Chevron CEO Wirth on Third-Quarter, Windfall Taxes, Venezuela

you got a lot of cash you made a lot of money what are you gonna do with it well Alex it's good to be with you too uh we had a good quarter and uh look we're we're winning back investors with higher returns year to date our return on Capital employed is greater than 20 percent in a strong cash yield of over seven and a half percent if you take the dividend and the buyback together we're investing in lower carbon we're a leader in methane management we're the the second largest biofuels producer we're investing in growing that here in the United States and yet we still trade around only half of the market multiple energy represents about five percent of the S P 500 by market cap but more than double that by earnings so we're staying disciplined uh and uh and intend to continue to execute so back to the money for a second though uh at some point though if you keep making this kind of cash you're looking at either raising your capex and already you're looking at the high end of your capex guidance or increasing shareholder payouts can you rank that well we've got a very consistent uh Capital allocation framework that we've maintained for a long time for many many years and it starts with the dividend and returning cash to shareholders we've got a three and a half percent dividend yield we've increased our dividend for 35 years in a row our second priority is to invest to grow both our traditional and our new energy businesses we're up 50 percent uh year to date this year versus the same period last year and have guided to uh you know staying within our range but increasing again next year the third priority is to maintain a strong balance sheet our net debt is below five percent we've reduced debt six quarters in a row and then the fourth priority is uh to repurchase shares we've bought shares back 15 out of the last 19 years we're currently at the high end of our guidance of 15 billion dollars per year which is about four percent of the outstanding shares every year so it's a balanced approach uh to Capital allocation and as we go through the cycles we intend to maintain that balance Okay so so even with all the money still going to be balanced um Mike let's go to the Permian for a moment I mentioned that it's really on fire um Darren Woods on the call from Exxon just talked about the fact that the Permian should grow 20 for them this year versus 25 last year and I wanted to get your take on what you think Permian growth is going to look like well we had another quarter of record production our year-to-date Permian production is over 700 000 barrels per day it's up 15 percent versus the same period last year which was about 600 000 barrels per day we've been increasing activity uh we're spending three billion dollars there this year we've guided to four billion dollars next year as we bring more rigs uh into uh activity and uh and so yes I think the the permian's a great resource for this country and it's contributing to the growing energy Supply that's so important in this economy it a hundred percent and I wonder how long that can continue the as you have inflation continuing to rise particularly in the Permian and labor shortages can you walk me through kind of the trade-off of how costs are rising in the Permian versus what you think growth is going to be able to be like in the Permian sure we do see tight markets for rigs for uh completions uh for pipes and all the things that go into production there uh we we plan our work and work our plan and so what we're doing this year we had planned uh last year and the year before we have uh contracts lined up for uh for Rigs and For Crews to meet the the profile I talked about as we move into next year uh so we've we've kind of you know planned through the cycle here but I do think there are some real constraints that uh that the industry faces in accelerating beyond the rate of activity that we see uh underway today my good morning it's guy these are great numbers these are fantastic profits that you are generating for your shareholders would you call these windfall profits huh uh no I wouldn't uh you know we we're in a we're in a commodity business that goes through Cycles there are hard times uh as we saw just two years ago where we had enormous losses you move into another part of the cycle and uh and and we have you know with strong earnings uh Good Times uh don't last just like the difficult times don't last we have to invest through those cycles and uh and it's important that we do in order to continue to meet the growing demand for energy we need an approach to energy that that bounces economic Prosperity energy security and Environmental Protection and that's uh I think that's the frame that we think within and that's a frame we try to engage with policy makers Within and what are those policy makers saying to you because the noise around windfall taxes is growing Mike I'm sure you're more than aware of that do you think you're going to end up paying them well we've seen that tried in the United States uh in the 1980s and the result was a lower lower investment in lower production uh you know typically uh if you want less of something you tax it if you want more of something you you tend not to tax it and so uh you know a a short-sighted uh approach to a commodity business uh that that sends a signal uh that's the opposite we actually want more Supply and so attacks on the industry that would invest in bringing more Supply uh is is not something that that we believe would be productive the president as you say is taking a tough line with the industry um seems to be attacking the industry on an almost daily basis at the moment do you think the tone coming from DC changes after the midterms well uh you know we've we've had some constructive discussions with the administration there are areas of Common Ground we share their uh objective of uh ensuring safe safe affordable uh and stable fuel supplies I'd like to see more collaboration between uh between our industry and the administration and work towards uh Common Ground we need more energy of all types and of course we're investing in renewable fuels we're investing in hydrogen we're investing in carbon capture the Administration has made uh you know greenhouse gas reduction uh priorities so have we the administration would like to see more traditional energy investment so would we uh we've received some mixed signals and I think we we could benefit from further dialogue to see if we can't get the words and the actions and the policy to a line that create an environment that would encourage further investment um talk about further investment and then the government I feel like the rubber meets The Robe when it comes to Venezuela there have been talks that have been evolving between the two governments what is your conversation with the government when it comes to Venezuela and are you kind of readying things to kick off if sanctions are removed well we we operate within the license that the government has given us to uh comply with those sanctions and have very limited uh ability today to try to ensure the safety of our people and the Integrity of assets there are discussions that have been reported in the media within the administration uh that that we aren't necessarily a part of and so uh you know we're trying to maintain the capacity uh to help invest in uh in producing more supply for the for the world markets if and when the sanctions would would be modified we don't Lobby for or against sanctions that's uh you know the purview of the government not our company but uh we're always preparing contingencies for an evolving uh set of circumstances how quickly do you think you could ramp up if there was a thought well you know the we rely on on service providers and others so mobilizing people mobilizing equipment and materials take some time so I think you're talking about uh months and years uh in order to uh to to begin to uh you know maintain and refurbish fields and equipment and uh and you know change any investment activity but it's very hypothetical at this point I I don't know how the policy would would unfold but it wouldn't be an instantaneous um uh you know effect Mike let's pop around the world but you're a well-traveled man so I'm sure you'll be able to keep up um Europe I'm here in London Europe's got a bit of a gas problem right now the solution certainly uh in Brussels and elsewhere is to talk about a gas price cap what do you think of that plan well the real solutions are uh in supply and demand and uh and that's where price gets set and there there are a number of uh policies being discussed in the short term about price floors price caps uh where I think the uh you know the focus would be best placed is how do we encourage investments in diverse reliable and affordable energy Supply so in the in the short term a price cap you know actually would uh mute the signal which says produce more consume less and and I'm not sure that it solves the problem in the long term and so I think the discussions are are best focused on what what does it take to invest in infrastructure invest in Supply have diverse Supply and meet the environmental goals that we all share I'm sure you talked to European customers all the time where do you think the argument is right now visit the longer term contracts and what do you think longer term contracts actually look like and why is Europe so reticent well it's a very interesting point guy uh the investment in liquefied natural gas which would be an alternative to uh to guests coming in on a pipeline from Russia uh the Investments are massive they're billions and billions of dollars they take years uh to actually execute and then they take decades uh to pay out and so investors are uh you know reluctant to make those kinds of massive Capital Investments without some certainty that there's a customer on the other side of that that will be there uh to actually purchase that supply and I think in the the present context there's a very short-term focus in in Europe rightfully so given the uh you know the immediate circumstance uh and where we really need to have a discussion is about the longer term Energy Mix that that economy will require so that investors can put the capital to work in order to be a part of that and so this this issue of committing to longer duration contracts I think isn't going away I think we have to sit down and have an honest conversation about what that mix looks like and then I think you'll see the Investments uh be sanctioned and move forward like they want five or seven year contracts and you guys need 20. I mean there's a big discrepancy sometimes with that um to that point what are your plans to export gas to Europe from your uh properties in the Eastern Mediterranean well we're working on a number of different options right now we'll probably take an investment decision on an expansion of one of the fields in the Mediterranean early next year that may Supply Regional markets more than uh than European markets but we're advancing uh a couple of different ideas for LNG exports that could uh could help meet European demand uh one would be floating LNG the second would be to work with uh facilities in a neighboring country and uh and try to move gas through those existing liquefaction facilities uh these things all take some time in terms of commercial negotiations engineering and construction but we're actively looking to expand our our position in the Eastern Mediterranean and hopefully bring supplies to Europe in the the next few years um Mike before we let you go because anyone got to go jump on your call I just want to end with the shortages that we're seeing here in the US on the east coast in particular when it comes to Diesel and distillates there's been conversations about export bans how do you wind up getting more product to the Northeast Etc what do you think the best solution of that could be and what do you think of an export ban situation yeah and you know we believe an export ban actually carries the risk of unintended consequences uh with a market that's tight on Supply you want to encourage uh Supply and Export ban um actually most of the exports go to uh go to Latin America and then supply to the Northeast comes in part from from Europe uh an export ban could increase Global prices it could constrain refining capacity because there could be products that can't be sold in the US because of specification differences uh that that therefore would be stored and then refineries would would have to curtail production uh the best solution is to take actions that allow markets to work more efficiently and so that can be things like specification waivers that allow product that's produced that currently can't be sold in the US to be moved to U.S markets and to consider waivers of things like something called The Jones act which constrains access to shipping to only a very few types of ships uh to move from one U.S port to another a waiver there would bring more shipping capacity uh into play and enable movements to happen more economically and so there's some things to allow markets to function quickly and efficiently that I think would be helpful constraints on markets uh we think could have some unintended consequences

Channel: Bloomberg Television

Views: 6,270

Keywords: Bloomberg

Id: oVJzGthWLo8

Length: 13min 47sec (827 seconds)

Published: Fri Oct 28 2022