August 2, 2024 • 8 mins
Chevron CEO Mike Wirth discusses the company's future. Wirth speaks with Bloomberg's Alix Steel.
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Episode Transcript
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Speaker 1 (00:00):
Chevron missing profit estimates despite record production in the permium basin.
The company also announcing plans to move its headquarters from
California to Texas. Now, the disappointing quarter adding pressure to
the company's fifty three billion dollar effort to acquire has
Ploomberg's alex Steel caught up with Chevron CEO Mike Worth.
Speaker 2 (00:19):
We had some high maintenance. We had a couple of
events at L and G facilities that required maintenance during
the quarter, which brought liftings down, and so it's a
little bit hard I think for analysts to anticipate that.
We've tried to communicate those events, but we had that
refining margins came off hard in some of our key markets,
and then there were some one time items well write
(00:41):
offs and tax items that are very difficult to forecast.
So these are non recurring items that made the quarter
a little bit light versus expectations. But the underlying execution
is good and as I said, the growth remained strong.
Speaker 3 (00:54):
So now you do have to wait till May twenty
twenty five for the arbitration to work out. When it
comes to that deal, why is this taking so long
if it's a simple issue or it's an issue of scheduling.
What's the problem.
Speaker 2 (01:09):
International arbitration often is a lengthy process. Selecting the arbitrators,
getting schedules aligned between all the parties and the arbitrators
is more complex sometimes than one might expect. We do
continue to see this as a straightforward contract interpretation question,
(01:34):
and we continue to remain confident that the arbitration will
affirms and Chevron's interpretation of it. But you're correct, it
is taking more time than we had originally anticipated in
and that's unfortunately not unusual when you get into international arbitration.
Speaker 3 (01:49):
Moving to some of the intricacies of the quarter, you
mentioned it that record production for Chevron and the Permian,
which kind of leads me to you, guys moving your
headquarters to Texas is part of that needing to be
closer to sort of the core business of operations right now.
Speaker 2 (02:06):
Well, it's really to be closer to the core, you know,
epicenter of our industry. Houston is the energy capital of
the world. We have key partners that are there, suppliers, vendors,
the universities that we do a lot of research with
and recruiting from are there, and so it's a natural
place for companies in our industry to have their their
(02:29):
home office and headquarters. And in fact, over the last
many years, we've seen our Houston based employee population go
up in our California based employee population come down. And
this is really concluding a process that has been underway.
It's it's you know, we know how to work around
(02:50):
the world in kind of a virtual environment, but there's
no substitute for being face to face with people in
terms of collaboration, innovation, mentoring and development, external relations, in engagement,
and Houston really is the place for our company to
be for all of those reasons. We do have a
big business footprint in Texas, which is now larger than
our business footprint in California. For many many years, that
(03:13):
was not the case. California was our home, it was
our birthplace, and it was where our largest business footprint is.
And so that's certainly a change that has occurred. But
the primary motivator here is to get our people together
to increase engagement and collaboration.
Speaker 3 (03:27):
So pro Texas versus anti California.
Speaker 2 (03:31):
I wouldn't necessarily put it that way. I would look,
we've had some policy differences with California, and certainly California
and Texas approach energy very differently, and so we speak
up on that. We advocate for policies that keep prices low,
that keeps supply reliable, that encourage an investment, and California's
(03:54):
advanced policies that do the opposite. And so we've certainly
expressed our views that we don't think that's good for
the California economy. But this isn't a move about politics.
It's a move about what's good for our company to
compete and perform.
Speaker 1 (04:08):
And I'm pleased to say that alex Steel joins US now.
Great interview, of course, And I have to say I
didn't know that Chevron was headquartered in California. It seems
like Texas would be the natural home here.
Speaker 3 (04:19):
It does, But remember the Premium wasn't always the Permian.
The Permium was just some rock that no one drilled.
So now that that's become so important, whether through Exon
and the Pioneer acquisition or through Noble and a PDC
acquisition for Chevron, it does make sense from that aspect. Also,
now the US is a huge exporter of energy, right,
so it also kind of makes sense for you'd be
headquartered in the Gulf Coast, which is where so much
(04:42):
is also being exported. Plus they're starting a Golf of
Mexico asset, so that's really big for them now as well.
So from that perspective, it'll be a slow few years
until this happens.
Speaker 1 (04:51):
But that's not necessarily politics that's driving them there.
Speaker 3 (04:55):
I mean, yes, no, I mean I don't think politics
helps it either.
Speaker 4 (05:00):
At the end of the day, I want to talk
a little bit about the pressure here that Chevron is
under when it comes to HESS. This is a massive
fifty three billion dollars deal, a lot of delays. How
did they really respond to that uncertainty?
Speaker 3 (05:12):
I mean, the problem is it keeps getting pushed out,
and that's really the problem, Like that it went into
FTC review. Yeah, sure, the arbitration was definitely a surprise,
but that it keeps getting pushed out and the lack
of visibility is actually quite difficult. And the problem is
it just highlights what Exxon has and which Chevron doesn't.
And if you're an oil investor, can you really own
(05:33):
both of those stocks in your portfolio? If you can, great,
If you can't, do you go with the one that
has Guyana or you go with the one that might
not have Guyana until May of twenty twenty five, and
that just kind of delays and pushes it out. Now,
Mike Worth is going to say, but we have a
really strong production profile in the Permian, we have really
strong overseas assets, we have Gulf of Mexico, there are
ten ten geese operation in Kazakhstan, huge cost overruns. But
(05:55):
he's going to talk pretty positively about that production profile.
But you know what, it's still not Guyana, and that's
really where the growth profile is going to be coming from.
Speaker 1 (06:03):
Well, this gets to what you were saying in the
commercial break, right, GINALI like, is this a paar trade
that's developing? How are investors thinking about this?
Speaker 3 (06:10):
I mean, I don't want to say yes, but I
don't want to say no to that. I mean, I
don't know.
Speaker 1 (06:14):
If you're doing a very good economist, thank you.
Speaker 3 (06:16):
I don't know if it's easy to be like short Chevron,
like buy Exon. I don't think it's that clear in
any way whatsoever, because you know, Chevron isn't just maybe Guyana,
like they do have a behemoth assets in the Permian.
They have great stuff going on there as well. But
that is a tough asset to then live with out
they're going to say they can live without it, but so.
Speaker 4 (06:35):
Can you explain a little bit more behind the stock
both today, because ultimately it wasn't just about Hess.
Speaker 3 (06:40):
It wasn't just about Hess, So it was about a
couple of things, largely about us, but also they had
a huge perd. They had a huge earnings miss and
a large part of that is due to some international
earnings revenue miss and you heard Mike Worth talking about
that on the tape that some of it was like
a one off. He doesn't necessarily expect that to continue.
That's one off tax things like the stuff you wouldn't
have had already on before. What we do know is
(07:02):
a Tekzig in a Kazakhstan has had a lot of
cost overruns over the years. It's supposed to be on track,
but that's always going to be a question mark. You've
also had a Chevron be hit really hard with the
war in Israel and Gaza because they have a natural
gas deposit over there as well, and the Gorgon Facility
energy facility over in Australia has also had a lot
of difficulties. So there are just production stuff that is happening,
(07:25):
as you do when you're an oil company, you always
have production stuff that you got to maintain and take
care of.
Speaker 4 (07:30):
What about renewables, I know that this did come up
in fits and starts, but I understand that they took
a little bit of a different approach here in how
they address the question around.
Speaker 3 (07:38):
Renewables, so particularly when it comes to Xon. Actually, so
they actually address this on the call and saying the
complexity of low carbon markets is particularly challenging, and they
talk about how it involves new technology and new markets
and not an existing customer base. That is very different
than the European guys like shel MVP and the approach
that they've taken. They invested heavily renewables, are now pulling
(07:58):
back a little bit and sort of not moving away
from oil and gas in the same way. Chevron is
somewhere like in the middle. I mean, they have their
own venture profile where they can put money into new
cool stuff. They have a hydrogen project that's gonna they're
working on. So I think that for both chef On
an Exxon, what they're doing is they're trying to stick
to their knitting, Like what can I do in an
(08:19):
energy transition space, that already is stuff that I'm doing,
like I'm drilling stuff out of rocks, I'm putting stuff
in rocks, Like how can I keep doing that when
it comes to the energy transition And that's sort of
that approach versus like hey, let me go buy this
wind farm.
Speaker 4 (08:31):
For example, Alex, we thank you so very much for
your time, for your reporting, for your great interview as well.
Let us, of course, Bloomberg's Alex Steele
Chevron missing profit estimates despite record production in the permium basin.
The company also announcing plans to move its headquarters from
California to Texas. Now, the disappointing quarter adding pressure to
the company's fifty three billion dollar effort to acquire has
Ploomberg's alex Steel caught up with Chevron CEO Mike Worth.
Speaker 2 (00:19):
We had some high maintenance. We had a couple of
events at L and G facilities that required maintenance during
the quarter, which brought liftings down, and so it's a
little bit hard I think for analysts to anticipate that.
We've tried to communicate those events, but we had that
refining margins came off hard in some of our key markets,
and then there were some one time items well write
(00:41):
offs and tax items that are very difficult to forecast.
So these are non recurring items that made the quarter
a little bit light versus expectations. But the underlying execution
is good and as I said, the growth remained strong.
Speaker 3 (00:54):
So now you do have to wait till May twenty
twenty five for the arbitration to work out. When it
comes to that deal, why is this taking so long
if it's a simple issue or it's an issue of scheduling.
What's the problem.
Speaker 2 (01:09):
International arbitration often is a lengthy process. Selecting the arbitrators,
getting schedules aligned between all the parties and the arbitrators
is more complex sometimes than one might expect. We do
continue to see this as a straightforward contract interpretation question,
(01:34):
and we continue to remain confident that the arbitration will
affirms and Chevron's interpretation of it. But you're correct, it
is taking more time than we had originally anticipated in
and that's unfortunately not unusual when you get into international arbitration.
Speaker 3 (01:49):
Moving to some of the intricacies of the quarter, you
mentioned it that record production for Chevron and the Permian,
which kind of leads me to you, guys moving your
headquarters to Texas is part of that needing to be
closer to sort of the core business of operations right now.
Speaker 2 (02:06):
Well, it's really to be closer to the core, you know,
epicenter of our industry. Houston is the energy capital of
the world. We have key partners that are there, suppliers, vendors,
the universities that we do a lot of research with
and recruiting from are there, and so it's a natural
place for companies in our industry to have their their
(02:29):
home office and headquarters. And in fact, over the last
many years, we've seen our Houston based employee population go
up in our California based employee population come down. And
this is really concluding a process that has been underway.
It's it's you know, we know how to work around
(02:50):
the world in kind of a virtual environment, but there's
no substitute for being face to face with people in
terms of collaboration, innovation, mentoring and development, external relations, in engagement,
and Houston really is the place for our company to
be for all of those reasons. We do have a
big business footprint in Texas, which is now larger than
our business footprint in California. For many many years, that
(03:13):
was not the case. California was our home, it was
our birthplace, and it was where our largest business footprint is.
And so that's certainly a change that has occurred. But
the primary motivator here is to get our people together
to increase engagement and collaboration.
Speaker 3 (03:27):
So pro Texas versus anti California.
Speaker 2 (03:31):
I wouldn't necessarily put it that way. I would look,
we've had some policy differences with California, and certainly California
and Texas approach energy very differently, and so we speak
up on that. We advocate for policies that keep prices low,
that keeps supply reliable, that encourage an investment, and California's
(03:54):
advanced policies that do the opposite. And so we've certainly
expressed our views that we don't think that's good for
the California economy. But this isn't a move about politics.
It's a move about what's good for our company to
compete and perform.
Speaker 1 (04:08):
And I'm pleased to say that alex Steel joins US now.
Great interview, of course, And I have to say I
didn't know that Chevron was headquartered in California. It seems
like Texas would be the natural home here.
Speaker 3 (04:19):
It does, But remember the Premium wasn't always the Permian.
The Permium was just some rock that no one drilled.
So now that that's become so important, whether through Exon
and the Pioneer acquisition or through Noble and a PDC
acquisition for Chevron, it does make sense from that aspect. Also,
now the US is a huge exporter of energy, right,
so it also kind of makes sense for you'd be
headquartered in the Gulf Coast, which is where so much
(04:42):
is also being exported. Plus they're starting a Golf of
Mexico asset, so that's really big for them now as well.
So from that perspective, it'll be a slow few years
until this happens.
Speaker 1 (04:51):
But that's not necessarily politics that's driving them there.
Speaker 3 (04:55):
I mean, yes, no, I mean I don't think politics
helps it either.
Speaker 4 (05:00):
At the end of the day, I want to talk
a little bit about the pressure here that Chevron is
under when it comes to HESS. This is a massive
fifty three billion dollars deal, a lot of delays. How
did they really respond to that uncertainty?
Speaker 3 (05:12):
I mean, the problem is it keeps getting pushed out,
and that's really the problem, Like that it went into
FTC review. Yeah, sure, the arbitration was definitely a surprise,
but that it keeps getting pushed out and the lack
of visibility is actually quite difficult. And the problem is
it just highlights what Exxon has and which Chevron doesn't.
And if you're an oil investor, can you really own
(05:33):
both of those stocks in your portfolio? If you can, great,
If you can't, do you go with the one that
has Guyana or you go with the one that might
not have Guyana until May of twenty twenty five, and
that just kind of delays and pushes it out. Now,
Mike Worth is going to say, but we have a
really strong production profile in the Permian, we have really
strong overseas assets, we have Gulf of Mexico, there are
ten ten geese operation in Kazakhstan, huge cost overruns. But
(05:55):
he's going to talk pretty positively about that production profile.
But you know what, it's still not Guyana, and that's
really where the growth profile is going to be coming from.
Speaker 1 (06:03):
Well, this gets to what you were saying in the
commercial break, right, GINALI like, is this a paar trade
that's developing? How are investors thinking about this?
Speaker 3 (06:10):
I mean, I don't want to say yes, but I
don't want to say no to that. I mean, I
don't know.
Speaker 1 (06:14):
If you're doing a very good economist, thank you.
Speaker 3 (06:16):
I don't know if it's easy to be like short Chevron,
like buy Exon. I don't think it's that clear in
any way whatsoever, because you know, Chevron isn't just maybe Guyana,
like they do have a behemoth assets in the Permian.
They have great stuff going on there as well. But
that is a tough asset to then live with out
they're going to say they can live without it, but so.
Speaker 4 (06:35):
Can you explain a little bit more behind the stock
both today, because ultimately it wasn't just about Hess.
Speaker 3 (06:40):
It wasn't just about Hess, So it was about a
couple of things, largely about us, but also they had
a huge perd. They had a huge earnings miss and
a large part of that is due to some international
earnings revenue miss and you heard Mike Worth talking about
that on the tape that some of it was like
a one off. He doesn't necessarily expect that to continue.
That's one off tax things like the stuff you wouldn't
have had already on before. What we do know is
(07:02):
a Tekzig in a Kazakhstan has had a lot of
cost overruns over the years. It's supposed to be on track,
but that's always going to be a question mark. You've
also had a Chevron be hit really hard with the
war in Israel and Gaza because they have a natural
gas deposit over there as well, and the Gorgon Facility
energy facility over in Australia has also had a lot
of difficulties. So there are just production stuff that is happening,
(07:25):
as you do when you're an oil company, you always
have production stuff that you got to maintain and take
care of.
Speaker 4 (07:30):
What about renewables, I know that this did come up
in fits and starts, but I understand that they took
a little bit of a different approach here in how
they address the question around.
Speaker 3 (07:38):
Renewables, so particularly when it comes to Xon. Actually, so
they actually address this on the call and saying the
complexity of low carbon markets is particularly challenging, and they
talk about how it involves new technology and new markets
and not an existing customer base. That is very different
than the European guys like shel MVP and the approach
that they've taken. They invested heavily renewables, are now pulling
(07:58):
back a little bit and sort of not moving away
from oil and gas in the same way. Chevron is
somewhere like in the middle. I mean, they have their
own venture profile where they can put money into new
cool stuff. They have a hydrogen project that's gonna they're
working on. So I think that for both chef On
an Exxon, what they're doing is they're trying to stick
to their knitting, Like what can I do in an
(08:19):
energy transition space, that already is stuff that I'm doing,
like I'm drilling stuff out of rocks, I'm putting stuff
in rocks, Like how can I keep doing that when
it comes to the energy transition And that's sort of
that approach versus like hey, let me go buy this
wind farm.
Speaker 4 (08:31):
For example, Alex, we thank you so very much for
your time, for your reporting, for your great interview as well.
Let us, of course, Bloomberg's Alex Steele
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