of reenergized to probably use a bad word or a bad pun. But I think you're going to see the coal is going to be more robust going forward as well.

The rumors of its death have been greatly exaggerated. That brings us to Chevron, which is to say you all were set to spend $13 billion in CapEx this year or so -- sorry, $19 billion. You're going to spend $10 billion in buybacks, $13 billion in dividends...

If you look at just flowing where price almost has to be mathematically around $90 this year, that's something like $25 billion of cash flow that you haven't moved around. And so how do you think about that cash flow coming into the system? What do you do with it? I think I know what you do with it now. How do you think about what you do with that over time?

Yes. So I'll go back to the four priorities that I mentioned in my opening remarks, grow the dividend consistently, invest to grow future cash flows to support the dividend, maintain a strong balance sheet, which in our industry is vital. We've got a AA credit rating and have for decades and then buy shares back consistently over time. Don't try to time share repurchases. In our industry, the criticism, which I think is valid, is companies tend to buy shares back when commodity prices are high, which means equity prices are high.

So they're buying the stock when it's at its peak, and they don't tend to buy the stock back during the troughs. We try to buy stock back steadily through the cycle so that we're not trying to call the peaks and the troughs and not be countercyclical, procyclical, just buy through the cycle. As we come into this, we're definitely going to see cash flow this year that is surplus to those needs.

And what happens is going to go on the balance sheet. And the balance sheet will be even stronger. That's never a bad thing in a commodity industry. The companies who have storied names that are only seen in the history books, not on the street anymore are the companies that found themselves vulnerable with a balance sheet that wasn't well positioned and they got hit in a cycle where they couldn't weather it.

And so it's never a bad thing in our industry to strengthen your balance sheet. Over time, we don't need a balance sheet that's that much stronger than where we are today. And so the money comes back to shareholders through share repurchases, through growth in the dividend.

We're very tight on our capital investment into the growth sector. So as I said, right now, we've got a range of $18 billion to $21 billion that we've guided for the next several years. I don't anticipate we'll go outside of that range. You're talking about having tens of billions of dollars of cash that is surplus to those needs that grows on the balance sheet and that ultimately that flows back to shareholders.

Yes. There was an interesting argument that Chevron outperformed much better in January and February, where it was sort of easy, right? Oil started the year at $60. It was clear that wasn't sustainable. And then since the war, not just you all, but the sector broadly has not performed the way you might have expected.

If you told people to start the year in February 28 is when oil is going to rip, people might have waited to buy your shares, and that would have been the wrong answer. So there's an argument that at today's prices, maybe the share price isn't that procyclical and there's value to be had there.

I would agree.

For the audience or for you?

We call that a buying opportunity.

Yes. The other aspect is you talked about that balance sheet, right? The balance sheet you have had weathered COVID, weathered 2016 war on shale, weathered GFC can go further and further back. What you hate to have is to be the battleship without firepower at the bottom of the cycle.

You have used the bottom of the cycle historically to be acquisitive, right? You find those that weren't prepared when the tide went out. I imagine that, that cyclical M&A strategy will never go away. But what about M&A sitting here at sort of the top of the cycle? Are there any opportunities in either you divesting assets into a market or putting assets into your portfolio?

Yes. We're always high-grading our portfolio. And so we've got some assets that we're in the process of selling right now. We've got a concession in Angola that we're in contract on that has an override that we will take some of the upside as -- when we get to closing based on the movement in the oil price.

So high price is a good time to be a seller. And some of the assets that don't compete as effectively for capital in our portfolio, we may look to sell to others who they fit better and then you can get a stronger price in a market like this. We tend not to be a buyer of assets or companies at this point in the cycle. And there can always be kind of a unique circumstance that might violate that rule, but it's hard to find those.

And we have tried to be well prepared. We acquired Noble Energy in July of 2020 when there were no other buyers out there, and it was a company that was in a difficult situation, and we were able to acquire at a very opportune time.

And so you can't always predict that. You don't have perfect knowledge on the future, but the history books are not filled with good deals in commodity industries that were done at high prices. It's easier to find ones that were done lower in the price cycle. And so that tends to be what we look for to the extent you can do that with certainty about what the future is going to look like.

And if I think about assets that you like, competitive returns, lots of runway and low breakeven, the appropriate operating environment. I think I've got three questions on Venezuela, which checks some of those and questions some of those. So talk about Venezuela and your opportunity set there and what you're pursuing.

Yes. So we've been in Venezuela for virtually the last 100 years with a short period of time we were out of the country. We're the only American company on the ground there for the last many years as others left in the late 2000s. And it hasn't always been easy. We've gone through some challenging times with sanctions imposed by the U.S. that constrained our ability to participate in our joint ventures. We're a nonoperated partner in three different ventures in Venezuela.

We've got a really good workforce on the ground there. We've got high-quality assets, the best quality assets in the country. What many people are surprised to learn is that Venezuela has more oil than any country on the planet, including Saudi Arabia. So it is a very well-endowed hydrocarbon province. It is very close to the largest customer for that type of oil, which are the Gulf Coast refineries.

And historically, it's been pretty well connected to that market. And so as we've seen the changes in the country here over the earlier part of this year, we find ourselves in a pretty advantaged position being on the ground with operations, with good knowledge of working through the regulatory and government environment there with a good working relationship with the U.S. government on the sanctions regime and a position that we understand very well geologically.

We've been able to improve that position by returning a couple of assets to the government that wouldn't compete for capital in our portfolio, one kind of towards the end-of-life oilfield and then a very early in life gas field that hasn't begun development yet, unlikely to draw capital investment for us. Others may see them differently. So we've returned those to the government.

And we picked up a deeper position in one of our joint ventures, so more equity in one of the joint ventures and an adjacent acreage to some of our existing acreage, which has got a longer runway and is very synergistic with our existing operations. So we've strengthened our portfolio thus far.

We're in discussions with the government about better financial terms, which are necessary to encourage investment into the country. The government has changed their hydrocarbon law and moved to a more competitive regime, but it's -- there are ranges for taxes and royalties and other terms that are then negotiated kind of deal by deal. So we're in discussions there to try to land those at a place that will allow it to compete for capital within our portfolio against other choices we have around the world.

And we'll see how that all plays out. I think there's an improving working relationship every month between the USG and the Venezuelan government. We certainly see signs of encouragement. We're still owed some money on loans we made to the state-owned oil company many years ago. We've got a mechanism in place now to recover that.

And we've been growing production using that same mechanism to fund some basic maintenance and simple infill drilling and well workover type activities. So we've taken production in our ventures from about 50,000 barrels a day to above 250,000 barrels a day over just the last couple of years.

And on that program alone could see that go up by another 50% or so by the end of 2028. There's certainly the potential for production to grow more than that if we can get these contract terms agreed and see an environment that allows us to have the confidence to increase our levels of investment there.

So it's a nice option within our business, a lot of runway. Our contracts there for the various concessions go deep into the 2040s. So we've got a couple of decades at a minimum ahead of us that we could invest and grow there. We'll have to see how it all plays out.

And there's ways to play with fiscal terms. When you're investing international capital, you think about the IRR, you think about the NPV, you think about the maximum cash impairment, right? How much capital have I put into that system before I start to get revenue. And we're seeing countries like Libya countries like Iraq start to modify fiscal terms to kind of mitigate that last factor, which is like I understand I'm taking risk, but let me mitigate how much capital I put to work. Is that something you'd want to see in Venezuela as a bit of a surety?

Yes, those are the kinds of dynamics that are very important in these contracts because one way you mitigate risk is by managing how much capital you can have laid out at any point in time. And if you've got mechanisms to recover that sooner rather than later, so it doesn't continue to accumulate before you begin to see inflows you then have derisked the investment.

And so we're seeing a number of different governments around the world that we're in discussions with, be very open-minded to mechanisms like that, that can create a better environment for us to invest in.

Another place with a lot of oil is the Permian Basin. They're 1 million-plus-barrel-a-day producer. We have a somewhat specific question on, can you provide an update on the Permian data center? What are some of the issues in firming that up? But maybe start by just framing the Permian in the portfolio, why shouldn't that compete for even more capital and what your plans are there?

Yes. So I'll get to the data center question in just a second. But our basic Permian position, we've got over 2 million acres in the Permian. And the three words I would encourage you to remember about our Permian position are scale, technology and royalty. So scale is huge. We've got many billions of barrels of resource yet to be recovered in the Permian. Technology can unlock much greater recoveries. Today, despite all that you hear about horizontal drilling and hydraulic fracturing and the shale revolution or miracle or however you hear it described, we're only recovering about 10% of the molecules in the ground.

So we're leaving 90% of the molecules behind. Never in the history of our industry have we known where there was that much of oil and gas and left it behind. It's a matter of working on the technologies to improve these recoveries from this very dense rock matrix that holds it. And so there's real upside opportunity in unlocking that.

We're doing a lot of work on that. Others are doing a lot of work on that. And that can take an asset that may have 2 decades of running room and give you 3 decades or 4 decades or even more. And 1 million barrels a day, it could take you to a point where you say, well, let's take that number up. So there's a lot of upside in technology there given the early stage of life that this is in.

And then the third is a unique advantage that we have, which is royalty. Typically, in the U.S. people lease land from a landowner and they pay a royalty. We pay a royalty to the federal government, offshore Gulf of America or in federal lands in New Mexico. Private lands, you pay a private landowner. We own most of our acreage in fee and have for decades in West Texas and to a certain degree in some of the New Mexico acreage that we're in.

So 75% of our Permian acreage, we pay no royalty or we pay a royalty to ourselves effectively because we don't have to pay -- we don't have to take cash that comes in and pay it to the landowner because we are the landowner. So you put those three things together. And if we can be competitive on every other aspect of performance, which we are, you're going to have an unmatched position in the Permian.

This has running room not only at 1 million barrels a day through the end of this decade, we see holding a plateau until the end of the next decade and perhaps longer, subject to some of these technologies I've talked about. And early days in the unconventionals, the criticism was companies plowed all the free cash flow back into growth, and there really was no return of capital to shareholders.

We've grown to 1 million barrels a day where we're now holding a plateau with a very small rig fleet and small completion fleet compared to what it took to grow to there. And what that does is it helps us really widen out the free cash flow out of that asset. So it's throwing off again, at a $60 oil price, $5 billion a year in free cash flow at a higher oil price, even more than that. So strong returns, strong free cash flow, very durable long into the future.

Last thing I'll say on the hydrocarbon side is we're primarily going after oil-bearing strata right now. There's a lot of gas in the Permian Basin as well, which is maybe the bridge into the data center question. And that is everybody's read all the enthusiastic and almost hyperbolic excitement about data centers, AI and everything goes with it.

The reality is you're turning energy into knowledge, essentially using these technologies. And the limiting factor now isn't the models and the ability to build great models. And frankly, notwithstanding the market cap of a company like NVIDIA, it's probably not GPUs either. We're seeing the response on GPUs and memory and some of the other things that are required.

The real binding constraint in the U.S., in particular, is going to be power. Go back to 2015, the U.S. and China both used about 5,000 terawatt hours of power. Fast forward to 2025, the U.S. is still using about 5,000 terawatt hours of power. China is at 10,000 terawatt hours. So China, in the last decade has built out a power infrastructure equivalent to the entire United States grid, while the United States has done nothing. And that enables them, and they're still on a pace to grow. And this has primarily been coal.

They've got hydro in there. They've got some renewables in there as well. But they have -- they do not have a power constraint. They've got GPU and model constraints that are the things they're working on in the race. The U.S. really has a power issue. And so you hear the President talk about it, you heard Doug Burgum talk about it. We need a lot more power. The grid wasn't designed for this kind of growth.

So there's real issues with the grid. There's real issues with permitting. There are debates over how do you do this with wind and batteries. The reality is the U.S. has such an endowment of natural gas that a big part of the answer is going to be natural gas-fired generation. In the Permian, natural gas price is negative right now because there's not enough takeaway capacity.

And so rather than flare it, companies will pay you to take their gas. We actually have pipeline takeaway capacity in excess of what we need for our own gas. So we can have somebody pay us on the one hand and give us the gas. So you have revenue and revenue at no cost like that.

But we're also looking to develop gas-fired power generation out there to support the data center build-out. We're deep into discussions with Microsoft. It's been taken up in the media for multi-gigawatt scale power generation. Negotiations aren't complete. So it's not done until it's done, but it's a high-quality customer that clearly has not only a current business but a growing business in data centers and AI, strong -- obviously, a very strong company from a balance sheet standpoint, the kind of company we can work well with.

And we would intend to build an initial multi-gigawatt site to serve a customer like this. We've got other sites we've identified and have begun working on, and this could become a growth element of our portfolio.

With the idea, if you help them -- the razor-and-blade model, you help them stand up the power, which is not the most amazing return, but then you're providing that source of natural gas.

And look, we'll get returns. Our expectation is we won't fund the project and sign the contract, we can't. They're going to be competitive with other options that we have. The nice thing about this is you would get a cash stream that is not necessarily commodity price correlated.

So we'd get a capital recovery charge, operating costs and then the commodity price risk would be borne by the customer. And we can help manage that risk. There's different ways you can do that. But we wouldn't have -- the way we have in many of our other businesses, where the cash flow is riding on the same commodity price cycle.

Similar to the LNG portfolio, where LNG has floors and ceilings and some price, but it's almost like a bond annuity goes for 20 years, and it's helped part of a portfolio because other parts are going to be volatile.

The LNG analogy is very good one, particularly when you're looking at stranded gas.

We do have a question on Western Australia that's really about the opportunity for Australian shale gas to feed into LNG. But let's make that even broader. It feels like we're on a cusp of an exploration cycle globally, an international exploration cycle, which is long-lead times, sometimes putting lots of money to work -- risk. Talk to your international exploration strategy and what is that delivering and when?

Yes. So we, over the last decade or so, have narrowed our exploration activity into proven basins, near infrastructure where we could find discoveries, tie them into existing facilities and have shorter cycle time and low-risk. Because we were adding so much resource and reserve to our portfolio in the unconventional part of our business. We've had a decade where every year, we've got reserve bookings and resource growth in unconventionals, and we really didn't need to be very active in exploration.

And I talked earlier about capital discipline and making trade-offs, and we made a trade-off and less exploration while we're focused on building up unconventionals. We now produce 1.6 million barrels a day, 40% of our 4 million a day is coming from shale. That's a big piece of our business. We do want to continue to add assets around the world, explore, particularly offshore. And so we've made changes in our business model with a more centralized decision process now to manage a global portfolio.

We brought in talent from the outside, new Head of Exploration hired in with deep experience with multiple companies, has joined us. He's got [indiscernible] he has brought in some other people, he got in some great talent from Hess. We've got new experience, new ideas, a lot going on in the technology space. If you look at exploration, it generates some of the largest data sets on the planet.

And doing a run on our seismic data after we do a big 3D seismic shoot takes months. Advances in high-power computing, quantum on the horizon, some of the AI tools are giving us a very different set of tools to hunt for needles in haystacks. And there's a lot of very encouraging work underway that I think is going to change the way exploration works. We've added acreage in probably 10 to 12 different basins around the world that are relatively underexplored.

Some of these won't work. Some of them likely will work. And then we're putting some more resources into some more capital. So it's business model, technology, talent and the resource access with acreage and then some more capital. I think in the medium term, so call that 5 years, you talked about lead time, you'll see some contributions from that to our business. I'll loop back quickly to Australia and shale gas.

Australia has got pretty well-understood shale basins in a couple of different parts of the country, deeper than the U.S., higher temperature than the U.S. and conditions that are different than what we see in the U.S., likely higher cost to develop than what we see in the U.S. and -- but it's there.

And frankly, there was a time when the U.S. was thought to be higher cost and more difficult. And so I wouldn't bet against the industry figuring out a way to start to develop the shale in Australia. We've done some work around it. Again, I said it 3 or 4 times, it's got to compete in our portfolio. And right now, we don't see it competing in our portfolio. And so we don't have a position there, but other companies -- other good companies do and are working it very hard, and I hope they're successful. The world needs them to be successful.

It's competing in your portfolio, it's competing against Tengiz. Talk to Tengizchevroil, talk to the start-up there last year and ultimately, how we are positioned today.

This is one of the largest oil fields on the planet in Kazakhstan. We entered shortly after the fall of the Soviet Union. This was a 50,000 barrel a day oil field under the Soviet regime. In the intervening 30 years, we've taken it from 50,000 barrels a day to 1 million barrels a day. Most recent expansion took it from about 650,000 or 700,000 up to 1 million barrels a day, came online a little bit more than a year ago, ramped up very, very smoothly and reliably.

And we've got strong production coming out of that asset today. It travels through a pipeline to a port on the Black Sea. Pipeline transits through Russia. So there's some geopolitical risk that is involved in getting it to market. But it's a very strong contributor to Kazakh economy, but a strong contributor to our portfolio and our other partners there.

The concession runs from 1993 to 2033, so a 40-year concession from the government. We entered into discussions with the government about a year ago right now to talk about an extension of that contract. Those discussions are going well. There's a technical path, a commercial path, a legal path.

The partners in the venture have been aligned working with the government and have narrowed down the list of issues that are important to both sides to be negotiated, and we are in the process of working our way through that. So no showstoppers that have emerged at this point, not a deal yet.

It's a big complex deal. We need something that works for the Republic of Kazakhstan and works for the investors. It looks to me like there should be deal space there for both parties to come away with something that meets their needs. So stay tuned. We'll talk more about that as things advance.

A lot of those issues will have dollars attached to the more Tenge, if you're using Kazakh currency. And some of those dollars could be right -- a desire of the Kazakh government for more investment for more growth. What's the runway? What's the exploration or sort of the development opportunity set there?

Yes. I mean this is a super giant field. And it's produced a lot of oil already, but supergiant fields are called that for a reason. They're big and they've got a lot of runway. And so that's part of what we're talking about now is a technical development scheme, what are the investment opportunities what kind of economics would those bring with them for the investors, what would that bring for the Republic.

And so those are all issues that are being worked on. But it's -- this is a many-multibillion-barrel field, of which only a portion has been produced. And so there's reason to continue to invest if we can find a model that works for everybody.

You are an integrated oil company, and we've spent all of this time talking about the macro and upstream. Talk to ultimately the role that refining and petrochemicals plays for you. It is the minority of earnings, minority of focus, but still at global scale.

Yes. On a stand-alone basis, it would be a sizable company. It just sits inside of our company, which makes it look maybe a little bit less significant. But we've got a global refining system, primarily in the U.S. and Asia is the footprint. Petrochemicals, primarily U.S. and Middle East, generates strong returns through the cycle. We have integrated businesses on the refining side where we've got a pull-through of feedstocks to high-value products, good brands and markets downstream of those, so you can capture margin as it moves across the value chain.

Our refineries have scale. They have what's referred to in the industry as complexity, which means they can convert low-value molecules by either creating longer chains or shorter chains or reconfiguring the hydrocarbon chains into a lot of high-value product. And then we've got a good optimization effort to get those out to the highest netback markets.

And so refining and marketing is a good strong contributor in cash flow, $4 billion out of our downstream and chemicals business every year in cash flow and normal margin conditions. Petrochemicals growth, the demand for petrochemicals, which are in every product that we use in our daily lives are -- the demand is widely distributed, an emerging middle class and growing global population continue to drive that growth.

We will continue to invest in that business primarily through two large joint ventures, one in Korea that's focused on what's called the aromatics part of the petrochemical business. And then U.S. and Middle East, which are olefins partnership with Phillips 66. So good, big important parts of our business and particularly the petrochemical side, we would expect. We've got two big projects under construction right now, and that will provide growth long into the future.

And maybe in the last minute, ultimately, what's the value proposition for owning Chevron stock?

Well, I summarize what I said earlier, it's consistency and predictability. You're going to get a strong dividend. The dividend is yielding almost 4% today. Dividend increases, as I said, 6% CAGR on the dividend over the last 15 years, 39 years of increases, consecutive years of increases. You're going to get consistency, predictability, security, capital discipline, cost discipline and most of the cash comes back to the shareholders.

We have distributed over $50 billion back to our shareholders over the last couple of years. We have $25 billion-type years. And so we're -- more money has gone back to shareholders than it is going into investment through the dividend and the share buyback. And I would expect that to continue. So it's predictable, it's safe, it's secure. There's upside in the equity value and the dividend is yielding. You'd like to compare it to inflation-protected treasuries and it's got quite a premium to those.

I'll close with that, right? Remember, don't compare a commodity business giving you a dividend to a government dividend. Ultimately, inflation is ultimately good for a commodity-based business. Inflation is not so good for yields on dollars. So with that, thank you, Mike, thank you in the audience. I appreciate your time.

Thanks, everybody.

Good morning. My name is Katie, and I will be your conference facilitator today. Welcome to Chevron's First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I will now turn the conference call over to the Head of Investor Relations of Chevron Corporation, Jeanine Wai. Please go ahead.

Thank you, Katie. Welcome to Chevron's First Quarter 2026 Earnings Conference Call and Webcast. I'm Jeanine Wai, Head of Investor Relations; our Chairman and CEO, Mike Wirth; and CFO, Eimear Bonner, are on the call with me today. We'll refer to the slides and prepared remarks that are available on Chevron's website. Before we begin, please be reminded that this presentation contains estimates, projections and other forward-looking statements. A reconciliation of non-GAAP measures can be found in the appendix to this presentation. Please review the cautionary statement and additional information presented on Slide 2.

With that, now I'll turn it over to Mike.

All right. Thanks, Jeanine, and welcome to your new role. This quarter, Chevron delivered solid performance driven by disciplined execution and a resilient portfolio. Despite market volatility and heightened geopolitical tensions, our people remain focused on safely delivering the reliable energy the world needs.

Our approach remains consistent, maintain capital and cost discipline, generates strong cash flow and deliver superior shareholder returns. Chevron's fundamentals are strong. We have a world-class portfolio and upstream assets with peer-leading cash margins and we're carrying strong momentum into the second quarter with U.S. production over 2 million barrels of oil equivalent per day, Gorgon and Wheatstone LNG running at full rates, TCO producing above 1 million barrels of oil equivalent per day and U.S. refineries operating at record crude throughput. The unique combination of Chevron's industry-leading refining complexity and our diverse waterborne equity crudes from TCO, Guyana, Permian, Venezuela and Argentina, creates opportunities for value capture through integration.

Our high-quality upstream and downstream portfolios delivered significant integration benefits during the quarter. We maintained strong supply into tight markets and maximize margins across products, including fuel oil sulfur and other secondary products, which saw significant price dislocation. We continue to optimize flows across our value chains to maintain high utilization and reliable supply into the market. In the second quarter, we expect global equity crude throughput to more than double to year-over-year to 40%.

In Asia, we anticipate over 80% refinery utilization. Moving to Venezuela. We continue to leverage our deep expertise and long-standing position to create an option for the future. Two weeks ago, we announced an asset swap with PDVSA. The agreement increases our position in the [ Ornoco ]. [indiscernible] 8 expands our continuous acreage position with Petro [indiscernible], offering operating and development synergies along with long-term growth potential and optionality. Petro Independencia is a joint venture we've been in for more than 15 years, where we've increased our equity stake to 49%. Churn operations are running smoothly. We're still in debt recovery mode and expect Venezuela to continue to represent 1% to 2% of cash flow from operations. This transaction is expected to improve resource depth and integration upside supporting potential growth into the future.

Now over to Eimear to discuss the financials.

Thanks, Mike. For the first quarter, Chevron reported earnings of $2.2 billion or $1.11 per share. Adjusted earnings were $2.8 billion or $1.41 per share. Included in the quarter was $360 million charge related to legal reserve. Foreign currency effects decreased earnings by $223 million. Organic CapEx was $3.9 billion in the quarter, consistent with historical CapEx trends of lighter spending in the first half of the year. In organic CapEx was approximately $200 million.

We expect to finish within full year capital guidance. Adjusted first quarter earnings were $440 million lower than last quarter. Adjusted upstream earnings increased due to higher realizations, lower DD&A and favorable OpEx and tax impacts. Adjusted downstream earnings decreased primarily due to unfavorable timing effects, which were partly offset by higher refining margins. Unfavorable timing effects totaled around $3 billion for the quarter, reflecting a steep rise in commodity prices in March.

The effect was evenly split between inventory valuation and mark-to-market accounting on paper derivative positions linked to physical cargoes. We anticipate approximately $1 million of the paper positions to unwind in the second quarter with the majority of related cargoes delivered in April. Looking forward, we would expect additional timing effects when prices are rising and further unwinds when prices are falling. Chevron generated cash flow from operations, excluding working capital, of $7.1 billion in the quarter.

This includes unfavorable impacts from special items and timing effects totaling approximately $3 billion. Adjusted free cash flow was $4.1 billion for the quarter. and included a $1 billion loan repayment from TCO. Share repurchases were $2.5 billion in line with guidance. Working capital was impacted by sharp commodity price increases as well as the build in inventory. Consistent with historical trends, we expect an increase in working capital in the first half of the year and are released in the second half, the extent of which will be primarily driven by prices.

Over the period, more than $5 billion in commercial paper was issued to manage liquidity and general business needs, about half has already been paid down in April, and we expect these short-term balances declined further throughout the second quarter. First quarter 2026 oil equivalent production increased by approximately 500,000 barrels per day compared to the first quarter of 2025. This reflects the integration of legacy [indiscernible] assets in addition to continued organic growth across the portfolio. The conflict in the Middle East had a limited impact on production in the quarter with less than 5% of our portfolio located in the region. In the Partitioned Zone, we're operating at near minimum risk to manage storage. In the Eastern Mediterranean, both Tamar and Leviathan are operating at full capacity. During the quarter, we continued to execute key expansion projects, completing the offshore scope for both the Tamar optimization project and the Leviathan third gathering line. Let me close by reinforcing that despite changes in the external environment, we're executing our plan with discipline, consistent with our long-standing financial priorities. This disciplined approach gives us resilience during periods of volatility and the ability to invest and return cash to shareholders through the cycle, all while ensuring we maintain a balance sheet built for the long term. Chevron business is strong, and our 2026 guidance is unchanged.

Capital spending and production outlooks are consistent with previous guidance, and we're on track to deliver our $3 billion to $4 billion structural cost reduction target by year-end. This consistency underpins our 2030 targets on November 9, including over 10% growth in adjusted free cash flow and earnings per share and 3% improvement in [indiscernible] all of $70 Brent.

These aren't aspirational goals. They're grinded in assets that are operating today, a more efficient organizational model and continued capital discipline.

I'll now hand it over to Jeanine.

Okay. That concludes our prepared remarks. Thank you, Mike, Eimear. As a reminder, additional guidance can be found in the appendix of the presentation as well as in the slides and other information that's posted on chevron.com. We're now ready to take your questions. [Operator Instructions] Katie, please open the line.

[Operator Instructions] Our first question comes from Neil Mehta with Goldman Sachs.

Mike, I would love your perspective on the current conflict in the Middle East. And if you could share how you think about this in the context of your 4-decade history in oil and gas and how significant of a moment is this what do you think the long-term implications are of the current conflict. And I know at the Analyst Day in November, we talked about a flat nominal $70 Brent as a mid-cycle planning assumption. But does this event change the way you think about mid-cycle pricing.

Yes. Thank you, Neil. This is clearly a very significant disruption to the global energy system. It's a scenario that we've thought about. We've included in some of our planning exercises for many, many years. It's early, I think, to have firm conclusions about how the energy system will change in the long term. I do think there will be changes. But I think we have to see how things play out over the coming weeks, hopefully, not longer than that. As this comes to some sort of a resolution and the energy system begins to be reconstituted in a way that can reach some new equilibrium.

I think that new equilibrium will look different than what we've known before. But I'm not sure I could argue with a lot of confidence that I could describe exactly what that looks like. One thing you can expect from us is consistency. You will see capital and cost discipline no matter what. You will see us invest in highly competitive assets with scale and longevity no matter what, assets that are low on the cost curve. You're going to see us invest to drive strong returns and free cash flow, maintain a strong balance sheet. So we can create predictable and growing shareholder distributions. We've got great visibility through 2030. Eimear just reiterated our guidance for that. And we've got assets online now that deliver predictable visible cash flow growth for the balance of this decade. And we've got a full hopper for beyond that.

And so I think the things that Eimear talked about consistency, discipline, the strength of our portfolio on the ground operating today are all things that will underpin our strategy going forward. And as we see how this is resolved and as we see what the energy system begins to look like post the conflict, if we want to fine tune that at all, we'll come back and talk to you about it. But I really think it's early for me to give you anything concrete other than to reiterate, I think, the things that you've seen out of us and that in my 44 years, have stood us in good stead through unexpected events and cycles are characteristics that you should expect to endure.

We'll take our next question from Arun Jayaram with JPMorgan.

Mike and Eimesar, it feels like one of the key themes from the print is the opportunity for Chevron to optimize margins from the refining system as well as your increased exposure to waterborne crudes post the Hess merger? And I'm looking at Slide 4. I was wondering if you could help us think about the value capture opportunities and maybe the experience in 1Q? And how should we think about this integration favorably impacting your go-forward earnings power?

Yes. Thanks, Arun. As part of the organizational changes that we made last year, we stood up a global enterprise optimization team. And they've really got to remit across all of the upstream and the downstream to be sure that we're getting maximum value out of the entire set of assets, and we're integrating where it makes sense. They've done a really nice job in the last quarter of keeping our system operating at high degrees of utilization, capturing good margins through volatility.

Our portfolio provides options to move things around in times like this. Our refineries in Asia, which are all in various types of ventures, we expect those to run over 40%. Chevron equity crude in the second quarter, much higher than under normal market conditions and probably much higher than we'll see in some of the other refining assets in that region because we have the ability to direct equity flows to those refineries at a time when access to crude is very important and very difficult. In the U.S., we're operating at over 50% equity crude throughput some refineries much, much higher than that. We've used the Jones Act waiver to move crude from the Gulf Coast around to the West Coast. In Asia in the first quarter, we ran CPC Blend, we ran [indiscernible]. We're going to WTI, all in our GS Caltex refinery in South Korea. And just to give you a point of reference, I used to run our downstream business. And in those days, we were about 15% equity crude into our refining system and 85% crudes from the market. As I said, we expect to be over 40% in Asia, north of 50 and much higher than some refineries in the U.S. And so that's a significant change from our history. And at a time when margins are likely to move back and forth across that value chain. They may be in the upstream, they may be in the downstream. We're going to be able to capture those with a much higher great confidence. And importantly, in a world that is getting very tight on products, we're going to keep our assets very full and be able to provide significant supply into markets that dearly needed. And so we're not going to quantify the value that we're capturing, but I think you'll see it flow through in the numbers, and it is meaningful. And I think that's continuing already into the second quarter and likely beyond.

We'll take our next question from Devin McDermott with Morgan Stanley.

So Eimear, in your prepared remarks, you highlighted Chevron's long-standing consistent financial priorities. I wanted to build on that a bit and get your latest thinking on capital allocation at higher prices and particularly that balance between shareholder returns, building cash and growth. you did leave the buyback range unchanged quarter-over-quarter, which I think makes a lot of sense and I commend you for not being [indiscernible] on the buyback, but maybe just talk through the strategy there. And then on the growth spending side, what would you need to see to shift spending, maybe add some capital in the Permian and move away from the plateau back toward growth in that asset so 2 parts to the question, but would love to hear your thoughts. .

Yes. Thanks, Devin. Well, overall, it comes back to staying consistent with our 4 financial priorities and being really disciplined on that volatility. So that's why today, we're not changing any of our capital allocation rim work. We're not changing any of our ranges, and we're happy with where we are and with all of those. So just maybe to recap, first and foremost, growing the dividend. And this year, we've grown it for the 39th consecutive year. two, investing in the business in the most capital-efficient way. Our budget is $18 billion to $19 billion for the year. We're on track with that budget. Our capital performance is really, really strong. With that capital, we're going to grow 7% to 10% and production this year. So we're reconfirming that growth. The third is the balance sheet.

The balance sheet is in great health. The balance sheet will get stronger with higher cash generation. And then fourth is the buyback staying within $2.5 billion to $3 billion for the range. So with only 8 weeks into the conflict, as Mike said, it's too early to have a different view on the fundamental outlook around price. It's too early to see or have a view of whether that is structurally changing. And so when it comes to capital allocation, we're comfortable with where we are, and we're staying consistent and disciplined.

We'll take our next question from Doug Leggett with Wolf Research.

Mike and Eimear, I wonder if I could follow up on Devin's question. And maybe just ask for a little bit more color around 2 specific assets. Obviously, you had some changes in Venezuela, Mike. But my understanding is that's been running essentially as recycling cash flow to maintain the business and obviously pay down your legacy money euro debt and so on. But I'm wondering, are you at a point now where the fiscal terms have changed the security situation is different. Basically, the broad picture for Venezuela, where you would be prepared to incrementally put more capital -- and I guess I'd ask the same question of the Permian where not so long ago, you did have a growth story there. You stabilized it, but one could argue that in both of those areas, there might be a call for incremental oil production longer term and you guys are in a pretty strong position to deploy capital if you did. So I guess it's a capital increase question, but it's also specific to those 2 assets.

Yes. So Doug, I guess what I would say, number one is we are operating now, as I mentioned in my prepared remarks, with TCO greater than 1 million barrels a day, Permian solidly above 1 million barrels a day the Australian LNG facilities running at full capacity, Gulf of America. I mean, all the big pistons in the engine are firing. And as we come into the second quarter, we've got tremendous momentum across the system. Production in the second quarter is expected to be higher than production in the first quarter.

Eimear reiterated 7% to 10% production growth guidance for the year. And so we've got strong growth in the business right now. And so -- and then we've got options, right? We've got a portfolio that presents us with options. I think Emer said it pretty well in response to Devon, it's early into this conflict to be making big changes. We don't know how things will be resolved. You could build a scenario where things get resolved quickly.

The straight reopens, and we get back into a market that's pretty well supplied. You can build another scenario that says this goes on and the market is tighter, and it looks different on the other side of it. I don't know exactly how this will play out. So we're not going to make any rash or immediate changes to a system that's running a high degree of capital efficiency today and operating efficiency, really important to stay focused on reliability at a time like this and safety at a time like this. Specific to Venezuela, your understanding is right. We are still recycling cash flow. We still have debt to recover.

We're obviously recovering at a faster rate in this kind of a price environment. And there are indicators of positive developments in the country, but there are still questions. And so the fiscal terms are not clear. There's ranges that they've indicated for tax for royalties. There's still things that need to be addressed relative to dispute resolution, et cetera. And so we'll continue to operate in the mode we're in right now, which has yielded some growth over the past couple of years and in fact, yielded growth this year. but we need to see further progress before we would put more capital to work. We've got a lot of resource there, and we could grow it. In the Permian, I think Eimear mentioned that, and we're running the Permian to deliver strong free cash flow right now. We could hit the gas and begin to grow it again. But I don't know what the future looks like. And at this point, the value that we're seeing an improved asset reliability and reduced lost production to downtime, et cetera, is very real. And we get that because we are so focused on that. and a shift to quickly turn to more production growth might dilute that focus. And so we'll update you over time if our view on these things changes. But for right now, I think it's really steady as she goes.

We'll take our next question from Steve Richardson with Evercore.

Mike, I wonder if you could talk a little bit about the exclusivity agreement with Microsoft on the power projects, specifically, you've been at this for a while. No doubt you've learned some things that it's been a bit of a journey getting to this place in terms of dealing with a different type of counterparty in a different industry. But also, could you just update us on time to clarity on contract and FID and all those good things.

Sure. So it has been reported, I think we've confirmed that, that we're in an exclusive discussion with Microsoft, and we're very pleased to be in those discussions with such a high-quality customers, Microsoft, and it's a company we know well. They've been a partner of ours for a long time. They're our primary cloud provider. They've been a key technology provider to us for many, many years. And we've got a deep and very good relationship with Microsoft. .

The project that we're advancing in West Texas is progressing well. We've submitted an air permit. We've secured, not only the large turbines that we've talked about before, but also small block generation that's useful in early scale-up and for some reliability. We've selected an EPC who's doing engineering work on that. We've agreed with a water provider, et cetera. So we're advancing the project with a lot of pace we're beginning to take delivery on turbines this year. So subject to definitive agreements, which we are in negotiations for, we will move towards FID later this year. And I think we'll deliver a project with speed, with scale and that's differentiated.

We'll remain disciplined on returns. The negotiations thus far look like we can a place to meet where Microsoft's expectations on power prices and our expectations on return on investment can both be satisfied. And so like I said, we're very, very pleased I think we'll probably have more to say about this on the next call. So stay tuned.

We'll take our next question from Biraj Borkhataria with Royal Bank of Canada.

Just wanted to follow up on Venezuela again, and this situation is obviously evolving quite quickly. At the start of the year, comments from the U.S. administration was essentially around other companies not looking backwards at the receivables balance and looking forward. And then more recently, you today and some of your peers have been talking about the potential to get some of that paid back. So my question is really, how should we think about what is a reasonable time frame to assume for you to get your couple of billion dollar receivable -- receivables balance back?

Yes, Biraj, we came into the year with a round number, something close to $1.5 billion in a receivable. As I said, the rate at which that gets paid down is somewhat a function of the price, and we're receiving it faster this year than last year, obviously. I think we'll still carry some sort of a balance on that as we get to the end of this year, but much lower than where we are.

And I think that would probably be fully paid off at some point in 2027. And subsequently, we would update you on what the model would be for cash distributions going forward. And I think by the time we get to 2027, some of these open questions that I referred to in response to prior question relative to tax royalty contract terms, et cetera, are likely to be clarified and we'll be able to give you more guidance on what we might do relative to capital investment. I think in any scenario, we remain the advantaged incumbent with people on the ground with operations, with supply chains and contract resources, et cetera, that put us in a very good position to be a big player there, presuming that we see further progress.

We'll take our next question from Sam Margolin with Wells Fargo.

Appreciate the view that the visibility on the long term is very limited right now. But in the near term, there's some extraordinary things happen, too. localized shortages could start to become an issue in some of the places that you operate in the next couple of months, depending on how the situation plays out. Chevron is exposed to these kind of idiosyncratic market events, volatility events, not just in regular operations, but also in the way you manage the supply chain.

So I wonder in the context of the timing effect in 1Q and the derivatives exposure, if anything's changed or if you're adjusting kind of your operating cost share within this highly volatile and extraordinary environment?

Yes, Sam, it is an unusual environment. We've had experience working in unusual environments. In 2020, we saw kind of the inverse of this with the collapse of demand and excess supply in 2022, we saw a version of this when the conflict in Ukraine began. And so we've got a playbook to deal with these things. And you work on optimizing supply into these markets. You look at your financial exposures and counterparty circumstances and manage your risks there.

The timing effects that were reported are the kinds of things you expect in a market like this and the kinds of things we've seen before. And so there's nothing unusual there. It was a big run-up in crude price over the course of the quarter, and things that normally don't really appear in our financials relative to derivatives become very evident in the market like that. In a market that goes the other way, you see those effects and they go the other direction. And so I wouldn't overreact to anything in our numbers. We're very focused on supply in the markets. And I mentioned Asia, where there is clearly some of the nearest term stresses we are working to keep our refineries in Asia running at, I would argue probably the highest degree of utilization of anybody out there because we can direct crude into those refineries. I gave an example of some of the trust we've moved there. We can take crews that would normally go into our U.S. refineries. We've got good substitutions for those that are available to us, and we can move other crudes we've got access to into Asia. And so we're very sensitive to trying to maintain supply into markets that are getting tight.

We're very sensitive to the implications of this for customers, for counterparties, et cetera. And so it's a dynamic situation, but we've got an organization that's very experienced in managing these unpredictable and dynamic markets, and I'm very confident that we can manage those exposures very well.

We'll take our next question from Betty Chen with Barclays.

Mike, Eimear. I want to add about the TCO. In your prepared remarks, you actually mentioned that TCO is producing above 1 million barrel BOE per day. So that's above your nameplate capacity, and that's coming back from the disruptions that you saw in 1Q, when [ you ] just speak to where that asset is performing, what was driving that outperformance and maybe the debottlenecking opportunities? And then while we are on this topic, Mike, could you just give us an update on any -- how the renegotiation contract conversations going?

Sure, Betty. So first of all, TCO returned to full service in March following the repairs on the electrical system in February, and there were some adverse weather dynamics in the Black Sea in early March. We've got 2 out of the 3 single point moorings available at CPC, the third one later this year. But with 2, we can handle full flow on the pipeline. So the pipeline is running full, the plant is running full. We've done a lot of maintenance work as a part of what's going on over here this last period of time. And we have the plant expected to be near full availability for the remainder of this year. You mentioned the debottlenecking work that we did late in 2025.

We've now got that running in its new configuration. Early performance has been very encouraging. I don't think we've got enough run time yet to give you any specific guidance on that. We just need to see a little bit more operational data. But you can expect on the next call that we should give you an update on that. And at times like this, when the market signals are to run all of your assets as strongly as you possibly can, but that's what's happening at TCO. We continue to see the benefits of a centralized control center in optimizing all the different generations of processing capability there and finding, I'll call it white space or the opportunity to squeeze more production through those assets. It's a very complex optimization equation. And we've got new tools to do that in a way that we just never have before. And so I'm encouraged by what we're seeing thus far, and we'll give you more guidance next quarter.

On the concession we're making good progress there in the discussions. We're working closely with all partners in the venture and the Republic. There are technical and commercial teams that have been established and all partners and government representatives are actively participating in that process. I think this has ensured that we keep everyone well aligned. We're proceeding on the same path. And and it's moving along. So that's another 1 where I think at some point later this year, we'll give you an update.

This is a venture that's creating enormous value for all stakeholders, whether it's the partners or the Republic over the last 33 years, and we looking for a solution that will continue that history. Maybe a final point on TCO overall. Our guidance of $6 billion in free cash flow this year is unchanged, and that accounts for the operational issues that we saw in the first quarter and accounts for what we're seeing today. And so the cash flow guidance at $6 billion at $70. So obviously, at a higher price, if that's where we end up this year, we'll see stronger than that.

We'll take our next question from Lucas Herrmann with BNP Paribas.

Mike, no, just touching on the LNG business briefly. I mean the market is obviously tighter. I just wondered how much flex you've got across your portfolio to take advantage of arbitrage or other opportunities that may be emerging. How much -- how much production is not effectively committed? That was broadly it.

2 Okay. Thanks, Lucas. Yes. So we ended last year with a portfolio that's about 16 million tons per year. Majority of that obviously is out of Australia, where we've got 40 Tcf of resource and access to the strong and growing demand in Asia. Globally, our portfolio is about 80% long-term oil-linked contracts and about 20% exposed to the spot market. We like that over time.

I think coming into this year with some of the expectations for length in the LNG market, People would have said that's a good place to be. When spot prices get very strong, obviously, you say, well, I'd like to have more spot. We've got to look at our way through those kinds of cycles. And our oil link contracts, which have a lag don't show a lot of the current market environment in the first quarter, you can expect in subsequent quarters that you will see that flow through into the pricing on that 80% of our volume.

And of course, the 20% that's sold on our spot contracts is seeing the kinds of prices you've seen in the market recently. We just sold our first U.S.-based cargo and that will grow by 2030 to another 4 million tonnes per annum. So that take us up to 20 million. That was sold into Europe on spot-based prices. And we've got our -- I mentioned earlier, we've got our portfolio running very, very strongly. Wheatstone and Gorgon at full rates, same in West Africa. So we're seeing the benefits of this and the proportions are as I described.

We will take our next question from Manav Gupta with UBS.

I want to shift to chemicals. Globally, we are seeing naphtha crackers run drive because there's just not enough naphtha. Your portfolio is very U.S. centric. There's a little bit out there with 15%, but mostly the capacity in the U.S. And what we are hearing is that they're pushing for $0.20 per pound polyethylene price hike. So we ended fourth quarter at record low historic margins but 2Q could be actually over mid-cycle. Can you talk a little bit about that and how you benefit from that?

Sure, Manav. So just to remind everybody, our exposure to petrochemicals is primarily through Chevron Phillips Chemical, also some through GS Caltex in Korea. And CPChem is very much tilted towards ethane-based cracking here in North America and some in the Middle East. CPChem is liquids cracking, but it's derived from its own refining flows and so not reliant upon naphtha supply out of the Middle East. We've seen strong price moves, particularly in the Olefins chain, which is where most of our exposure is.

And those price moves as I think you're probably aware, we're predominantly here in the second quarter. So you don't see much of that in the first quarter. But chain margins have significantly improved from very low levels, as you mentioned last year. to what now are our chain margins that I would agree are likely better than mid-cycle chain margins. And I think you're going to see for people that have assets that are up and running in parts of the world where you're cracking advantaged feedstock and certainly, North America ethane would be described that way. you should see pretty good margin capture in those businesses, absolutely.

We'll take our next question from Jean Ann Salisbury with Bank of America.

I wanted to get your latest thoughts on the Bakken, whether the initiatives to lower costs have given you more conviction that it's core in your portfolio? And whether the higher oil prices may have increased the interest from others in owning that asset?

Sure. So look, the Bakken assets have been running well. We've said that you should probably expect to see a couple of hundred thousand barrels a day production there to plateau. First quarter was a little bit below that, primarily on some weather effects. We've brought down the rig count there. We're running 3 rigs now versus 4 previously. We're drilling longer laterals. We think we can sustain production that way and totally utilize existing infrastructure, drive strong free cash flow there. We're applying best practices from our portfolio, bringing some things in from [indiscernible] practices like we did from Noble and PDC.

This is a more liquids-weighted position in the shale. And so you're right. The strong liquids pricing makes it perform very, very well. And we were getting interest from others really since we've announced the deal and certainly since we've closed the deal, we've had some incoming on that. We want to see a little bit more operating data and really understand the asset.

As I mentioned before, we've underestimated the quality of the DJ when we acquired Noble. I want to -- and thankfully, we didn't sell it quickly. And here, we want to be sure we fully appreciate the value that we've got in the Bakken. I'll give you an example of one of the things we'll be doing. We're testing advanced chemicals to improve recovery in the Bakken today. things we've been doing in the Permian and in the Early response looks pretty good. And so to the extent we've got ways we can improve the recovery and the value on that asset and maybe do some things that aren't available to others, we had to be able to drive more value out of that than a buyer potentially could. And so performing very well, really pleased with it, and we're in no hurry to do anything other than continue to improve it. And in due course, like every other asset in the portfolio, we ask questions about how does it fit for the long term, but it's a little premature for us to be asking that question today.

We'll take our next question from James West with Melius Research.

Mike, Eimear and Jeanine, I wanted to dig in a little bit on your Eastern Mediterranean assets. It seems to me that the region, given the conflict near that region that you're those assets are much more valuable at this point. And so as we think about Leviathan, Tamar, which you operate and then [indiscernible] I know you're not an operator, but you're obviously involved heavily involved there, how you're thinking about those assets going forward because there's a lot of natural gas that needs to get to a lot of places in the region for energy security purposes and others. So I'd love to get your quick thoughts on that.

Yes. So broadly speaking, James, I would agree with you. We have liked these assets from the get-go. That's why we're investing in expanding production at both Tamar and Leviathan, making good progress on those projects with some ramp-up this year of another 600 million cubic feet per day of production on a 100% basis, a longer-term expansion with underway.

We took FID on that in January and are excited about that. Of course, we've begun work on feed work at [indiscernible]. So this is a high quality, nice clean biogenic gas. The demand for the gas in the region continues to grow and supply reliability everywhere in the world now is obviously a priority. And so the markets that we're feeding are growing, and the quality of the resource is very high. The quality of the assets, just shout out back to Noble, those continue to impress us as we look at the expansions with the way they were engineered and designed. And we view the Eastern Med as an area with some growth potential. We've got exploration activity there. And it's -- you can think of it as a big gas hub with a lot of resource that has been discovered and more still to be discovered. And so we're pleased with our position there, and you can expect us to continue to pursue exploration and development opportunities over time.

We will take our next question from Bob Brackett with Bernstein Research.

You mentioned that Chevron, of course, has a playbook to deal with supply shocks. Governments around the world also just off playbooks during supply shocks. Can you talk to what sort of government policies around the world that are helpful during the supply shock and which are perhaps unhelpful?

Yes. You're right, Bob. There are playbooks all across the spectrum. And there are policies that are helpful in responding to a circumstance like this, and there are those that are not. Broadly speaking, we've got a supply challenge in the world. so policies that encourage more supply that enable supply that facilitate the ease of supply are the ones that are helpful, and I'll give you some examples, releases of strategic reserves.

Clearly, that puts oil into the market that wouldn't otherwise be there. That's a good policy move. In the U.S., we've seen the waiver of the Jones Act. That allows us to use ships that otherwise couldn't trade in these markets to move supplies from where they exist to where they're desperately needed. That's a good move. We've seen moves to relax specifications, which take a government-imposed constraints on what product can move to what market and enable you to move products that are needed and otherwise would not be able to do so. So those are the kind of -- we see it in the U.S. another one we've seen is the use of the Defense Production Act to enable some offshore California production to come into service and get into the market. And we're working with the operator of that asset to get it to our El Segundo refinery to meet local needs.

California is the state where the supply pinch is being felt first, and I would say most acutely, and it's flowed through all the way to the street. And so there are a number of actions that have been taken that I think have been very positive in terms of creating supply and flexibility in the system to get that supply where it's needed. The actions that can be unhelpful are price caps which do not allow the signal to use energy efficiently flow through into the economy, and they send a signal that can discourage the creation of s into markets that need them. well intended to buffer the impact of this on consumers and economies. But what it does is it distorts the normal behavior of the market. Export bands can do the same thing.

They can constrain supplies that would otherwise flow into the market to the places that need the most and make the situation worse. And then, of course, the one that a number of governments have gone to historically are some sort of taxes on profits that are generated during periods like this. The history of those taxes is they don't generate nearly as much revenue as they're initially advertised to do and what they do is they send unhelpful questions about future investments. And so they can slow the supply response, not in the immediate term, but out into the medium term. and create circumstances which create vulnerabilities out into the future.

And so we're engaged with governments around the world to discuss these policies to encourage those that really do help respond to the situation. and to caution people about policies that may not help. One thing that a company like ours with a large diverse portfolio has is we're not overly exposed to a potential bad policy decision in any particular market because we have such a broad footprint, a more narrow footprint or 1 that's more concentrated in some of these areas could be more vulnerable to those effects.

We will take our next question from Phillip Jungwirth with BMO.

A lot going on in the world right now, but I wanted to ask about each climate litigation just because that's been an overhang for the industry for a while. We might get some clarity here with the Supreme Court now taking up the issue with the Colorado plate case. But how should you think this could settle the question around state versus federal jurisdiction and just advance the whole climate debate in the U.S.

Yes, we're not party to that litigation, Phil. So I can't comment too specifically about it, but we are party to another case that was just heard by the Supreme Court and concluded that a case that had been heard in state court really should be removed to Federal Court.

And I won't get into the rationale behind that. You may or may not be familiar with it. But the principles are somewhat analogous that this is a matter for federal courts to decide in our view. And in fact, it's truly a matter for elected officials to decide and establish climate policies that appropriately reflects the sentiment of the public and the interest of the nation and that cities, counties, states, are not the appropriate place for climate policy to be established or for climate issues to be subject to litigation.

And so we're hopeful that the case it does make the Supreme Court provides some clarity at the federal court level, we've seen kind of mixed views come out. And so this is a matter that I think really would benefit from some clarity that emerges from the highest quarter of the land. And more to follow.

We will take our next question from Nitin Kumar with Mizuho.

Back in November, you had given us a little bit of an update on your exploration program kind of setting up the company beyond 2030, included some country potential opportunity into new countries. Given the events that have happened here in the last 8 weeks, any change to the picking order of those priorities? Or anything that you're prosecuting a little bit faster to get that oil to the market?

No. I would say it really hasn't changed. I mean exploration is a longer cycle activity. We've got a portfolio that's diverse. I think that's valuable as you look at the circumstances right now. We do have some opportunities in the Middle East region, but we certainly have a number of opportunities we're highly interested in that are outside of the Middle East. And the reality that the world needs this energy supply and will need it long into the future. means that we need to continue to look for resource around the world. We're pleased with the portfolio that we've built up.

We're pleased with some of the new talent that has joined the company. We've got a different model under which we're making decisions now. We're using new technologies to try to improve the -- both the cycle time and the success of our exploration program. So you can expect to see those things continue. We've increased our financial commitment to it as well. And so more to follow. But I think this is a discussion that will occur over the next number of years. And to the kind of earlier comments, if we're not going to change our activity levels in the Permian, for instance, in response to the last few weeks of disruption.

Certainly, that's a place where you do have shorter-term handles you could pull something like exploration, which is longer cycle, really doesn't get affected by this in the short term.

We will take our next question from Jason Gabelman with TD Cowen.

You've guided to your equity affiliate distributions being at about 70% of what the full year guide is by the end of 2Q. I'm assuming some of that is related to the higher oil price. Can you just talk about if the relationship between equity distributions and the oil price is linear and if you have a rule of thumb there to help the market kind of think about the potential upside as a result of what we're seeing in the market. .

Yes, Jason, obviously, as Mike talked about, we're coming into the second quarter with a lot of really strong momentum on our affiliates, starting with TCO back at full rates and testing the upside of the capacity. CPChem is also contributing Angola LNG full. So those are the examples of just the tailwinds that we're seeing on the assets and the strong momentum that we have. So that's why we were able to increase our affiliate distribution guidance today. And so that's $2 billion more -- over $2 billion more relative to the first quarter. It's because of the confidence that we have in the performance.

Another thing I would mention is TCO has already changed their distribution schedule there and I giving us dividends monthly. We've already got the first one in the bank in April. So those actions, coupled with the operational momentum is why the guidance is raised. Look, obviously, the guidance is at $60. And so there's a lot of upside there's a lot of upside here depending on how prices unfold. Thanks for the question.

We will take our final question from Geoff Jay with Daniel Energy Partners.

I guess I had a kind of a follow-up to Bob Brackett's question really about California specifically, I mean, there's been a lot written about its reliance on imports, it's low inventory levels. And I guess wondering, as an operator of refineries in that state, are there -- have there been other relief valves Jones Act helped. Have there been other sort of operational changes that you've made to kind of make sure that, that market is adequately supplied.

Well, I think you've referred to -- I've referred to 1 and I guess both of them, the ability to bring this new production offshore from Sable onshore and make sure that's getting into the California market. I mean that's California oil through a California pipeline to a California refinery to California customers. And that was not happening just a few months ago. Same thing with Jones Act. We can bring crude oil or products from the Gulf Coast that are needed in California. You've got some special specifications you have to hit.

So maybe blend stocks that would come around. But yes, we are very sensitive to our customers in California and the circumstances there. I think you're well aware of what California's policies have delivered to the state, which is an oil industry that is in decline or whether that's upstream production or refining, where we've seen a couple of refineries shut down this year that has constrained supply capability.

And at a time when the world is feeling these constraints. California is reliant upon supplies from other parts of the world, which are maybe needed to keep their own economies going. And so it's a real dilemma for the state. We are doing everything we can to meet our supply obligations there, but it does point out the vulnerabilities that have been created in California as a result of decades of poor energy policy.

Okay. Katie, sounded like that was the last person in the queue. Is that correct?

That is correct. No additional questions in queue at this time.

Okay. I'd like to thank everyone for your time today. We appreciate your interest in Chevron and your participation on today's call. Please stay safe and healthy. Katie, back to you.

Thank you. This concludes Chevron's First Quarter 2026 Earnings Conference Call. You may now disconnect.

Good morning. My name is Katie, and I will be your conference facilitator today. Welcome, everyone, to Chevron's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I will now turn the conference call over to the Head of Investor Relations of Chevron Corporation, Mr. Jake Spiering. Please go ahead.

Thank you, Katie. Welcome to Chevron's Fourth Quarter 2025 Earnings Conference Call and Webcast. I'm Jake Spiering, Head of Investor Relations. Our Chairman and CEO, Mike Wirth; and our CFO, Eimear Bonner, are on the call with me today. We will refer to the slides and prepared remarks that are available on Chevron's website. Before we begin, please be reminded that this presentation contains estimates, projections and other forward-looking statements. A reconciliation of non-GAAP measures can be found in the appendix to this presentation. Please review the cautionary statement and additional information presented on Slide 2.

Now I will turn it over to Mike.

Okay. Thanks, Jake. 2025 was a year of execution. We set records, started up major projects and strengthened our portfolio. Production reached record levels globally and in the U.S., supported by key milestones and strategic actions, including completion of the future growth project at Tengiz, adding 260,000 barrels of oil per day, start-up of Ballymore and Whale and the ramp-up of Anchor in the Gulf of America, advancing toward our goal of 300,000 barrels of oil equivalent per day in 2026. Achieving 1 million barrels of oil equivalent per day in the Permian and shifting focus to free cash flow growth and closing the Hess acquisition, creating a premier upstream portfolio with the highest cash margins in the industry.

Additionally, in the downstream, we delivered the highest U.S. refinery throughput in 2 decades, reflecting recent expansion projects and higher efficiency. This performance drove strong results, including industry-leading free cash flow growth. Excluding asset sales, adjusted free cash flow was up over 35% year-over-year, even with oil prices down nearly 15%. And for the fourth consecutive year, we returned record cash to shareholders, delivering on our consistent approach to superior shareholder returns.

Chevron has been in Venezuela for over a century, and we remain committed to leveraging our deep expertise and long-standing partnerships for the benefit of our shareholders and the people of Venezuela. Since 2022, in full compliance with U.S. laws and regulations, we've worked with our Venezuelan partners to increase production in our ventures there by over 200,000 barrels per day through a venture-funded model to recover outstanding debt. We see the potential to further grow production volumes by up to 50% over the next 18 to 24 months. We are reliably delivering Venezuelan crude to the market, including our own refining system. There is significant potential in our assets and in the country. We're optimistic the future holds a more competitive and robust pathway to deliver value to Venezuela, the United States and Chevron. We've been a pivotal part of Venezuela's past. We're committed to the present, and we look forward to a continued partnership into the future.

Our advantaged assets in the Eastern Mediterranean continue to grow, and we're advancing multiple high-return projects to bring world-class gas resources to regional markets. Leviathan recently reached FID to further expand production capacity. Combined with a near-term expansion, gross capacity is anticipated to reach roughly 2.1 billion cubic feet per day at the end of the decade, contributing to a doubling of current earnings and free cash flow. At Tamar, the optimization project start-up is in progress, increasing gross capacity to approximately 1.6 billion cubic feet per day. And Aphrodite has now entered FEED, working towards developing a competitive investment in Cyprus. We expect these projects to build on the existing assets' top quartile reliability and unit development costs, further expanding our differentiated position.

Before concluding, I want to provide a brief update on TCO. Earlier this month, TCO experienced a temporary issue on the power distribution system. Production was safely put in recycle mode while the team identified the root cause. Early production has now resumed, and we expect the majority of the plant capacity to be online within the coming week and unconstrained production levels within February. Our full year 2026 guidance of $6 billion of Chevron share free cash flow from TCO at $70 Brent is unchanged.

I want to reiterate our message from Investor Day. Chevron is bigger, stronger and more resilient than ever. We're entering 2026 from a position of strength, and we'll continue building on our momentum in the years ahead.

Now over to Eimear to discuss the financials.

Thanks, Mike. Chevron reported fourth quarter earnings of $2.8 billion or $1.39 per share. Adjusted earnings were $3 billion or $1.52 per share. Included in the quarter were pension curtailment costs of $128 million and negative foreign currency effects of $130 million. Cash flow from operations was $10.8 billion for the quarter and included a $1.7 billion from a drawdown in working capital. In line with historical trends, we expect to build in working capital in the first quarter of 2026.

Organic CapEx was $5.1 billion for the quarter and full year organic CapEx was in line with guidance. Inorganic CapEx related mostly to lease acquisitions and new energies investments. We repurchased shares at the high end of our fourth quarter guidance range at $3 billion. Our balance sheet remains strong, ending the year with a net debt coverage ratio of 1x.

Compared to last quarter, adjusted earnings were lower by roughly $600 million. Adjusted upstream earnings decreased primarily due to lower liquids prices. Adjusted downstream earnings were lower largely due to lower chemicals earnings and refining volumes. Adjusted free cash flow was $20 billion for the year and included the first loan repayment from TCO and $1.8 billion in asset sales. Share repurchases, combined with the Hess shares acquired at a discount for over $14 billion.

Looking ahead, we expect continued growth in cash flow, driven by low-risk production growth, ongoing cost savings and continued capital discipline.

2025 marked the highest full year worldwide in U.S. production in Chevron's history. Excluding impacts of the Hess acquisition, net oil equivalent production growth was at the top end of our 2025 guidance range of 6% to 8%. Production at TCO, the Permian and the Gulf of America was in line with or better than previous guidance due to strong performance and disciplined execution.

We expect volume growth to continue in 2026 as we see the benefits of project ramp-ups, a full year of Hess assets and continued efficiency in our shale portfolio. A full year of Permian above 1 million barrels of oil per day and Bakken production underpins the expected growth in shale and tight. Recent and upcoming project start-ups in Guyana, the Gulf of America and the Eastern Mediterranean are anticipated to increase offshore production by approximately 200,000 barrels of oil equivalent per day. We expect TCO to grow 30,000 barrels of oil equivalent per day, delivering near its original plan as the 2026 maintenance schedule has been optimized.

In total, growth in these high-margin assets is anticipated to contribute to a 7% to 10% increase in production year-over-year, excluding the impact of asset sales.

Last year, we launched our structural cost reduction program as part of our continued commitment to cost discipline. Execution has exceeded expectations with $1.5 billion delivered in 2025 and $2 billion captured in the annual run rate. These results reflect a broad organization-wide effort to operate more efficiently, challenging high and where work gets done, streamlining processes, integrating advanced technology and leveraging our scale across the supply chain.

We've restructured our operating model to be leaner and faster with a more intense focus on benchmarking and prioritization. And we're not done. We expect this momentum to continue as we aim to deliver on our expanded target of $3 billion to $4 billion by the end of 2026, with more than 60% of savings coming from durable efficiency gains.

As Mike referenced, we're entering 2026 in a position of strength. Our diversified portfolio has a dividend and CapEx breakeven below $50 Brent and a deep opportunity queue with lower execution risk. Capital discipline remains at the core of our strategy as we focus on only the highest value opportunities. Our balance sheet is in excellent shape with significant debt capacity that provides additional resilience and flexibility.

This disciplined approach allows us to manage through cycles, invest for the future and consistently reward shareholders. Over the last 4 years, we've returned more than $100 billion in dividends and buybacks. As we showed you at our Investor Day, our track record of growing the dividend is unmatched across decades. Today, we announced a 4% increase in the quarterly dividend, in line with our top financial priority.

I'll now hand it off to Jake.

That concludes our prepared remarks. Additional guidance can be found in the appendix to this presentation as well as the slides and other information posted on chevron.com. We are now ready to take your questions. [Operator Instructions] We will do our best to get all your questions answered.

Katie, can you please open the lines?

[Operator Instructions] We'll take our first question from Arun Jayaram with JPMorgan.

Mike, I was wondering if you could elaborate on a few of the moving pieces around TCO volumes in 2026 including the optimized maintenance schedule? And perhaps, Mike, you could just discuss the issue on the power distribution system and where you stand with some of the debottlenecking activities that could potentially result in an increase in your productive capacity at TCO.

Sure. Let me start with the power issue since that's been the most recent information there. The team proactively suspended production at the facility when an issue was identified in the power system. I'm really proud of the organization for taking that step, being willing to reduce production when they identified a condition that created a risk and focusing on the safety of people, assets, the environment. They acted with urgency to get the facility into a safe posture, immediately began working on root cause identification and very quickly began implementing solutions to get production back online.

Production has been resumed at the Korolev field. A number of the assets or power distribution assets have been taken out of service have been brought back into service. We've actually got power now to one of the pressure boost facilities and are in the process of beginning to ramp things back up to higher rates through the processing plants, as I outlined in my opening comments. Also in the news, just to close the loop on it, we have 2 mooring berths back in service at CPC. We've been working for the last 30-plus days, maybe 30 to 45 days through a single mooring berth.

So back into start-up mode on TCO and as I indicated, full field production capacity not far away. When you look at the full year guide, where we said we expect to be near our original production expectations, two things I would point to. One is a maintenance optimization, which is timing of activity and optimizing downtime. And so as we've looked at the schedule for this year, we've got a more optimal plan that will accomplish the maintenance objectives and reduce the amount of planned downtime that goes with those.

And then the second thing gets to your question about debottlenecking. At our Investor Day, we shared some history at TCO that demonstrated over our years there in multiple projects, we've been able to steadily improve plant capacity beyond nameplate. We're working on that again now with the new project. And in fact, one of the pit stop turnarounds that we took late in 2025 was to address -- to retray a column or a portion of a column and address some issues that have been identified that we believe will allow us to push some more throughput through the plant.

We've actually not run that at full capacity long enough to be able to speak to exactly what the impact of that is because of some of these other constraints that I just mentioned. But as we're back up and running, we'll certainly have a chance to test that. And I would expect that and other steps that we take will lead to gradual debottlenecking, and we'll look to try to creep the capacity further upward. And we'll advise you as we've got run time and confidence that we can demonstrate that. We'll let you know what that looks like.

We'll take our next question from Neil Mehta with Goldman Sachs.

Just, Mike, if you could unpack Venezuela a little bit more. And specifically, your just thoughts on the conditions of the assets on the ground and how much running room there is in terms of the resource there? How big could this be in the context of Chevron's portfolio? And I think, Mike, you alluded to the fact that you might be thinking about this more in a self-funding model type of way. So anything you can unpack there, too, would be great.

Yes. Neil, maybe I'll put a little bit of context around this just because I have had different discussions with people over the years, and I'd like to get everybody kind of level set on it since it's been more front and center recently than it has been historically.

First of all, our operations there through the last month and all the things that have happened on the ground have continued uninterrupted. Our people are safe. We continue to work closely with our partners in Venezuela to get crude to the market. So we've not been impacted by any shipping issues or anything else that have been in the media. We're actually in 4 different joint ventures with PDVSA, 3 of which are producing assets. Since 2022, when there were some changes in the licenses out of OPEC under the Biden administration, we've grown production by over 200,000 barrels a day. Gross production now is up around 250,000 barrels a day. And as Mark mentioned during the White House meeting, there's the potential for up to an incremental 50% production growth over the next 18 to 24 months as we get some additional authorizations from the U.S. government.

The activity on the ground right now is entirely funded through the cash within those ventures. And so the current license agreement requires us to pay certain taxes and royalties that we're legally obligated to pay. It enables repayment of debts that we have -- still have debt balances that were owed, and we've been steadily working those down. And then the additional cash goes back into the operations for normal operating costs. That has funded things like well workovers, basic maintenance on pumps and pipelines and compressor stations and the like, which have allowed us to improve production as we have and would continue to, as I indicated, up to maybe 50% additional growth.

So that's the current state of things. As I think everybody on the call knows, the resource potential in Venezuela is large. It's well established, and there's a lot of running room ahead. I can speak to the state of our assets, and we have worked hard to keep them safe and reliable and maintain them during this period of time. I think as you look at the performance out of other assets that we're not involved in, you can see that, that may not be the case across the rest of the industry in the country as the production has kind of steadily eroded over the last decade or so.

And so I think the opportunity to do some of the things we've done in some of these other operations is probably there. I think it's a little early to say what our longer-term outlook is, Neil. You should expect us to remain focused on value and capital discipline. It's a large resource that has the opportunity to become a more sizable part of our portfolio in the future. But we also need to see stability in the country. We need to have confidence in the fiscal regime. There was a hydrocarbon law that was passed just yesterday that we're in the process of reviewing to understand how that applies.

And so there'll be a number of signposts that we'll be watching. And as I try to remind people always, like anywhere that we invest, fiscal terms, stability, regulatory predictability are important. And so it will have to compete in our portfolio versus attractive investments in many other parts of the world. With the right changes, we certainly could see our operations and footprint expand in Venezuela, and we're working with the U.S. government and the Venezuelan government to try to create circumstances that would enable that.

We'll take our next question from Doug Leggate with Wolfe Research.

Mike, I wonder if I could just quickly take you back to Tengiz. And it's -- I guess it's really more of a macro question because I think you're aware that Kazakhstan seemingly has some fairly substantial compensation cuts planned in the summertime. And I don't know how much of that was supposed to be Tengiz. I think it was a previous question from one of the guys asking about maintenance. But now that you've had this unplanned downtime, I'm wondering, does that kind of meet the compensation plan if you had any contribution to that? In other words, we should not expect any further cuts later in the year. I don't know if you can speak to that both on a macro and a Chevron-specific level, please?

Yes, Doug, I really can't. That's a matter for the Republic and obviously, OPEC+ as they engage in their discussions, which we're not privy to. I'll point out that historically, because the TCO barrel is a pretty attractive barrel from a fiscal standpoint to the Republic that what we've seen historically is if there are restrictions on production in the country, those tend to affect the barrels that are less fiscally attractive to the government and TCO doesn't have a history of being impacted to a great degree by that. And so I would point to that. I know history is not always a prediction of the future, but that's how things have historically worked. And I just don't know what agreements or understandings there are within the country relative to OPEC.

We'll take our next question from Ryan Todd with Piper Sandler.

Maybe on the Eastern Med, you've made a lot of progress in the Eastern Mediterranean over the last 6 months. Can you walk through kind of the drivers of the progress in the region, keys to Aphrodite development, getting that to FID and then maybe additional opportunities in the region, including places like Egypt, where we've seen some headlines involving yourselves of late?

Yes. Thanks, Ryan. We are -- continue to be very excited about the resource potential in the Eastern Mediterranean. I used to get some questions back during the last year or so when there was a lot of kind of geopolitical uncertainty in the region. But this is a tremendous resource. All credit to Noble Energy for the way they developed both Tamar and Leviathan. And across our core assets -- on a gross basis, we've got over 40 Tcf of resource. And this is comparable to our assets in Australia, which have been the focus of investors for a long time, but this is similar scale. In the near term, we're focused on safely bringing online projects at both Tamar and Leviathan later this year. Tamar will add about 500 million cubic feet a day of capacity, Leviathan, about 200. And then the Leviathan expansion we just took FID on will take gross production there to 2.1 Bcf by the end of the decade. So steady growth. Combined, those projects should increase production about 25% and double earnings and cash flow by 2030.

And then as you mentioned, Aphrodite just entered FEED. We're working towards a competitive project in Cyprus. This is one that's been kind of on the drawing board for quite some time, and we've reached, I think, a good understanding with Cyprus on the development concept there. And so all of these lead to our confidence in the region. Last thing is we've got at least one exploration well, I know that is going to go down offshore Egypt. We've got a large position in a number of blocks offshore Egypt further to the west in areas that are relatively underexplored and have been under some military exclusions. Historically, there's working petroleum systems onshore, and we've got reasons to believe they could extend offshore. So we're going to be testing that with shot seismic and going to be getting some wells down.

So an important part of our portfolio, good things underway now. And I think the running room on this one continues well into the future.

We'll go next to Devin McDermott with Morgan Stanley.

Eimear, you had some helpful comments and details in the slides on the cost reduction progress so far. And if we look at what's on deck for 2026, what's ahead still, I think some of the remaining improvement is really driven by some of the fairly material organizational changes that Chevron implemented last fall. And now that you're a few months into this new operating model, I was wondering if you could talk about some of the early results that you're seeing so far, both on cost and operations. So any positive surprises or conversely kind of lessons learned or areas that are still work in progress?

Okay. Thanks, Devin. Yes, we've hit the ground running. We went live with the new organization in October, and the new operating model is live and well, and we're seeing that reflected in the early results that we've shown you today in the prepared comments. So we've saved $1.5 billion thus far on the cost reduction program. So some of that's coming from divestments, some of that's coming from efficiencies and technology. And so you see the early results of the organizational impacts in the results already. The run rate is greater than $2 billion at the end of the year. So we are expecting the organizational efficiencies to add to the results that we're seeing thus far. So we're very confident in the targets that we've set and delivering that over the course of this year. And just a reminder, that's $3 billion to $4 billion.

Look, in terms of the lessons learned, what I'd say is we're seeing results everywhere. Every team as part of this program has been benchmarking, has been looking for areas of improvement. So we've got a lot of programs that are looking at improving our competitiveness across every metric. Some of the examples that I would call out, production chemicals, now that we have our shale and tight portfolio and assets altogether in one business, we've been able to look at that from an operational efficiency perspective, not only to optimize operationally, the chemical treatments, but also the cost and the dosing. So that will be an operational lessons learned where the scale and the design of the new organization makes that easier to do and the results speak for themselves.

Another area, maybe in the technology space, we've talked about this for a number of years, but AI is really starting to take off in terms of being used in every part of the business. And in the new organization, our supply chain team is set up a little bit differently, and they've really been using AI in a neat way to glean more intelligence around how to approach certain negotiations. And so that would be an example as well. So all in all, we're on track to deliver the $3 billion to $4 billion. I'm very confident in that. And this is overall OpEx reduction while we significantly grow. So we'll keep you updated on the progress. Thanks for the question.

We'll take our next question from Sam Margolin with Wells Fargo.

Maybe revisiting the Permian. I think it was like the second half of '23 where you called out that productivity -- well productivity in the Permian on the operated side was inflecting higher. And now 2 years later, it seems like we're really seeing it flow through in capital efficiency. And so the question is like when you get this kind of momentum in short-cycle capital efficiency, what does it do to your decision-making process? Not -- I don't want to spin you around on Permian plateau, but just given the cost and productivity structure of your operation there, it feels like it's getting incrementally capital efficient to accelerate. So just in the context of what you're seeing performance-wise, how do you feel about the Permian strategy?

Sam, I'll take this one. Yes, well, what we're seeing is exactly what we set out to achieve, and that was to hold Permian at 1 million barrels a day. We've seen that for 3 quarters and optimize on cash generation. And we are already seeing cash efficiency improve. We're at $3.5 billion of CapEx already, and that was something that we thought that it was going to take us some time, but the team has just done a terrific job. Every aspect of the factory there has seen efficiency and improvement. And now we're taking that further given that our shale and tight portfolio is together as part of the new organization in one business. And so we'll see that capital efficiency extend to the Bakken, extend to the DJ and extend to Argentina.

One data point I'd give you just to illustrate it clearly is drilling rig efficiency. And since 2022, we've more than doubled our drilling efficiency from that point. And so we're drilling the development areas for much less.

In terms of our decision-making right now, no change to our decision-making. I mean, Permian plays a role in our portfolio. We're focused on growing cash flow, not growing production and the capital efficiency enables that. So I'll just finish by emphasizing all of these actions are improving returns.

We'll take our next question from Paul Cheng with Scotiabank.

Mike, can you discuss how you see the opportunity set in 2 of the OPEC countries, Libya and Iraq, where a lot of your competitors seems to be -- believe that the opportunity sets have much improved and making wave. We haven't heard from Chevron. And also that comparing to your peers, your LNG size or portfolio size is much smaller. And how that fit into your long term? Do you have a different view comparing to your peer on the LNG business?

Paul, a couple of questions there, I guess. First of all, you might have seen we recently signed an MOU in Libya. We're a little bit underweight, relatively speaking, Middle East versus some other parts of the world, and that's been intentional. The types of contracts and the terms have been on offer in the Middle East, broadly speaking, for the last decade or more, have not been very competitive versus some of our alternatives. And so you've had a lot of service type contracts. And in a world of limited human resources and limited capital resources, we need to deploy these to what we believe are the highest return opportunities. And it's been tough for a lot of those to compete within our portfolio. So we've not gone into Iraq. It's been a decade or more than since we've last really had any kind of a serious look at Libya.

Those things are changing. And I think in part, when we saw President Trump make a visit through the region earlier this year, we saw a notable uptick in inbound inquiries and the desire to engage not just in those 2 countries, but in any number of other countries that would like to see American companies invest in their economies. And so we -- the resource potential in some of these countries is undeniable. Iraq and Libya are 2 of the largest resource holders in the world. And so we're engaged in discussions in both of those countries. They have been reported in the media to look at everything from existing producing fields and coming into those to operate and grow, also looking at exploration opportunities as well. Improvements in fiscal terms have been critical. Pairing discovered resources with exploration opportunities make things more attractive. And so we need to see compelling value opportunities there if we're going to invest. We intend to stay disciplined on capital and seek the highest returns.

My quick response in LNG, Paul, I think I've spoken to this before, is we're a global player. We need to be in projects that compete. And a lot of things that we've passed on around the world, similarly to my comments about some of these Middle East opportunities, they just don't deliver the returns that we're looking for. And so we've got some U.S. offtake where we don't need to put capital to work because we have a large gas position. We've got a strong credit position, and we can get attractive throughput rates and let somebody else deploy the capital into those businesses. So we'll have some LNG offtake from the U.S. And we'll continue to look at opportunities. We're not opposed to adding, but it's got to deliver competitive returns. Thanks for the question, Paul.

We'll take our next question from Steve Richardson with Evercore ISI.

I was wondering if we could maybe just dovetail on those -- the comments just there on changing fiscal terms internationally and the opportunity. It just feels like you've positioned the company arguably really well to win in a low commodity price environment and with a ton of leverage to the upside as your sensitivities suggest. So that -- but the opportunity set just keeps on getting bigger. I mean we're just talking about Venezuela, talking about some of these opportunities in the Middle East. You've got a revamped exploration program. So can you just follow up on that in terms of how do we think about maintaining that leverage to the upside while developing some of these future opportunities? And how do you instill that discipline in the organization, if you could?

Yes, Steve, I mean, we've steadily worked to high-grade our portfolio. We've looked to add very strong and competitive assets to our business. And we have divested ourselves of positions that are not bad assets, but they fit better for somebody else than they do for us. And so in doing so, I think we've strengthened the company. You've seen our breakeven has come down. You see that we're able to operate at lower cost because we're actually in fewer positions that have more scale. They've got longevity, so we can apply technology to these assets. And I think you can expect us to continue to do so. We want to grow gradually over time, but demand for our products isn't growing at an enormous rate. Demand for oil has grown arguably 1% a year, give or take. Gas has grown a little bit more strongly than that.

And so we've got volumetric growth a little bit above that last year, this year because we had some acquisitions and project start-ups. But over time, we've got to grow cash flow. And that's the focus. We've got to drive breakevens down because we're in a commodity business. We can never forget about that. And we've got to apply base business excellence to everything that we do. So we've got to drive value out of these assets. We've got to work them better.

I'll give you -- Eimear talked earlier about bringing all of our shale businesses together. As you look now at what we're doing with the Permian, the DJ, the Bakken and Argentina, all as part of one organization. And I see people, practices, technology standards being shared across those businesses. We're steadily driving the kind of improvement that Eimear was addressing in her response to Sam across that entire portfolio. And so we've consciously positioned the company, as you say, to have the resilience that I talked about. I said we're bigger, better and more resilient than ever. That means we can ride through the cycles in even better position than we could in the past. And we've got a balance sheet that provides ballast if you get into a long cycle. And we've got this track record of continually raising the dividend, steadily buying shares back through the cycle and being able to reinvest in the business to strengthen it over time. And that's the playbook going forward.

We'll take our next question from Biraj Borkhataria with RBC.

Just a follow-up on portfolio. I have been touched on a couple of times, but we've seen a bunch of headlines on you maybe looking to sign deals in various countries. I was just wondering, is this a concerted step-up in your efforts? Or is this largely initiated by resource-rich countries and reverse inquiries? Some perspective there would be helpful. And one of the things just to note on is your portfolio has become more concentrated over time, which has been -- which is good and bad depending on the situation. So I was just wondering if that's part of your thinking is looking to diversify and how you're thinking about the portfolio there.

Yes, Biraj. So look, business development is part and parcel of what we do every day, week, month and year. There are times you're in a pretty sparse environment in terms of opportunity, and there's times when it's more target-rich. What I would say is -- and this tends to kind of work on a long cycle sometimes. What we see today are more attractive opportunities, frankly, than I think we've seen in the past. And I spoke to the Middle East, so I won't repeat that, but we do see a lot of interest in that part of the world, and it's reflected in these more competitive fiscal terms. And so I don't think we've necessarily changed our appetite or our level of diligence and activity in the BD environment. We just see a more attractive suite of opportunities out there. We'll continue to be very selective and pick and choose.

I hear your comment about portfolio high grading and concentration, if you will. At the core, we run big things big. We like long -- large positions that have lots of running room. We like to apply technology and base business excellence to drive value through those assets. When you're in a position with a lot of smaller assets spread all over the world, your safety exposure, you've got a lot more surface area on safety, environmental issues, compliance issues, you just go down the list. And so you deploy a lot of your great people to manage those things across assets that can be small and out there kind of in the tail of a portfolio, having large positions where you can put your best people to work on assets that really matter is something that I believe is important. And so I recognize you could get too concentrated. I don't believe that we are. And as I mentioned earlier, we're a little underweight in the Middle East, which is an area we wouldn't mind having some more exposure if we can find it in a competitive financial standpoint.

We'll take our next question from Manav Gupta with UBS.

You have a very strong refining portfolio, and there are 2 tailwinds we see to that refining portfolio. One is your competitors closing capacity in California, leaving you with one of the biggest footprints out there and above mid-cycle margins. And second is the possibility of using some of those Venezuelan and heavy sour barrels in your refining systems, Gulf Coast and other places. Can you talk a little bit about those 2 possible tailwinds to your refining margins?

Yes, Manav. Thanks for bringing up something near and dear to my heart, the downstream business, where I spent a lot of my career. First off, on where you ended on Venezuelan crude. We've been bringing about 50,000 barrels a day, give or take, into our Pascagoula, Mississippi refinery on the Gulf Coast. We can take another 100,000 barrels a day into our system, both at Pascagoula and on the West Coast, where we've got coking capacity at El Segundo. So I think you should expect to see us, assuming it competes against alternatives to be running more Venezuelan crude in our system over time.

In California, it's an interesting situation. We have a very strong downstream position there. We've got scale. We've got complexity in terms of conversion capacity. We've got flexible crude sourcing, advanced logistics, a very strong retail brand to integrate the business. And so we're as competitive as anybody, and I would argue advantaged really versus the rest of the competitors in California, you're seeing some refineries close that is going to take capacity out of the system. And already, we've got a market there that is geographically and logistically isolated. It's isolated by specification as well. And as a result, California pays higher fuel prices than the rest of the country by simple market forces being at work there. There's -- we've seen decades of what, in my opinion, has been poor energy policymaking that has made it more difficult to invest. The irony is we have places in the world like Venezuela that are trying to become more attractive to investment as places like California enact policies to become less attractive to investment.

All of that is unfortunate as someone who spent a lot of time in that state, but it highlights the need for policy that enables investment and for competitive terms and regulatory environment. And so we'll see how things play out in California over time.

We'll take our next question from Alastair Syme with Citi.

Reserve replacement this year obviously benefits from Hess, but you're also taking on the new production, and that means reserve life has dropped again, and it's now a lot lower than it was 5 to 6 years ago. The question is, how do you think about the suitability of this metric to your business and really as a guide for investors in your business?

Alastair, I'll take this one. Yes, I mean, RRR, reserve, replacement, ratio in a business that has depletion is an important metric. It's not the only metric that we look at when we think about the depth of our inventory or the quality of the portfolio. And last year, in addition to the RRR that was associated with the inorganic growth with closing Hess and bringing Guyana and Bakken into the portfolio. There are also -- some of that did come from organic adds as well, so extensions, discoveries and project sanctions. So it's a blend of both.

Look, with RRR, it can be lumpy. So some years, you can get kind of a flurry of things happening at one time. And so what we look at is we look at the 1 year, but we also look at the longer-term trends as well. We look at the competitive metrics, too. And when we take all of that into consideration, we had a great year in 2025 on RRR, and we lead the peer group in both 5 and 10 year. Thanks for the question.

We'll take our next question from Jean Ann Salisbury with Bank of America.

You all had said at the Investor Day that you had started to test the chemical surfactants in other basins outside of the Permian. Have you gotten any early results back from the DJ or Bakken? And do you anticipate that it's going to work as well there?

Yes. Thanks. I'll take this one. So we've been primarily focused on Permian. And in fact, we've increased the treatments from about 40% of the new wells being treated at the first half of 2025 to almost 85% will be treated this year, and we're striving to hit 100% in 2027. So it has been more of a focus in the Permian. And I'd just point out, we're testing our proprietary chemical technology, but we're also testing the combination of that with other commercially available chemicals. So cocktails as such. We're trying out different things depending on the development area.

We showed in Investor Day some of our results. What I'd say is we're now realizing 20% improvement in 10-month cumulative recovery on the new wells. So we have even more information than what we shared at [indiscernible]. So we're really excited, and we expect that's at least a 10% recovery uplift when we think about it over the full life of the well. And what we've also learned is we can apply these technologies not only to the new wells, but the existing wells. And what we've seen in almost 300 of the treatments that we've done in existing wells that we've [ arrested ] decline by 5% to 8%. So all in all, very encouraging.

The programs to scale in other parts are underway, though. We don't have results that we can share with you today. We did do some treatments in Bakken in the fourth quarter. We expect to see some of that soon. We have pilots underway in the DJ and Argentina as well. And so we'll share the results. I mean, we publish the results, they're verifiable. We give you the paper references so that you can see for yourself, but we will share all of that in due course. But we're really, really excited.

And what I would also say, this is one technology program amongst a set of programs that's really focused on doubling shale and tight recovery. We've got a stimulation program that is very, very deep. We've also got an effort to leverage the unmatched data position we have around our shale and tight wells using AI to glean insights into how to design wells, develop wells and increase recovery. So very comprehensive, and we anticipate we'll have some results for you this year. But right now, we're just focused on getting the treatments out to those other shale and tight basins.

We'll take our next question from Betty Jiang with Barclays.

This is a good follow-up to Jean Ann's question. I want to ask about the Bakken specifically since you've been there for a couple of quarters now, how is it performing relative to your expectations? What's the cross learning between the 2 teams? And how do you think about the Bakken position overall today?

Yes. Thanks, Betty. Look, we're pleased with the Bakken. We're applying best practices, as Eimear mentioned, from other parts of our portfolio. We're looking at things that Hess had been doing in the Bakken to apply those in the DJ, the Permian and Argentina. We've already optimized our development program to reduce capital spending, better utilize existing infrastructure, maximize value. We've moved from 4 rigs to 3 with a similar drilling output. We've optimized the workover fleet, renegotiated some of the key supplier contracts, working on advanced chemicals with some optimism. We're implementing long lateral development in 60% of the wells this year and up to 90% in 2027.

So driving value there, we're going to -- Hess had a target, and we will hold that to level it out around 200,000 barrels a day, plus or minus, and really focus on cash flow. So similar to the way you've heard us talk about the DJ and the Permian. We think we can drive a lot of asset productivity efficiency, technology and free cash flow growth in this asset as well.

We'll take our next question from Geoff Jay with Daniel Energy Partners.

I was just really struck by the margin improvement sequentially in U.S. upstream. And I know there's a lot of moving parts, but it looks like realizations were down over $3 on a BOE basis, but costs -- the margin was actually up. And I guess I'm wondering if there's a way you can help me understand how much of that are those structural cost savings and production optimization efforts you guys are doing and kind of what the pathway for that looks like going forward over the next year or so?

Yes. Geoff, I'd point to a couple of things. Number one, we've been bringing on new production in the Gulf of America. These are high-margin barrels. And so when you bring that into the mix, you start to see the margin expand. Number two, as we've moved to plateau in the Permian, and I also mentioned the DJ and the Bakken, that's 1.6 million barrels a day. As you start to drive efficiency and productivity and technology across that kind of a production base, you can see a real impact of that. The third contributor then are some of these structural reductions that we're making in our organization and more efficient support of people to these businesses, consolidating all of our shale assets into one organization. So I'd say there are multiple levers there.

But your broader point is one that I think is important. I mentioned earlier that we're in a relatively low growth. It's a growth business, no doubt about it. But demand for energy globally grows gradually. We need to focus not only on growing volumes in order to meet that demand, we've got to continually work on expanding margins. And that's through value chain optimization, that's through all these other things that I just talked about. And so margin expansion is something that in my background in the downstream, we worked hard to expand margins through things we can control. You can do that in the upstream, too. We've got people focused on that, and we're seeing the results, as you point out.

We'll take our next question from Bob Brackett with Bernstein Research.

A follow-up around Venezuela. You've mentioned bringing Venezuela heavy into Gulf Coast refineries and having some capacity on the West Coast. Do you have a sense of how much heavy from Venezuela could be absorbed by the U.S. without impacting heavy light dips or without backing up Canadian heavy?

Bob, good analysts do great work on that. Markets are wonderful things. And what's going to happen as you bring more of these barrels in, as you say, you're going to kind of back out what's currently feeding the system. They're going to redistribute around the world and kind of a new equilibrium will establish. And light heavies will reflect that, flows will reflect that. I don't have a simple rule of thumb I can give you or kind of a simple way to describe that. I'm pretty sure you can get down into the details and model that better than I'm going to be able to describe it to you. But you're right, it's going to shift these things around.

We'll take our next question from Phillip Jungwirth with BMO.

On chemicals, I mean, you made no secret about wanting to get bigger in this area. Obviously, you need a willing buyer and seller price that works, plus it's tough to do deals at the bottom of the cycle. But the question is, how do you view the benefits to Chevron of owning more of CPChem? Are there things you could do differently versus the current JV structure, whether it's operational or strategic? And are there other avenues to get larger in petchems beyond this?

Yes. So look, CPChem is a well-run company, and I want to give them full credit. And it's been a well-run company for a long time. We've been very pleased with our investment in that company. We've been pleased with our relationship with our partner, and it's been a good vehicle for us. We think the long-term outlook for chemicals is positive. We're in a tough part of the cycle right now. But with the growing middle class and growing global population, the products that CPChem needs are increasingly going to be in demand around the world. We've got a couple of projects underway that will be highly competitive when they come on next year. We'll see how this cycle plays out. I think it's still got some time to go. We would like more exposure to the sector.

But as you say, you got to have 2 people that want to do a deal. Are there other ways we could do things? Yes, we can look at things. We -- I'd remind you, we also have a very large aromatics position in North Asia at GS Caltex, one of the largest aromatics plants on the earth. And so we'll look for the right ways to increase our exposure to petrochemicals over time.

We'll take our next question from Paul Sankey with Sankey Research.

Mike, good to hear that you're not modeling the heavy light spread constantly. Mike, if I could ask you a couple of specifics on Kazakhstan, which you've already referenced. But was the power outage, what caused that? Was that just an upset? And secondly, the specifics of the loading, was that owing to military activity, I guess?

Yes. So look, the investigation is ongoing on the power outage, and I don't want to speculate on it. The team is gathering new information each day. We've got our subject matter experts from in country, from outside the country. We've got OEMs from all the various vendors that we work with involved in this, and they're making good progress. But I'm not going to comment on it at all. I think it's a mechanical issue. I can say that. But beyond that, I don't want to say anything more. It's not a sabotage or cybersecurity or anything like that.

On the loading berth, it's been well publicized. 1 -- there's 3 offshore single-point moorings at the Novorossiysk terminal or offshore at Novorossiysk. 1 of those was out for maintenance, 2 were in service. 1 of those 2 was hit by a submarine drone back in December as part of the military activity in the Black Sea. So that's what took CPC down to 1 loading berth. It is -- we're back up to 2 loading berths now, and there's a third one that is slated for some big maintenance work, and we'll be back later this year.

Historically, the Caspian pipeline and that terminal have been very, very reliable. And I think if you look at it in the fullness of time, the uptime and the reliability record has been very good. Notwithstanding that, when it's -- when you're pinched back like that, it's frustrating and a lot of people have been working very hard at TCO and all the shareholders at CPC to address these issues.

We will take our final question from Jason Gabelman with TD Cowen.

I wanted to ask about the balance sheet as it relates to M&A. In the past, you funded acquisitions primarily through shares, and there are some assets on the market in Kazakhstan that can make sense to acquire, though it seems like maybe that acquisition would need to be funded by cash instead of stock. So with that in mind and maybe in a broader sense, how do you view using cash to fund acquisitions, not of the Hess size, but some of a smaller size like [indiscernible] and Noble versus using equity given the current balance sheet? And kind of related to that, I noted that on the front of the earnings release, you put debt to cash flow instead of net debt to cap. It looks like that's maybe a preferred debt metric. Is that so? And if so, why the change?

Yes. Jason, let me talk about transactions, and I'll let Eimear talk about ratios and metrics. When we do a deal, you're negotiating with a counterparty and the consideration is part of the negotiation. And there are times when your counterparty prefers cash, there's times when they prefer equity, there are times when they may want a mix. And so that's a matter of negotiation. On large-scale M&A in our sector where you can have a long time between deal signing and close, i.e., a deal we just closed after a very long cycle, using equity hedges commodity price risk on both sides of the transaction. And if you enter into a deal in one commodity price environment and you close it in another and you've got a lot of cash in the deal, you can find out that you find yourself where one party feels like the deal got a lot better for them and the other feels like it got a lot worse.

And so equity and transactions like that tend to be preferred by both counterparties because of a way to hedge out some of the commodity price risk. Smaller deals that close faster and are of a different nature, you can find cash is preferable. And so we -- look, we'll work with whatever consideration makes sense in a negotiation. We're flexible, and we've bought things with cash over the last many years, and we've done equity deals. So it really depends on the circumstances.

Eimear, do you want to talk about metrics?

Yes. There's a number of metrics out there to look at the debt ratios. And so what we've done here is we've just moved towards what our rating agencies look at and what many of you look at in terms of ratios. So we're just trying to be consistent. And we still look at net debt ratio. But overall, the message is our balance sheet is in really good shape, and we're in a position of strength. Thanks for the question.

I would like to thank everyone for your time today. We appreciate your interest in Chevron and your participation on today's call. Please stay safe and healthy. Katie, back to you.

Thank you. This concludes Chevron's Fourth Quarter 2025 Earnings Conference Call. You may now disconnect.

Good morning, and thank you for taking the time to join us for Chevron's Investor Day, where you'll learn about our financial strength, our diversified portfolio and the leading value proposition today and for years to come.

I'm Jake Spiering, Head of Investor Relations. We'll start the morning off with a presentation by our Chairman and CEO, Mike Wirth; and our Chief Financial Officer, Eimear Bonner. They'll cover our corporate and financial strategy, followed by a question-and-answer session. At the end of that session, we'll take a brief 15-minute break. When we come back, our Vice Chairman, Mark Nelson; and our Vice President of Lower Carbon Energies, Jeff Gustavson, will provide a presentation on our diversified portfolio, followed by another Q&A session. The full presentation is available on Chevron's website.

Before we begin, I would encourage everyone to review the cautionary statement in the provided materials as the presentation today contains estimates, projections and other forward-looking statements. Now to set the tone for the day, we'll open with a brief video, which highlights Chevron's rich history, significant accomplishments and exciting path ahead. I hope you enjoy it.

[Presentation]

All right. Well, good morning, and welcome to Chevron's Investor Day. As you saw in that video, Chevron has a storied past and an even more compelling future. I'm excited to show you we're bigger, stronger and better than ever and poised to deliver even stronger cash flow and growing value.

I'll start with industry-leading free cash flow growth. It's here. Now we're delivering on every milestone we set out. And as you'll see today, we view this as just the beginning. We built a resilient world-class portfolio with a premier upstream position in the industry, high margin, low breakeven and balanced across asset classes and regions. We have a highly competitive downstream and chemicals business. And we've developed diversified growth options that extend through this decade and into the next.

Importantly, we remain committed to superior shareholder returns. Capital discipline is at our core, and it's what positions us to translate higher free cash flow into consistent returns for shareholders. In short, Chevron is stronger, more resilient and better positioned than ever. And we're excited to show you why we believe the best is yet to come.

The foundation for performance at Chevron starts with safety. Protecting people, assets, communities and the environment is our highest priority. Producing the energy the world needs involves inherent risks. This year, we've experienced incidents that remind us how important it is that effective safeguards are always in place. We're focused on learning from these events and implementing actions that improve our ability to deliver energy safely and reliably.

The world's appetite for energy continues to grow. Reliable and affordable energy remain essential for human progress. Oil and gas demand is at an all-time high. It will set another record this year, and it's expected to do so again next year. And again, the year after that and beyond. Due simply to field decline, there's a need for significant investment to close the oil supply gap, equivalent to five Saudi Arabians that would otherwise appear over just the next decade. Demand for gas is expected to grow even faster than for oil, including the critical role gas will play providing the energy backbone for data centers and advanced computing.

Meeting this demand will require scale, expertise, technology, partnerships and financial strength. This is where Chevron excels.

For decades, our vision has been to be the global energy company most admired for its people, partnership and performance. We've also consistently held a simple, clear objective, lower returns, higher returns and lower carbon. We've been an industry leader on capital discipline. We believe that costs always matter. We've demonstrated a track record of dependably increasing cash returns to shareholders. Our approach to new energy has been pragmatic. We'll invest only where we believe we can compete and deliver returns. This isn't about chasing headlines. It's about creating value. And we're lowering the carbon intensity of our operations, cutting the carbon intensity of our oil production almost in half over less than a decade.

Some things are changing at Chevron, including our organizational model and our portfolio. What hasn't changed is our approach to creating value. As I said earlier, Chevron is bigger, stronger and better than ever. Over the last decade, we've reshaped the portfolio, grown production, become even more cost and capital efficient and steadily grown cash returns to shareholders.

Production is up by over 1 million barrels of oil equivalent per day, an increase of more than 40%. At the same time, the capital spending is down by nearly 40%. Unit development costs are lower and capital efficiency is higher. Divestments and concession expirations have been more than offset by inorganic growth in the Eastern Mediterranean, DJ Basin, Guyana and the Bakken. And we've delivered organic growth in Kazakhstan, Australia, Gulf of America and the Permian. We've also built a leaner operating model, changing how and where we work while keeping a relentless focus on efficiency.

All that enables us to return over 3x more cash to shareholders today versus a decade ago while keeping our share count relatively flat. And we're building on that momentum to become even better.

Over the last year, we've delivered on core milestones that result in industry-leading growth in cash flow, volume and value. From 2024 to 2026, cash flow from operations is projected to grow at 3x the rate of our nearest peer. That's underpinned by an expected production compound annual growth rate of 10%, more than 40% higher than the growth rate of our next best competitor. And we'll be even better positioned to withstand the volatility of commodity markets with a breakeven price to cover both CapEx and the dividend expected to be below $50 Brent. In over 43 years in this industry, I've seen more than a few cycles and surprises. You can count on us to be prepared for the unexpected and resilient through any headwinds.

And the improvement doesn't just end in 2026. Over the next 5 years, we expect annual adjusted free cash flow growth to average greater than 10% at a nominal $70 Brent price. And at real prices, escalating over time like many of our peers use, that growth would average over 14% annually. This outlook is underpinned by our world-class upstream assets, where we continue to increase capital efficiency across our shale portfolio, optimize world-scale fields in Kazakhstan and Australia and grow high-margin deepwater production.

We had diversified growth through new chemicals projects and new power solutions. Never in my career have I seen a higher confidence outlook further into the future and with lower execution risk than I see today. Underlying it all is a relentless focus on lowering operating costs, using innovation and technology to expand margins and remaining disciplined on capital. And this expected growth is even higher on a per share basis. Assuming the midpoint of our buyback guide, this would add over $8 of adjusted free cash flow per share over the next 5 years, nearly doubling our expected 2025 rate.

Chevron's purpose is to develop the affordable, reliable, ever cleaner energy that enables human progress today and well into the future. So before I hand it off to Eimear, let me just say a few words about the role of innovation and technology, including AI.

Innovation has long been a core strength at Chevron, enabling us to work faster, smarter and safer every day. This continues in all core areas of technical focus, and we continue to see higher levels of performance in our assets as a result. We expect artificial intelligence to enable the next leg in this journey, driving improvements in efficiency, asset productivity, optimization and exploration outcomes.

Both Mark and Jeff will share examples of what we're already doing with AI. We have a dedicated enterprise team focused on integrating AI into how we work every day, prioritizing the highest value opportunities across our business. We also believe Chevron has a meaningful role to play in meeting the growing power demand created by new data centers. Jeff is leading this effort and will show more in his comments. With that, I'll hand it over to Eimear to discuss our financial priorities.

Thanks, Mike. Good morning, everyone. Chevron's financial priorities are long-standing, grow the dividend consistently, invest capital efficiently, maintain a strong balance sheet and buy back shares steadily through the cycle.

So let's start with the dividend. Simply put, we reward shareholders first, and our track record proves it. We have the highest average growth rate of our peers over the last 25 years, and you can see that our consistency is unmatched. We know our shareholders rely on our dividend. We don't cut it in times of pressure, and our capital discipline focus enables continued growth through commodity cycles. Our consistent approach to rewarding shareholders stands out from the competition.

Our second priority is to invest capital efficiently. And over the last decade, we've led the industry in a more disciplined and efficient level of investment. Since 2021, our capital efficiency has been better than both the peer and S&P 500 averages, and we expect that leadership to continue. As Mike noted, we've reduced CapEx by 40% over the last decade. And today, we're reducing the annual CapEx guidance range by $1 billion to $18 billion to $21 billion through to 2030. This capital program supports our forecasted growth in earnings and cash flow and is balanced between short- and long-cycle projects across diversified asset classes and geographies. We believe capital discipline is fundamental to our strategy in providing long-term value for our shareholders.

We also understand how important it is to our shareholders to manage volatility through commodity cycles. Our strong balance sheet is an asset that we use to mitigate risk and create value. Given strong cash generation, our debt coverage ratio is nearly twice as strong as the S&P 500 average at current prices. And even at $50 Brent, we expect it would remain better than the average. We have surplus debt capacity and hold a AA credit rating. This strong credit resulted in some of the tightest spreads across all of corporate America in our recent bond offering.

With a portfolio that has the lowest upstream breakevens, a flexible investment program and a premium balance sheet, we're positioned for any price environment.

Now to our fourth and last financial priority, buying back shares steadily through the cycle. We bought back shares in 18 of the last 22 years and established new records in each of the past 3, averaging a reduction of about 5% of shares annually. Given our stronger cash flow growth, we're reducing our price assumption for the top end of the range from $85 to $80 Brent. Over the period, we expect to repurchase $10 billion to $20 billion annually at average prices of $60 to $80 Brent. Our consistent approach underscores our priority of steadily returning cash to shareholders.

We have a proven track record of maximizing value, consistently high-grading our portfolio by divesting assets that don't compete for capital and delivering synergies on the assets that we bring in. We announced a $10 billion to $15 billion divestment target by 2028, and we've already achieved $9 billion.

Looking ahead, we expect $1 billion to $2 billion of asset sales per year through 2030. We've successfully integrated multiple quality companies that have bought great assets and great people and have created even more value than expected. The Hess integration is largely complete, and we've already delivered our initial $1 billion run rate synergy target. What was expected to take 12 months was achieved in just 3. With this momentum, we're raising our Hess synergy target to $1.5 billion by the end of 2026.

Now as you've heard us say many times before, costs always matter, and they always will. We're focused on running our assets as efficiently as possible. This includes continuous improvement across all levels of the company, where we relentlessly benchmark and pursue performance that's better than the best. Recent changes to our operating model and ongoing standardization across the company are already delivering results. And we're leaning in on technology and AI to do our work safer, faster and at a lower cost.

With the career progress that we've made and the actions underway, we're raising our structural cost reduction target to $3 billion to $4 billion of annual run rate savings by the end of 2026.

Delivering high return volume growth while also lowering our absolute costs is expected to deliver strong earnings growth through the end of the decade. And when you combine this with our buyback program, we expect to further expand returns on a per share basis. In addition to the cash flow Mike talked about, at flat nominal $70 Brent, we expect annual average adjusted earnings per share growth of more than 10% through 2030.

And at escalated real prices, it's over 14%. With this growth, along with continued capital discipline, we expect greater than 3% improvement in return on capital employed by 2030 at flat nominal $70 Brent. And at escalated real prices, this improvement would be almost double.

Bringing it all together, we've got a winning combination. First, the free cash flow inflection is here. And as Mike said, we see this as just the beginning. We expect to generate more cash and keep growing through the end of the decade. Second, as I just showed you, we expect to increase earnings and returns. And finally, we remain focused on capital and cost discipline, lowering capital guidance and increasing our structural cost reduction target.

So I'll leave you with this. Chevron offers a unique proposition, a commitment to shareholder returns, a strong growth trajectory and leading resiliency. No other company in the S&P 100 matches our combination of forecasted earnings and cash flow growth balance sheet strength and a market-leading dividend. At our historic dividend growth rate and the midpoint of our buyback guidance, we'd return over 45% of the current market cap to shareholders over the next 5 years. Thank you.

So Mike will now join me on the stage, we'll take your questions.

We're now going to begin our question-and-answer session. I will call on you after you raise your hands as we do have a number of analysts present. Please limit yourself to one question as a courtesy to make sure we can answer as many questions in the time allotted. We'll have our first question from Neil Mehta at Goldman Sachs.

And I'm looking forward to hearing more on an asset level, but the chart that a lot of investors are anchoring to this morning is the free cash flow guide for 2030, which looks like it's $29 billion at $70 Brent at the middle of those fuzzy bars. And so I just want some -- your confidence interval in terms of actually achieving that. We noted on the slides, you talked about greater than 10% and 10% would get you to the $29 billion. So just your thoughts on how much of this has been derisked? And how much should we focus on the greater than?

So Neil, maybe I'll start and then let Eimear give you a little bit more details. What you'll see or if you've already looked ahead at the slides is at an asset level, Mark will go through and give you several numbers for the Permian, for Bakken and DJ, TCO, Australia, downstream and chemicals, and that will probably build you up to 80-plus percent of where we're going to go.

The confidence is really underpinned by the fact that most of this growth is in flight. We've got projects that are online and ramping. We've got projects that are in execution and performing well. And there's very little kind of betting on the come to get there. So I can build it up for you kind of in a different way. But I'll tell you, at an asset level, we've got these battleship assets that are delivering today and ramping towards stronger performance tomorrow.

Yes, Neil, your interpretation of the graph was correct. So it's close to 30%, so between 28% and 30% is the fuzzy bar. Let's break it down in terms of the segments.

So think of upstream as contributing 7% of the 10% CAGR and the rest of the portfolio contributing the 3%. And when we look at upstream, there's two main drivers there. One, there's production growth. So 2% to 3% CAGR is the production guidance that we've given. So we are growing through the time period. But in addition to growth, we're growing margins. And we're growing margins because of a few things in the upstream. Our oil weighting is higher. We're lowering costs across the system, and we also have higher entitlement percentages. So when you put all that together, we're able to increase the margin on upstream. So that gets you 7% of the TAM. And the balance is coming from downstream, chemicals, and even some power is contributing at the back end of the plan period. And within that 3%, think about 2/3 of it is really the downstream and chemicals piece.

So that's how we get to the greater than 10% CAGR. And what I want to emphasize here, to Mike's point about confidence, it's -- this is a high confidence outlook. I mean we can see the building blocks, all these growth catalysts we can see. I mean my expectation -- our expectation and what we're working on internally is that it will be greater than 10%. And so that's the breakdown.

We'll take our next question from Devin McDermott at Morgan Stanley.

So I wanted to kind of build on Neil's question on the free cash flow growth. You highlight a sub $50 Brent breakeven over the course of the plan, which is a nice reduction versus where you all are right now. But I'd imagine given the free cash inflection in the near term and next year, the 10% plus free cash flow growth over the course of the plan, there's a pretty substantial reduction in that breakeven over the course of this 5-year look that you're giving us today. So I was wondering if you could just quantify that rate of change for us maybe in a more static dividend environment. How low does that breakeven go through 2030? And then how do you think about allocating that excess free cash, dividends, buybacks and sustaining that peer-leading dividend growth rate that you highlighted in the slides?

Yes. So I mean, dividend reduces through the time period. And that's because the cash flow generation that's coming from the assets that are online, so the cash engines today, TCO, Permian, Gulf of America, Australia and then the growth that's coming. So the free cash flow is growing. And so we see dividend coming down with that. Breakeven coming down with that. And so sub-50%, I think you can expect somewhere in between the 40s through that period.

And in terms of what we'll use that for, obviously, we have a commitment to the dividend, so to sustain growing the dividend. That's our #1 financial priority. So we'll be guided with that. We will look then to our second financial priority, which is what investments we need to make in the business. And third, we'll maintain a strong balance sheet. And then fourth is steady buybacks through the cycle. So as we see cash generation grow through that period, you can expect us to be steady through the cycle, consistent with the range that we provided.

Take our next question from Doug Leggate at Wolfe Research.

Mike, I wanted to ask you about M&A, because the statement you made was, I think, was quite prescient when you said what hasn't changed is our approach to valuation. 10 years ago, you were exploration-led, organic led. In the last 10 years, you've been M&A led. How do you see that mix changing beyond what you've laid out today? Because obviously, today is what you've already secured. So I guess the question is, what happens next?

Yes. So Doug, the way I think about it, there are really three different ways that we bring resource into the portfolio, convert it to reserves and then produce and turn it to cash. One is through exploration. We find resources that we hadn't known was there before. The second is through acquisition. We can acquire resource. And then the third is through technology, where you unlock resource that you currently have that's not economic today, but you find ways to go out and drill in deeper water to reduce development costs in the deepwater to improve recoveries out of shale to derisk additional benches and you can use technology to bring more resource into the portfolio.

Over time, we rely on all three of those, and all 3 of those have delivered consistently. At any given point in time, they won't be 1/3, 1/3 and 1/3. And so we have had times, if you go back a couple of decades ago, where we had a very strong track record in exploration and a lot of resource that way. The last period of time, we've used M&A. Through it all, technology has kind of steadily continued to march forward and contribute.

Going forward, we're rebuilding our exploration portfolio. We're bringing new tools to bear, as you saw in the opening video, and Mark will talk more about that. We brought new talent in from both Hess and a new hire to run our exploration program. And I expect better exploration results. I expect more resource commitment to exploration, both human resource, technology resource and financial resource. And from that, I expect to see more contribution from exploration.

On M&A, it's always a bit speculative. We've had a nice set of additions that we've done over the last several years at a company level. The thing that is interesting today is there are a number of opportunities out there in terms of new country entries. We've had discussions underway that have been reported in the media, so I can acknowledge these in Libya. We've had discussions in Iraq. The interest on the part of the government is strong. The suite of fiscal terms are more attractive today than historically they have been. And so you may see in the acquisition category a little more at the asset level or country entry level than you've seen over this last period of time because the opportunity set today there is more interesting and attractive than it was a decade ago. And so it will be a mix over time. You've got to be good at all three of those. You have to invest in all three of those. And over time, we need to see contributions from all three. Thanks, Doug.

We'll take our next question from Sam Margolin at Wells Fargo.

Thanks for all the materials. I'll ask about power. These are really unique investments in the peer group, and I think they've been enabled by some of these upstream reinvestment needs that are coming down. So I guess these are big orders on the turbine side. If you could just talk about how that capital fits into the overall CapEx framework. And then ultimately, what the value proposition is with the power assets because not only do you generate income from power, but it's transformational to some of your gas assets, too, potentially, depending on how it's put together.

Yes. So first of all, welcome back, Sam. It's good to see you. And I don't want to get too far ahead of Jeff because I think he's going to want to share some more on this in his section. But maybe at the highest level, the capital is going to fit into the range that Eimear just talked about in the range that's lower than it had been historically. So our plans account for that. We've got a partner. We may look at different financing alternatives in there, but we've accounted for it in our capital budget guidance.

The value proposition is interesting because we've stayed away from power to this point other than for our own needs. And that's both traditional power as well as renewable power. We didn't want to go into the merchant power generation business. We have the unique capabilities in renewable development. What's different is the 5 gigawatts that we currently operate every day to keep our facilities operating at high levels of reliability, 24/7, 365, we've got a new customer class that has emerged that has that very same profile. And we've got a lot of experience in doing this. We've got access to resource. We've got a high-performance customer that's ourselves at Kazakhstan and Gorgon and other facilities like that.

And importantly, in these places where we got this experience, we're not reliant on the grid. And as you all see every day, power prices in this country are a real issue today. And so being able to help support the very necessary buildup of data centers because it's a national imperative. It's a competitive issue between the United States and China. But doing it in a way that doesn't unduly burden the consumer is increasingly going to be important. And so we have unique experience in doing that and building at scale and operating at scale and in doing so in a way that doesn't put the cost into the rate base for the average citizen.

And I think increasingly, in this country, we're going to find the imperative for speed, the desire for scale is going to bring us back to natural gas. And this issue of being able to do it without laying the cost out across the broad rate base is very important.

So that's the model we're pursuing. The contracts, Jeff will talk a little bit more about it, but they'll look more like an LNG -- PPAs will look a lot like a long-term LNG contract. We'll have certainty of cash flow. We're only going to make final investment decisions if it's underpinned by a competitive return. But we think there's an opportunity there for us to be part of that. So Jeff will share more with you in his segment.

I'll take our next question from Paul Cheng at Scotiabank.

Mike, I want to go back into the one comment you made during your prepared remarks. You're talking about how the process and organization that changed that led to the much lower cost. If we look at over the past 10 years, your headcount reduction is about 1/3 and you have made a number of acquisitions and then your headcount naturally should go up.

So can you talk about that, how dissect it? I mean, what percent of the improvement is really from the new technologies we've been able to do? And what percentage of the improvement is really changing the organization or the process, how you conduct business? And if you can talk about what changed that is the biggest change that lead to this kind of pretty drastic improvement.

Yes, I'll talk about it at a high level and then let Eimear talk a little bit more about some of the specifics.

You're right, Paul. The slide I showed that was 10 years ago versus today, we're a much larger company on many different dimensions, and yet our costs have been relatively flat and our headcount has come down by like 1/3 over that period of time from the mid-60,000s down to the low 40,000s. Much of that is through a combination of organizational structure, technology and the pursuit of efficiency. But it was all grounded in a legacy organizational structure that was very devoted to autonomous business units around the world that had the authority on the ground to make a lot of decisions, that had the resources necessary to operate. And if you go back a long way in time, that was how our industry had to evolve, particularly in some of the far reaches of the world.

We have had historically centralized some back-office functions into service centers in the Philippines and Argentina. But much of our technical work still went on very much in business units and out close to the action. We hadn't centralized as much of that. That's a big change in what we're doing today.

We've also organized our upstream businesses along the lines of asset classes more than geographies. And so all the shale businesses are together, be they in Canada, the U.S., Latin America. All our deepwater businesses are together, no matter where in the world they are to drive efficiencies, best practices, standards and resource optimization. And then we're moving technical work to centers of excellence. And so we're on this journey that Eimear talked about where we will continue to see further efficiencies and reductions. And I don't we're not yet banking a lot of this on things like AI taking more costs out, which I certainly expect we will see over time.

Yes. So Paul, within the $3 billion to $4 billion program, we have three focus areas. The first one was costs reducing due to divestments. So think of that as the portfolio rationalization that we've been doing. And so we're already seeing those costs in the bottom line. We're seeing lower upstream OpEx costs given the divestments last year, for example. So think about a $1 billion of the $3 billion to $4 billion there.

The second area is what Mike talked about is this operating model change where like assets that are brought together, and we were just seeing the power of procurement across common assets versus discrete decentralized assets. That would be one example. How do we bring supply boats together for offshore? How do we think about contracting differently? So the standardization and centralization as a result of the organizational change that we've been through in the last year is -- was initially $1 billion of a cost reduction target. And that focus area is actually delivering more results than we expected. So by the end of this year, we'll have already achieved $1 billion of that.

So that's why we feel confident that we can raise the target because we're seeing more there. And what I would say around all of those efficiency improvements is we've got this -- this relentless focus on benchmarking. So what can we learn from other assets in the portfolio that can help assets be more effective and efficient, what we can also learn from industry. And so we've got a culture of that going on as well.

So that's the second focus area. And then the final one to your question on technology, we have numerous examples of where we're seeing costs reduce. I would point to digital twins that you saw on the video. So the way we use these digital representations of our assets to do work through that digital interface versus having to send teams on the ground to do planning excursions for turnaround, example. We're seeing in our turnaround costs and in our movement around our competitiveness there being enabled by technology.

Another good example would be how we're using drones and robots to inspect tanks. So previously, that is manual intensive, high-risk work, and we're using the technology. So that third focus area of technology is really an area where we're seeing the green shoots, more than green shoots, in fact, and we see much more potential there. And that gives us the confidence in raising what was a $2 billion to $3 billion target to a $3 billion to $4 billion target today.

Next question, we'll go to Arun Jayaram from JPMorgan.

You talked about the portfolio resilience of the less than $50 breakeven. Could you talk about cash return guidepost around the $60 to $65 Brent environment?

Sure. So our intent is to be steady through the cycle. So you can expect us to be buying back shares within the guidance that we provided, $10 billion to $20 billion. We've changed the price point at which we can deliver those buyback programs. So at the lower end, it's 60. But at the upper end, it's 80. And so that points to the cash generation, the growth in cash generation, we can deliver at the high end of the buyback guidance at a price that's $5 lower. So that's how to think about just overall the range and the price points that we tie to the range. And in a world that's 65, so a world like today, you can expect us to stay where we are today. I mean it's not something that we jerk around and we were normally very prudent. We look at the context, how do we see the price outlook? Is it structural? Is it more of fundamental led? Is it long term? Is it more temporary?

If we were to change where we are today, given the rate that we're at $2.5 billion to $3 billion a quarter, we take that into consideration the outlook along with just cash generation and the investments that we'd be making. But you shouldn't expect us to be outside the range that we're in.

Next question, we will go to Biraj Borkhataria from RBC Capital Markets in the front.

I wanted to follow up on the resource access point you touched on, and you mentioned the sort of improving fiscal incentives and terms. So two questions related to that. One is, what do you think is driving that change, a step change? And secondly, how competitive are these sort of negotiations, tenders or processes? Because it feels like there are only a small handful of global international companies that can benefit from that step change, of which you're on. So just some reflections on that would be helpful.

Yes. So these things can kind of swing a little bit, I think, in cycles, Biraj. And I cited the Middle East because it's a place where we see the most activity and our business development team has been spending the most time. And there are any number of countries. I named two, but there are many more than that, that we've been in conversation with.

One thing that I will tell you is the change in administration has sent a signal. It sent a signal relative to countries that would like to see American investments come to their countries. And of course, there have been many announcements and reports of investment from other countries coming to the U.S. And that is -- that's a real change in mindset, I think. It's a change in what we've seen in many of these places in terms of their desire to work with American companies. And so there are only a few companies with the scale.

Obviously, some of these resources require technical capabilities. I mean we've mentioned TCO earlier, but you get into high pressure, high temperature, sour gas, certain types of environments, there are very few companies that have a demonstrated track record of working under those conditions. And so it's very attractive. We'll see how these negotiations play out. As I said, there are probably -- there are more of them that we're talking to and we'll be able to actually follow through on. But they're attractive. They're diverse in terms of the type of resource. We're talking about both oil and gas. We're talking onshore and offshore. Talking about some discovered resource and some exploration prospectivity. And so it's a very interesting landscape that we find out there today.

We'll take our next question from Paul Sankey at Sankey Research.

Mike, we're talking about 20 years ago, your first analyst meeting here at the [ St. Regis ] when Chevron had 2 million barrels a day of refining capacity, and you were the architect of taking that down to the 1 million barrels a day that you're at right now.

In terms of the business shape, you expressed, I think, no interest in getting bigger again in refining, although that seems to be the current bottleneck globally, but an interest in getting into chemicals where we've seen all-time low margins effectively or very poor margins.

Do you think that this announcement for AI to the 2,500 megawatt plant that you're talking about in Texas can be the next leg of the industrial reshaping of Chevron? Or are you going to kind of stick with this upstream focused 2% to 3% growth plus cash return as the industrial shape that you want? And I guess the follow-up is, could you see yourselves doing a mega deal in the context of the Trump White House as perhaps the opportunity to do something generational?

Yes. So I'll answer your first question, Paul. And the -- look, I love our refining business. Our refining business is highly competitive. I don't want to say that we would never do something in refining because if it were the right opportunity, we could. But we've long had a view that we want to be a more upstream weighted company, and we've shaped the portfolio accordingly. We've got a big downstream. It just sits inside a company with a much larger upstream. And so I think you can expect to see that overall portfolio weighting continue.

Chemicals are in a tough part of the cycle right now, but the demand and the long-term demand for the things that we all rely on in our everyday lives is inexorable, and we'll see in a classically cyclical commodity business, petrochemicals will come through the trough. And long term, we believe there will be good returns there.

The opportunity in power, I think, is to be determined. It could become a much bigger part of the industrial model for the company going forward, but I don't think we can say that today. We certainly see an interesting opportunity. We're leaning into it right now with some big commitments on equipment. As I think I mentioned earlier, we've got a site identified, some of the stuff has been reported in the media. You quoted a capacity, which is probably in the ballpark of where we would start out, which is big for power generation. And we've got more turbines than would be required to deliver that on order, firm deliveries. speed matters in this. There's a great appetite to move. There's supply chain constraints, particularly around turbines, both large and the smaller block turbines as well.

So we think there's an interesting opportunity there. We're making good progress. We'll see how that unfolds. I think it's worth giving it a shot. We've laid out some other bets to create options, if you will, in things like lithium that could become part of that over time, where there is clearly natural market demand as opposed to demand that's created by some policy that may be here today and not be in the same form tomorrow. So we've got options across a number of these potential new avenues for us to build out our energy business and be part of the future of energy.

But at the core, I think our upstream business, even the IEA now believes that the world is going to be using more oil and gas for longer than a lot of people thought not too long ago. And I think you have to know what you are. And at the core, that's who we are. And we intend to be very, very good at that for a long, long time to come. Thank you.

We'll take our next question from Nitin Kumar from Mizuho.

Mike, Eimear, I'm hoping you would be willing to unpack a little bit of the trajectory of the free cash flow that you're growing. If you look at it, it's about $10 billion, but you have a pretty good head start between $1 billion of CapEx coming down. I think you mentioned $3 billion to $4 billion of cost savings. TCO is -- so if you can help us just think about the trajectory like if you get to 40% or 50% of the target in the first couple of years, is that how we should think about it?

Yes. I think in the next 2 years, once you've got a year of FGP online, a year of Permian at 1 million the Gulf of America will have fully ramped up. It's 3 major capital projects to $300 million. So those 3 large catalysts, they're pretty significant. So you add those and you're at versus where we are today by 17 for the year, and you'll get to 24 pretty quickly. And so you can expect between '27 and the end of the time period to get to the 29, 30.

So that's the -- how the growth breaks done. More in the next couple of years. but still steady growth through the end of the period. And that's production growth and that's only from upstream. But as I said in my previous comments, it's more than just production. It's margin growth as well because our portfolio has got more oil weighted and our portfolio is also lower cost. And so when you couple the production growth with the margin expansion and you get a significant catalyst from upstream, on the balance of the portfolio, downstream chemicals and power contribute as well to a lesser extent, 3% versus 7% from upstream. But those are the key building blocks around production cost and the portfolio.

The specific assets you might just note for that back part of the 5-year period would be 4 more FPSOs coming on in Guyana. We've got 4 online today. There will be 4 more. There'll be 2 big petrochemical plants come online, one in the U.S., one in Qatar. You'll see Eastern Mediterranean expansion projects come on. with gas, both Tamar and Leviathan in the near part of the plan with smaller increases in Leviathan with a larger pickup in there. Argentina starts to contribute more. And then the Power business will start to contribute. So there's a number of discrete projects and assets that you can look to, Jake and team can give you a little bit more to fine-tune your models on those.

We take the next question from Ryan Todd at Piper Sandler.

In the slides there, you have a chart showing the last couple of corporate transactions that you did at PDCE and it has with a 50% increase in synergies of both those. Can you talk about with -- as you look back on these last 2 transactions, what are the things that have gone well that have helped you drive synergies at higher levels? And maybe specifically, perhaps, what are the things that have been positive surprises? And whether -- what are some of the opportunities going forward that, that may open up?

I'll make a couple of comments and then let me give you some of the numbers. There have been no negative surprises. And sometimes when you unwrap an acquisition in all its glory, you find a few things you weren't banking on. We didn't -- we haven't seen anything like that with has. So it's all been positive. The thing to me, in addition to strong asset performance that has been the most rewarding and encouraging, but not surprising is the quality of the people. And they're just excellent. And whatever part of the portfolio go to Gulf of America, Bakken, the team working in Guyana, the exploration team. These are first-class individuals that bring exceptional talent to our organization. And that talent will deliver value beyond just the assets that they came with.

And we're already seeing it. I'll talk about exploration, where Mark will share more about the changes. Our exploration model, our technology, our theories on play types, our assessment of some of the frontier basins that we've entered have all been interrogated and improved by a new set of eyes and a new set of experiences being brought to bear that see things differently than our team would have seen them. And so there are synergies we can quantify. We've talked about put options and net operating losses and costs, which are all very real intangible and financial and bankable. What's a little harder to build into your models or our assessment of value is what value will be created by bringing in these people in the talent. It's very real. We've seen it happen before. And to me, it's the part that is the most encouraging.

Yes. Maybe I'll build on just what we're seeing as we've integrated Hess and the increase in the synergy target that we announced today of an additional $500 million. has really come from what Mike talked about, the talent, we call it the Best of Both. So there's so much that you can see before the transaction is closed. But when you bring the teams together, that's where more insights has been developed. And specific to Hess as we've brought our Gulf of America portfolio together would be an example. We find ways to do our contracting differently to provide operational support in that area differently.

And so some of the synergies that we shared -- so part of the synergy target that we updated today include some of those. And we have clear line of sight already not even a few months after closing. Another example as we brought the shale and tight businesses together. So as part of the reorganization, we pulled all of the assets together, Argentina, Permian, DJ, we're not bringing in back end. We were able to think differently about how do we source fracking for a much larger portfolio. And in the shale and tight business, we moved to a single contractor there. And immediately, we get the synergies. So we've blind sight on that, too. And then in addition to that, we've got development plans and learnings and best practices that we can share and optimize, and we are seeing some of that as well. And we're able to still develop the fields, but maybe do it differently, whether that's with longer laterals or a different development plan or a lower number of rigs. So those are real examples of why we feel so confident in adding to the initial $1 billion of synergies today and raising that to $1.5 billion. We're not hoping that it happens. We actually have line of sight on all of it. So thanks, Ryan.

We'll take our next question from Steve Richardson at Evercore ISI right here in the front.

So you're outlining a view here with a lot of opportunity upstream and a deep asset bench. And at the same time, you're holding yourself to a certain amount of discipline on the capital side. So can you talk about how you've institutionalized this view? Because I'm assuming what's implying is these other opportunities come in is that there's constant high grading going on and you're kind of holding yourself within this envelope, but at the same time, we all know commodity price opportunities, things come and targets go by the wayside. So can you talk about how institutionalized that is and how you think about that over the next couple of years?

Yes. I'll make a comment first and let Eimear follow-up. There's really 2 ways you can deal with these things. You can either expand the capital to absorb all the opportunities or you can constrain the capital to high grade the opportunities. In the past, we did a little bit more of the former than I think we probably should have. And so today, we've been very, very rigorous in terms of setting guidance around that in terms of creating a lot of transparency internally, much more than we used to have to early-stage project development and putting projects in front of a joint team of senior leaders of the company who come from all the segments, so you don't get advocacy for particular parts of the company or particular projects that goes too far.

And you get to a point where it's more difficult to say, no, sorry, we're not going to do that. So there's much better early space transparency. There's much better cross-segment vetting of opportunities. And what I'm finding is that leads to higher quality project development, more honest conversations early about the potential downsides of projects. So where are we taking on a lot of risk, and we're finding that the hydrating process, when you engage people transparently with clear expectations, they actually come to the table and engage in really good conversations about the trade-offs, the priorities and where the capital should flow because at the end of the day, they're all shareholders, too, and they're all employees.

And so we've really taken a different approach and enterprise approach to earlier stage project reviews and vetting and ensuring the things that are moving through the pipeline where you start to get to a point where we're making more substantive commitments are things that have seen the light of day, and [indiscernible] gets yourself to a point where you're have [indiscernible] on so many things that you start to say, well, we got to follow through on this, we got to follow up to this. There's more value destroyed if we stop. So we're killing things earlier, but there's a lot more transparency even in those meetings for years.

Yes. Yes. I would point to 2 things here. Not everything gets funded, period. There's a lot of opportunity. I mean we have more opportunities in the hopper than we fund. And it's that rigor that Mike talked about. We're returns-focused. We need to see the returns. We need to test every investment, a range of prices because that's our reality. These have to be accretive in low prices as well. And so we're really focused on that very, very rigorous. And I think the organization has got used to that. that there's a high bar for investment. So I would say that's one thing that we have institutionalized.

The second thing is we also look at, so how can we get more value with less capital we put ourselves through that process. We don't just accept. And what we've learned is that there are different ways to design solutions. Some solutions can be the maximum design that covers every possible scenario that you can encounter in an asset. Others are more minimum functional. And they are actually -- they maximize value. And so what we've tried to institutionalize in addition to the discipline is discipline around, look at the minimum solution and design the minimum and then justify every enhancement beyond the minimum so that we know exactly what we're investing in and that we can see the value in all of those enhancements.

And I think those things are things that we have that are alive and well in the organization today. And that's why we feel confident that we can have the portfolio we have today, we can support the investments that we have today. We can deliver the free cash flow growth. And we can do that with less capital than we had previously guided to.

Take the next question from Alastair Syme from Citi.

I know the price outlook you show on forecasts or planning assumptions, but I was intrigued about the use of $10 LNG, JKM against the $70 oil forecast, oil outlook. So maybe use that to sort of tee up your view on the LNG market. And how does LNG compared to the power opportunity in the Gulf Coast?

Yes. So LNG has been interesting over the last few years as Europe has gone through a recalibration on gas supply as the U.S. has become the largest LNG producer in the world as we've seen Qatar decide they want to step back into expansion. And we certainly see over the next several years, an awful lot of supply coming to the market and demand growing, no doubt about it. But if all the supply that's in the queue were to arrive, you see a market that's going to be oversupplied for a period of time and that would weigh on spot LNG pricing. And LNG markets years ago were tightly linked to crude markets, that's linkage is somewhat diminished, not entirely, but you're seeing a lot more gas-based LNG pricing in the world now with different indices.

And so we've got a, I think, a view that fullness of time, you get out into the 2030s and LNG markets, just as I mentioned earlier, petrochemical markets, will rebalance over time because the old [indiscernible] with the cure for low prices is low prices. still holds true. But I think spot markets will be pressured for a while. 80% of our portfolio is oil-linked today. And I expect us to continue to seek out predominantly oil-linked pricing, we do some other sales within our portfolio. But crude, on the other hand, once we get all the OPEC+ supply back into the market, you're seeing non-OPEC supply grow, but you can see that growth attenuating as well. I think crude markets firm up a little bit before LNG markets -- as LNG markets cycle down. And it's unusual to see things that we've seen only maybe once or twice over the past couple of decades, where across the commodity basket, everything is tight at the same time. It's why we want to have a diversified portfolio in terms of asset class, geography, customer mix and all the rest of it.

And so that's our current view, and you see it represented there. Those are not forecasts. Those are kind of planning assumptions for the purpose of guidance.

Take our next question from Lucas Herrmann at BNP Paribas.

I just wonder if I could touch on balance sheet for the moment and the way that you now think of it. I'm not quite sure where your range in gearing terms is or the objective is around the rating. Clearly, at the present time, projects are ramping, but you've got the incremental cost associated with the dividend, and there's a lot of volatility and uncertainty in the market. So I mean simply, how do we -- when we model, how do we think about the constraints that balance sheet presents to your return to shareholder approach?

Yes. Thanks, Lucas. So first of all, what I would say is maintain a strong balance sheet. It's our #1 financial priority. So a lot of focus always on the balance sheet and maintaining its strength so that we have that strength to weather all prices given just the nature of our business. That's point number one.

Two, we're in a very strong position today. So the balance sheet is really strong. If you look at the coverage chart that I showed during my presentation. And so here, we're using this metric and the net debt over cash flow from operations, less than 1, less in the average of the peers, less than the S&P 500, very strong position with debt capacity, ample debt capacity. And I would give you $15 billion of capacity right now in a world that is a $60 word for 5 years. You can expect us to always be focused on the balance sheet. And overall, we have a AA credit rating. And so very, very strong. And with the credit rating that we have and the cash generation that we have today and the growth that we see greater than 10% over the planned period, we'll be able, in a $60 world with our balance sheet, to maintain $10 billion of buyback through that period and keep a AA.

We'll take our last quick question from Jason Gabelman at TD Cowen.

I had a question on the CapEx range, $18 billion to $21 billion. And I think in the past, you've been much more levered to shell growth than we've thought and less so to, I guess, exploration success. So in the past, we thought that CapEx guidance has been probably more impacted by oil price than portfolio opportunities. And I wonder, looking forward, if that's changing given there is less shale growth in the plan and more potential on your exploration backlog?

So what I would say, I think there's a slide where we show our sources and uses at different prices. And you'll see that in both of those scenarios, CapEx doesn't change. And that's because when we look at our investment choices and decisions, we test everything at high and low prices. So we don't like to move capital around. Our investments have to withstand lower prices and deliver the returns. So don't expect us to start changing our capital program just because we see prices slide a little bit below where we are today because we've already tested the robustness of those investments at lower prices. Bar something and that we would never be expecting like another COVID. I mean, we're in that scenario, we did cut capital. You should not expect us to move that around, Jason.

Okay. I think we are at the end of the first part of the meeting. So thank you for the questions. We're going to take a brief break now, I think, 15 minutes and then resume with presentations from Mark Nelson, Jeff Gustavson, followed by another Q&A session. So we'll see you back here in 15 minutes. Thank you.

[Break]

Well, welcome back, Syme, welcome back. It's great to be with you all again. It's really good to be back in this room for some of us that have done this a few times. In this section, Jeff and I will take you through the key elements of our advantaged portfolio.

Let's dive in. Our consistent strategy has guided our disciplined approach to optimizing and high-grading our assets. Through strong execution and returns-focused acquisition and divestments. We've built what we believe is the premier energy portfolio. Our upstream consists of high-value positions with resilient and diversified resources in some of the world's most prolific basins. In downstream, we have a high-quality portfolio with assets in premier markets where we compete and win. And in new energies, we're pragmatic, and focused on advancing solutions with competitive returns at a pace set by the market.

Our Upstream portfolio is built to deliver industry-leading cash and resilience. As you can see, we lead our peers in cash margin, and we have a strong queue of opportunities that are expected to drive even higher returns on every investment dollar. We have the highest oil price exposure and hold a leading position in natural gas production versus peers. This intentional mix of commodity exposure provides significantly greater upside to Chevron in a higher oil price environment. And as Eimear showed, resilience at lower prices with the lowest breakeven among the peer group. And we're only getting started. We're driving production growth from an advantaged portfolio that's been positioned to deliver the most value for every barrel produced. We expect total upstream production to grow by a 2% to 3% compound annual average over the next 5 years.

Growth is coming from our highest margin barrels resulting in an expected 10% increase in margin over the same time period at flat pricing. This anticipated production growth is an outcome of our disciplined investment and strong execution driving cash generation. And we expect this high return growth to continue well into the future, enabled by our deep opportunity queue. Chevron's commercial resource base is diversified across asset classes with approximately 50% in shale and tight and the remaining balance between deepwater, LNG, conventional and heavy oil. Over the past decade, we've unlocked more than 7 billion barrels of oil equivalent in additional resource by applying leading technology across the portfolio. With more than 20 years of combined inventory, we'll continue leveraging innovation and expertise as we aim to maximize value from our high-quality, long-duration upstream portfolio.

Now let's move into the key assets, which make up the strong resource base. Starting with Australia. Gorgon and Wheatstone are performing at world-class reliability levels. With decades of remaining resource, these assets are expected to generate durable cash flows well into the future. We're focused on deploying technology to improve efficiency and sustain reliability. The use of digital twins has already realized millions of dollars in value, and we're also seeing the impact of AI tools to help plan our maintenance work, reducing critical task planning time by 25%. Looking ahead, a few of strong economic backfill projects are already underway and are expected to deliver top quartile unit development costs, sustaining strong long-term cash flow.

At TCO, for more than 30 years, we've steadily grown production in one of the world's most technologically advanced oil and gas developments. We've consistently innovated to safely manage high-pressure sour gas while efficiently growing production capacity to 20% above nameplate over the last 15 years. This year, we brought FTP online and is operating reliably at rated capacity. Through the new integrated operations control center, we optimize production from the reservoir to the 3 large plants driving higher uptime and efficiency and enabling the opportunity to increase capacity over time. At $70 Brent, we estimate Chevron's share of TCO free cash flow to be approximately $6 billion in 2026 and more than $5 billion in 2027.

Turning to the Permian. We have a winning position supported by resource depth and royalty advantaged acreage that delivers peer-leading returns. With a highly economic drilling inventory that is expected to sustain current production levels through at least 2040, we're focused on optimizing value over decades. Starting in 2026, we expect to further moderate capital spending to roughly $3.5 billion. As thousands of reliable base wells with lower decline rates continue to produce, fewer new wells will be required each year to maintain the plateau. And our technology leadership continues to drive further capital efficiency. We have visible results applying advanced chemical treatments to enhanced recovery in both new and base wells. Our plans include scaling these chemicals to all applicable new wells going forward with average expected recovery uplift around 10%. Grounded in capital discipline and innovation, we expect the Permian to generate $5 billion in annual free cash flow through 2030.

The Permian sits within a larger shale and tight portfolio, which has been streamlined into one organization to better scale resources, technology and best practices. In the DJ, we've combined expertise from Noble and PDC Energy with our own to take our basin-leading performance to the next level. Well completions efficiency has improved 100% over just the last 2 years using frac innovations from the Permian. In the Bakken, we're already applying our expertise and technology to optimize development plans to include 3-mile or greater laterals in 40% of future wells. Together, these 2 basins are expected to generate roughly $2 billion of annual free cash flow into the mid-2030s. And our liquids-weighted Argentina position provides an attractive opportunity for growth. We're continuing to pace development and incorporate learnings from across our shale portfolio and see the potential to grow this asset over the coming decade.

Now let's take a closer look at how we're applying technologies across our shale and type portfolio to drive performance improvements.

[Presentation]

And we're just getting started. Being a leader in the shale business, means we have the scale to optimize natural gas to deliver the most value. In the U.S., if you look at gas production on a per share basis, we have the most natural gas exposure of our peers and we're diversifying our market exposure to create margin and balance. We secured 7 million tons per year of new U.S. LNG offtake with first cargoes expected beginning next year. This is projected to increase our global LNG portfolio by 25% and further balanced Atlantic and Pacific Basin exposure. And we expect to continue to diversify sales channels including expanding into power generation.

Now turning off to our offshore portfolio to start with our newest position. Guyana is a world-class asset with industry-leading resource and meaningful production growth expected into the next decade. Its developments rank among the highest cash margin and lowest carbon intensity in the industry with 6 announced projects below $35 per barrel breakeven. With the recent Hammerhead FID, there are now 7 FPSOs in production or under development. By 2030, 8 FPSOs are expected to be online enabling over 1.7 million barrels per day of gross capacity. We're proud to continue the work Hess began in Guyana and remain committed to supporting the country and its people.

In the Eastern Mediterranean, we're growing highly reliable supply to meet robust demand underpinning regional energy security. The Tamar optimization project and Leviathan third gathering line are in execution and expected to start up early next year, driving near-term production growth of 25%. We're also nearing FID for a larger expansion at Leviathan, which we expect to increase regional production by an additional 25%, contributing to doubling earnings and free cash flow by 2030. Beyond 2030, we see further potential. Engineering work is advancing on the appetite development, and we plan to drill another exploration well in the Nile Delta in 2026. Chevron brings nearly 100 years of offshore expertise, technology innovation and industry leadership to the Gulf of America, and we look for decades more.

We delivered strong execution over the last few years, increasing production to nearly 300,000 barrels per day of oil equivalent. This includes the industry's first 20,000 psi deepwater development at Anchor and starting up anchor, Valleymore and Whale on time and on budget. Once these growth projects are fully ramped, we expect to generate approximately $3 billion of annual free cash flow through the end of the decade. And we're focused on debottlenecking infill and expansion opportunities. With the addition of Hess, we hold 20% more acreage in the Gulf than our closest peer with approximately 80% within tieback range. And we expect ocean bottom node seismic coverage across 70% of our exploration leases by the end of 2027. We believe our leadership in deepwater technology combined with our vast acreage position provides us with an advantage in the next phase of exploration. And over the next 5 years, we anticipate drilling at least 10 to 15 exploration wells.

And we're leveraging these strengths to enhance our exploration program around the world. We're pursuing both near infrastructure opportunities as well as high impact for interior plays. Over the last 2 years, we've increased our acreage position by more than 50% and entered 10 new basins. AI is embedded across our workflows and growing an impact. from seismic processing and interpretation to inventory characterization and evaluation. We lead the industry in cloud-based high-performance computing and our proprietary imaging technology delivers ultra-high resolution subsurface images at extreme depth. Building on these capabilities, we're applying cutting-edge geophysical imaging to our new exploration areas and stepping up activity. Over the next few years, we plan to increase annual exploration spend by approximately 50%, with focus in areas like the Gulf of America, South America, West Africa and the Mediterranean.

Moving to downstream. We have intentionally structured our portfolio for competitiveness, flexibility and integration. We're strategically positioned in locations where refining, marketing and retail are tightly linked and designed to drive the highest total return across the value chain. Our refining system delivers strong cash margins, and we're driving further improvements in reliability and efficiency through technology and innovation. Robotics and drones now perform critical work processes more safely and efficiently, generating more than $60 million in value over the last 2 years alone, while eliminating more than 100,000 at-risk work hours. Chevron's brand is a competitive differentiator. We're a top U.S. fuel provider with higher margin capture than any peer. We expect sustained annual free cash flow greater than $4 billion in refining and marketing at mid-cycle margins through the end of the decade.

Our chemicals portfolio is anchored by feedstock advantaged assets strategically positioned to serve high-growth markets. CPChem's existing facilities are at the most competitive end of the global cost curve with 2/3 of capacity in the top quartile. Additional capacity from projects in the U.S. in Qatar both near the lowest anywhere in the world, loss cost anywhere in the world is expected to further strengthen this position. CPChem's operating performance is strong, and it keeps getting better. Despite difficult market conditions, polyethylene utilization remains above 100% due to consistent reliability and optimization efforts. And beyond CPChem GS Caltex and Oronite extend our global reach in commodity and specialty chemicals to serve attractive markets.

Now I'll hand it off to Jeff to talk about our exciting new power business, how artificial intelligence is generating value and our pragmatic approach to new energies.

Thanks, Mark, and good morning, everybody. Our approach balances today's needs with tomorrow's opportunities, positioning us for long-term growth.

Let's start with how we're enabling AI's growing need for reliable large-scale power. Since announcing our intent to pursue U.S. data center power solutions in January, we've made significant progress. Our position is based on 4 key differentiators: an early mover advantage with critical equipment secured, a large, low-cost natural gas position. and our proven operating capabilities in behind-the-meter power as well as pathways to lower the carbon intensity over time. Our first project in West Texas is expected to have 2.5 gigawatts of gas-fired generation expandable to 5 gigawatts. We're an exclusive advanced customer negotiations and are targeting first power in 2027. We expect mid-teen returns and anticipate leveraging partnerships and project level financing to provide capital efficiency and flexibility. We're planning for an FID decision early next year, contingent on securing a long-term offtake agreement that delivers competitive returns.

As Mike mentioned, we're not just working to power the AI revolution. We're applying it across our own business to create additional value. and we're accelerating that effort. Since 2023, we've had a dedicated AI team focused on innovation and impact. We're collaborating with industry leaders reimagining key workflows starting with shale and tight and exploration. And in the Permian, we have an unmatched data advantage through our interest in one out of every 5 wells. We're building AI-driven tools that can further unlock this advantage. Let's take a closer look at Apollo. The industry has long used the traditional type curve playbook to estimate prospectivity across the basin. The warmer colors indicate higher potential. But this view lacks granularity. It yields binary outputs and relies on very few variables. Apollo uses multivariate machine learning to analyze data for more than 50,000 wells to provide a more granular view of where the most prospective areas could be.

On the screen, you can see the increased detail as well as changes in predicted recoveries across the basin. After identifying a target area, the next step is the development plan. We're training Apollo to optimize key variables such as well spacing, completion design and development timing. We believe Apollo has the potential to create a competitive advantage. We're continuing to train the model and scale use across the portfolio to drive improved recoveries and returns. This is one of many tools we're developing and we're already seeing AI generate value for Chevron today with the potential for billions in annual value beyond current forecasts by the end of the decade.

Let's now turn to our New Energies businesses. Renewable Fuels are a proven solution that can lower the carbon intensity of transportation for customers today. We're proud to be the second largest bio-based diesel supplier in the U.S. And in 2025, we expect to deliver record renewable natural gas production. Through our joint venture with Bunge, we capture crush margins and secure access to U.S. feedstock supply, an advantage that is anticipated to grow in 2026 with the expansion of an oilseed crush plant in Louisiana. At Geismar, advanced pretreatment technology strengthens feedstock flexibility, while El Segundo's processing capabilities allow us to shift between traditional and renewable moats.

Combined with our strong West Coast distribution network, this integration facilitates advantaged market access. So we built an integrated competitive business that is structured to give us flexibility, resiliency and access to the best markets. We're advancing other new energies opportunities, too, where our early investments are positioning us to lead when policy markets and customers demand them. At ACES in Utah, we've begun production and storage of green hydrogen and an underground salt cavern for dispatchable power generation. Once fully operational, this site is expected to offer storage capacity 2 to 3x greater than all U.S. grid-connected batteries today with further expansion potential. We've also secured 125,000 acres in the Smackover formation in Texas and Arkansas to evaluate lithium development with appraisal drilling expected next year.

And on the Gulf Coast, we're advancing carbon capture and storage projects at Bayou Bend and our Pascagoula refinery with engineering milestones expected in 2026. We're also investing in the next phase of energy innovation with a $1 billion commitment to lower carbon venture investments, including our third future energy funds announced last year. Through it all, we'll remain pragmatic in our approach, focused on creating value for shareholders. Every day, we work to provide the affordable, reliable and ever cleaner energy that enables human progress, reducing the carbon intensity of our own operations is key to that goal. These charts speak for themselves. We're a clear leader when it comes to delivering lower carbon intensity oil and gas with first quartile performance in both. We've reduced our upstream oil intensity by approximately 50% since 2016 and our gas intensity by about 17%.

And we're not done. We're improving operations, applying technology and using marginal abatement cost analysis to help deliver the most efficient reductions for every dollar spent. We've executed more than 100 carbon abatement projects since 2021, delivering over 1 million tons per year of CO2 equivalent designed abatement. We're deploying satellite and aircraft detection programs to identify and reduce methane emissions. Over 250 facilities in Colorado have been retrofitted to reduce methane by converting pneumatic devices to operate with nitrogen instead of natural gas. And in Australia, we operate one of the world's largest carbon capture and storage systems, more than 11 million tons of carbon emissions from our Gorgon LNG facility have been sequestered so far. And we're executing work that is anticipated to further increase CO2 injection rates.

So to sum it up, our approach has been pragmatic and our strategy is simple. Focus on areas where our strengths meet customer needs to deliver competitive returns. We've built a large-scale renewable fuels business that delivers lower carbon intensity fuels today and we're advancing opportunities across hydrogen, lithium and carbon capture, pacing for when markets are ready today and tomorrow. We're already a leader in the industry on oil and gas carbon intensity and executing abatement projects to lower our intensity even further. Our first behind-the-meter power project is advancing and will help to provide the power required to support U.S. leadership in AI. Our direction is clear, we'll stay consistent in our strategy, we plan to keep lowering our carbon intensity, save pragmatic on new investments and be prepared when opportunities emerge that create value for our shareholders.

Now Mark will help us wrap up the session.

Thank you, Jeff. To close, our diversified portfolio and disciplined execution, provide investors with a winning investment proposition. Chevron's foundational assets, coupled with capital efficient growth, create a unique inflection point. and are poised to deliver cash flow growth through the end of the decade. And our portfolio is deep with high-return projects across our traditional businesses and pragmatic high potential opportunities and new energies. This, combined with a consistent financial framework and a proven track record position us to deliver superior shareholder returns across the cycle.

As we've shown you today, we're stronger, more resilient and better positioned than ever to deliver leading performance today and into the next decade. Thank you for your time. And now Jeff will join me on stage, and we'll take questions.

[Operator Instructions] With that, we'll take our first question from Josh Silverstein from UBS.

Just for the volume, Al, can you just talk about how much is already under FID to give us confidence in that 2% to 3% growth outlook because there was a big focus on exploration here. So is that more upside driven versus what you already have locked underway?

Yes. Thank you, Josh. If you step back and look at this message about a greater than 10% CAGR on free cash flow growth, it is front-end loaded. And that's why the confidence is so high. In addition to that, we have opportunities for the future, such as run through what's driving production in the short term.

We'll have a full year of our bringing our assets on. You've got the TCO that's now over 1 million barrels. Permian settled in over 1 million barrels. You've got Eastern Mediterranean starting to grow. You've got Australia steady. And you go to the back part of the decade, and you've got Guyana, Eastern Mediterranean and Argentina.

So you've got a series of growth patterns over that 5-year 5-, 6-, 7-, 8-year period to give us high confidence in our ability to grow production 2% to 3%.

We'll take our next question from Jeff Jay from Daniel Energy Partners

Can you hear me okay? I really wanted to follow up on the advanced chemical treatments. So I was looking at the appendix on Slide 46. And I guess my first question is, I mean, the uplifts look impressive. But how different are these chemical treatments than what you were doing before, both on new well treatments and base well production? And how differentiated are they from what your competitors are doing?

Well, first off, thanks for getting to the appendix so quickly. Greatly appreciated. Greatly appreciate that, Jeff. If you think about how we performed in the Permian, one thing I'd want you to step back and recognize is we just continue to improve. That's the benefit of a factory and a plateau. When you think about our very, very visible results on EUR today, that appendix is placed there so that you can go back on your own, look at specific well data with inverse and others and see what difference is being made today.

If you were to summarize what was on that appendix slide, it would leave you with the following a 10% EUR bump, right? It would decline reduction of 6 to 8 percent, given that we've worked this over our whole system, the ability to reduce the cost of that additive 50%, so you could get breakevens as low as 4,000 barrels.

So the reality here, we are now applying that to essentially every new well in the Permian, and we're beginning to test it in some of the other basins. When you compare that to competitors, it's an industry where there are no secrets, right? Much of what we're doing today is actually proprietary from our own specialty chemical company that makes surfactants or night.

So we really like the cocktail we've created to date, and I would only expect more of that to come.

We'll take our next question from Betty Jiang from Barclays.

Question to you, Jeff. So power. You guys laid out the 2.5 gigawatt in West Texas expandable to 5. I think that's a huge project and it's a huge footprint. Could you just speak to the customer base? Like do you foresee a hub of hyperscalers would that project be supplying power to your own operations. Just so speak to the scope of that project and then also the midterm return -- a mid-teens return, what's baked in and what's not baked in?

Yes. So thank you for the question, Betty. We are in exclusive negotiations with a customer on the site that we have laid out here on the slide that you see in front of you, there could be additional customers that come into this over time. We're in the midst of these commercial negotiations. But the demand in this space and customer interest has been high, leading up to these exclusive negotiations, and it still is high.

We have many inbounds coming with other customers who are interested in what we're doing in this space. But we're focused on this 1 customer and concluding these negotiations that we have underway. I think in terms of supplying power for our own operations, that's not in our current plans.

This would be more or less exclusive behind the meter power to very large-scale customers whose desire for this power on a short time frame. Seems to grow and grow and grow. So powering our own operations. We do use renewable power, electrified many of our rigs in the Permian, but that wouldn't be the purpose here.

We're really dedicating this to this one customer. On returns, I go back to what Mike said in his comments. This is a fast-growing space, demand is far exceeding supply for power in the U.S. there are repercussions of that across the country.

This is a space where we bring differentiated capabilities. We operate large-scale behind-the-meter power all around the world, where high reliability for some Mark's operations are very, very important. So we're translating some of those same skills into this space.

Importantly, we think we've built a very competitive project. It is underpinned by the large natural gas resource that we have in the Permian, customers like the low-cost resource and the long duration of this resource, but it's also underpinned in our early actions to secure equipment to secure a site -- to select an EPC to start the permitting process so we can meet the customer demand that you see up there on the screen.

That gives us confidence in that context as we enter these commercial as we're in these commercial negotiations, we're able to not just Target, but almost require mid-teens returns to underpin our investment. We have not concluded those negotiations yet. We will remain disciplined and value-focused like we do in all parts of our business.

And hopefully, when these conclude, we'll be able to announce an FID decision, and we'll provide more details in due course. Thank you.

Take our next question from Phillip Jungwirth from BMO.

You showed Permian production at plateau through 2040. It looks like you have the sticks identified with the NPV chart, but I was hoping you could talk through the visibility here for non Chevron-operated barrels.

And then how should we think about the option to grow, whether it's the magnitude? Is this kind of a call on broader Permian growth? Or is it more Chevron-operated activity that could increase at a higher oil price?

Phil, thank you for the question. When you think about the Permian in general, our confidence level in getting through 2040 at this type of plateau just grows every year as we continue to take less capital as we apply some of the EUR examples we described earlier. Despite having been at this, I mean if you step back to 2020, when we first mentioned the plateau of 1 million barrels, we've grown 75% since then.

Given some of the improvements we've seen in our drilling costs and completion times, we're going to end this year at the low end of our capital range of 4.5%. So we're down to the 4.5 range of capital starting next year with 3.5 to keep that $3.5 billion to keep it -- the 1 million barrels going. That gives us a lot of room going forward. Today, we're 50% to 55% company operated, so today, and I think as you look forward, the NOJV acreage that we hold in some of the very, very best basins operated by some of the other large operators.

So it gives us confidence that, that rate will continue going forward. So I think you'll see our balance between, say, 50%, 253% co-op, 30%, 32% in the NOJ holding for the remainder of this decade and into next decade. So it's all about the quality of the acreage and our ability to continue to reduce the inputs to get those outputs.

Take the next question from Devin McDermott at Morgan Stanley.

So I wanted to come back to the AI opportunity in the business. It's something that talked about some of the applications so far. And also, it's interesting that it's not yet embedded in the plan when we look out through 2030. And I think, Jeff, you quantified it for us a little bit that you see billions of dollars of potential value creation over the course of the plan.

So can you talk a little bit on where you are in rolling out some of the high-impact applications that you cited? And then where should we look to see the biggest financial impact, capital intensity, operating costs, margin capture, something else?

I think we'll see impacts in all of those areas. Before I get to the kind of the high-impact opportunities, transformational opportunities, we've been on this digital journey for many years. This has been a priority for our company for a long time. We're now using some of the next-level AI tools to just scale those efforts up.

I talked about creating a central AI-focused team about 2, 2.5 years ago, which really started to get into this. There's 3 kind of areas that we're focused on. One is just overall workforce productivity, getting the right tools in all of our employees hands. And already, well over half of our employees have access to cutting-edge tools.

We're encouraging them to use in each and every day, you're already seeing value just in individual productivity across the company. Some of the tech relationships we have, which we're now expanding with some of our power-related work helps facilitate that. But that's 1 -- 2 is -- which is related to that is transforming some workflows, existing workflows in the company.

We went through a massive operating model change that was asked in the earlier session. We have better visibility on our workflows across the company and how work gets done than we ever have. And now using AI tools not just to speed up decision-making and lower cost but to improve decision-making.

And the list of areas that we're already seeing benefits in this -- in our business is too long to get into today. But what we're most excited about are some of the transformational opportunities. I think watch a few spaces. Our [indiscernible] and type business, both subsurface impacts. You saw some of that with Apollo.

Taking large-scale data, we have the visibility into 1 and 5 wells unmatched in the basin, marrying that with some of these AI tools to create AI systems where you make better development systems or better development decisions, better design decisions, better when you get to the surface and moving molecules, better commercialization decisions I think that's where you really see the value expand.

We've made progress in this space, but we still have a lot more work in front of us. You might speak to exploration.

Yes. Well, I was going to go actually to Emer and I were recently in our engineering center in India. And the good news and the bad news is I've been around a long time. And the -- what it used to take to go get information to plug and abandon an old well -- in the old days, you first had to go find all of that information.

You had to sift through it all, create an application but the orders in, put the permits in, when Emer and I were in India here recently, the Australia team went to bed and then the next morning, the team from our India operation had the permit application, what was necessary to plug-in abandon a particular well and all the orders placed.

Massively more efficient and it's repetitive. So there are these transformational activities, and it's changing our everyday work activity. When you standardize and centralize, it gives you a chance to do more of that, which is opportunity for us going forward.

We'll take our next question from Doug Leggate at Wolfe Research.

Mark, I wonder if I could kind of try and connect some of the things you've talked about on the growth, particularly in Guyana with what Emer was saying about the cash flow growth. And I want to pose a question like this, ExxonMobil has talked about 1.3 million barrels a day of production by 2030.

But there's 4 incremental FPSOs at round numbers of 900,000 barrels a day of incremental capacity. My question is, what are you assuming in your 2030 targets. I just looked on the visualization side with 800,000 barrels a day of production in Guyana today. So that would mean Exxon's number is 500,000 barrels a day up from here but there's 1 million barrels of capacity coming online. It makes a heck of a difference to your 2030 cash flow numbers. So what's embedded in your assumption?

Yes. So first off, we're so excited to have Guyana as part of the portfolio. It is a world-class asset and with 11 billion barrels of resource. And our per share holdings in that, we benefit more than anybody by the upside in Guyana. Today, everything that we have shared today reflects the operator's view.

Nothing different than what the operator thinks that's what a good partner would do. Do we see upside potential. When you think about 11 billion barrels, big fields getting bigger, although we haven't forecasted, I would expect upside and as a partner, we'll do everything in our power to help find that.

There's still time for exploration. There are some deeper reservoirs to test, and we look forward to working with a partner to do that.

We'll take our next question from Neil Mehta at Goldman Sachs.

I wanted to flip to Slide 30 when you talk about some of the other shale basins and specifically, Mark, as you think about the back and would you characterize it as core, I think it's clearly a key part of the plan. And then Argentina's got less attention maybe during this session.

I know there's a lot of moving aboveground issues there, but curious on how that competes for capital in the portfolio.

Well, so let's start with the Bakken. This is another asset that happy to have in the portfolio. And maybe the comments that Emer and Mike made is the people that are impressive. in reality. But having the Bakken in our portfolio today, the [ Hess ] team did a really good job of building production up to around that 200,000 barrel a day range. You played a certain role in the [ Hess ] portfolio.

It naturally plays a slightly different role in the Chevron portfolio. So producing around that 200 million barrels a day is the target for us. At that level, we can apply all of our best practices. So today, you've already noticed is we have reduced rigs by 1. So we're down to 3 rigs versus 4 at the same production level.

We have reduced the number of workover rigs by 5, allowing kind of maintenance activity to be a little bit more efficient. As I made -- as I commented in my prepared remarks, we are increasing the length of laterals in the geography in that particular basin. And you'll see us even do some 4 miles we have been catching up to do, I think, versus the competition in that regard.

And we're introducing the first integrated oil control center there in the region. So all of that leads us to holding near that 200,000 barrels a day and just reducing the cost to do so. I think we're just scratching the surface in the Bakken. So more to come. And everything that we view in the Bakken includes our 38% holding of the [ Hess ] Midstream and our consolidated reports.

On Argentina, we talked a long time about the quality of that acreage. In my prepared remarks, we talked about tripling to the 180,000 barrels a day. There's nobody really debating the rock. So it's between the rock and then the aboveground risks there. From a geology standpoint, we said in our materials that it was 75% oil weighted.

I would also leave with you that on a lateral foot basis, EUR is 50% higher in Argentina than the average Permian average Permian well. So clearly, the geology is good. The other thing you need to do is make sure you have infrastructure to get it to markets. You have seen our action in participating with an export pipeline is under construction as we speak, getting that crude to product.

And that crude with blending competes nicely with [indiscernible] so it will be a highly desirable crew. The challenge today would be kind of the overarching cost of doing business in Argentina. And the current administration is taking actions in this regard. Today, it costs us 35% more to drill a well in Argentina than it does the Permian despite the strong geology.

Given some of the actions that are underway with the government, our hopes would be that capital controls would be reduced as some of the tax burden and workforce flexibility would be increased. So tax is coming down, ability to manage people and then the opportunity to bring in the absolute best technology, I think, is going to be critical to unlocking Argentina.

We have the ability to accelerate like much of our portfolio. We think we've paced it right now to keep up with the reforms that the government is working on.

We'll take our next question from Sam Margolin at Wells Fargo

I wanted to ask about gas and power integration. You have the slide on gas sales mix. It looks like you got a slug of power indexed gas that you expect to come with the projects. I think that will grow after 2030 because the capacity is ramping to. So maybe it will be commensurate with that.

But it has significant effects on your Delaware Basin operation. You still delineate a number of locations by oil price but if gas is higher, the number of locations will be influenced by that, too. And also like on the type curves, if you have GOR effects that aren't expressed in the type curves, you're less sensitive to that if you have gas realization tailwinds.

So I mean, can you just talk about what you guys think internally about the economics of sort of your Delaware Basin asset with the gas and power integration?

Sure. Thanks, Sam, for the question. When we entered this space about a year ago when we made the announcement in January that we had secured 7 large-scale frame turbines from [ GE or Nova ] we had an idea of where you might be able to build out large-scale power in the U.S. And we knew Permian would be pretty high on that list.

One of the reasons we really like doing this in this basin is given not just the large natural gas resource base. But the duration of that, you're talking about very large amounts of natural gas to deliver the power that we had on the later slide.

At a very competitive cost, more competitive than, I think, almost anywhere in the country. That's been very attractive to customers, which is where all of this starts. We need to be able to attract the right customers to sign long-term power purchase agreements that meet our return thresholds.

I'd say it starts with the location in this very large natural gas resource base. To get to your question, we also like the fact that we're a large natural gas producer in this basin. And as you all know, gas trading around the Waha hub, the West Texas Natural Gas Hub trades at a significant discount to Henry Hub.

At times, it goes to 0 or even negative, there is an added benefit for us Mark's business in attracting new customers in the region and not having to move it to the market or to international markets. We want to do all of that, but there's an added economic benefit for us in just sourcing demand in the basin -- and so we're -- we like both of those aspects of this. I'll let Mark talk a little bit more.

To pull on the thread Sam. All it does is it makes our shale and type businesses stronger. Right? Simply because you have more options as to where to put today would be 3 Bcf of gas. We have taken some longer-term LNG offtakes in a capital-light way to create some other optionalities into the future. This is just one more option to ensure that the the net margin for all that we produce in our [indiscernible] portfolio gets to market at a higher price. And so I think it does help over time, continue to drive value into the shale and tight businesses over time.

Take our next question from Arun Jayaram from JPMorgan.

You mentioned that you expect Permian CapEx to go to about $3.5 billion next year. I was wondering if you could help us think about the trajectory of Lower 48 capital over the forecast period over through 2030?

Yes. So I think for our entire $18 billion to $21 billion of capital, about half of that happens to be in the United States in its entirety. I would expect in the Permian, in particular, getting to get going from $5 million to $4.5 million to now $3.5 billion. I would expect us to continue to try to drive that down over time. It's what we do every day, and that just means more cash for all of us.

But half of our -- just over half of our capital budgets in the U.S.

We'll take the next question from Nitin Kumar from Mizuho.

Great. Mark, I wanted to touch base on one of the earlier comments you made about the LNG offtake. It's new 7 MMA, but it's also earlier than some of the other deals that we've heard of. Earlier, Mike said that you expect the LNG market to be oversupplied until the end of the decade.

So just kind of curious if you could help us put the pieces together, why the offtake? And sort of how is that part of Chevron's macro view?

Yes. Thanks, Nitin. I appreciate the question. It helps to maybe step back versus a look at the context, and Mike touched on this a little bit. But our LNG portfolio today starts with world-class assets in Australia, very, very reliable now a low unit cost of production, keeping those full with the 40 Tcf of gas that's available in Australia.

That's kind of the anchor of our LNG position, mostly point-to-point, mostly oil-linked contract. We now have a full plant in Angola. So Angola LNG and a small plant in Equatorial Guinea that allows a little Atlantic margin exposure. But then we have this 3 Bcf a day of gas coming out of the associated gas out of the United States.

So our opportunity was in a time where we could get some of the very, very best capital-light unit cost for offtake out of the U.S. Gulf Coast to lock those in for the next 20 years to ensure that we would have options for margin in the future. On timing, how about half of these come on towards the end of this decade and the other half come on early next decade.

So it's paced out a little bit over time. But maybe to reinforce the points that might make you shouldn't see us having large, large spot exposure in LNG nor should you see our portfolio shift to something other than oil weighted.

Next question will come from [indiscernible] from HSBC.

For all the information on the power gas piece. We're starting to see a lot of news flow coming out about data centers being built globally. And I was wondering if you guys have started to do the work in terms of other markets that are attractive and what type of returns you would require to maybe expand into those markets?

Thanks for the question. We have done some looking -- we've looked at this a little bit. We have gotten some customer interest in this specifically and kind of going around the world where might this work? Where do you have a very large natural gas resource base at a low cost.

Obviously, there are parts of the planet where you may be able to replicate this. We are very cognizant though of some of the political realities of this data center build-out the competitiveness of it. There are additional risks, depending on where you are -- where to build some of these, especially where some of those very large natural gas resources exist.

So what we're focused on today is where we think -- we can put together the most competitive project really anywhere in the world, and that is in West Texas. 5 of the 7 turbines are dedicated to this first project, and we're in exclusive negotiations with a customer on that.

We're looking at options for the other 2 turbines expect those to be in the United States and expect Texas to rank pretty highly on that list.

I'll take the next question from Biraj Borkhataria from RBC Capital Markets.

I wanted to ask about the TCO debottlenecking slide because that 20% uplift over a long period of time, but that clearly adds a lot of value. Obviously, we're at a new baseline now. How should we think about debottlenecking potential going forward?

And also in terms of the time line, given the concession -- the current concession ends in early 2030s, you're your willingness to pursue that.

Yes. Thank you, Biraj. I think the example of -- thinking back to what was it, 2008, when the second generation plant was built in the 20% debottlenecking that occurred before we made our recent investment, which is on the slide there. That's one of the reasons we're a partner that we think should continue on in [indiscernible] the ability to work with the Republic to maximize the value of what is a highly complex reservoir is part art and science, and we believe we deliver all of those things.

Given that debottlenecking is such a high return and can happen so quickly. We think all parties are aligned to begin the journey on debottlenecking as we speak. In fact, I think we mentioned in our third quarter call, we have a pit stop and we may be happening just starting as we speak, we're going to make some adjustment on some trades to maybe even expand some capacity in one of the splitter columns.

So short answer, is debottlenecking begins today, it's no different than Anchor. A platform we celebrated it earlier. Next year, we'll spend probably $9 million to $10 million at 1/3 of capacity to anchor. Debottlenecking is something that we do. It is the thing that isn't as exciting sometimes doesn't always get the headlines, but that's real barrels and it's the highest return investments we can make. So I would expect progress shortly.

We'll take the next question from Paul Cheng at Scotiabank.

Mark, on the West too Downstream, we are seeing a lot of changes. And given your position on the infrastructure, even though that you probably is balanced, you don't need to import. But when we take into consideration of your Asian position in whether you're seeing Korea or that in Singapore.

Does it make sense for you trying to become a consistent importer into that business into that, even though that you don't win in the [indiscernible] supply -- or that you think that from a business case that that's not something that you want to pursue. And also there's a number of pipeline proposal, will you be willing to commit to be a shipper there.

Thanks, Paul. You can't have one of these conversations without talking about California, right? Yes. Maybe to step back just a moment, I think I would say that what you're seeing today is a result of decades of policy, right? So it wasn't all that long ago that I was a resident of California. I'm a little bit worried that it's the California Energy users that are getting punished in all of this.

But the reality today is when you have 2 world-class refineries and you own a lot of your own infrastructure and you have the best brand in the market we can watch all of these things happen and choose to participate as we think it's best for ourselves. So we are advantaged today. Despite the fact that a couple of competitive refineries are shutting down, I would leave you with it took decades of policy to create what's happening today.

It will take decades of policy improvement to get out of it. So we will watch pipeline activities very closely. We certainly will do our best to operate reliably and take care of the California consumer, but we're better positioned than anybody to figure out that path as it becomes as it becomes clear.

And on these pipelines that you're talking about remember -- we're connecting from a market that uses that product today that has to be made in California specifications, and it has to pay tariff number one, tariff #2, then it has to land in the market to compete. And so we'll put our cost of supply up against anybody today.

We'll put our cost of supply up against anybody. So it takes a -- having it come from Korea in a ship landed in California. It's hard to be a world-class refinery delivering that same product. Today, we're in a good position to do that. Could we go to imports certainly.

Take our next question from Ryan Todd at Piper Sandler

As we think about some of the technology that you talked about in [ Titan Shell, ] whether it's chemical treatments or APOLLO that you demonstrated, how should we think about the time line at which these technologies are applied across the portfolio, the time line at which we start to see improvements.

And the outlook of current production -- does it include any of those assumptions in terms of uplift? And maybe finally, on the whole thing, how do you balance -- if you get greater productivity per dollar spent, how do you balance the opportunity to either exceed growth production targets or lower CapEx?

How about I start and then you close out. So I want to -- I'll kind of start where you ended. The opportunity to continue to improve, whether it's technology or other type of efficiencies, that's the advantage of a factory. That's the advantage of staying over 1 million barrels that staying in that range. We can apply those things, continue to reduce the capital that's spent or the resources required to generate more cash. That's our current view today.

What's so nice about our portfolio is we have the option to accelerate that in the future. But today, it would simply drive more cash to the bottom line. That would be the way we think about it in the short term. I'll repeat some of the things I said earlier. We see this as a really big opportunity, Ryan.

And we are differentiated in the data that we have we talked a lot about shale and tight and all the things you can do to drive better subsurface outcomes, including recovery, but more recovery faster and all of the development decisions and design decisions that go into a very large resource base, and that's just in the Permian.

If you think of the surface implications for this over 1 million barrels a day operating footprint, not all of it operated, but a large portion of it operated. The surface implications are also just as exciting. I talked about some -- the way we can optimize value chains and moving molecules to the very best markets, but just managing our operating expenditures, moving to more a proactive approach to maintenance as opposed to reactive.

And we do a little bit of both today, but these tools can take this data that we have in the space and the value to an entirely new level. We didn't get into exploration too deeply. You saw some examples of it in Mark's slide and in the opening video, you've got decades of data and a lot of it unstructured data, which is very hard to work with, almost impossible to work with now feeding that all into some of these AI tools to make better lease and prospecting decisions to increase the probability of success for every exploration well that we drill.

When you -- small percentage improvements across a very large asset base, lead to significant value impacts. I think in terms of timing, we'll continue to provide updates on this. We are thinking about this like a business. We put -- we invest money and time into this. We need to get money and value out of it.

We've got targets for late next year, and we've got more aspirational targets for 2 to 3 years to the end of the decade. So more to come, right?

Take our next question from Paul Sankey from Sankey Research.

Mark, you're talking about 2% to 3% volume growth. Does that mean that we anticipate more than that growth in the dividend over time? And is there ultimately a point where you reached the terminal sales for Chevron at which point with the dividend have to stop growing?

And Jeff, the New Energies has basically been something of a [ check the box ] on ESG, subsidized grab the subsidies while are available. I assume that the AI investment isn't subsidy dependent. And I was wondering what cost of capital and anticipated return you have from that business, which, as I said, I guess, most importantly, isn't subsidy dependent.

That was a creative 2-part question, all well done. But I can make the first answer really, really short. Emer could not have said more clearly that the priority for our company is a sustained dividend, growing dividend over time. So no, I don't see an equation where we have a portfolio that can't continue to do that over time. And it's our job to ensure that, that happens.

And I'll repeat what we said earlier, Paul, we've been very pragmatic in this space. When we launched new energies 4 years ago, there's a number of assumptions that you're making about future policy development, technology development, customer adoption. That's what this comes on to at the end of the day, that's been slower than what was anticipated -- and we're always value driven.

I think what we walked through is lowering our carbon intensity is first. And we have built a large integrated competitive renewable fuels business. We do have some options for future growth. But I think your question on the policy dependence of technological improvement on cost and ultimately, customer adoption drives value. That will drive our behaviors in this space.

AI is a completely different space. Lithium could be a different space. Large-scale power for data centers seems like it's a different space. We still need to prove that out. but that's what we're focused on today. On AI, specifically, I mean, a very high return on investment that we see today.

Now when you get into these next level tools, they don't come for free. And I think some of the partnerships that we've built in the power space will benefit us in the AI space. It's interesting to talk with them about how can I help you meet your power needs and how can you help us scale this.

I think there's some differentiation in that as well. That won't be free, so we need to make sure we measure the return on these investments, and we'll use the same and we'll take a value-driven approach here just like we do across all of our businesses.

We'll take the next question from Lucas Herman from BNP Paribas.

Can I just go back to the Chemicals business? I'll go over to [indiscernible] it's a M&A question. It's simply. You've got a lot of capacity coming on. seems slightly later than you originally indicated, it's '27 our or than '26, but that's not really the point.

The point Mark for me is to try and understand the delta to cash flow, but that's going to mean as the CapEx investment on these 2 mega projects comes out and the dividend because it ostensibly starts to come through. What should we anticipate as the potential return at deck of moving from building nonproductive to actually releasing capital?

What do you anticipate in the budget you -- or the forecast you're putting.

Fair question, Lucas. Thank you. In my prepared remarks, I tried to reemphasize the strength of the CP Chem portfolio from a competitive standpoint. There are not many people in the petrochemical space that are running today over 100% utilization. So that means you have to be at the best part of the supply stack to do that.

The project in Qatar and the project in the U.S. Gulf Coast, those are top decile projects. So it's important to reinforce where they will fit on the supply stack. One of the things that we chose to do with our CP Chem board positions was drive them to ensuring that they delivered safely and reliably at that portion of the supply sector they did not have to hurry given market conditions.

And so that's what you're seeing right now in regard to the first half of 2027 start-up for both of those. If you think about the earnings potential or the cash flow stream into Chevron, it might be worth starting our CP Chem or Chevron ownership of these projects because of their partnerships with QE.

So in Qatar, we're essentially a 15% partner in the cracker and we're a 25% partner in the one here in -- or the Orange Texas. The Board at CPChem targets of 50% of free cash flow as their dividend. And I think over the next couple of years, as the spend winds down, you should start seeing that come our way.

We'll take our next question from Jason Gabelman from TD Cowend.

I want to go back to the downstream business and ask about the free cash flow growth in the refining and marketing of $4 billion or sorry, that's the absolute number of $4 billion of free cash flow. Two parts. One, has that kind of mid-cycle assumption change from the prior Investor Day a couple of years ago.

I think historically, that business had done something closer to $2 billion. And then part 2, what is driving that kind of cash flow, net cash margin growth? Because you didn't call out any discrete projects in the refining and marketing business. So I'm just wondering what's driving that cash flow growth?

Thanks, Jason. So just to be clear, the $4 billion of annual cash flow from the downstream is refining and marketing. So the Chemicals business would be separate from that. So it's really the R&M side of the equation. That's at mid-cycle margins.

You could -- some would argue today that for the next. At least for the next few years, we might be above mid-cycle margins, at least in the refining sector in the United States given some demand and rationalization that's going on today. We don't have to spend a lot of money. We work hard on our downstream portfolio to keep it really, really tight.

And when we do spend money, it's a high return. So the last project you might have recalled would have been a light [indiscernible] project at the Pasadena refinery, where we got up to 120,000 barrels a day of light tight oil now in that project has already exceeded expectations, both on volume and return. So we don't have to put a lot of input into the downstream business, especially refining and marketing, other than to keep it running reliably, obviously.

So I think you can feel pretty comfortable about the $4 billion. The question would be is there upside with margin here in the next couple of years.

We'll take our next question from Devin McDermott at Morgan Stanley.

In Mike's remarks earlier, you talked about new country entry in the Middle East and North Africa specifically. I was in the Middle East myself last week and there was a lot of chatter around the U.S. majors coming back in to the region. Could you characterize the opportunity set a bit more for us? Is this emerging exploration opportunity?

Is it stepping into existing fields that have cash flow today. And as part of that, would you all have appetite for another mega project in the region now with TCO wrapping up and having that in the rearview?

Well, I think [indiscernible] might be yes to all those things, but maybe let's step back. I'd like to take a minute and just -- because Mike mentioned it, thinking about the exploration space in general because this is about bringing new resources into the equation. And you're right, we have entered in my prepared remarks, I talked about 10 new basins.

That's almost double the entries of our competitors. So this is serious about us creating more opportunities to apply this new talent that we have brought together between the [ Hess ] team, the Chevron team and our new external leader of the exploration organization. We talked about spending more and having more opportunities, right?

So that kind of makes sense. When I think about the Middle East and you think of Iraq, we have both -- there's a lot of onshore opportunity. There's discovered resource. They're DROs that we can do, and there's new areas to explore. We would look at all those. The same would be true in Libya. We're active today in the partition zone.

We've been doing polymer flood testing there for the last 18 months. So we're drilling some additional exploration wells as we speak, we know how to do business in the Middle East. The conditions just had to want it. And as Mike addressed the conditions that they could compete now.

And so you should see us continue to focus on the Middle East.

We'll take our last question from Alastair Syme at Citi.

Actually another question on exploration. You mentioned a 50% increase in the capital budget. I mean that's a huge scale up. Can you talk about the organizational capability to do that, given I guess it's been deemphasized for some years.

Yes. I would -- first off, I think because of the kind of the world-class shale portfolio that we had, we were able to step back a little bit and now we're stepping back in. So it's 50% from a relatively small base, and that we will continue to ramp up. So if I'm going to go back to the talent that we brought in and then maybe the tools that we now have.

So again, this combination of the experience that has had in looking at different basins than we were looking at in some cases. So it's really nice to bring that talent together and then our new leader. We have already gotten that group together to test the prioritization of what we're going to invest in. You should expect us work our way back up to 16 to 20 exploration wells a year.

Half of that will be infrastructure base. So near existing assets and then half should be frontier over time. And I think that ramp-up will take us a year or 2 to get to that kind of level. You could expect in the next year or 2, us drilling exploration wells in Equatorial Guinea in Namibia, Nigeria. We talked about the Partition Zone, the Gulf of America. That's just the start.

And so I think the way I would think about this is our ability to drill and execute wells is actually really strong. When you look at the last couple of years, every exploration well that we've drilled has been drilled on time and on budget. In some cases, they just didn't find anything.

That's the outcome that we're trying to change. The data that we now have available. This is the part that gets a little bit exciting for me. When you think about one of the tools that we showed here in some of my prepared remarks. We talked about ocean bottom node seismic. We talked about -- you've heard of Elastic full waveform inversion. Those are for those who like to get technical.

Those are simply 2 things that allow you to be like me [indiscernible] part of my glasses, right? I get a clear view if I look through the right part it gives you a better resolution of what you're looking at. We showed on the screen, something called Apex and spatial high-grading Apex is what Jeff mentioned that gathers all of the exploration material that we have in the company so that people can assess it given the years of experience that we've had.

And then spatial high-grading, it would be like Zillow. Zillow for leases. It helps you accelerate where you would choose to make decisions about which leases you want. In addition to the new tools, we made organizational changes that make it faster for us to make decisions.

And I think that's evidenced in the basin entries in the acreage that we've acquired over the last couple of years. So we're on our way, and you should keep asking about it so that we can show that we're getting the right kind of outcomes. Thank you Alastair.

All right. Well, listen, I just want to say thank you. Thank you all so much for joining us here in person and via webcast for Chevron's Investor Day. Mike said it at the beginning, and I'll leave it with you now. Never in my career have I seen a higher confidence outlook further into the future with lower execution risk.

We're excited about our future, and we're happy we got to share it with you today. Thank you, and please be safe. Sure.

Good morning. My name is Katie, and I will be your conference facilitator today. Welcome to Chevron's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I will now turn the conference call over to the Head of Investor Relations of Chevron Corporation, Mr. Jake Spiering. Please go ahead.

Thank you, Katie. Welcome to Chevron's Third Quarter 2025 Earnings Conference Call and Webcast. I'm Jake Spiering, Head of Investor Relations. On the call with me today is our Chairman and CEO, Mike Wirth; and our Vice President and CFO, Eimear Bonner. We will refer to the slides and prepared remarks that are available on Chevron's website.

Before we begin, please be reminded that this presentation contains estimates, projections and other forward-looking statements. A reconciliation of non-GAAP measures can be found in the appendix to this presentation. Please review the cautionary statement and additional information presented on Slide 2.

Now I'll turn it over to Mike.

Okay. Thanks, Jake. In the third quarter, Chevron delivered record production and strong cash generation, supporting sustained shareholder distributions. The period was marked by several key milestones as we execute our plan for resilient and industry-leading free cash flow growth. Worldwide production exceeded 4 million barrels of oil equivalent per day, driven by strong growth and high reliability across the upstream. Hess integration is on track. Synergies are being realized and asset performance has exceeded expectations. The Ballymore tieback project reached design capacity ahead of schedule, taking us another step closer to delivering over 300,000 barrels of oil equivalent per day in the Gulf of America. And we achieved first production at the ACES green hydrogen project in Utah.

Earlier this month, a fire occurred at our El Segundo refinery. Importantly, there were no serious injuries and we continue to meet our supply commitments. We're cooperating with all regulatory agencies and have our own investigation underway. Our top priority at Chevron is always the safety of our people and the communities we work with.

Now I'll turn it over to Eimear to go over the financials.

Thanks, Mike. For the third quarter, Chevron reported earnings of $3.5 billion or $1.82 per share. Adjusted earnings were $3.6 billion or $1.85 per share. Included in the quarter were special items totaling $235 million. These included severance and other hedge related transaction costs and were partially offset by the fair value measurement of Hess shares held at the time of closing. Foreign currency effects increased earnings by $147 million.

Organic CapEx was $4.4 billion for the quarter. We expect full year organic CapEx inclusive of Hess to be $17 billion to $17.5 billion in line with guidance.

Adjusted third quarter earnings were up $575 million versus last quarter. Adjusted upstream earnings increased due to higher liftings and were partially offset by higher DD&A. Legacy Hess assets contributed $150 million in the quarter. Adjusted downstream earnings increased due to higher refining volumes, improved chemical margins and favorable timing and OpEx results.

Other segment earnings decreased due to higher interest expense, corporate charges and unfavorable tax effects. Adjusted third quarter earnings were down $900 million versus last year. Adjusted upstream earnings decreased due to lower liquids realizations and higher DD&A from increased production at TCO, the Gulf of America and the Permian. The increase in OpEx and DD&A includes the impacts of the Hess acquisition.

Adjusted downstream earnings were higher primarily due to improving refining margins. The other segment was down mainly due to higher interest expense and other corporate charges. These results include benefits from our structural cost savings program. Our new operating model is live, and we've captured approximately $1.5 billion in annual run-rate savings so far, and expect to see further benefits in the fourth quarter.

Cash flow from operations, excluding working capital, was $9.9 billion in the quarter. This represents a 20% increase compared to the same quarter last year when crude prices were $10 higher. Adjusted free cash flow, which includes equity affiliate loans and asset sales was $7 billion, and included the first loan repayment from TCO of $1 billion.

Cash returned to shareholders totaled $6 billion and was more than covered on adjusted free cash flow. We expect strong cash generation to continue even in a lower price environment, underpinned by the increased capital efficiency and growth in high-margin assets.

Third quarter oil equivalent production was up 690,000 barrels per day from last quarter, primarily due to legacy Hess production. In addition, strong execution drove production growth in the Permian, the Gulf of America and TCO. We expect full year average production growth at the top end of our 6% to 8% guidance range, excluding legacy Hess.

Back to Mike to wrap it up.

Okay. Thanks, Eimear. Before we close, I'd like to say a few words of remembrance in honour of Chevron Board member, Dr. Alice Gast, who passed away earlier this week. In 1978, as a 20-year-old sophomore at Stanford, Alice served an internship at Chevron's Richmond Refinery. She went on to earn her PhD in chemical engineering at Princeton. Her career came full circle, 34 years later when she joined the Chevron's Board in 2012. Alice was an internationally known scholar and researcher who served as President of both Lehigh University and Imperial College London.

She encouraged us to stay curious, value teamwork and believe the best solutions come from listening to one another. Her legacy lives on in the questions we ask, the way we work together and the respect we show one another.

And lastly, I have a final reminder that we're holding our Investor Day on November 12. You can find details and instructions for the webcast on chevron.com. We look forward to sharing our outlook to 2030 and highlighting our diversified and resilient portfolio. You can expect to hear about a consistent, disciplined and stronger Chevron. We hope you can join us. Over to you, Jake.

That concludes our prepared remarks. Additional guidance can be found in the appendix of this presentation as well as the slides and other information posted on chevron.com.

We are now ready to take your questions. We ask that you limit yourself to just 1 question. We will do our best to get all of your questions answered. Katie, please open the lines.

[Operator Instructions] We'll go first to Sam Margolin with Wells Fargo.

I expect we'll probably reserve kind of strategic and long-dated questions for the November day. So we'll stick to the quarter maybe in the Permian, good production result there. Capital efficiency has been kind of an ongoing talking point and a distinction between co-op and NOJV acreage. Can you elaborate a little bit on what drove the Permian result? And if you're seeing some better results in the field? Or if it's just part of a broader kind of industry trend of efficiency gains?

Yes. So look, we had a strong quarter. We're 60,000 barrels a day over the 1 million-barrel where we said we kind of move towards a plateau. It really highlights the efficiency gains. The team continues to deliver. We've got no change to our plans to moderate growth and focus on cash generation. We're focused on executing the program as efficiently as possible. Production is an outcome there. It will move up and down. I would expect we're going to see some quarters where it's back down a little bit based on when we're popping wells. But we've been able to continue to deliver strong performance with fewer rigs, fewer completion spreads, a lot of progress on little things including technology. And I think you'll hear more about this from Mark when we get together at Investor Day. So performance across the portfolio. Co-op, [indiscernible] royalty has been strong, and we expect to move into 2026 with good momentum.

We'll take our next question from Devin McDermott with Morgan Stanley.

Mike, I wanted to ask you about Kazakhstan. My understanding is you had the chance to meet with the President alongside the UN back in September. So I was wondering if you just give us a little bit of an update on how some of the discussions around the concession extension are going, where we are in that process? Any broader color on the dialogue would be helpful.

Yes. So I did see the President in New York during the UN General Assembly. It's actually the second time that I've seen him this year. And we had a good conversation about where we are. It was grounded in the fact that TCO has created enormous value for all stakeholders over the last 32 years as a stand-alone entity that has had strong partnership and performance with the Republic.

Tengiz is performing well. You saw it this quarter. It's very visible in our results. It's bringing significant value both to shareholders of TCO and to the Republic. And we are off to what I would characterize as a good start to the negotiations. These are going to take some time. It's a complex contract. It's important to the Republic and it's important, obviously, to the shareholders. I wouldn't expect quarterly updates on this just due to the nature of the work. We've got technical teams engaged. We've got commercial teams engaged. And so the overall structure and governance and negotiations has been defined and they're beginning, but we really are just at the beginning. And so we'll update you from time to time as there is something more for us to say.

We'll take our next question from Neil Mehta with Goldman Sachs.

Just wanted your perspective on the Bakken asset. You've had this under your portfolio here in [indiscernible] portfolio for a couple of months now. You made some adjustments to the activity plans. So what are some initial observations, thoughts on whether this asset is core? And do you view it as part of a broader Rockies corridor that can compete for capital in the portfolio?

Yes. We're excited to add the position to our shale and tight portfolio, has had a long-standing plan to grow it to 200,000 barrels of oil equivalent per day and to maintain that plateau for the foreseeable future. We're at that level now. We see some opportunities to continue to capture efficiencies from drilling cycle time improvements, the use of longer laterals. So similar to what we've described for the Permian, we're going to look to optimize capital efficiency, operating efficiency.

We will bring experiences from other parts of our portfolio to the Bakken. And just as we saw with Noble and PDC, I'm sure we will bring some best practices from Hess' Bakken operation to other parts of our portfolio.

We're in no hurry to make a decision on the longer-term role in the portfolio. I've mentioned this before, so I won't belabor it. But we had underestimated the quality of the DJ and its ability to compete in our portfolio. And as we really get a good look at it, we were pleasantly surprised. So we want to be sure that we've applied all the things that we've developed in other areas to the Bakken, take a look at how we'll compete for capital. We've got the midstream piece of it as well, which has to be factored into the thinking here. But we'll be thoughtful and thorough as we assess that and really focus on value. And we'll update you in due course as we reach any conclusions.

We'll take our next question from Ryan Todd with Piper Sandler.

And maybe a follow-up on that. I mean overall, the Hess contribution came in at the high end of expectations or at least the guidance that you had provided earlier including very strong production. Can you maybe talk a little bit about what were some of the drivers of the strong performance? And any other kind of key takeaways a little bit into the ownership there?

Yes, Ryan. It's Eimear. I'll take this one. Yes, strong production growth was really the main driver and then delivery of the synergies that we had expected. So both of those -- both of those things are really contributing here to the stronger performance. Just maybe to double-click a little bit on the synergies. We're moving at pace through integration. So this really applies not only to the back-end part of the portfolio, but the entire portfolio. We had $1 billion synergy target. Post close, we confirmed that we will deliver that. We'll deliver those [ run resaving ] this year. And so that is all on track, combination of the utilization of NOLs, productions that were canceled to close and then operating efficiencies now that we've integrated the assets through -- into the Chevron system. We see this show up in the 3Q results and we'll expect to see more of that in the fourth quarter.

Ryan, the one thing I might just add, we did see the start-up of Yellow Tail in the quarter an FID for Hammerhead. I had a chance to sit down with the legacy Hess team that has been working Guyana and go through it for an entire day. And I got to tell you, I was impressed with Guyana, obviously, but I was really impressed and pleased with the quality of the people, and I have high expectations for the contributions that we're going to get out of all the Hess employees that are part of Chevron now. It's the thing that maybe doesn't get quantified or talked about as much in these kinds of calls. But in my experience, a huge amount of value when we combine with another organization is bringing in people that have different experiences can help us innovate and improve. And I have seen that again. So that's another real positive, I just want to emphasize.

We'll take our next question from Doug Leggate with Wolfe Research.

Mike, I'm guessing you might touch on some of this in a couple of weeks, I'm not trying to front on you in any way, but I want to ask you about exploration. So you just made the point that you've hired or you've inherited a lot of people presumably exploration folks on Guyana from Hess. But you also just hired the ex-Head of Exploration from [indiscernible]. You used to be the top explorer, if you go back pre-shale 2010 through 2015, spending a significant amount of capital and exploration.

I'm just wondering, as you think about shale maturity, not necessarily for you guys, but in the industry generally. What is your prognosis for exploration, the role of exploration and the associated spending that could fit in Chevron going forward, let's see over the next phase of your development?

Yes. Thanks, Doug. Over the last several years, you're right, we've constrained our exploration spending, and we narrowed our focus into near infrastructure opportunities. We were adding a lot of resource and reserves in the unconventionals. And we're very serious about capital discipline. And so we made some trade-offs within the overall capital program. We now are at a point, I think, where we've characterized our unconventional position. It's a big and very attractive one. And we need to ramp up some of the exploration activity beyond just the focus on infrastructure opportunities.

So we'll move to a more balanced approach of mature areas that are well known and also early entry into high-impact frontier areas. We've added a lot of new country entries over the last couple of years in the South Atlantic margin, the Middle East, the West Coast of South America as well. So we will look to have a broader program in some of those areas, countries like [indiscernible], Brazil, Namibia, more opportunity in Nigeria and Angola, where we like some of the prospects that have added both blocks and have been shooting seismic recently.

So we're looking for more out of that. We've modified our internal organization as part of the overall restructuring that you've heard about to simplify decision-making and speed it up. We're going to be bringing new technology to bear and have some really interesting things going on there. We've got some new people from Hess, also now Kevin joining us from [ Total ]. And our current Head of Exploration, [indiscernible] has reached the end of long and very wonderful career. There's a natural time to move on to a new person. And often, we look both inside and outside the company. And I think Kevin brings some unique experience that we expect will be helpful as well. And so, we will talk about that more in a couple of weeks when we see you. But the short story is more emphasis on frontier exploration. I think you'll see a little more commitment of resource. So that would be both people and capital to that.

We'll take our next question from Biraj Borkhataria with RBC.

Actually, just another follow-up on the exploration front. It has been notable the new country entries. The one that [indiscernible] was in Namibia. I believe you're planning a 10-well campaign there. It doesn't seem like your first well has sort of put you off the basin. So a couple of questions related to that. Could you give us your updated thoughts on the prospectivity of the basin. And secondly, whether you feel like you have enough exposure through the exploration campaign or whether you'd be looking to add more from any inorganic opportunities that might arise?

Yes. So look, we've got a portfolio of opportunities that's been identified from seismic on our blocks. We've drilled 1 well that didn't yield commercial hydrocarbons, but it was very well executed. And a lot of valuable information from that, that we're using to evaluate options to drill some other blocks on these licenses. We recently completed a farm-in on a couple of other blocks in the Walvis Basin, and we've got an opportunity to play some plate concepts from the Orange Basin into the Walvis with a well that we'll drill in '26 or '27.

So that's an area that, obviously, there's been a lot of interest in folks have had some success. We had success there a long time ago with the [ kudu ] gas discovery, which is several decades back. And we remain optimistic. It's exploration. And so you've got a -- you've got to do the work to see what you find. The 10 wells you referred to, we've got an environmental permit that will allow us to go up to 10. I would interpret that as a plan to actually go to that number, unless we see things that would suggest that's the right thing to do.

In terms of inorganic, we don't really comment on commercial activity or discussions, but we always look at everything to make sure we got a good understanding of the market. And as I mentioned, we've actually farmed in to some things. And you'll continue to see, I think, us optimize our portfolio in Namibia as well as other locations.

We'll go next to Paul Cheng with Scotiabank.

My -- just -- when I look at your results over the past year or 2, your base operation has done really well. Just curious that have you changed the way that how you manage your base. And so does that become a repeatable. And [indiscernible], it's not just you, but that the rest of the industry also seems to be doing better. So should we assume going forward, the underlying base decline is going to be far more modest for you, I think it's about 3%. So is that on the ballpark, we should assume or that could even be lower in the future for you?

Yes. Thanks, Paul. I appreciate you paying attention to our base operations around the world. There's probably a couple of things I would point to for us, and I can't necessarily comment on others. Number one, we are focused on doing all the little things right. The restructuring of the company that's underway has created in the upstream, an organization now that is aligned around asset classes primarily. So offshore, unconventional, we do have a couple of big assets that are reporting uniquely in places like Australia and Kazakhstan. But we're aligned in a way now to drive best practices and technology more effectively across those operations. And as we improve in 1 place, we should see those improvements show up in other places more quickly.

We are applying a lot of technology, and we'll talk about this a little bit more in a couple of weeks, but particularly the information technology that allows us to automate things and make decisions faster, stay on top of things, I think, is going to yield further results, but we're already seeing the early returns on that.

The other thing that I would just remind you of is we have a portfolio, Paul, that as compared to, say, a decade ago, for sure, but you can look at different time periods. We have a lot more of our production now that is in either a facility limited position. Think of TCO or think of Gorgon and Wheatstone, as fields that could deliver more, but the facilities limit that. So you essentially don't see a decline there because those are very plateaued at low capital. And increasingly, Permian, DJ, Bakken, we have unconventionals that are being managed that way as well. And so at much more efficient capital, and you're seeing that in the Permian right now. The production for the basin can hold flat in a very capital-efficient manner.

Now each well has new wells have that peak production profile. But in aggregate, as you go from hundreds and hundreds into thousands and thousands of those wells that are in that kind of longer, flatter portion of their life, they also have kind of shallow decline that you can offset with this capital [indiscernible] program.

So the point I'm making, and sorry for going on is it's a combination, I think, of portfolio effects, which yield less capital-intensive work to hold production and assets that have facility limits on them. And those combine to give us the attributes that you're observing. And that is intentional. That's not an accident. It's a portfolio that's been designed to do that. So we don't face the massive capital investment to offset big decline and are faced with that year after year after year.

We'll take our next question from Steve Richardson with Evercore ISI.

Mike, I'd love your perspective on the California refining market. We've got a couple of pretty notable shutdowns in process and some proposed pipeline projects to bring products to the West Coast and obviously, more waterborne imports. So I would love to hear your perspective on that, the policy backdrop and what this -- where this leaves your business in the state?

Yes. So the 2 recent, I guess, 1 that's underway right now and 1 is set to close in 2026. Again, a lot of attention. Remember, there's a couple of other facilities that have been converted from petroleum-based feedstock to bio feedstocks with much lower overall production capacity. So you've seen a market where supply has tightened. It is a function of policy, pure and simple. Others have spoken to that as they've made changes either in the way of refineries being used or announced plans to close it. And so, the policy is yielding the desired results. I think you're seeing some discussion now where the policy is being reconsidered, and there may be some small steps in the right direction we've seen, but nothing that I would say is significant.

The other thing that is underway is people have to think about how do they get product to the state now because it is not going to be balanced to long. It is going to be balanced to short. And so marine imports are going to have to become a more regular feature. People are going to have to figure out how to do that. The recent talk about pipelines is interesting in California doesn't have inbound product pipelines or crude pipelines for that matter. These are interesting announcements. They're ambitious projects. There's many moving parts. These are complicated to permit. They're complicated to build. But I think fuel suppliers are looking for ways to meet the demand.

One thing I think, as [indiscernible] about is the supply is going to come from somewhere. So to the extent California starts to pull product from other markets, that has other knock-on effects as well. And so we'll see if these projects get built, we'll see how the market dynamics play out. But it's clearly a changing market. We've got a strong refining and marketing presence there. And to this point, can compete and deliver acceptable returns, but that's something that will continue to be tested. And the policy moves by the state will have an impact on the decisions get made by us and I suspect by others.

We'll take our next question from Jean Ann Salisbury with Bank of America.

This was true before Hess, but now more so, Chevron's portfolio is more weighted towards upstream than many of your integrated peers. Are you happy with that mix? Or is that something that you might seek ideally to even out over time with more downstream [ or CHEM's ] exposure?

Yes, Jean Ann, our portfolio post Hess is back to kind of 85% upstream, 15% downstream. And that's kind of where we've been over the last couple of decades. And so I don't think -- we don't feel compelled to try to weigh it up in the downstream further than that. Over the cycle, and I came out of the downstream, I love the downstream business. They got a lot of affinity for it, but upstream is a declining depletion business. Downstream is a business of capacity creep in facilities that often get bigger over time, not smaller. And it's hard to close refineries down. We've seen some rationalization over the last 5 years as COVID and some other market imbalances kind of drove that.

But historically, and I think going forward, we're still of a view that downstream returns over time are going to be more pressured than upstream returns, which tend to be a little more self-correcting.

The 1 piece of the downstream, we've been pretty clear that we would like to grow is petrochemicals. We've got a couple of projects underway at CPChem right now. Tough market conditions in that sector. But over the long term, we like the demand growth and economic opportunities in petrochemicals. But I think you should expect to see us stay with a portfolio weighting that's not too different than where we are today.

We'll take our next question from Jason Gabelman with TD Cowen.

It looks like equity affiliate distributions have been running much higher than guide year-to-date. I think every quarter [indiscernible] guide this year by about $700 million. Wondering what's driving that beat? Is it TCO outperformance? Is it higher LNG prices? And should we expect that to continue into 4Q and next year?

Jason, I'll cover that. Yes, I mean, the affiliate dividend performance has really exceeded expectation, and it comes down to TCO's performance since starting up earlier in the year. They've operated safely and reliably and the results to speak for themselves. So it is really a TCO story. When we look at the guidance, though, I mean, no change to the guidance even with that performance. Given that in fourth quarter, we've got a pitstop plan for TCO. So you'll see production come off in the fourth quarter due to that pit stop. And so they also -- TCO have to conserve some cash because they've got 2 loan repayments to make next year, 1 in the first quarter and 1 in the third quarter.

So those 2 factors are really driving the change in guidance that we've provided that on the surface looks like it's coming down, but really, it's being driven by those 2 things.

We'll take our next question from Arun Jayaram with JPMorgan.

Just a quick follow-up on TCO. That was a driver of the earnings beat this morning. Your production on the liquid side grew 5% sequentially, notwithstanding the turnaround in fourth quarter, but are you essentially ramped to capacity there?

Yes. We're really pleased with how TCO has been performing. We had another quarter of very reliable production, and I want to emphasize reliability, starting up a new complex set of processing trains like we did there, historically, can offer some reliability challenges. And this one has been touch wood exceptionally smooth. So we're pleased with that. We didn't have any planned maintenance here in the third quarter. And so you see things running, yes, very much at planned nameplate.

We continue to also -- one of the things that Mark mentioned when he was on the call last time is we now have 3 generations of surface plants to process both the liquids and the gas. The original complex technology line area of the facility, which goes way back. The second generation plant, which was started up last decade and now the third generation plant, which is this decade. We have an integrated control center that can route streams optimally across all 3 of these facilities. We're using a lot of high-end information technology to automate this to a greater degree. And so we've got more knobs to turn and levers to pull to really optimize plant performance. And we've got a field now that's producing us less back pressure, and so we're seeing all of that come through.

The history on these great, big, complex facilities, a little bit like I mentioned about refineries is we do find ways to crude capacity and debottleneck them over time. It's premature to reset any guidance on that, but the history suggests that there's an opportunity there. And certainly, those are the kinds of things that our people are working on. Fourth quarter will reflect the pit stop that Eimear mentioned, but we'll be working on that and talking to you more about it over time as we see how things perform.

We'll go next to Phillip Jungwirth with BMO.

One of the big U.S. upstream themes has been getting more value for Permian gas. There's been a number of pipelines announced FID. I know Chevron is already relatively well positioned here. But given that you produced, I think around [indiscernible] a day net from the Permian, just hoping you could talk about what you're already doing on the marketing side here and also what you think you can do in the future to further maximize value?

Yes. Thanks, Phil. I know this has been getting some attention recently. In the Permian, we market all of our company-operated production. So that would be oil, NGLs and gas. And just a little less than half of the NOJV production. So you can think about it in total, that kind of, call it, 70% or so of our production gets U.S. Gulf Coast pricing. The remaining portion of NOJV and royalty volumes that we don't market can be exposed to in-basin pricing and Waha pricing on gas. So our Waha exposure can vary a little bit each quarter.

Last quarter, it was a little closer to 20% rather than the 30% that would be implied by what I just told you, because we were able to use some of our own excess firm transportation capacity out of the basin to capture value from others that didn't have an opportunity to move out of the basin. So we can capture some of the arb that opens up from time to time there to offset some portion of that volume that we don't actually market ourselves.

Going forward, I think you should look for us to do more of the same. We're covered on all 3 streams right now for out-of-basin transportation. To the extent we're long, sometimes we can use that to capture additional value. And we tend to -- because we're running a very steady, well-planned program, we can commit in advance because we've got a high degree of confidence on the composition of the production and the volumes that we're going to need. Obviously, for shippers -- or for midstream companies were a desired shipper given the credit quality and reliability that we offer to them. And so we'll continue to use that to ensure that we're well covered and that we can optimize value across the entire value chain.

We'll take our next question from Lucas Herrmann with BNP.

Mike, I just wanted to briefly go back to the Downstream and Chemicals. And as you mentioned, I mean you've got 2 very large facilities coming on stream in partnership with Qatar Energy next year. And I -- the question is simply, as they come on or as they build the capacity, what's the increment at current levels that you'd expect from -- for cash flow. And to what extent a little bit like TCO, can one expect to see CapEx across CPChem 4 distributions to the center to yourselves increase [indiscernible]?

Yes, Phil, we'll talk about this a little bit more at Investor Day. Two things I would just point out, these are world-scale facilities. They have very advantaged feedstock positions and they will be very low on the cost curve. And so they're highly competitive facilities that will be coming into the market. At the margin, some of the length in the market tends to be in countries where they're cracking naphtha. They tend not to be world-scale facilities, and they're feeling a lot of economic pressure right now. So we think both of these projects are well positioned to deliver returns over the long term. They're kind of 20% type IRR expectations on these projects. We're very pleased with our relationship with QE.

Chevron's exposure comes through a joint venture in CPChem and then a further venture with QE. So you have to think about that as you think about how exposed we are and how much cash those might generate because it flows back through the dividend policy at CPChem and we're only exposed to a portion of each of those facilities. More to follow at Investor Day on that subject.

We'll take our next question from Paul Sankey with Sankey Research.

Mike, I know you can't talk obviously about the specifics of the analyst meeting, but I wanted to ask you a question if you just set the table a bit here in terms of the macro environment. And the reason I'm asking is just at this analyst meeting, is going to be your first since 2023, which is the longest gap that you've had between meetings as far as back as I know. And so given the world, I just wanted to get your perspective on how the world has changed, perhaps some of it is cyclical, some of its structural as we go into this meeting. And to answer the question a little bit and help you out here with what I'm thinking. I mean you've got the continued war in Russia since 2023 Russia, Ukraine. There's a massive shift in ESG that we've seen since then. The AI boom completely new. OPEC policy, I think, has changed. And of course, the big one is the second Trump administration and then finally, the interest rate environment, I guess, has changed. I'd just like you to kind of set the stage, if you will.

All right. Well, Paul, what you've done is you've kind of teed up the answer I give to people when they say, isn't this kind of yesterday's business and there's not a lot going on in it. I mean the world changes constantly. And in 2.5 or 2 years and 8 months, whatever it will have been since our last meeting, a lot has changed. The war in Russia had only begun, the war in Ukraine. The Middle East hasn't seen hostility breakout. We hadn't seen [indiscernible] hit the way that it now has been. You're right. We were kind of at peak ESG. At our last meeting, there was not much interest in AI at the time or not much public acknowledgment of what was probably going on behind the scenes there.

OPEC was responding, I guess, at that point in time, still we've been in a high-price market due to the start of the conflict in Ukraine, but before long, they started constraining and we had President Biden in the U.S., not present Trump. So we always have a changing context in this industry. The last few years might have had a little more interesting change than most. But the fundamentals really are what we try to look through and the global economy continues to grow. The population of the planet continues to grow. Economic development continues to advance. And affordable and reliable energy is fundamental to that progress. And I think the conflict in Ukraine has pointed that out.

What we're seeing with AI and the stress on the power system in the U.S. is pointing that out. And so affordable, reliable energy is the lifeblood of a modern economy. That's the business that we're in and the fundamentals of that, we continue to believe offer value-creating opportunities for wise capital investment long, long into the future. So we'll talk about that. We'll give you some guidance on our business out to the end of the decade. Right now, I think most of our guidance goes to the end of next year.

I think 1 thing I would say, Paul, is you should expect us to be consistent in what you're going to hear from us. Our strategy has stood the test of time over a pretty volatile period, as you just described. And we know you're interested in cash and earnings growth through the decade. What we'll also talk about is how we'll deliver that through continued capital and cost discipline through innovation, through technology through a very strong portfolio through one that is low risk and high confidence, as I've seen in my career and is set up to continue to reward our shareholders with continued strong cash returns through the dividend policy where we have been a leader. And through a steady through-the-cycle share repurchase program, where I think we've been very predictable and consistent.

So that maybe says no huge surprises. But it does say that a good story is continuing to get better.

We'll take our next question from Bob Brackett with Bernstein Research.

There's a view out in the macro market for oil that the market's oversupplied in '26 and that shale has to make some room for OpEx spare capacity. You all touch more barrels in the Permian than anyone through your operated, your non-op JVs and your royalties. What's the state of the Permian today? And how would you forecast that, say, into next year?

Yes. I mean the current rig count is somewhere in the neighborhood of 250 rigs, I think, that is at or at least close to multiyear lows. I think most third parties seem to think that level of rigs is an appropriate number to maintain current production levels. And that's, of course, dependent upon are they still finding good productive opportunities beyond the top-tier acreage. Our company is still able to deliver cash back to shareholders, which is a promise that I think we've seen a lot of the Permian operators now commit to that may be tested as we go through a period of lower prices, and see how they handle the trade-off between capital and cash returns to shareholders.

We continue to see efficiency and productivity gains in our fleet. I think others are probably seeing similar kinds of gains and we continue to work on technology and things that will improve not only the ability to execute well, but the ability to recover more. So most companies seem to be guiding to kind of flattish or maybe slightly reduced CapEx as we go forward. I would say that's probably not a bad proxy for where production is likely to go. So not growing at the rate that we've seen before, probably plateauing. But as all of you that watch the Permian over the last 15 or 20 years have seen these things change. And it's a dynamic basin. It's a highly responsive basin with a lot of players in it, and it can be quite responsive to market signals.

We'll take our next question from Geoff Jay with Daniel Energy Partners.

My question is on Argentina. I noticed that you had to produce a reasonably high percentage uptick in this quarter. And given that you -- I think you have roughly the same amount of acres there as you do in the [indiscernible] I'm kind of curious as to how you think the potential of Argentina production could be over the next 2 or 3 years? And what are the key gating factors to that growth?

Yes. Well, let me start by just reminding everyone that we've been in Argentina for many years. We've been in vertical production through some acquisitions that go back decades. And it's been a place where we've got a lot of history. We understand the subsurface. We really like the quality of the subsurface and our position in the Vaca Muerta both in the South at Loma Campana, where we're partnered with YPF and up North at El Trapial, where we operate ourselves.

I'll also say it was encouraging to see the support for present Malay in the recent election. We've been pleased with some of the macro sign posts in Argentina that have improved since the current administration took office in 2023, efforts to stabilize the banking system to reduce or remove capital controls, lower inflation, invest in regional infrastructure. Those are the types of policy reforms that can make Argentina more attractive for investment and more competitive within our portfolio.

We don't really have a change in our near-term plans. We want to continue to see some of these signposts evolve. But we like the quality of the rock. We have seen some modest growth this year with kind of 25,000 barrels a day expected in 2025. We're taking lessons and talent and technology from these other basins to Argentina to approve outcomes. And with continued progress in the policy arena, this could compete for capital very effectively as we go forward. We certainly hope that it does. There's a lot of running room. I'm not going to quantify it, but it's got -- it's certainly got upside because it's got scale, as you say, and the quality of the rock is highly competitive. So the DJ might not be a bad analog, but we're going to be 1 step at a time.

We'll take our next question from James West with Melius Research.

Quick question on the Permian for you. I'm curious, as other operators are dropping CapEx dropping rigs, dropping frac spreads, you guys recently had 1 million barrels a day. You're having a lot of success there. What's the differentiator on your operations versus, say, the smaller peers?

Yes. Well, welcome, James. It's nice to hear your voice, and we look forward to seeing you in New York in a couple of weeks. Look, we operate on a long-term plan. We've got a factory or a manufacturing type approach to developing this asset. We plan our work and work the plan. We don't whipsaw much on near-term commodity market dynamics, smaller operators that may be not in the same balance sheet position, may not have a diversified portfolio, may have other financial constraints. Can operate -- may operate differently. We just can find that a continued steady, consistent manufacturing approach allows us to pilot and trial new techniques, new technologies continue to improve. And we just grind out better efficiency and productivity each and every day.

And so we're 40% more productive on drilling wells than we were just a few years ago. The same thing on completions. And I think the scale and the steady approach to development yields the steady improvement. And I think smaller companies just don't quite have the same ability to do that without having to reset the program. But look, I'll comment quickly on our NOJV. We partner with some of the largest operators in the basin. And we're not seeing a lot of change in activity levels there at this point. Their activities remain aligned with our business plan. We've got very good line of sight on the 2025 performance through the balance of the year and pretty good line of sight on 2026 production where we've got plans that we've got visibility of wells that are either online or under construction today, AFEs that are already being processed for 2026. And so at least relative to our performance, there are not signs that we would see the NOJV piece of our business significantly constrained or contracting as we go through next year.

I would like to thank everyone for your time today. We appreciate your interest in Chevron and your participation on today's call, and we look forward to seeing you in a few weeks. Please stay safe and healthy. Katie, back to you.

Thank you. This concludes Chevron's Third Quarter 2025 Earnings Conference Call. You may now disconnect.