Chevron Q1 2025 Earnings Report

Chevron EPS Results

• Actual EPS: $2.18
• Consensus EPS: $2.15
• Beat/Miss: Beat by +$0.03
• One Year Ago EPS: $2.93

Chevron Revenue Results

• Actual Revenue: $47.61 billion
• Expected Revenue: $49.05 billion
• Beat/Miss: Missed by -$1.44 billion
• YoY Revenue Growth: -2.30%

Chevron Announcement Details

• Quarter: Q1 2025
• Date: 5/2/2025
• Time: Before Market Opens
• Conference Call Date: Friday, May 2, 2025
• Conference Call Time: 11:00AM ET

Chevron (NYSE:CVX), through a network of subsidiaries, engages in integrated energy and chemicals operations worldwide. The company is the 7th largest integrated oil company worldwide, the 2nd largest in the US, and has been in operation since 1879. Chevron was part of the original Standard Oil Company and is one of the 34 successor companies that were formed when it was broken up. Today, the company brings in roughly $160 billion in annual revenues and is the last remaining oil and gas component of the Dow Jones Industrial Average.

Originally called Standard Oil Of California the company grew quickly via mergers and acquisitions. It was hailed as one of the Seven Sisters to dominate the US and global production throughout the mid-20th century and became even bigger in 1985 when it merged with Gulf Oil. The merger with Gulf Oil resulted in the rebranding from Standard Oil Of California to Chevron (a brand used by the company outside its California jurisdiction) and then ChevronTexaco Corporation in 2005 when that merger took place. The company rebranded again in 2005 to what we know today as Chevron Corporation.

Chevron Corporation is now based in San Ramone, California, and has operations in 180 countries. The company employs more than 42,500 people who operate 5 refineries and 8,000+ Texaco, Chevron, and Standard Oil service stations in the US alone. The company's Exploration and Drilling operations produced a record 3.1 million barrels per day and its US refineries process more than 1 million barrels per day. At the end of 2021, the company has more than 11.3 billion barrels of proven oil and liquid-equivalent reserves and boasted a 112% reserve replacement rate.

The company operates in two segments, Upstream and Downstream. The Upstream segment explores new reserves, develops known reserves, produces petroleum and gas products as needed, transports, processes, pipes, stores, and markets petroleum worldwide. The Downstream segment refines and markets the full line of petroleum-based products including but not limited to fuels such as gas, diesel, and aviation fuel, as well as lubricants, petrochemicals, and plastics. The company transports products via pipeline, rail, marine vessels, and truck.

Chevron recognizes the need to lower the world’s carbon output and is working toward that end. The company’s strategy is two-pronged and includes reducing its own carbon output while investing in green and lower-carbon technologies. The company’s goal is to invest $10 billion or more into lower carbon energy sources and technologies by 2028.

Chevron is a Dividend Aristocrat. The company has been paying a dividend since 1989 and it has raised it every year since its inception.

Chevron Q1 2025 Earnings Call Transcript

Key Takeaways

• Chevron returned $6.9 billion of cash to shareholders in Q1 and has now exceeded $5 billion in quarterly returns for twelve consecutive quarters.
• Amid macro uncertainty, Chevron cut its 2025 CapEx budget by $2 billion and aims to deliver $2–3 billion in structural cost savings by the end of next year.
• Key project startups included TCO’s Future Growth Project hitting nameplate capacity in just 30 days, Ballymore’s first oil online this month, and the Pasadena refinery expansion coming fully online.
• In Q1 Chevron reported $3.8 billion of adjusted earnings ($2.18/share), generated $7.6 billion of operating cash flow (ex–working capital) and recorded its lowest quarterly organic CapEx in two years at $3.5 billion.
• Chevron boosted its strategic portfolio by acquiring nearly 5% of Hess common shares ahead of their merger, adding over 11 million net exploration acres, and advancing new power and pipeline ventures.

Presentation

[Operator]

Good morning. My name is Katie, and I'll be your conference facilitator today. Welcome to Chevron's First Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' remarks, there will be a question and answer session and instructions will be given at that time.

[Operator]

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 Spearing. Please go ahead.

[Jake Spiering, General Manager of Investor Relations at Chevron]

Thank you, Katie. Welcome to Chevron's first quarter twenty twenty five earnings conference call and webcast. I'm Jake Spearing, Head of Investor Relations. Our Chairman and CEO, Mike Worth and our CFO, Hemer Bonner are on the call with me today. We will refer to the slides and prepared remarks that are available on Chevron's website.

[Jake Spiering, General Manager of Investor Relations at Chevron]

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 two. Now, I will turn it over to Mike.

[Michael Wirth, Chairman & CEO at Chevron]

Thanks, Jake. This quarter, Chevron delivered strong performance and advanced our plans to further strengthen the company over the near and long term. This included multiple project startups and asset divestitures. Our advantage portfolio underpins a track record of consistently rewarding shareholders through the cycle. Cash returned to shareholders has exceeded $5,000,000,000 for twelve consecutive quarters.

[Michael Wirth, Chairman & CEO at Chevron]

In the first quarter we returned $6,900,000,000 through dividends and buybacks. We also acquired nearly 5% of Hess' common shares and look forward to completing the merger in the coming months. Recent macro uncertainty underscores the importance of cost and capital discipline, both core to Chevron's leadership. Our 2025 CapEx and affiliate CapEx budgets represent a $2,000,000,000 reduction from last year, and we've targeted 2,000,000,000 to $3,000,000,000 in structural cost savings to be delivered by the end of next year. Chevron has a proven track record of managing through uncertainty and commodity cycles, and with long standing financial priorities as our guide, we're well positioned to win in any environment.

[Michael Wirth, Chairman & CEO at Chevron]

We're focused on execution, to unlock industry leading cash flow growth. At TCO, we reached nameplate capacity in just thirty days, significantly ahead of plan. We expect cash distributions from TCO to increase going forward, including a $1,000,000,000 loan repayment in the third quarter. In The Gulf Of America, we achieved first oil at Ballymore this month. This is the latest in a series of major project startups within the past year, and they are expected to increase production to 300,000 barrels of oil equivalent per day in 2026.

[Michael Wirth, Chairman & CEO at Chevron]

The expansion of our Pasadena refinery has further strengthened our Gulf Coast value chain. And we've made good progress on our asset sale program, achieving premium valuations while retaining future upside in East Texas gas assets that could deliver over $1,000,000,000 in value at today's prices. In February, we announced senior leadership appointments and changes to our operating model to enable more efficient execution. We're also expanding our pipeline of future opportunities, adding more than 11,000,000 net exploration acres since the start of last year, advancing our gigawatt scale power solutions venture to support the USAI data center build out, and participating in a pipeline project to increase export capacity in Argentina. Now I'll turn it over to Ymer to go over the financials.

[Eimear Bonner, VP & Chief Financial Officer at Chevron]

Thanks Mike. For the first quarter, Chevron reported earnings of $3,500,000,000 or $2 per share. Adjusted earnings were $3,800,000,000 or $2.18 per share. Included in the quarter were special items totaling $175,000,000 Legal and tax charges were partially offset by the fair value measurement of the Hess shares. Foreign currency effects decreased earnings by $138,000,000 Organic CapEx was $3,500,000,000 our lowest quarterly total in two years.

[Eimear Bonner, VP & Chief Financial Officer at Chevron]

Inorganic CapEx was approximately $400,000,000 primarily related to investment in our Power Solutions partnership. Chevron generated cash flow from operations of $7,600,000,000 excluding working capital. Working capital was primarily tax payments related to the sale of our Canadian assets that completed in the fourth quarter twenty twenty four. We expect a working capital unwind of $1,000,000,000 over the remainder of the year. In the quarter, we issued new long term debt of $5,500,000,000 The purchase of Hess shares is expected to reduce the number of Chevron shares issued at closing by approximately 16,000,000.

[Eimear Bonner, VP & Chief Financial Officer at Chevron]

Compared with last quarter, adjusted earnings were $200,000,000 higher. Adjusted Upstream earnings were flat to last quarter. Higher realizations and timing effects were offset by lower liftings and lower affiliate earnings, mainly from higher DD and A at TCO. Adjusted Downstream earnings were higher due to improved refining margins and lower turnarounds and maintenance. First quarter oil equivalent production was flat to last quarter.

[Eimear Bonner, VP & Chief Financial Officer at Chevron]

Production from the future growth project at TCO and recent project start ups in the Gulf Of America offset impacts from asset sales. We expect growth towards a sustained 1,000,000 barrels of oil equivalent per day to resume in the Permian in the second quarter with higher frac activity. Chevron's strategy and financial priorities remain consistent and our track record is proven. We've grown our dividend for thirty eight consecutive years through multiple commodity cycles, leading our peers in growth over the last decade. We've built a resilient upstream portfolio that leads our peers in breakeven.

[Eimear Bonner, VP & Chief Financial Officer at Chevron]

We're delivering growth projects that are expected to generate an incremental $9,000,000,000 of free cash flow in $20.26 dollars Our capital program is as flexible and efficient as it's ever been, with the majority of our 2025 spend directed to short cycle assets and soon to be online deepwater projects such as those in the Gulf Of America and Eastern Mediterranean. Our balance sheet remains strong, with net debt ratio of 14%, well below our target range of 20% to 25%. We've repurchased shares 18 of the last twenty two years and bought back at record levels in the past two years. We provided a guidance range for annual buybacks of 10,000,000,000 to $20,000,000,000 depending on market conditions more than two years ago. That guidance remains unchanged.

[Eimear Bonner, VP & Chief Financial Officer at Chevron]

In line with the current macro environment, we expect share repurchases to be 2,500,000,000.0 to $3,000,000,000 in the second quarter. I'll now hand it off to Jake.

[Jake Spiering, General Manager of Investor Relations at Chevron]

That concludes our prepared remarks. Additional guidance can be found in the appendix to this presentation and the slides and other information posted on chevron.com. We are now ready to take your questions. We ask that you limit yourself to only one question. We will do our best to get all of your questions answered.

[Jake Spiering, General Manager of Investor Relations at Chevron]

Katie, please open the lines.

[Operator]

Thank

[Neil Mehta, Head of Americas Natural Resources Equity Research at Goldman Sachs]

Yes. Good morning, Mike and team. Mike, I know you were in Kazakhstan A Couple Of Weeks ago, so I would love a full rundown of your perspective on TCO specifically, the startup looks like that has gone really well. Early discussions around the concession extension and then your perspective around production levels and risk of curtailment.

[Michael Wirth, Chairman & CEO at Chevron]

Okay. Well, hey, thanks Neil. First of all, you know, I am really pleased with the commissioning and startup performance at the future growth project. It was a world class ramp. We achieved nameplate capacity in less than thirty days.

[Michael Wirth, Chairman & CEO at Chevron]

This was due to extensive testing of equipment during the commissioning phase, leveraging a lot of the same people, procedures and other practices that were put in service for the wellhead pressure management project over the prior twelve months, applying learnings from some of our other major capital startup projects over the years. Brought in experienced operators from the existing operations that are familiar with the field, the operating conditions, and people that have participated in other startups. So it was just very, very well executed. You know, we'll continue in the short term to do performance testing of major equipment under actual operating conditions, process optimization, etc. So we are very, very pleased with that startup and the performance to date.

[Michael Wirth, Chairman & CEO at Chevron]

I did travel to Kazakhstan last month and I had an opportunity to meet with President Kiev with a very good visit. Talked about our historic partnership. We talked about our investments in the country and how they've delivered value over the last three decades plus. And with the project behind us, we did turn our discussion to to the future And there was mutual intent expressed to negotiate an agreement which extends the concession beyond 02/1933. I took away a very positive outlook on that.

[Michael Wirth, Chairman & CEO at Chevron]

We think it's in everyone's best interest to try to complete these negotiations in a timely manner. You know, that said, these are complex discussions. They do take some time to complete and we'll provide updates on that as appropriate as those efforts advance.

[Jake Spiering, General Manager of Investor Relations at Chevron]

Thank you, Neil.

[Operator]

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

[Jean Ann Salisbury, Managing Director at Bank of America]

Hi, good morning. A lot has been going on in the California refining market. With the recently announced competitor closures of refineries. How are you thinking about your position there?

[Michael Wirth, Chairman & CEO at Chevron]

Yeah, we've got a strong position. We've got two refineries that have good scale, good complexity. We've got strong integrated value chains with a strong brand in the marketplace. I'm not surprised to see the announcements that have come out. We've been pretty vocal that the policies coming out of the state of sacral out of the state and out of Sacramento, particularly make it nearly impossible to invest in California going forward.

[Michael Wirth, Chairman & CEO at Chevron]

You know, the result of that has been significantly higher cost for consumers than in the rest of the country. There's the risk that supply of fuels is going to be tighter and and that that creates future risk. On the last call, I said some of these policies, including the state inserting itself into operational matters like planning turnarounds. I think is an unwise move. Think central planning of the economy hasn't worked in other socialist states and it won't work in California is my prediction.

[Michael Wirth, Chairman & CEO at Chevron]

We do not have any announcements on our refineries at this time.

[Jake Spiering, General Manager of Investor Relations at Chevron]

Thank you, Gina.

[Operator]

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

[Biraj Borkhataria, Global Head, Energy Transition Research at RBC Capital Markets]

Hi. Thanks for taking my question. I just wanted to go back to the financial framework and the decision to slow down on the buyback today. If I look at the last twelve months, the payout ratio has been almost 100%, and that was obviously at oil price of much higher than it is today. So I'm just trying to reconcile how cash generation would look at 60,000,000,000 or maybe below and how I reconcile that with the low end of the 10,000,000,000 to $20,000,000,000 range because to me, it looks like the bottom end of the range should maybe be lower than that $10,000,000,000 So how are you thinking about the balance between executing the buybacks on a consistent basis and then obviously leaning on the balance sheet?

[Biraj Borkhataria, Global Head, Energy Transition Research at RBC Capital Markets]

Because that balance sheet has allowed you to do countercyclical deals like mobile and things like that. So appreciate some color on that. Thank you.

[Michael Wirth, Chairman & CEO at Chevron]

Yeah. Thanks, Biraj. You know, taking back to our long standing financial priorities. You know, the first priority is to grow the dividend. We've increased that for for thirty eight years in a row, 5% increase earlier this year.

[Michael Wirth, Chairman & CEO at Chevron]

Second is to invest in the business. We've been very disciplined with capital, lowered organic capital by a billion dollars this year and affiliate capital by another billion dollars this year. Keeping a strong balance sheet, you know, 14% net debt, a double a credit rating, which is something very few companies in any industry carry. And then buybacks with a through the cycle approach. We've repurchased shares in 18 of the last twenty two years, including through COVID, through the financial crisis.

[Michael Wirth, Chairman & CEO at Chevron]

And, you know, more than two years ago, we announced or we introduced guidance on the buybacks with a range of 10 to $20,000,000,000 based on a view of the external environment. The high end of that was premised on a strong outlook on the commodity, the lower end of that was based on a weaker outlook for the commodity. And I think it was 85 ish on the top end and 60 ish on the bottom end. And so, you know, for most of the last two years we've been in the upper portion of that range. The market has moved to the lower portion of that range and our guidance remains within that range.

[Michael Wirth, Chairman & CEO at Chevron]

So, I think it's important to look at this through the cycle. You know, the rate at which we're buying shares back now is higher than at any point in our history, others in the last three years. You know, in '22, '20 '3 and '24 were the highest buyback years we've had. Before that we never even had a year that got above eight and we've been much stronger than that here, you know, subsequently and continue to do that forward. That the range is unchanged.

[Michael Wirth, Chairman & CEO at Chevron]

We've also always said that we would move back towards a '20 to 25% net debt ratio through the cycle. And in in so this move is consistent with that. Last thing I'll say is, you know, we've been through these cycles before. We know what to do. We know how to manage through it, and we know that opportunity can present itself as you referenced.

[Michael Wirth, Chairman & CEO at Chevron]

And we will remain attentive to those kinds of opportunities if and when they arise and we'll retain the financial strength to, you know, to consider them.

[Eimear Bonner, VP & Chief Financial Officer at Chevron]

Biraj, I might just add a little bit on your point on cash generation at 60. So, as we guided to in the last quarter, we're poised to deliver leading free cash flow growth, dollars 10,000,000,000 of incremental free cash flow growth at $70,000,000,000 That's $9,000,000,000 at $60,000,000,000 And the key catalysts that deliver that are the start ups of our major projects and the achievement of major milestones, And all of that is well underway. And then the completion of our cost reduction program as well that's off and running. So, just the cash generation, we feel that that is very resilient even at lower prices and we're prepared.

[Jake Spiering, General Manager of Investor Relations at Chevron]

Thanks, Biraj.

[Operator]

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

[Jake Spiering, General Manager of Investor Relations at Chevron]

Doug?

[Doug Leggate, Managing Director - Senior Research Analyst at Wolfe Research]

Oh, sorry. I was on mute. I'm so sorry about that. Hey, Mike.

[Doug Leggate, Managing Director - Senior Research Analyst at Wolfe Research]

Thanks for taking my question. Gosh, I was going to ask about the macro, but I didn't want to ask such an asinine question, but you seem to be in the crosshairs of probably the two most important macro stories in the market right now. I just love your perspective on it. The first is obviously Venezuela and the potential loss of production there. And the other is what appears to be an impending market share battle going on with the declaration of cooperation single handedly seemingly pointed at Tengiz.

[Doug Leggate, Managing Director - Senior Research Analyst at Wolfe Research]

In other words, the startup of production has exacerbated Kazakhstan's overproduction against their quota. And of course, that seems to be what's driving these accelerated decisions by OPEC plus So I guess my question is, can you offer any perspective on the physical changes you're seeing in your business in Venezuela? And when you met with the President, was there any consideration whatsoever of curtailment to try and help meet their quotas? Because frankly, if the answer is no, it's pretty bearish for the oil price.

[Michael Wirth, Chairman & CEO at Chevron]

Yeah, so I'll start with Venezuela, Doug. I think the news coverage on this has been pretty accurate. You know, we've got a long history in the country and believe that our presence has been a good thing for for Venezuela, been a good thing for The US. We've been operating under different forms of sanctions from OFAC going back to the first Trump administration through the Biden administration and ongoing under the current one. Recent changes have resulted in us being unable to pay our tax and royalty payments for liftings that were being made to bring Venezuelan oil to The US.

[Michael Wirth, Chairman & CEO at Chevron]

And so those liftings have come to a halt. The barrels are still flowing, they're just going to other markets. China is the biggest importer of Venezuelan oil. Their media reports that government officials from Venezuela have been in China this week discussing even more sales to China. Our current license reaches its end on May 27.

[Michael Wirth, Chairman & CEO at Chevron]

We're in dialogue with the government on how that license will be modified and extended if in fact that's what they choose to do and that's certainly been the history over the many years I just referenced. So we'll share more about that as we know more, but the barrels are flowing, they're just not flowing to US today. On OPEC plus in Kazakhstan, you know, really were not discussions of that. We don't engage in discussions about OPEC or OPEC plus targets and my discussion with the president focused on A, the startup of the project which has been good and B, the future. And so, you know, the fact of the matter is the barrels we produce at TCO are of high value to the government.

[Michael Wirth, Chairman & CEO at Chevron]

They're important to their fiscal balance and historically those barrels have not been curtailed. Anything beyond that I would refer you over to, you know, people that speak on behalf of OPEC plus or the countries.

[Operator]

Thank you. We'll take our next question from Lloyd Byrne with Jefferies.

[Lloyd Byrne, Managing Director - Equity Research at Jefferies LLC]

Hey. Good morning, Mike, team. Thank you for all your answers. I was gonna ask about the return of capital, and I think that's a really good answer you guys had. But let me try the Gulf Of Mexico.

[Lloyd Byrne, Managing Director - Equity Research at Jefferies LLC]

The Ballymore is online. Can you just walk through the next steps to get to the 300,000 barrels a day and are there any hurdles we have to look out for?

[Michael Wirth, Chairman & CEO at Chevron]

Yeah, we're as I said, we're very pleased with with Ballymore. That project in particular has some of the most prolific wells that we've seen in the Gulf Of America and frankly well beyond that. You know, the expectation as we ramp up there is that we'll see 25,000 barrels a day flow from each of three wells. So 75,000 barrels a day of production from just three wells. We've got two of those wells online right now and ramping them up.

[Michael Wirth, Chairman & CEO at Chevron]

The third one will come online later this year. The project has been executed on time, on budget and in just three years. They're also interestingly some of the highest temperature wells we've ever seen, three twenty five degrees down in the formation which other prolific fields in the Gulf Of America have been at two seventy five, two 50, two 20 five. So a very interesting field, very prolific field. Whale, you know, won't speak for the operator.

[Michael Wirth, Chairman & CEO at Chevron]

I'll just say that the startup there has been smooth and we expect that to ramp through 2025 and I'd refer you to them for details and at anchor we've got two wells online right now that are performing very well. We expect two additional wells to come online this year, one around mid year, one towards the end of the year and remaining wells to come online in '26 and '27. So at each project we've got strong production flowing, we've got drilling activity and completion activity underway or in the queue, rigs, vessels, crews all assigned to them. And so, know, in The Gulf, weather can always be a bit of a risk. But other than that, from an execution standpoint, these are all three in a very good posture.

[Operator]

Thank you. We'll go next to Ryan Todd with Piper Sandler.

[Ryan Todd, Senior Research Analyst at Piper Sandler Companies]

Great. Thanks. You've got a slide in the deck looking at Permian well performance and the improvement you've seen there in the Delaware Basin in 2024. Can you talk about

[Ryan Todd, Senior Research Analyst at Piper Sandler Companies]

I mean, you've talked about some of this in the past, but can you

[Ryan Todd, Senior Research Analyst at Piper Sandler Companies]

talk about what drove the difference, whether in terms of well mix, development strategy, completions, etcetera? And what you see is the potential implications for the 2025 program or outlook?

[Michael Wirth, Chairman & CEO at Chevron]

Yeah, so just to ground everybody, roughly 80% of our development program last year was in the Delaware. And we saw strong improvement in performance there versus the year prior. In particular, second Bone Spring in New Mexico outperformed expectations.

[Michael Wirth, Chairman & CEO at Chevron]

We also had good performance in the Texas portion of the Delaware and the Wolf Camp C and the Wolf Camp A, which showed good year on year performance improvement. So we expect twenty twenty five type curves to look pretty similar to what we saw last year in the Delaware. And again, most of our program is in the Delaware eighty five percent as we look at 2025. So even a little bit more than we saw last year. Last thing maybe I'll say on that Ryan is, you know, sometimes we had questions when I meet with investors on gas oil ratio.

[Michael Wirth, Chairman & CEO at Chevron]

You know, we are right now seeing an oil cut that's somewhere in the range of 43 to 45%. We think that's going to continue as we move through, you know, the end of the decade. It may move around a little bit by quarter based on pop timing and geography, but we expect that to be pretty stable. And also on New Mexico, you know, we're going to see more pops in New Mexico this year than we did last year. And overall, tend to be bigger wells, they're more productive wells, they produce more oil, they also produce more gas.

[Michael Wirth, Chairman & CEO at Chevron]

But very pleased with performance in the Permian and feel very good about the outlook for this year.

[Jake Spiering, General Manager of Investor Relations at Chevron]

Thank you, Ryan.

[Operator]

We'll go next to Paul Cheng with Scotiabank.

[Paul Cheng, Analyst at Scotiabank]

Thank you. Good morning. My it seems like there's some thank you. There's some good news from Cyprus. You guys signed with the government that to allow the gas project to go to proceed.

[Paul Cheng, Analyst at Scotiabank]

Can you give us some idea that maybe update us on in terms of the timeline, what's the next step, the size of the project in terms of the gas warning, any colors that you can provide? Thank you.

[Michael Wirth, Chairman & CEO at Chevron]

Yeah, you bet Paul. You know, I'll start by saying we're excited about our entire portfolio in the Eastern Mediterranean and that is a tribute to the people at Noble. This is largely a legacy Noble energy position. We've got some good exploration acreage in the offshore Egypt area that we brought to the table as well and expectations for some exploration wells there in the coming couple of years. But it was a nice milestone to see that we've got an agreed field development plan for Aphrodite, some updates to the PSA there.

[Michael Wirth, Chairman & CEO at Chevron]

And the initial development plan, Paul, is going to be a floating production unit in Cypriot waters, production of about 800,000,000 cubic feet of gas per day. The gas would flow to Egypt, a market that's growing and has a need for more gas demand there is very strong. We entered pre feed activities in the first quarter. We're working to ensure that we can get competitive returns out of this project. There's some commercial work that needs to be done as well and and all that needs to be done before we move to a potential FID.

[Michael Wirth, Chairman & CEO at Chevron]

So, you know, we are again pleased that we've we've got an agreement on that. That gives you a little bit of the scale of the project in first phase here. And we'll talk about it more as we move through the pre FEED and into FEED.

[Operator]

Thank you. We'll go next to Steven Richardson with Evercore ISI.

[Stephen Richardson, Analyst at Evercore]

Hi, good morning Mike. Was wondering if you could give us a little, you're curious on your recent thoughts on CPChem, obviously in the middle of pretty significant investments in that business through what looks to be a trough, at least in the olefin side of the business. But maybe your current thoughts on the business? Then also, how are you thinking about potentially maybe owning more of it over time and how that fits into your current thoughts?

[Michael Wirth, Chairman & CEO at Chevron]

Sure, thanks Steve. Well, first of all, I'll say we like the longer term fundamentals of chemicals business. You know, we've been in a tough part of the cycle here recently as we've seen some capacity additions into the market. So it's going to take time for the market to absorb those. We think we're still a few years away from returning to mid cycle, but CPChem has been a great business for us and we've got twenty five years of history roughly now.

[Michael Wirth, Chairman & CEO at Chevron]

And they've been a good operator, they've been a good project executor. It's a portfolio that's significantly advantaged due to their feedstock position, is primarily ethane in The US Gulf Coast and The Middle East. They've had a very good low cost operator and we've got a couple of growth projects underway, one in Cutter, One in Texas on track to come online end of twenty six early '20 '7 ish and and so it's been a very successful partnership for us over more than two decades. Getting a larger share of a business that you like is always something that you would take a look at. We have advised the partner in CPChem that we'd be interested in acquiring the other half at a reasonable value for both parties and and we'll see how that plays out.

[Jake Spiering, General Manager of Investor Relations at Chevron]

Thanks, Steve.

[Operator]

We'll take our next question from Josh Silverstein with UBS.

[Josh Silverstein, Managing Director at UBS Group]

Yes. Thanks. Good morning, guys. Chevron is a pretty unique asset in the Permian given your mix of operated non op and royalty volumes. Can you provide some details as to what you're seeing across the non op and royalty side now and any reduction activity there and how that may play into kind of the plateau level for Chevron?

[Josh Silverstein, Managing Director at UBS Group]

Thanks.

[Michael Wirth, Chairman & CEO at Chevron]

Yeah. So at this point, we don't really see any actions that have been taken to pull back by our partners. You know, we haven't always identified exactly who our partners are, but three quarters of our production come from larger mega cap companies, people that you cover and know. And most of that production comes in the core parts of the basin areas that have got low breakevens and are very proven. On N O J V, we've got a line of sight to essentially all of the AFE's and and most of the pops have already spud.

[Michael Wirth, Chairman & CEO at Chevron]

You know, the planned pops for this year in our NOJV, the wells have already been spud. So I think there's a pretty high degree of confidence that we're gonna see that go. On royalty, maybe not quite as high a number, close on pops that are also in execution. So, you know, we do have an interest and I want to say it's a it's a one in every four acres in in the Permian. And a lot of that exposure gives us the ability to see exactly what's going on with other operators.

[Michael Wirth, Chairman & CEO at Chevron]

At this point, I think people are, know, what we see as people pretty well stay in the course.

[Jake Spiering, General Manager of Investor Relations at Chevron]

Thanks, Josh.

[Operator]

We'll go next to Lucas Herman with BNP Paribas.

[Lucas Herrmann, Analyst at BNP Paribas]

Thanks very much. Thanks for the opportunity. Probably one just a question on cash flow for Remo. It looks as though the equity contribution or dividend contribution that you're anticipating this year is now $2,000,000,000 relative to I think you'd have guided towards $1,000,000,000 of excess, etcetera, at the full year stage. Am I correct that you've changed your expectation?

[Lucas Herrmann, Analyst at BNP Paribas]

If so, is that a consequence of higher expected dividends? Or don't think it's a change in lower net income. So any comment, Iaina, I'd appreciate it.

[Eimear Bonner, VP & Chief Financial Officer at Chevron]

Yeah, Lucas, I think maybe the two things to point out are the impact of the TCO DDNA. So given that we started up the project in January and ramped it up ahead of our original schedule, the earnings guidance going forward reflects the DD and A update. In addition to that, we've got some CPChem outlook for margins has been updated as well. So those will be the two main factors. Everything else is consistent.

[Jake Spiering, General Manager of Investor Relations at Chevron]

And Lucas, the affiliate dividend guidance for the full year is unchanged as it was. So it's just a difference between the two. Thanks.

[Operator]

We'll take our next question from Roger Read with Wells Fargo.

[Roger Read, Senior Energy Analyst at Wells Fargo Securities]

Yes, thanks. Good morning. I guess maybe with, you know, the macro in a lot of people's minds at risk of lower oil prices. Just wondering, Mike, with all the changes here or project completions, Gulf Of Mexico, fairly essentially through its process, Kazakhstan up and running, the Permian kind of flat lining. When we think about the resiliency of Chevron and say a $50 oil world, what do you think has been sort of the change in the whether you want to call it a basic line rate or the sustaining CapEx?

[Roger Read, Senior Energy Analyst at Wells Fargo Securities]

Like how should we think about kind of cash flows and cash CapEx commitments in a possibly softer oil price world?

[Michael Wirth, Chairman & CEO at Chevron]

Yeah, I mean, there's there's two things that I might point to Roger. Number one is, you know, we've got a portfolio now that has a much larger percentage of it in large and very flat production profile assets, I. Low decline assets. So big LNG projects in Australia and Western Africa, you know, the expansion of TCO And frankly, you know, the way we've been able to in a very capital efficient way, move towards kind of plateau ish production with relatively, you know, highly efficient investments in some of the unconventionals. And so, if I go back a decade ago, we were fighting decline and that required a lot of capital investment and and just to hold even, let alone to show some growth.

[Michael Wirth, Chairman & CEO at Chevron]

And we've been showing growth here in recent years with a much lower capital budget. The second thing that's really important is the flexibility that we have in our capital budget. So, you know, we've already come down a billion dollars from last year from 16 to 15. Our CapEx as a percentage of cash from ops is I think the lowest in the industry. And almost two thirds of our capital is either short cycle shale or project that's, you know, project spend that's completing over the next year or so.

[Michael Wirth, Chairman & CEO at Chevron]

And so we've got a lot of flexibility if we need to exercise that. You know, we've shown, I would call discipline coming into this year by tightening our belt a notch and bringing capital down a little bit. But if we needed to bring capital down further, you know, we certainly could do so. We showed in 2020, you know, we started the year at a $20,000,000,000 capital budget. I think we finished the year at 12.

[Michael Wirth, Chairman & CEO at Chevron]

So we've got the ability to flex that capital if we need to. Know, we've not made that decision at this point, but certainly that's, I would say those are the two big things that are different if you look back to days gone by.

[Operator]

Thank you. We'll go next to Philip Jungworth with BMO.

[Phillip Jungwirth, Energy Analyst at BMO Capital Markets]

Thanks. Good morning. Congrats on the start up of Valleymore, Anchor Well before that. As we think about what's next in Gulf Of America, can you just talk about your optimism around future prospects, Paleogene or Brownfield tiebacks? Generally, how do you see the cost structure or break even now for deep water versus shale?

[Michael Wirth, Chairman & CEO at Chevron]

Yeah, so thanks for the congratulations. What I would say is in the relative near term, you're going to see us focus on infill and stage developments. You know, we've got a long history here of projects that once we've got a new hub in place, they have multiple stages of development. We've seen that at Jack St. Malo, at Tahiti, at know, Mad Dog and Perdido.

[Michael Wirth, Chairman & CEO at Chevron]

And we're working on future stages of some of these recent startups. An anchor phase two, a Ballymore two, a Whale two. And I would fully expect that you'll see us extend the life of those projects with some highly efficient and very returns accretive further development. If you look at our exploration portfolio, 80% of it is within tieback range of existing hubs. And so Ballymore is a great example of a strategy to really focus on identifying opportunities to develop accumulations that might not support a new greenfield development, but are highly economic to tie on as a brownfield project.

[Michael Wirth, Chairman & CEO at Chevron]

And so we'll continue to focus our exploration portfolio in that we've had, you know, we've been a participant in a discovery that's already been announced earlier this year and are very optimistic about our exploration program. And then the other 20% you would maybe describe as more frontier. Breakevens have come down a lot and you know, there was a time again and maybe in kind of Lincoln Rogers question about what's changed. Know, a decade ago, we needed oil prices that were well north of what we see today to get a very modest return. Development costs were going up.

[Michael Wirth, Chairman & CEO at Chevron]

They were in the twenties headed to the thirties and higher. We're now down in the teens and pushing into the low teens on development costs through a whole, you know, approach to facility design and construction standardization. And and so we've seen the break evens there become very competitive. They had to because we had such good opportunities in other parts of our business. So, you know, we got one of the best portfolios in the industry and you know, Wood Mac data shows that we've got the lowest upstream break even in the industry and I think a big part of that is what we've been able to see in deepwater development.

[Jake Spiering, General Manager of Investor Relations at Chevron]

Thank you, Phil.

[Operator]

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

[Betty Jiang, Senior Equity Research Analyst - US Integrated Oil and E&Ps at Barclays]

Good morning. Thank you for taking my question. I want to ask about the progress on the power ventures. I mean, it's clear that the AI power demand is not slowing down, and you guys have the timing advantage. How are the customer conversations going?

[Betty Jiang, Senior Equity Research Analyst - US Integrated Oil and E&Ps at Barclays]

You've spent the 400,000,000 of inorganic CapEx in the JV in 1Q. Just want to see how that spending trends over time, especially considering some of the inflationary pressure we're hearing in this space.

[Michael Wirth, Chairman & CEO at Chevron]

Yeah, we've been actively engaging with prospective customers and are still seeing very strong demand in those conversations. We're trying to narrow frankly because there's so many people that are interested in trying to partner up when you can move quickly as we can with these these turbines. So we're also narrowing down the potential sites. We screened a lot of potential locations in different geographies around the country. We have narrowed those significantly and are moving towards engineering and EPC options on the sites that we find to work the best for us and for customers, which is an important part of that.

[Michael Wirth, Chairman & CEO at Chevron]

We're working toward an FID before the end of the year. As you note, speed to market is an important differentiator here. We will remain disciplined. There are cost pressures on some of the components of building out a power complex like this. We've secured pricing on the turbines themselves.

[Michael Wirth, Chairman & CEO at Chevron]

There's other elements of the build out that are also required and between market demand, potential tariffs and other effects. We have to keep an eye on that. So we're going to stay very disciplined because this needs to generate returns that will compete in our portfolio. And if we can achieve those kinds of returns, these projects will move forward. If we can't, we will need to look at look at our alternatives.

[Michael Wirth, Chairman & CEO at Chevron]

But right now, I would say everything is is moving fast as you said. There's a tremendous amount of interest, tremendous amount of activity And I'm very pleased that we're in a first mover position on this, called an early mover position.

[Jake Spiering, General Manager of Investor Relations at Chevron]

Thank you, Betty.

[Operator]

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

[Devin Mcdermott, Managing Director at Morgan Stanley]

Hey, thanks for taking my question. So Mike, in your response to Roger's question before, you talked a bit about flexibility of the capital program. And Emer, you had similar comments in your prepared remarks. Given the cash flow growth you've already highlighted, the low upstream breakeven, strength of the balance sheet, there's probably no need to make adjustments on capital even in somewhat softer oil prices. It's probably more just about optimizing returns.

[Devin Mcdermott, Managing Director at Morgan Stanley]

But I wanted to ask about how you think about some of the parameters or market conditions that might make you make some adjustments to some of your short cycle investments in places like the Permian.

[Michael Wirth, Chairman & CEO at Chevron]

Yeah, I think you've read the situation right, Devin. We're prepared. You get into an environment like this and and you know, you pull out the playbook. And we've looked at different market scenarios in both the depth and duration of of a potential commodity cycle. And we've looked at our business and how we're how we're postured today from a production standpoint, a cash generation standpoint, a debt standpoint, and all the different levers that we have to pull.

[Michael Wirth, Chairman & CEO at Chevron]

And have identified the things we could do based on signposts and view on the market. It's very early to, I think, have a high degree of confidence in terms of how this all plays out. The trade and tariff situation has been dynamic and we need to see how that manifests itself over time. And of course, you know, the OPEC change is one that is relatively recent as well. And we have to see how that plays out.

[Michael Wirth, Chairman & CEO at Chevron]

And so, we're very well prepared and we've been through these kinds of things before. I would say, you know, I've been in, you know, one of the senior positions in eight when we had the financial crisis in '14, when we saw prices drop in '20 when we had COVID and again now, I don't think we've ever been in a better position to navigate it and have had more levers available at our disposal and more strength to come through a cycle than we have today.

[Eimear Bonner, VP & Chief Financial Officer at Chevron]

Devin, I would just add that our balance sheet is in a really strong position at 14% net debt. Our credit rating is AA. So as part of being prepared, it's ensuring that our balance sheet is strong and so that's good. I'd also mention that the cost reduction program and the capital reduction that is underway, actions that we took last year put us in a strong position as well. Cost and capital discipline always matter in our business, And so, we are focused on delivering on the plans that are behind those reductions and they're picking up pace and we're doing well there.

[Eimear Bonner, VP & Chief Financial Officer at Chevron]

So, it's preparation. We have leading indicators that we're monitoring signposts and we don't need to do anything additional today, but we'll ready with those signposts to act if needed.

[Jake Spiering, General Manager of Investor Relations at Chevron]

Thank you, Devin.

[Operator]

We'll take our next question from John Royal with JPMorgan.

[John Royall, Executive Director at JP Morgan]

Hi, good morning. Thanks for taking my question. So I was hoping for a little more color on the expansion at Pasadena and how that's running and the benefits you're seeing overall to your Gulf Coast system. I know it was partly about synergies with Pascagoula. So maybe just a little more color on that and how the project is contributing several months into the startup?

[Michael Wirth, Chairman & CEO at Chevron]

Yeah, thanks John. The project is complete and online. We had feed into the crude unit the December. And we've been ramping up to full capacity here this quarter. We had stable operations in the first quarter at about 110,000 barrels a day of crude feed and we're really learning how to optimize that plant now at these higher feed rates.

[Michael Wirth, Chairman & CEO at Chevron]

It'll allow us to run more of our own equity from the Permian and as we look at export markets that can be attractive to capture full value chain margins here in The US. You know, it'll take it up by about 50% before we could run about 85,000 barrels a day. This will take us up by 40,000 to 125,000 barrels a day. And so we've got the ability to support supply more products to our customers in the Gulf Coast. We've got a big market position in Texas, which historically has been served through product exchanges or purchases.

[Michael Wirth, Chairman & CEO at Chevron]

We can integrate fully into that now with our own production. There are very significant synergies we can realize with Pascagoula on intermediate streams that can be moved from one facility to the other for upgrading to higher value products. It also helps during turnarounds to be able to store inventories, to move intermediates back and forth or finished products back and forth. And we've got US flagged tonnage that allows us to move those streams between the two facilities. And so, a good project to improve flexibility and margin capture here on the Gulf Coast.

[Jake Spiering, General Manager of Investor Relations at Chevron]

Thank you, John.

[Operator]

We'll go next to Jason Gabelman with TD Cowen.

[Jason Gabelman, MD - Equity Research at TD Cowen]

Yeah. Hey, Mike and team. Thanks for taking my question. I wanted to go back to the buyback guidance, if I could. You've cut to the low end of the range, but it is still a pretty wide range.

[Jason Gabelman, MD - Equity Research at TD Cowen]

And I think we see your peers either guiding to a percentage of cash flow or a fixed amount that gives more visibility to where the buyback will be quarter to quarter and year to year. So I was wondering if you could provide any additional color on how to think of the pace of buybacks through the balance of the year, if it's going to oscillate between the low end of the high end of the range or where it will oscillate in between? And then the other point on that is if you could just talk about where the buybacks could be following the Hess acquisition, you had a prior guidance of $5,000,000,000 per quarter, sorry, I'm wondering if you have any update on that figure? Thanks.

[Michael Wirth, Chairman & CEO at Chevron]

Yeah, Jason. First of all, there's not a formula that we're going to announce a percentage of this or that. Because that really in some ways defeats the purpose of what we've tried to do, is to be steady through cycles and not expose investors to the uncertainty that volatile markets can introduce into this. And so you've seen our range has been consistent. We introduced it as I said more than two years ago.

[Michael Wirth, Chairman & CEO at Chevron]

As we've issued quarterly guidance and executed, that's also been fairly consistent with the guidance and with the then current market conditions. And as we have seen market conditions change and we've modified our guidance, I would expect to remain consistent if we're in a market like the one that we're in right now. And so, know, we don't intend to yo yo this around if that was kind of the the question. And I think our track record, you know, if you if you lay it out and and look at it versus others, it it speaks for itself that we have been able to to stay steadfast and consistent as I mentioned earlier, 18 out of twenty two years, including during some significant downturns and the absolute rates of the range that we've issued now 10 to 20 are above anything we ever did prior to COVID. Even in the, you know, the kind of late two thousand's before the financial crisis when we were seeing $140 1 hundred and 50 dollars oil markets, we were repurchasing at max one year eight billion dollars and we've now had you know three years, I think the trailing three years, you know the number is $50,000,000,000 in aggregate and the 10 to 20 going forward is a very strong and robust range that you can expect us to stay within.

[Eimear Bonner, VP & Chief Financial Officer at Chevron]

Jason, maybe just specific to the guide rate that we issued for the quarter, 2,500,000,000.0 to $3,000,000,000 If we were to rule that forward, it would keep us well within the 10,000,000,000 to 20 billion dollars annual range that Mike talked about. So it's still a very strong program. Putting it into the context of what we've done in the last couple of years, prices have been $15 to $20 higher when we've delivered a $15,000,000,000 program and we'll deliver something between 11,000,000,000 and $13,000,000,000 if we just project out. So, it's still a very strong program. We're still buying a significant amount of our shares and that's on top of a dividend that's growing faster than our peers on the S and P five hundred.

[Operator]

Thanks, Jason. Thank you. We'll take our final question from Bob Brackett with Bernstein Research.

[Bob Brackett, Senior Research Analyst at Bernstein]

Good morning. Thanks for getting me in. A question around the tariff situation and how it might impact either CapEx or projects. What are some of the things you can do to adjust to tariffs in terms of controlling costs?

[Michael Wirth, Chairman & CEO at Chevron]

Yeah, Bob, we're watching this very closely and preparing and actually in the process of taking some actions to mitigate the impacts.

[Michael Wirth, Chairman & CEO at Chevron]

Our direct exposure is relatively limited. Energy has been largely exempted from tariffs. And if you're looking at our cost structure of goods that we buy, of our third party spends roughly 80% of it is on services not on goods. Of the 20% that is spent on goods, a lot of that tends to be sourced locally or regionally. In our US for example, where our largest portion of our capital spend is, we've got strong domestic sourcing on most of the goods that we use in our unconventional programs in the DJ and the Permian for instance.

[Michael Wirth, Chairman & CEO at Chevron]

Our current estimate is we may see 1% impact on the cost of a shale well. So, you know, it's a dynamic environment and we'll watch how these things evolve, But we've got strong engagement with our suppliers, we've got sourcing from multiple locations and we've been, you know, anticipating this and preparing for it. So, the impact is not zero, but I think the impact is manageable and it's, you know, You've seen announcements in other industries where they're more directly exposed than we are.

[Jake Spiering, General Manager of Investor Relations at Chevron]

Thank you, Bob. 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.

Participants

Executives

• Jake Spiering, General Manager of Investor Relations
• Michael Wirth, Chairman & CEO
• Eimear Bonner, VP & Chief Financial Officer

Analysts

• Neil Mehta, Head of Americas Natural Resources Equity Research at Goldman Sachs
• Jean Ann Salisbury, Managing Director at Bank of America
• Biraj Borkhataria, Global Head, Energy Transition Research at RBC Capital Markets
• Doug Leggate, Managing Director - Senior Research Analyst at Wolfe Research
• Lloyd Byrne, Managing Director - Equity Research at Jefferies LLC
• Ryan Todd, Senior Research Analyst at Piper Sandler Companies
• Paul Cheng, Analyst at Scotiabank
• Stephen Richardson, Analyst at Evercore
• Josh Silverstein, Managing Director at UBS Group
• Lucas Herrmann, Analyst at BNP Paribas
• Roger Read, Senior Energy Analyst at Wells Fargo Securities
• Phillip Jungwirth, Energy Analyst at BMO Capital Markets
• Betty Jiang, Senior Equity Research Analyst - US Integrated Oil and E&Ps at Barclays
• Devin Mcdermott, Managing Director at Morgan Stanley
• John Royall, Executive Director at JP Morgan
• Jason Gabelman, MD - Equity Research at TD Cowen
• Bob Brackett, Senior Research Analyst at Bernstein