Chevron (CVX) Q3 FY26 Earnings Call Transcript

Unidentified speaker00:00

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Operator00:10

Good morning. My name is Katie and I will be your conference facilitator today. Welcome to Chevron's third quarter 2026 earnings conference call. At this time all participants are in a listen only mode.

Operator00:24

After the speaker's remarks there will be a question and answer session and instructions will be given at that time. If anyone requires assistance during the conference call please press star then zero on your touchtone telephone as a reminder this conference call is being recorded.

Operator00:31

I will now turn the conference call over to the head of investor relations of Chevron Corporation, Jeanine Wai. Please go ahead.

Jeanine Wai00:50

Thank you, Katie. Welcome to Chevron's third quarter 2026 earnings conference call and webcast. I'm Jeanine Wai, head of investor relations. Our chairman and CEO, Mike Wirth, vice chairman, Mark Nelson, and CFO, Eimear Bonner, are all on the call with me today.

Jeanine Wai01:01

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.

Jeanine Wai01:14

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 two I'll now turn it over to Mike.

Prepared remarks

Mike Wirth01:28

Thanks Janine Chevron delivered another quarter of outstanding operational performance and disciplined execution reliably supplying the energy the world needs In the US, upstream production was more than 2 million barrels of oil equivalent per day for the fifth consecutive quarter.

Mike Wirth01:35

We achieved record crude throughput in our refining system, helping meet demand and supply constrained markets.

Mike Wirth01:47

We also continued investing to develop future energy supply. We announced a discovery in Angola Angola within tieback range of Chevron operated facilities providing an opportunity for short cycle capital efficient development.

Mike Wirth01:57

Our joint venture with Bungie completed commissioning of a Louisiana oil seed processing plant on schedule providing additional feedstock for Chevron's leading US biofuels business.

Mike Wirth02:10

We expanded our acreage and established new fiscal terms in Venezuela and we recently announced an expected 50% 50% reduction in Bakken midstream tariffs that expands economic inventory and competitiveness.

Mike Wirth02:29

Chevron is well positioned to deliver more energy today and well into the future. Venezuela will be part of that story. We have deep on the ground expertise built over our 100 year history there. With new fiscal terms Venezuela is now more competitive within our portfolio and immediately accretive and free cash flow positive.

Mike Wirth02:48

Last month we announced plans to double production for our three joint ventures to roughly 600,000 barrels of oil per day all on primary recovery by 2031. This development program will be self-funding and could extend further into the 2030s underpinned by billions of barrels of resource.

Mike Wirth03:08

Total costs are expected to be under $20 per barrel with competitive investment returns and no major upgrades are needed as infrastructure has been well maintained. Chevron markets 100% of the crude from the three ventures with the majority going to US refineries including Pascagoula and El Segundo adding to domestic product supply.

Mike Wirth03:22

We'll look to capture additional value as we optimize product flows across our system. And we're on track to reach around 300,000 barrels of oil per day of gross production by year end, up 20% over the last 12 months.

Mike Wirth03:27

Now I'll turn it over to Mark to discuss our operational achievements.

Mark Nelson03:43

Thanks, Mike. Our strong operational performance is driven by a relentless focus on safe execution reliability cost and technology. At around 4 million barrels of oil equivalent a day, improvements in our base business create meaningful value.

Mark Nelson03:46

In Shell and tight we achieved first

Mark Nelson03:54

Reliability in the DJ Basin during the third quarter by applying AI to anticipate and minimize downtime and scaling learnings from the Permian.

Mark Nelson04:08

Reducing loss production events by 50%. In advanced chemicals continue to deliver strong results in the Permian increasing cumulative oil equivalent production by up to 23% in the first 12 months.

Mark Nelson04:33

We also delivered strong performance in other parts of upstream including record quarterly production in the Eastern Mediterranean as the Tamar optimization project and Leviathan third gathering line ramped quickly. And reliability in Australia continues to be strong where predictive maintenance centralized data driven decision making and AI helped maximize LNG supply into a tight market.

Mark Nelson04:59

In downstream efficient turnarounds and the flexibility to respond to market conditions are essential to meet customer needs. More than 80% of Chevron's US refinery turnarounds over the last two years were completed with first quartile duration we have peer leading complexity and we're deploying a proprietary catalyst increasing distillate yields by more than 10% at our largest US refineries.

Mark Nelson05:15

We're also adding supply by increasing capacity at existing production facilities and refineries through highly capital efficient expansion. In upstream, debottlenecking projects have recently added capacity of more than 85,000 barrels of oil per day.

Mark Nelson05:26

We announced a 20% capacity increase in TCO's third generation plant taking total processing capacity to slightly over 1 million barrels of oil per day.

Mark Nelson05:44

At Ballymore a 7% increase in capacity contributed to record deep water production in the Gulf of America. And at Anchor facility capacity has increased 33% or 25,000 barrels of oil per day which should benefit new wells coming online over the next year.

Mark Nelson06:01

We've done the same thing in refining contributing to record quarterly US crude throughput at a time when the market needs it. At Pasadena we accelerated debottlenecking to increase refinery capacity by approximately 15% at nominal cost.

Mark Nelson06:15

We'll continue to pursue additional low cost debottlenecking projects where practical including at Pascagoula where we expect to increase refining capacity by another 7% by 2030.

Mark Nelson06:30

In exploration, our new operating model centralizes expertise, applies one global standard to rank and select opportunities, and drives faster decisions. Together with new technology and leadership, this is reshaping our portfolio and changing outcomes.

Mark Nelson06:43

We've added 22 million acres over the last two years, doubling our footprint. This includes 12 new basins with a focus on both sides of the South Atlantic margin and the Eastern Mediterranean.

Mark Nelson07:01

AI is changing what we see subsurface and how quickly we see it. One of our proprietary AI solutions, Apex, draws on four petabytes of data and 100 years of company knowledge now pulling together basin information in hours not months.

Mark Nelson07:19

Scout AI now deployed in 10 new basins builds basin assessments in hours not weeks. And our latest technologies combined with AI assisted interpretation provide sharper subsurface imaging to identify and high grade new prospects with greater conviction.

Mark Nelson07:33

AI pattern recognition has identified more than 150 leads in our Gulf of America portfolio alone with 16 prospects moving into evaluation All of this is leading to better outcomes.

Mark Nelson07:51

We've made 15 infrastructure led discoveries in two years at a success rate of 40% above the industry average Real time optimization using AI Continuously monitors drilling conditions recommends actions to reduce non-productive time and maximizes performance.

Mark Nelson08:06

With 30 net new prospects identified, we're increasing exploration spend by 50% relative to 2025 and are focused on executing with capital and cost discipline. I'll now turn it over to Eimear to discuss the financial results.

Eimear Bonner08:20

Thanks, Mark. For the third quarter, Chevron reported earnings of $9.9 billion or $5.06 per share Adjusted earnings were $10.4 billion or $5.28 per share.

Eimear Bonner08:38

Cash flow from operations excluding working capital was $16.6 billion Organic capex was $3.9 billion in the quarter in In line with historical trends we expect fourth quarter capex to increase while still finishing the year at the low end of our annual capex guidance.

Eimear Bonner08:45

Chevron's net debt coverage ratio improved in the quarter as a result of the strong cash generation.

Eimear Bonner09:03

Adjusted third quarter earnings were 1.6 billion dollars lower versus last quarter. Adjusted upstream earnings decreased due to lower realizations, lower liftings and unfavorable timing effects more partly offset by lower DD&A and tax effects.

Eimear Bonner09:09

Adjusted downstream earnings increased primarily due to higher refining margins and volumes.

Eimear Bonner09:14

More than offsetting unfavorable timing effects.

Eimear Bonner09:24

Chevron generated $16.6 $16.6 billion of cash flow from operations excluding working capital and $14.2 billion of adjusted free cash flow in the quarter.

Eimear Bonner09:39

We reduced debt by more than $3 billion and grew cash by more than $4 billion further strengthening our balance sheet enhancing our ability to fund the long-term investments needed to reliably deliver energy long into the future.

Eimear Bonner09:45

Net debt to CFO at the end of the quarter was 0.4 times.

Eimear Bonner09:51

Working capital was negatively impacted by sharp commodity prices increases late in the quarter.

Eimear Bonner10:00

Looking forward consistent with historical trends we anticipate additional timing effects when prices are rising and unwinds when prices are falling.

Eimear Bonner10:14

Third quarter production was nearly 4 million barrels of oil equivalent per day despite anticipated entitlement impacts and planned turnarounds. highlighting sustained operating performance across the portfolio.

Eimear Bonner10:21

This includes one month of production from our Venezuela joint ventures following the change to equity accounting.

Eimear Bonner10:32

We delivered a new quarterly natural gas production record producing more than 9 billion cubic feet per day led by strong performance in Australia and the Eastern Mediterranean.

Eimear Bonner10:37

In addition, other core assets achieved new performance levels.

Eimear Bonner10:37

Levels.

Eimear Bonner10:56

In the US Gulf of America, it was set they set a new quarterly deep water production record the Permian recorded sixth consecutive quarter above 1 million barrels of oil equivalent per day and TCO has been operating near full rates over the last several months

Eimear Bonner11:11

In closing, Chevron delivered another quarter of strong performance and yet we're never satisfied. Execution is excellent across the base business and projects and we're relentlessly pursuing opportunities to safely improve further.

Eimear Bonner11:21

Technology is an important part of that. Our proprietary capabilities are helping increase reservoir recoveries and get more from every barrel we process.

Eimear Bonner11:31

2026 has also proving to be an inflection year for AI with more than 100 million dollars in value capture to date with much more building quickly.

Eimear Bonner11:47

At the same time the strength of our partnerships is creating opportunities for the next decade we see that in Venezuela in our efforts to extend our concession in Kazakhstan and as we pursue growth opportunities in Iraq.

Eimear Bonner12:03

Underpinning all of this is an unwavering commitment to consistent financial priorities and capital and cost discipline. We're delivering strong performance today while stacking competitive growth options to reliably deliver the energy the world demands for decades to come.

Eimear Bonner12:07

I'll now hand it back to Janine.

Jeanine Wai12:19

Okay, thank you, Eimear. That concludes our prepared remarks. Additional guidance can be found in the appendix of this presentation as well as on the slides and other information posted on Chevron.com.

Jeanine Wai12:30

We're now ready to take your questions. We ask that you please limit yourself to one question and we'll do our best to get all of your answers. Katie please open the lines.

Questions and answers

Operator12:59

Thank you. if you have a question at this time please press star one on your touchtone telephone to allow for more questions from participants we ask you limit yourself to one question if your question has been answered or you wish to remove yourself from the queue please press star two if you're listening on a speakerphone we ask you please lift your handset before asking your question to provide optimum sound quality again if you have a question please press star one on your touchtone telephone Our first question comes from Arun Jayaram with JPMorgan.

Arun Jayaram13:21

Yeah, good morning. Appreciate the color on your opportunity set in Venezuela Venezuela as a early mover advantage. I was wondering if you could maybe touch a little bit on the cost structure. I know that when you put that out in September it was probably $10 a barrel lower than we're thinking.

Arun Jayaram13:34

And maybe you could also elaborate on how you're managing some of the above ground risks as we think about restarting activity in Venezuela.

Mike Wirth14:05

Yeah, so let me comment on the risk question and then maybe I'll ask Eimear to make some comments on the cost structure. You know, Arun, we manage risk around the world as part of our everyday business. One of the ways we do that is by having strong terms and that gives us the ability to generate strong financial returns and certainly we've seen the terms on offer in Venezuela become much more competitive.

Mike Wirth15:42

We also have you know provisions in this contract relative to stability clauses international arbitration etc which as good as we see anywhere in the world Now you know one of the most important ways to address risk is not by relying on contracts but it's by doing what you say you're going to do that means you contribute to the economy you meet your obligations you treat people right and you're a positive force in society and in the country and you know in our 100 year history in Venezuela I'm very proud of the way our company has contributed through jobs investments in communities generating a lot of tax revenue bringing our values and focus on safety and reliability so to me the you know the best way to manage those risks is to have support of the people in the country and the and that leads to you know an environment where you can resolve any differences that may emerge the last thing that I'll say maybe two two last things that are different today than they have been historically is you know number one we are lifting all of the oil and so it's not going it's not being marketed by Pedovesa it's being marketed by us we then control the flow of the revenue back into the country and the disbursement of taxes and royalties that are legally obligated the payment of costs etc.

Mike Wirth16:18

The second thing is you know we're recovering the last bit of debt that you know that has accrued through loans that were made long ago and as we go forward this will all be self-funding and so the capital will be generated through the revenues in the venture and we won't be exposing additional capital investment so it'll be recovered quickly it's a factory type drilling program that has analogs to other things we do elsewhere in the world and we can manage the pace of activity up or down as market conditions call for it. So it's a very different set of dynamics than we've historically had in Venezuela.

Mike Wirth16:25

We're also very pleased with the cost structure that I'll let Emer talk a little bit about the $20 number we put out there today.

Eimear Bonner17:14

Yeah thanks Mike. The cost structure is really competitive so total cost less than $20 a barrel so think of that as capex and opex and as Mike said this is a factory like operation so we'll continue to learn continue to become more efficient over time so this is low cost it's a high return very competitive with our within our portfolio another thing I would mention is we're not anticipating that we'll have any major additional infrastructure spend as we double production between 300,000 and 600,000 through the end of the decade so we have the infrastructure we need and as we build out and as we grow it'll be more get small capital versus anything major those are the key things thanks

Operator17:20

Thank you we'll take our next question from Devin McDermott with Morgan Stanley

Devin McDermott17:24

Hey good morning thanks for taking my question

Devin McDermott17:58

So I wanted to check in hey good morning Mike I wanted to check in on the TCO concession extension progress there have been some media reports recently making statements around some of the government asks include things like one-time payments or working interest adjustments and I understand You might not be able to talk specifics or comment on that media speculation, but I was hoping you could talk at a higher level on progress and anything you can share on how the dialogue's been going, any thoughts on timelines, and then I guess the key question is based on your learnings in the process so far, what is an ideal win-win outcome look like in your view?

Mike Wirth18:12

Yeah, thanks, Devin. You're right. I'm not going to comment on media reports or specifics, but I can talk about the process. We continue to make good progress, and I continue to be very encouraged.

Mike Wirth20:39

The discussions began a little bit over a year ago, we've had technical commercial and legal teams meeting on a regular cycle I've been in contact with the president multiple times during this period of time to be sure that we stay aligned all the TCO partners have been at the table and have been actively participating all the relevant government officials have been in all these meetings and has ensured good alignment the list of issues has narrowed really to what I'd call the fundamental core issues and we're focused on working those I think they're very reasonable issues to be on the table they're the things you would expect here you know 35 or so years after the initial deal was put together and we're working our way through those so you know this is a large complex contract and obviously a very important asset to the Republic I don't see any red flags and so we continue to be pleased I'll give you more meaningful updates as we have milestones to report in terms of what good looks like we need to have something that is you know in today's world I think competitive for the Republic and they want to see their large resource assets stewarded responsibly which is something we're very proud to have done for our years there and the work on the technical side of this is to have a development plan that we're very aligned around going forward as we continue to steward this massive you know resource position for decades into the future for the partners we need something that's a competitive value proposition and that means that for the capital we've already invested and the capital we would invest going forward that we can get a competitive return everybody every one of the partners has alternatives in their portfolios and this needs to be competitive as we've discussed with Venezuela and other assets and I think each side understands what the other side is looking to accomplish and we're working together to land this in a place that that all the parties feel that this is a an agreement that that meets their needs. So more to follow as we reach you know a significant milestones.

Operator20:46

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

Neil Mehta21:06

Yeah, good morning, Mike and team. Just want your perspective on the Bakken since the last time we connected you did restructure some of the Hess midstream contracts. So just trying to think about the financial impact but maybe just stepping back big picture now that you've had some time with the Bakken do you view that asset as core or not?

Mark Nelson21:34

Hey, thanks, Neil. This is this is Mark. I'll I'll give the front end of this and then we'll have Emer comment on the kind of on some of the economics but our operational activities that we've been working on in regard to improvements day to day and this action with Hesham midstream are all about enhancing value and increasing flexibility As Mike mentioned in his comments, the 50% reduction in tariff it quite frankly makes the Bakken stronger.

Mark Nelson21:57

It improves upstream returns it expands economic inventory and it maybe most importantly increases operational flexibility and this is what excites me the most because it will allow us to evaluate the full potential of the basin. We've already begun to put in place more optimized development plans that build on the ongoing operational improvements that we have been building in over time.

Mark Nelson22:29

We'll move from three rigs to two rigs at year end while sustaining 180,000 barrels a day of oil equivalent production again building on the operational improvements that we've made and you should expect to see more long laterals with these changes. We'll go from 60% long laterals this year to over 85% in 2027 and we'll begin to lean into our advanced chemicals opportunity so I'm encouraged by what I'm seeing today and the future potential and Emer maybe you can help on the economics.

Eimear Bonner22:50

Yeah thanks Mark. Hi Nelia so we expect to realize several financial benefits with this in addition to simplifying the reporting structure as you mentioned so overall it increases our corporate RoC by 0.5% deconsolidates 3.7 billion dollars of debt and delivers incremental recurring earnings.

Eimear Bonner23:40

So it'll close at you know at the end of the fourth quarter we're still on track and when it closes we'll report a one time non-cash after tax loss of three to four billion dollars we will treat that as a special item and it just reflects the accounting treatment on deconsolidation not any deal economics as we look to 2027 we'll see an immediate improvement in Bakken upstream earnings and cash flow it'll be partly offset by some cash outflows primarily related to taxes but we're really excited about this proud of how the operational teams are working together in our centralized shale and tight organization of which Bakken is now a part of that and this transaction does take a step further and helps us unlock more financial upside.

Mark Nelson23:43

Thanks for the question.

Operator23:49

We'll take our next question from Neil Dingman with William Blair.

Unidentified speaker24:21

Morning. Thanks for the time. My question is on capital allocation. Mike, specifically obviously the balance sheet now is even you know what I call beyond pristine when you look forward you tend to have numerous exploration opportunities I just think the opportunities both organically and externally are just broad so given the I guess my question is given how much how low the balance sheet is now is your thoughts about next year have you changed in the way of allocation

Eimear Bonner26:34

William I'll take this one yeah the balance sheet is strengthened over the course of the year as a function of the outstanding operational performance that we've seen across the organization and you know given the fact that the market dynamics are still very volatile I mean in third quarter alone a $64 intra quarter spread I mean we saw prices as low as 68 as high as 132 dollars a barrel so we're not changing anything in the short term given that volatility I mean our capital allocation framework and our financial priorities are long standing they've been in place for decades and you know over high prices and low price environments they've really stood us well so no change to capital allocation um maybe just recap you know the first priority within that is to grow the dividend consistently we've done that that for 39 consecutive years we'll continue to do that that is a commitment we have to shareholders the second is to invest capital efficiently we have a capital program that's underway and we are trending towards the low end of the guidance this year we're investing in the business today and that's also enabling us to invest in the future so no change there in fact we're seeing in places like the Permian that we can deliver on the goals there with less capital the third is to maintain a strong balance sheet so that the cash generation and the coverage ratios that you saw in the material today really show how strong that is and the fourth is repurchase shares through the cycle and we have maintained our rate of 2.5 billion to 3 billion of buybacks and we intend to be buying back shares within that range and overall our track record of using this framework whether it be dividend growth consistency or buybacks through the cycle 19 of the last 23 years it's held up very well so we're on track with our 2020-30 plan that we guided in the investor day and we don't see any major challenges there.

Eimear Bonner26:46

Neil welcome back and we will give you some additional color on the 2027 capital program in December after we meet with our board

Operator26:51

Thank you. We'll take our next question from John Royall with Piper Sandler.

John Royall27:17

Hi, good morning. Thanks for taking my question. Um I wanted to see if I could dig in a little on the comment Mark made about increasing distillate yields at the refineries if you could just provide a little detail around what you've been doing with your catalyst to boost your output on the diesel side and maybe just if you could talk more broadly about any other initiatives you're looking at and refining and just other levers that maybe you could pull that are similar to this lever with the catalyst and distillate yields.

Mark Nelson29:14

Yeah, thanks. Thanks, John. You know, maybe stepping back, I couldn't be more proud of our manufacturing team with another record crude throughput, strong reliability, something we've been working on for a while, our top quartile duration of turnarounds, and then these capital efficient debottlenecking actions. There's a lot of strong momentum and what's interesting in the manufacturing business is that sometimes repeatability is the best equation. And so we want more of that going forward specifically to the change that we made with our catalyst I think you know you we've got peer leading complexity and that means we've got a high proportion of hydro cracking so we were able to after a little bit of an adjustment deploy this proprietary catalyst into our largest refineries and it immediately with some adjust adjustments to cut points allowed us to increase distillate production by 10% our for our large refineries our third quarter distillate yield in the United States was 46% and across our global portfolio was even higher than that in fact Pascagoula hit a diesel production record at least over the last three or four four years this quarter as well and so I think what we need going forward to meet customer needs is more of the same in some cases that's might be viewed as boring I view that as exciting we're bringing AI into our reliability equation where we're helping to predict where risks occur using 100 years of data that's helping us continue our reliability string we're also bringing AI into our yield equation where we're looking more quickly at how we can produce more of what customers needs today need today and then I think we mentioned this in our prepared remarks for Pascagoula over the next two turnaround cycles will increase capacity there by another 7% so more of the same to come and couldn't be more proud of the team thanks for the question John

Operator29:22

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

James West29:55

Hey, good morning everyone. So I wanted to touch on AI a little bit further. I know Mark spent a couple comments on it but Chevron was really early in the adoption and implementation of AI not just amongst the super majors but the oil industry broadly oil and gas industry broadly so I'd love to hear how you're using this at the both the enterprise level and then maybe some further context on in your exploration programs.

Eimear Bonner31:42

Okay, I'll get us started across the enterprise. We are sitting on both sides of the AI equation. So on one side, leveraging AI to lead and drive performance and on the other side delivering the energy that will power AI. We got our focus on three main things so the business using AI to make better decisions operate more efficiently and to helping meet that growing energy needs and then the third area is really equipping everyone in the organization with the capabilities that they need um let me give you a couple of examples because we have captured real value this year more than 100 million dollars year to date and we expect obviously that to increase significantly as we scale maybe shale and tight is the one dimension before I hand over to Mark to cover exploration but we're using an AI production engineering kind of an agentic assistant to help us optimize production on an ongoing and basis so we've got this deployed in Permian in Bakken and in our PZ assets so this is something that we have built in-house that is 24 7 optimizing the production from our wells another example would be how we're using AI to help us with designing wells and scoping capital projects so there we've got some proprietary tools that are in development and we're testing them at a really early stage and then on the operations and commercial side human agent teams helping us with turnaround and refinery planning so Mark maybe on the exploration side you can cover it

Mark Nelson32:01

Yeah thanks Emer James quite frankly I I think it's reshaping our portfolio and exploration at a large scale and it's delivering higher confidence prospects at pace And the way I think about it as our goal is to have rapid access to data, data, reduce cycle time, and then increased success rates.

Mark Nelson32:16

Back in our investor day, we shared one of the first things we did, which was the system called Apex, which allows us to get our hands on data more quickly for better and faster decision. This is that 100 years of data at our fingertips.

Mark Nelson33:04

The next thing that that we did was create something called Scout AI, which allows us to essentially do a deep basin assessment in hours. And we're applying that in 10 new basins as we speak when you combine those tools along with our spatial high grading elastic waveform inversion and ocean bottom node data that we have available um we are coming up with new prospects. I mentioned in my prepared remarks about the Gulf of America where we created over 150 leads and then essentially added 16 to our list to evaluate. So we're incorporating this throughout the exploration process including real time drilling optimization. So it's touching every part of the exploration value chain and I expect the impact just to continue to grow.

Mark Nelson33:07

Thanks for your question.

Operator33:13

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

Biraj Borkhataria33:43

Hi there. Thanks Thanks for the presentation and for taking my question. Um I wanted to go to slide six which I thought was very interesting um we obviously spend a lot of time looking at major projects but you know these barrels or some of the highest value add barrels that you have so I just I was wondering if you could talk about the potential to do something like this in your LNG portfolio and particularly in Australia um you know are there any sort of active de-bottlenecking projects are ongoing and where are we now relative to nameplate and you know what's the potential there Thank you.

Mark Nelson34:14

Yeah, thanks, Biraj. I would view de-bottlenecking as a mindset and it just builds on our mindset of capital discipline. You know, I I would say historically manufacturing facilities like refineries were somewhat accustomed to this, but given some of the operating model changes that we've made and centralizing project activity, major capital projects as well as small projects, is creating this opportunity to see across the portfolio where we have these opportunities.

Mark Nelson34:27

And we've mentioned some of the examples in the upstream from the 20% increase at FGP to the 7% increase at Valleymoor and the 33% increase at Anchor.

Mark Nelson35:11

We are already above nameplate at Oregon and Wheatstone today and I see more potential for that but what excites me even more than just that potential de-bottlenecking that can exist there it's the reliability with the world class reliability we have in Gorgon and Wheatstone is allows the customers to get what they need and having backfill projects highly competitive backfill projects for decades into the future allows us to continue to leverage that so I think I see both things working together continued reliability potential for capital efficient expanded capacity and backfill projects will help us do what we need to do. And I think part of that led to our record production in the third quarter for the combined assets. So more to come.

Mark Nelson35:13

Thanks, Braj.

Mike Wirth35:29

Yeah and Biraj maybe offline Jeanine can follow up with you we've done a lot of de-bottlenecking already at both Gorgon and Wheatstone and I think we've talked about that on prior calls but we can share that information with you so you can see what's already been done there which is a really good story Mark's just building on

Operator35:36

Thank you we'll take our next question from Jean Ann Salisbury with Bank of America

Jean Ann Salisbury35:52

Hi, good morning. If permits for behind the meter projects in the US become harder to get, is there more value in already permitted sites like Project Kilby and I guess as a related question, how large could Project Kilby get and what are the gating factors to grow them in your mind?

Mark Nelson37:31

Hey Jean Ann. Yeah, we're really excited about Kilby. It's a it's a great project. Um 2.67 gigawatts um of power in West Texas with strong partners um we signed a 20 year PPA with Microsoft um AAA quality customer as you know that really leverages our strength so you know from the really from the very beginning um we designed our solution to kind of consider some of the concerns that are be being expressed in terms of you know the grid and so this is a behind the meter power project um it won't put any pressure on the grid in the short term um won't raise prices it's using non-potable water um and so that's why Governor Abbott on the 6th of August announced that it complies with the standards so you know right now we do have a room to expand um we could expand this from single cycle to combined cycle it will all depend on additional permits beyond the permit obviously that we're working through the system for Kilby as part of our FID decision so it's going to come down to subject to permitting overall I would just say we're working towards our FID we have our EPC contract that we're finalizing and we're working through the permit process we have to secure our financing but we're on track with Kilby to have first power in 2028 and full energization in 2031

Operator37:37

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

Sam Margolin38:25

Hello. Thanks for taking the question. Um maybe just circling back to Venezuela and the broader resource opportunity I think one of the things that stands out about Venezuela is just the pace with which the business plan came together you were able to in a matter of months commit you know a significant development to the resource owner and you know globally it does seem like there's a lot of kind of mega resources or resource whales that are more willing to accept foreign investment and partnership than in the past. And so the question is if the process with Venezuela is representative of maybe what your capabilities are globally and you know if other resource owners are paying attention and if you think there's a transferable opportunity with the process.

Mike Wirth41:14

Yeah, it's an interesting question, Sam. I appreciate your comments about how quickly we were able to reach a development plan and alignment with, you know, the government of Venezuela. as a you know incumbent on the ground as the only incumbent on the ground we definitely have an advantage in terms of our understanding of the geology the infrastructure we've got a very very talented workforce we've got the service providers that you know are prepared to ramp up with us etc and it does have as I mentioned you know parallels with other factory development campaigns that we prosecute around the world I'll go to Iraq as the maybe an analog as you talk about large resource holders and you know willingness and interest in bringing in new investment I mentioned already that the terms in Iraq are more attractive than what we've historically seen there and they're you know right now at least as we're working through the negotiation they look very competitive we are working on a development plan there in concert with you know the ministry and have a good line on that and I think it will have things in common with Venezuela in terms of its it'll be primarily drilling there may be some infrastructure work but I think that that that'll be modest and manageable as opposed to a major capital project and the resource depth there is is significant and there's good exploration prospects that are would come along with this deal I've mentioned on prior calls that we are in discussions with other governments a number of them in the Middle East that are also interested in that kind of a proposition and so we have been I think you know Eimear mentioned today stacking growth options very active in business development very active in exploration with some success there and addressing the longer term growth outlook post 2030 with a very deep set of resource opportunities that have longevity that have attractive break even costs attractive financial returns and working to line those up so that we can pick and choose amongst the best of those and allocate capital to continue to supply this energy that the world is is going to need well into the future so stay tuned as we bring things to a point where we can be more specific as we were today about Venezuela we will lay that out for you

Operator41:21

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

Doug Leggate41:53

Oh, hi, everyone. Mike, thanks for having me on. I wonder if I could, I mean, there's obviously been a lot of chatter by the government, the US government about incentives for drilling and so on. on. I'm wondering if we look back to when you had your long term growth trajectory in the Permian, you slowed that down after the Hess deal and free cash flow was a priority and so on. I guess my question is, whether organically or given where your share price is inorganically, what would it take for you to go back to growth in the Permian beyond your current plan?

Mike Wirth44:47

Well, you know, we had signaled the intent to bring the Permian to a plateau in kind of the middle of the last decade, to be honest, when we were at pretty modest production levels and as we reached and surpassed a million barrels a day we turned to managing that plateau which will last not only the end of this decade but the end of the next and I expect well beyond that as we apply more technology to this enormous resource base Mark mentioned in his comments today the progress we're seeing with some advanced chemicals that are helping us improve recoveries we actually continue to have we've got a next generation of that chemistry that's moving out into field pilots which we are optimistic may prove even more successful in terms of improving production outcomes and adding value and we continue to look at other technologies related to drilling stimulation of the reservoir and different types of fracturing technologies all of which will provide optionality into the future and what they can do is they can extend the economic life of the plateau they can make it economic to grow to a higher level they can take benches that are currently sub economic and they can make them economic and so we're certainly working on all of those but in the near term as we've just turned now for just a few short quarters from growth to managing the plateau we've seen a 25% 25% reduction in capex per barrel we're seeing a reductions in operating costs we're seeing reductions in downtime events we're seeing a tremendous amount of innovation and application of new tools and technology to get more value out of this million barrel a day business and it's one of the things I've learned coming up through the refining side of the business is sweating the assets challenging people to innovate and find more value every year in the way we operate can deliver significant improvement and that's the key focus right now going forward you know like I said we've got a long resource life we've got the advantaged royalty position which is very attractive and it creates optionality so I I don't want to speculate about what might take us back into a growth mode there but we're building the capability to do that economically if and when within our overall set of opportunities and you know cognizant of global demand and other things within our portfolio we may you know we may choose to do that.

Mike Wirth44:51

Thanks for the question, Doug.

Operator44:57

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

Manav Gupta45:26

Um good morning I was wondering if I can pick your brain a little bit on the ethylene chain margins we started the year at record lows saw a massive bounce in 2Q we are moderating a little but we're still above mid cycle and I think your own project is probably going to start up sometime next year so just trying to understand uh global supply dynamics how much capacity is offline and also I'm trying to understand between refining margins and ethylene chain margins where do you see normalization happening first thank you

Mark Nelson47:19

Well, thanks, Manav. You picked a couple topics very difficult to predict. I'll I'll start with refining maybe and then go to PetChem margins on the refining side I would expect margins to stay elevated in the short term and we you know the world has 10% of its refining capacity offline today exports are reduced due to the conflicts and you know quite frankly the products businesses have less shock absorbers so I would expect margins to eventually moderate as refinery runs recover and export flows increase but that will take some time and so on the refining side of the business what we can do is what we can control and that's help consumers get as much as they possibly can out of our systems I think we've demonstrated in the third quarter that we're doing that on the chemicals side you know it's debatable today but somewhere between 5 and 10% of pet chem capacity seems to be offline today and that makes markets tighter especially from Middle East volumes not flowing and that likely means at least through the end of the year margins will stay a bit elevated maybe into next year but I'd make two observations first without rationalization and some project deferrals markets may very well return to oversupply as flow normalizes and then maybe second ethane especially in the United States remains the feedstock of choice and to your comments both of those things play to CP Chem's strength it's an ethane advantaged portfolio and they are working as we speak to bring on the two large crackers one in the Gulf Coast one in Qatar full production both will be next year but we want those to come online safely and reliably and they're working hard at that thanks for the question

Operator47:25

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

Lucas Herrmann48:09

Yeah, Mike, thank you very much. Nice to have the opportunity. Um Um question on freight and freight rates and the elevation that we've seen it's been a sort of central topic on a number of the calls over here but just to get some idea if possible and the extent to which you know elevated freight rates likely to impact upon you know the refining business refining profitability the profitability probably of the organization overall yeah the extent to which you are you know long short both owned shipping and long term charter shipping at this point and you know how it plays to the business if we should be thinking about it we should be thinking about it but whether it's relevant to you with in on a quarterly basis in any way

Mike Wirth50:35

Yeah, I think it's been the big mover here this last quarter Lucas and it's got a lot of attention you know the crude oil prices historically on two basic things quality and location and right now location really matters if you are very close to the crude oil that you're going to run in your refinery you don't have to move it very far hopefully you got on a pipe and not in a ship and on the other hand if you're very distant if you gotta if you've gotta source your crude from a conflict region the logistics are expensive the insurance is expensive the time is much longer and all that works its way from the refinery right back into the net back for your production it's an advantage to have a controlled fleet and we have a significant portion of our fleet that are either ships that we own or ships that we have on long term time charter where we charter both the boat and the crew or a bare boat charter where we put our crew on that vessel these are contracts we entered into before the conflict began they reflect charter rates before pre-conflict which are significantly different than they are today and so we capture that transportation margin in our economics and so the other thing that's been interesting is because our upstream portfolio has evolved we've moved from when I was running downstream we ran maybe 15% of our crudes were out of our own equity system today we've been up in the 50% range sometimes higher at certain refineries and we've got the ability to ensure reliable supply from the wellhead all the way through to the loading rack with transportation that we control and make sure that our refineries are as advantageous as they can be make sure that that our uplift and capture on our crude production is as great as it can be and so we're seeing significant value in optimization globally of our asset base and so it is a material contributor to the you know the results you're seeing this quarter absolutely and I think going forward until these conflicts are resolved this is likely to be a part of the story in the future

Mike Wirth50:39

Thanks for the question Lucas

Operator50:44

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

Betty Jiang51:09

Hi, good morning. Thank you for taking my question. Um if I take a step back and actually ask about M&A, um just wondering given the ongoing disruptions around the world, does that change your views around where within the energy value chain perhaps for you to have more or less exposure, how do you think about the you know inorganic opportunities in general?

Mike Wirth51:32

Yeah, I'll start, Betty, Betty, by saying our portfolio today is the best that it's ever been. Both in the near term in terms of providing energy the world needs and doing it in a way that creates value for shareholders and then in the longer term in the growth opportunities in both our traditional business and this emerging power sector that we've been talking about today.

Mike Wirth52:02

And so there's no gaps or weaknesses that we see that need to be addressed that said you're always looking to get better and you've seen over the last several years we have engaged in transactions that have made our portfolio better that have added assets that have scale have durability have strong financial contribution and we have at the other end of the portfolio we've moved some things out that that no longer compete for capital within our portfolio

Mike Wirth52:21

Owners and so we'll always look to be doing that I think M&A is a core competency of our company I think we've got a track record of staying very disciplined through market cycles of being value focused not deal focused and executing with really good integration

Mike Wirth52:40

I don't want to speculate about what parts of the value chain what parts of the world you know the conflict may present opportunities in we're always evaluating these things but we generally don't talk about them until we've got a deal that we've actually secured and at which time we'll lay it all out to you

Mike Wirth52:55

Maybe last thing is you talk about the conflict the history books aren't full of great deals that were done at $100 oil or $10 gas or you know high commodity prices and so you know I think those lessons are important to always bear in mind

Mike Wirth52:58

Thanks Betty

Operator53:02

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

Phillip Jungwirth53:34

Uh thanks for taking the question um it's been a year since you hired a new head of global exploration and we hit on AI earlier and you have a lot of good technology details in the deck but just more broadly would love to hear your observations on the progress you've made in the exploration portfolio over the last 12 months uh what you're most excited about going forward and just while it's not maybe deep water do you see much exploration potential in Kazakhstan where the government is making a larger push

Mark Nelson54:36

Well, thanks, Phillip. A lot to be excited about, but let's see, where to start? I think I'll I'll start with a high graded inventory better technology and faster decisions, which I expect to leave lead to improving outcomes I mean our opportunity set is the largest and highest quality I have seen in years you know we talked about doubling our acreage since 2024 and the 12 new basins in the third quarter alone we added six blocks in the Gulf of America and blocks in Angola Nigeria Guinea Bissau and Egypt and when I combine an expanded portfolio with the new technology we are getting better imaging and higher confidence prospects and so I I would expect here over the next few years to have high impact exploration in the areas like Namibia Equatorial Guinea Guinea Egypt and Suriname just to name a few and quite frankly this is the highest confidence outlook I have seen in years.

Mark Nelson54:57

We we mentioned in our comments about the discoveries that we've had the 15 discoveries I would expect at least half of those to be turned into tie back positions. The one I just want to emphasize in case you haven't seen it would be our Angola 105 4X well this is in the prolific lower Congo basin

Mark Nelson54:58

The

Mark Nelson55:28

The materials that have been made public indicate an oil and gas condensate column over 2000 feet and a net pay of 300 feet with excellent reservoir quality I suspect it will be better than that as we look closer and closer at the data it has outperformed our pre-drill expectation and we're working the kind of project definition right now for a tie back to our Sana facility in Angola so a lot more to come but we are definitely building momentum in our exploration business

Mike Wirth56:05

And what I might add on to that is that the Mark Eimear Eimear and I were in a review I guess earlier this week on our exploration portfolio and some particular opportunities and your question about talent we have brought in new talent I think that's brings in different perspectives different experiences which we're seeing value from and Mark mentioned it earlier in his comments but we we've got a very different model for making decisions now and prioritizing this work and I think all of that stuff comes together to yield the optimism that you heard from Mark

Operator56:14

Thank you we'll take our next question from Bob Brackett with Bernstein Research

Bob Brackett56:36

Good morning and let's continue on the theme of improved exploration outcomes. How does the improved speed, the improved outcome, how does that inform your strategy? Does it allow you to take more risk? Does it drive you increase your exploration budget or is it does it actually reduce your exploration budget because your chance of successes are improving?

Bob Brackett56:38

How do you frame that?

Mark Nelson57:21

Yeah, at this stage of the game, and I made some of these comments in my prepared remarks given the growth in the opportunity set and kind of the new team and the new approach we've brought forward and given from where we come I would expect us to increase our capital spend next year 50% from our previous baseline last year because the opportunity set is so strong over time you would expect to see us you know maybe drilling around 20 wells a year and think about that as half infrastructure half frontier and we'll continue to do that over time until we see a reason to adjust but it's nice to have an opportunity queue that gives us those choices

Mark Nelson57:23

Thanks for the question, Bob.

Bob Brackett57:24

Very clear. Thank you.

Operator57:31

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

Jason Gabelman58:13

Yeah, hey, thanks for taking my questions. I just wanted to go back to the Permian if I could and a couple there one you know production was off a little bit still above your million barrel a day target wonder if that's just normal quarter to quarter volatility or something else was going on there we saw comment from your peer that there was non-op disruption and then the other part on the Permian if I could do do you see kind of maintaining this stable production helping to mitigate some of the rising gas to oil ratios we're seeing in the basin from peers? Thanks.

Mark Nelson59:37

Yeah, thanks for the question. I would think about this logic maybe we continue to focus on maximizing free cash flow there we do have the inventory depth to grow above a million barrels a day as Mike mentioned earlier but now six quarters at this million barrels of oil equivalent we are driving significant efficiencies you can expect to see this number go up 3% down 3% but we're going to sustain this above million barrels of oil equivalent concept going forward because it is leading to the numbers that Mike mentioned you know think about I'm just going to reinforce one thing that get greater than 25% improvement in capex per barrel of oil that's pretty significant the our drilling and completion spend is down 40% our facility spend is down 50% that's all because we're staying in that that band our gas to oil ratio is relatively stable through the end of this decade and so we can maybe take advantage of some other parties challenges in this regard but I think you should expect us to continue to use the factory model and our NOJV activities have remained fairly stable through the course of this year there might have been a little bit of an uptick on work over rigs from our NOJVs but it's not material to our capital or production thanks for the question

Jeanine Wai59:55

Okay I think that was our last question great sorry about that we'd like to thank everyone today for your time on being on the call we appreciate your interest in Chevron Chevron and your participation again please be safe and stay healthy Katie back to you

Operator1:00:02

Thank you this concludes Chevron's third quarter 2026 earnings conference call you may now disconnect