Doug Leggate

Doug Leggate inquired about the trajectory of ConocoPhillips' free cash flow breakeven, aiming for the low $30s by 2030, asking for the current breakeven and the underlying capital expenditure assumptions.

Answer

Andy O'Brien, CFO and EVP of Strategy and Commercial, stated that the current pre-dividend free cash flow breakeven is in the mid-$40s, with an additional $10 for the dividend. The reduction to the low $30s by the time Willow comes online is driven by the roll-off of pre-productive capital (approximately $6 impact) and the doubling of pre-productive CapEx cash flow, with share buybacks also reducing the dividend burden over time.

Doug Leggate asked about the impact of the Willow spending increase on the cash cadence and the evolution of the dividend break-even, particularly considering qualified CapEx deductibility in Alaska, and what happens to the dividend break-even as Willow comes online.

Answer

Andy O’Brien (CFO and EVP of Strategy and Commercial) explained that the company's break-even is substantially decreasing, from mid-$40s (CapEx only) plus $10 (dividend) this year, to a $2-$3 reduction by 2026, and projected to be in the low $30s WTI for capital break-even by the time Willow comes online. He stated that the Willow CapEx increase (offset by LNG CapEx reduction) has no notable impact on break-evens or the unchanged cash flow inflection. Ryan Lance (Chairman and CEO) added that the 8% dividend increase, marking the fifth year of top-quartile growth, is sustainable due to the declining break-even and represents a lower portion of total cash flow, providing comfort for continued growth and share buybacks.

Doug Leggate asked about the impact of the increased Willow spending on the cash cadence and the evolution of the dividend break-even, emphasizing the significance of the recent dividend increase and the tax advantages in Alaska.

Answer

Andy O’Brien, Chief Financial Officer and Executive Vice President of Strategy and Commercial, explained that the Willow CapEx increase, offset by LNG CapEx reductions, has no notable impact on break-evens or cash flow inflection. He highlighted that the company's break-even is substantially decreasing, targeting the low $30s WTI by the time Willow comes online. Ryan Lance, Chairman and CEO, added that the 8% dividend increase, the fifth consecutive year of top-quartile growth, is sustainable due to the declining break-even and represents a smaller portion of total cash flow, providing confidence for future growth and share buybacks.

Doug Leggate of Wolfe Research asked about the sustainability of deferred tax visibility beyond 2025, considering the new tax legislation and moving parts from M&A and asset sales.

Answer

CFO and EVP Andy O’Brien clarified the tax components. He noted the lower full-year effective tax rate is due to a favorable geographic mix of income. He explained that the new tax bill provides a $500 million benefit in 2025 from accelerated bonus depreciation, which will continue to be a tailwind in 2026. However, he stated it was too early to provide specific figures for 2026 due to variables like CapEx and dispositions.

Doug Leggate asked if Shell's legacy portfolio suffered from underinvestment and how the company plans to address resource issues without a significant CapEx increase, through M&A or other means. He also questioned if Shell can maintain its 10% free cash flow growth per share target without a flat real oil price or increased leverage, given its strategy day assumptions.

Answer

CEO Wael Sawan expressed regret over past decisions like exiting Guyana, but affirmed that Shell can underwrite flat liquids production and 2% gas growth by 2030 through maximizing recovery from existing reservoirs and selective M&A. He highlighted leveraging company strength for partnerships in countries like Venezuela and Libya, and a reset exploration team. CFO Sinead Gorman expressed confidence in the 2030 target, driven by performance and capital reallocation towards upstream and integrated gas. She noted a healthy balance sheet with 20% gearing, within the 10-30% range, and significant share buybacks at attractive prices, confirming comfort with net debt relative to CFFO.

Doug Leggate asked if legacy Shell had underinvested in its portfolio and how the company plans to fix this, whether through M&A or without increasing CapEx. He also questioned if the 10% free cash flow growth per share target to 2030 can be maintained without the help of a flat real oil price or increased leverage, given the recommitment to buybacks.

Answer

CEO Wael Sawan expressed regret over past decisions like exiting Guyana. He outlined a strategy to fix the portfolio by maximizing value from existing reservoirs (e.g., increasing recovery rates), leveraging Shell's strength for partnerships in emerging markets (Venezuela, Libya, Iraq, Kuwait), resetting exploration capabilities (Angola, South Africa, Gulf), and selectively pursuing value-accretive M&A. CFO Sinead Gorman expressed confidence in achieving the FCF/share target through performance, capital reallocation towards higher-returning upstream and integrated gas assets, and a healthy balance sheet (20% gearing) that supports shareholder distributions without relying on increased leverage.

Doug Leggate asked about the path back to profitability for the chemicals business and whether it is considered core for Shell, and sought an update on Shell's recourse regarding the Venture Global arbitration outcome.

Answer

Shell CEO Wael Sawan expressed deep disappointment in the Venture Global arbitration outcome, stating Shell is exploring all pathways to protect its rights. For chemicals, he acknowledged the deep trough and outlined plans for hundreds of millions more in OpEx and CapEx reductions to achieve cash preservation and stop the bleeding, with impacts expected in 2026, as the upcycle is not yet in sight.

Doug Leggate asked about the path back to profitability for Shell's chemicals business and whether it is considered a core segment. He also inquired about any recourse for Shell to revisit the arbitration outcome regarding Venture Global.

Answer

Shell CEO Wael Sawan acknowledged the deep trough in chemicals, stating that past OpEx reductions were insufficient. He outlined a plan for further cash preservation, aiming to take out hundreds of millions more in OpEx and CapEx to achieve free cash flow neutrality, but did not explicitly state if it's core. Regarding Venture Global, Sawan expressed deep disappointment in the arbitration outcome and affirmed Shell's intent to explore all pathways to protect its rights.

Doug Leggate challenged the characterization of LNG results as the 'new normal,' asking for confidence in trading returning to normalized levels. He also questioned how below-the-line items like interest and lease costs factor into the company's comfort with its significant buyback program.

Answer

CEO Wael Sawan clarified that the 'new normal' for LNG refers to a baseline reflecting pre-2022 volatility and prices, with Q2 being more representative than the arbitrage-heavy Q1. CFO Sinead Gorman confirmed that all cash movements, including interest and leases, are considered in the value-versus-risk decisions for capital allocation. She reiterated that these costs do not change her comfort with the balance sheet or the 'sacrosanct' 40-50% CFFO distribution target.

Doug Leggate sought to reconcile the commentary calling Q2 LNG earnings the "new normal" with prior guidance of lower trading results, and asked how below-the-line costs factor into the buyback comfort level.

Answer

CEO Wael Sawan clarified that Q2 reflects a new baseline for LNG trading under current market conditions, whereas Q1 had exceptional arbitrage opportunities. CFO Sinead Gorman confirmed that all cash movements, including interest and leases, are considered in capital allocation decisions, but the 40-50% CFFO distribution target remains the primary commitment.

Doug Leggate asked about the dynamics of Venezuelan crude in the Gulf Coast, its competitiveness, and whether the market's widening WCS spreads are driven by physical barrels or speculative expectations, and also inquired about Phillips 66's sustainable refinery utilization rate going forward.

Answer

Mark Lashier, Chairman and CEO, confirmed Phillips 66's flexibility to process up to 250,000 barrels/day of Venezuelan crude, noting participation when economics dictate. Brian Mandell, EVP of Marketing and Commercial, stated that both physical barrels and market expectations are driving the widening differentials, with WCS $3.50 weaker in 2026 compared to 2025. He also highlighted the potential benefit of heavy naphtha to gasoline margins. Rich Harbison, EVP of Refining, discussed improved reliability programs leading to structural changes and increased capacities at Billings (71,000 bpd), Ponca City (228,000 bpd), Bayway (275,000 bpd), and Sweeny (277,000 bpd), totaling a 35,000 bpd system-wide increase. Mark Lashier added that disciplined turnaround management, including using machine learning, has reduced spend and improved utilization.

Doug Leggate questioned the dynamics of crude spreads, specifically regarding Venezuelan crude's impact on the Gulf Coast and WCS differentials, seeking to understand if widening spreads are driven by physical barrels or market speculation. He also asked about Phillips 66's sustainable refinery utilization rate going forward, given recent reliability improvements.

Answer

Mark Lashier, Chairman and CEO, confirmed Phillips 66's flexibility to process Venezuelan crude (250,000 bpd capacity) and its interest when economics are favorable. Brian Mandell, EVP of Marketing and Commercial, stated that both physical barrels and market expectations are driving the widening differentials, noting WCS is $3.50 weaker in 2026. Rich Harbison, EVP of Refining, explained that reliability programs have led to structural capacity increases at four refineries, totaling 35,000 bpd, allowing for higher utilization. Mark Lashier added that disciplined turnarounds and machine learning also contribute to improved utilization.

Doug Leggate of Wolfe Research asked about Phillips 66's forward strategy for its integrated model following recent shareholder engagement and whether the company's mid-cycle EBITDA target needs adjustment for the current environment, along with the appropriate level of corporate debt.

Answer

Chairman & CEO Mark Lashier affirmed the company's commitment to its strategy, emphasizing that the board continuously evaluates all alternatives to maximize long-term shareholder value. Lashier and EVP & CFO Kevin Mitchell explained that the gap to mid-cycle EBITDA is primarily in the chemicals and refining segments. Mitchell reiterated the goal of reaching $17 billion in debt through operating cash flow and dispositions, without compromising the plan to return over 50% of operating cash flow to shareholders.

Doug Leggate asked about Suncor's capital spending levels beyond 2026, specifically if the CAD 5.658 billion is a cap, and how it aligns with returning 100% of excess funds to shareholders. He also inquired about Suncor's immunity to WCS crude spread weakness and any materially different market dynamics.

Answer

Rich Kruger (CEO) outlined a long-term plan to develop resources while returning capital, aiming to keep CapEx at or below CAD 6 billion, allowing for dividends, production growth, and buybacks. Troy Little (CFO) emphasized Suncor's model of stability and predictability. Rich Kruger (CEO) reiterated Suncor's immunity to WCS differentials due to its integrated asset base, viewing external market noise as largely immaterial to its economic performance.

Doug Leggate asked about Suncor's spending levels beyond 2026, specifically if the CAD 5.658 billion capital expenditure is a cap, and how it relates to the proportion of cash returned to shareholders. He also inquired about Suncor's immunity to WCS crude spread weakness and any materially different market dynamics beyond normal seasonality.

Answer

CEO Rich Kruger explained Suncor's long-term plan aims for both incremental resource development and capital returns within a capital construct around $6 billion, allowing for dividend growth, production investment, and buybacks. CFO Troy Little emphasized the company's model of stability and predictability in OpEx, CapEx, and shareholder returns. Rich Kruger reiterated Suncor's immunity to WCS differentials due to its integrated asset base and ability to upgrade bitumen, viewing market volatility as opportunities rather than threats, and not expecting fundamental changes to impact value delivery.

Doug Leggate sought clarification on Kearl's sustainable gross production capacity, excluding weather impacts, and whether the Q4 production dip was a one-off event. He also questioned the rationale behind the 20% dividend increase, asking if it was supported by leaning on the balance sheet, an increased dividend breakeven, or other factors in the outlook.

Answer

John Whelan, Chairman, President and CEO of Imperial Oil, reiterated confidence in Kearl's 2026 guidance of 285,000-295,000 barrels per day and the path to 300,000 barrels per day. Cheryl Gomez-Smith, Senior Vice President of the Upstream, confirmed the October wet weather was a one-off event with no terminal impact. Dan Lyons, Senior Vice President of Finance and Administration, explained the dividend increase is based on a long-term outlook, aiming for robust and sustainable growth, supported by unit OpEx reductions, volume growth, and restructuring, rather than a specific breakeven target or short-term balance sheet leverage.

Doug Leggate asked about the sustainable gross production capacity at Kearl, excluding weather impacts, and whether the Q4 event was a one-off. He also sought clarification on how the 20% dividend bump is supported, questioning if it's due to a creeping up break-even, balance sheet leverage, or other factors in the outlook.

Answer

Chairman, President and CEO John Whelan reiterated the 2026 guidance of 285,000-295,000 barrels per day for Kearl. Senior Vice President of the Upstream Cheryl Gomez-Smith confirmed the wet weather in October was a one-off event with no terminal issues, stating Kearl has a well-defined path to 300 KBD and potential upside beyond. Senior Vice President of Finance and Administration Dan Lyons explained that the dividend is based on a long-term, sustainable outlook, considering unit OpEx reductions, volume growth, and restructuring. He clarified that while increasing the dividend can raise the break-even, cost reductions offset this, and the goal is robust, sustainable dividend growth, with NCIB for returning surplus cash.

Doug Leggate asked if the unplanned downtime at Tengiz (TCO) might offset Kazakhstan's planned OPEC+ compensation cuts for the summer, and whether further cuts later in the year should be expected, both macro and Chevron-specific.

Answer

Chairman and CEO Mike Wirth stated he could not comment on OPEC+ discussions or the Republic's plans. He noted that historically, TCO barrels are fiscally attractive to Kazakhstan, leading to less impact from country-wide production restrictions compared to less attractive barrels, but cautioned that history is not always a predictor of the future.

Doug Leggate asked if the unplanned downtime at Tengiz (TCO) might offset Kazakhstan's planned compensation cuts in the summer, inquiring about the macro and Chevron-specific implications.

Answer

Chairman and CEO Mike Wirth stated he could not comment on Kazakhstan's OPEC+ discussions. He noted that historically, TCO barrels are fiscally attractive to the Republic, and production restrictions in the country tend to affect less attractive barrels, suggesting TCO has not been significantly impacted in the past.

Doug Leggate asked about Chevron's exploration strategy, particularly in light of shale maturity and the recent hiring of the ex-head of exploration from TotalEnergies, inquiring about the prognosis for exploration and associated spending in Chevron's next development phase.

Answer

Chairman and CEO Mike Wirth explained that after a period of constrained exploration spending focused on near-infrastructure opportunities, Chevron will now adopt a more balanced approach, including early entry into high-impact frontier areas. He cited new country entries in the South Atlantic margin, Middle East, and West Coast of South America, with plans for broader programs in Suriname, Brazil, Namibia, Nigeria, and Angola. He mentioned organizational changes to streamline decision-making, the application of new technology, and the strategic hiring of Kevin from TotalEnergies as the new Head of Exploration, indicating a greater emphasis and resource commitment to frontier exploration.

Doug Leggate asked about Chevron's exploration strategy, particularly in light of shale maturity and recent personnel changes, inquiring about the prognosis for exploration, its role, and associated spending in the company's future development phase.

Answer

Chairman and CEO Mike Wirth explained that after constraining exploration spending and focusing on near-infrastructure opportunities, Chevron is now at a point to ramp up activity beyond that focus. He indicated a move to a more balanced approach, including early entry into high-impact frontier areas, citing new country entries in the South Atlantic margin, Middle East, and West Coast of South America. Wirth confirmed more emphasis and commitment of resources (people and capital) to frontier exploration.

Doug Leggate of Wolfe Research questioned the role of the Bakken assets in Chevron's portfolio, noting their historically negative free cash flow under Hess (due to midstream tariffs) and a potentially limited inventory life.

Answer

Vice Chairman Mark Nelson affirmed the Bakken is a valuable addition, generating solid cash flow when viewed in total. He acknowledged the unique Hess Midstream financing structure could be more efficient and stated Chevron will be value-driven in its approach, with more details to come at the Investor Day. He emphasized the plan to integrate talent and apply Chevron's unconventional capabilities.

Doug Leggate asked about potential upside surprises from assets not currently in ExxonMobil's 2030 plan, specifically mentioning Libya, Iraq, and Venezuela, and what it would take for re-entry into these markets.

Answer

CEO Darren Woods explained that historical challenges in these markets related to fiscal regimes and investment guarantees are evolving. He emphasized ExxonMobil's competitive advantages in technology, project execution, and operational excellence, which are being recognized by resource owners. Woods expressed confidence in making progress in some referenced areas, potentially leading to upside not yet in the plan. Regarding Venezuela, he reiterated that it's currently uninvestable under existing fiscal structures but noted the Trump administration's efforts to stabilize the country and ExxonMobil's advantaged heavy oil technology, confirming an offer to send a technical team.

Doug Leggate asked about potential upside opportunities not included in the 2030 portfolio, specifically mentioning re-entry into Libya, Iraq, and Venezuela, and what conditions would facilitate such investments. He followed up on the status of a technical team in Venezuela.

Answer

CEO Darren Woods explained that ExxonMobil seeks specific fiscal regimes and investment guarantees for high-potential resource markets. He believes ExxonMobil's differentiated capabilities in technology and project execution are increasingly recognized, potentially leading to progress in these areas not yet in the plan. Regarding Venezuela, he reiterated that current fiscal structures make it uninvestable but confirmed the offer to send a technical team to assist the administration's policy-making remains.

Doug Leggate of Wolfe Research questioned the risk profile of growing the Permian to 40% of production, asking how the company manages the higher decline rates and sustaining capital in relation to long-term dividend visibility.

Answer

Chairman and CEO Darren Woods responded that the Permian is one part of a large, balanced portfolio and that managing depletion is a core, historical challenge. He emphasized that the strategy is to pace development with technological advancements to improve capital efficiency and recovery, which will change the future production paradigm. Woods asserted that the company's long-term plans for earnings and cash flow growth fully account for the Permian's development profile.

Doug Leggate questioned the company's cash distribution philosophy, asking if the pace of dividend growth is being moderated until the shares issued for the Pioneer acquisition are fully bought back.

Answer

CFO Kathy Mikells clarified that the timing of the increased $20 billion buyback pace in conjunction with the Pioneer acquisition is a coincidence, driven by the deal's incremental cash flow. She reiterated the company's dividend philosophy is focused on being sustainable, competitive, and growing, highlighting their 42-year history of annual increases. The buyback program is viewed as a secondary benefit that reduces the absolute dividend payout.

Doug Leggate inquired about Occidental's projected 2026 capital expenditure range, seeking clarification on how the OxyChem sale and LCV capital roll-off would influence the budget. He also asked about the impact of the 2.5 billion BOE Permian resource addition on drilling inventory and the portfolio's sustaining capital break-even.

Answer

Sunil Mathew (SVP and CFO) detailed the 2026 CapEx projection, starting from $7.2 billion (2025 midpoint), subtracting OxyChem's $900 million, adding $250 million for Gulf of America/Oman, and potentially up to $400 million for U.S. onshore, resulting in a $6.3 billion-$6.7 billion range with increased U.S. onshore flexibility. Richard Jackson (SVP and COO) explained the 2.5 billion BOE Permian resource add stems from unconventional shale improvements, secondary bench development, Barnett resources, and EOR, noting that current projects have a sub-$40 break-even.

Doug Leggate asked about Occidental's 2026 capital expenditure outlook, seeking clarification on the projected range after accounting for the OxyChem divestment and reallocations. He also inquired about the newly added Permian resource, drilling inventory, and the sustaining capital break-even for the portfolio.

Answer

Sunil Mathew, SVP and CFO, provided a 2026 CapEx range of $6.3 billion to $6.7 billion, detailing the impact of the OxyChem sale, LCV capital roll-off, and potential U.S. onshore investments, emphasizing increased flexibility. Richard Jackson, SVP and COO, explained the $2.5 billion Permian resource add, attributing it to unconventional shale improvements, Barnett opportunities, and EOR, noting that project break-evens remain below $40.

Doug Leggate asked about the free cash flow implications of the Mukhaizna contract extension in Oman and questioned the potential scale of future non-core asset sales over the next five years.

Answer

President & CEO Vicki Hollub and SVP Kenneth Dillon described the Oman contract as a beneficial agreement that improves project economics and offers flexibility with multiple stacked pay zones. Regarding divestitures, Vicki Hollub noted that while there is scattered non-core acreage to be sold, these future sales are not expected to generate 'big dollars'.

Doug Leggate asked about Marathon Petroleum's refining CapEx, noting it appeared higher than initial guidance, and sought clarification on any changes or explanations. He also questioned the company's share buyback strategy, specifically if they would leverage their balance sheet to increase repurchases given elevated valuation and a recent slowdown.

Answer

CEO Maryann Mannen and CFO John Quaid explained that the CapEx reflects good opportunities to drive investments for reliability and margin, and projected 2026 capital to be below 2025. Maryann Mannen reiterated that no single quarter is indicative of their buyback strategy, affirming their commitment to share repurchases as the primary return of capital, but stated they would not take on debt for stock buybacks.

Doug Leggate asked about Marathon Petroleum's refining CapEx, noting it appeared higher than initial guidance, and sought clarification on whether this was due to cadence or other factors. He also questioned the recent slowdown in share buybacks, given MPC's strong share performance and elevated valuation, asking if the company would use its balance sheet to lean into repurchases.

Answer

CFO John Quaid explained that the capital spend reflects good opportunities to drive investments for reliability, mix, yields, and margin. CEO Maryann Mannen clarified that 2026 capital is expected to be below 2025 levels. Regarding buybacks, Maryann Mannen stated that no single quarter is indicative of their strategy, reiterating commitment to share buybacks as the primary return of capital, supported by MPLX distributions. She confirmed MPC would not take on debt to buy back stock but expects margin delivery to support continued repurchases.

Doug Leggate pressed for clarity on whether the high margin capture is sustainable and represents a new baseline, and also asked about the cash tax benefits from bonus depreciation.

Answer

CEO Maryann Mannen emphasized that performance gains are from sustainable, structural changes, not one-time trading, but stopped short of setting a new specific capture rate target. CFO John Quaid confirmed the company expects a 'nice cash tax benefit' from bonus depreciation but did not provide a specific quantification.

Doug Leggate asked about Coterra's multi-basin portfolio strategy in light of the Cambridge letter, comparing its performance to pure-play gas E&Ps, and inquired about the elevated LOE this quarter, its relation to workovers, and the expected trend for oil production and LOE.

Answer

Tom Jorden, Chairman, CEO, and President, stated that Coterra is a premier outfit and benefits from being a multi-basin, multi-commodity company, but declined to elaborate on the Cambridge letter. Michael DeShazer, Executive Vice President of Operations, confirmed that LOE was up due to workovers in Lea County but expects workover costs to decrease in Q4. Shane Young, Executive Vice President and CFO, added that LOE and total cash costs are expected to settle within range for the full year.

Doug Leggate inquired about Coterra Energy's perspective on the Cambridge letter, specifically addressing the debate around operating as a multi-basin portfolio versus a standalone pure-play in the Delaware Basin, and how Coterra's performance compares to gas-levered E&Ps.

Answer

Tom Jorden, Chairman, CEO, and President, stated that Coterra believes it is a premier outfit deserving of a premier multiple and sees benefits in being a multi-basin, multi-commodity company. Michael Deshazer, Executive Vice President of Operations, and Shane Young, Executive Vice President and CFO, addressed a follow-up on LOE, confirming it was up due to workovers in Lea County and is expected to decrease in Q4, settling within the annual range.

Doug Leggate of Wolfe Research posed a high-level question about whether Coterra's decision to increase Marcellus activity contributes to industry-wide oversupply that hurts commodity prices. He followed up by asking if Coterra would consider managing production seasonally by shutting in wells, similar to some gas-focused peers.

Answer

CEO Thomas Jorden defended the strategy, emphasizing that Coterra's decisions are based on the profitability of its low-cost supply even at draconian prices and that historical analysis shows a steady cadence of activity is the best approach. EVP of Operations Blake Sirgo added that shutting in production is 'absolutely in our toolkit' and would be managed in harmony with their long-term sales portfolio.

Doug Leggate asked about the definition of 'core inventory' in the context of core development, specifically how the 10 years of core inventory translates to a development cadence and if it includes lower-tier locations. He also followed up on gas, asking if Diamondback has its own solutions beyond waiting on infrastructure to improve gas realizations.

Answer

Kaes Van't Hof (CEO, Diamondback Energy) stated that core inventory refers to 5,000-5,500 sub-$40 type locations, representing about 10 years at 500 wells/year, with other inventory opening up at higher oil prices. Danny Wesson (COO, Diamondback Energy) explained that DSU design prioritizes highest rate-of-return zones first, then co-developing other zones to optimize returns and avoid degrading well performance or stranding wells. Kaes Van't Hof added that they 'drill every fourth well for free relative to peers.' On gas, Kaes Van't Hof explained that historical growth through acquisition led to dedicated acreage, but with Endeavor and current scale, they can now commit to new pipelines (Whistler, Matterhorn, Blackcomb, Hugh Brinson) and explore power projects for better market diversity and realizations, acknowledging that it's not great for the next 12 months but improving long-term.

Doug Leggate asked about Diamondback Energy's '10 years of core inventory,' how core development incorporates lower-tier locations, and the resulting development cadence. He followed up on whether including these zones uplifts the 10-year number or is already accounted for. He also inquired about Diamondback's own solutions for improving gas realizations beyond waiting on infrastructure, given its 500 BCF/year production and current low prices.

Answer

Kaes Van't Hof (CEO, Diamondback Energy) defined core locations as sub-$40 type inventory (5,000-5,500 locations, completing ~500 wells/year), which is modeled in acquisitions and developed today. Danny Wesson (COO, Diamondback Energy) explained optimizing DSU design by prioritizing highest-return zones and co-developing others to avoid degrading performance or stranding wells. Kaes Van't Hof stated the inventory number is dynamic, with more wells added next year, expecting Barnett/Woodford to become Tier 1 development zones. He reiterated commitment to new pipes (Whistler, Matterhorn, Blackcomb, Hugh Brinson) and exploring power projects, acknowledging past acquisition-driven dedications but emphasizing current size and scale allow for market diversity, with hedges protecting near-term low realizations.

Doug Leggate of Wolfe Research asked if considering a return to growth was a change in stance under the new CEO and questioned the practical inventory life beyond just Tier 1 assets.

Answer

CEO Kaes Van't Hof clarified it is not a change in stance but a recognition that the market will eventually call for growth from efficient producers like Diamondback, and they will be ready to answer that call cautiously. He explained that inventory life is extended by economic secondary zones and that the company evaluates returns at a pad or section level, which includes multiple zones, rather than focusing on individual well IRRs.

Doug Leggate asked about the potential risks to BP's long-term production guidance, considering the strong performance from BPX and recent discoveries, and whether an early production system for Boomerangy would fit within the current CapEx guidance.

Answer

Murray Auchincloss (CEO, BP) indicated that it's premature to update long-term guidance but expressed confidence in BP's potential to grow long-term organic oil volumes, a position not seen in 25 years. He affirmed commitment to the capital frame and mentioned improved 2025 production guidance, with 2026 updates expected in February.

Doug Leggate questioned the risk to BP's long-term production guidance, given current performance, BPX's success, new discoveries, and the potential for an early production system from Bumerangue, asking if the latter would be included in current CapEx guidance.

Answer

Murray Auchincloss (CEO, BP) stated it's premature to give extensive forward guidance beyond 2027 but expressed confidence in the potential for long-term organic oil volume growth, calling it a 'nice problem to have.' He emphasized staying within the capital frame and focusing on shareholder returns. He confirmed improved 2025 guidance and committed to updating 2026 production views in February.

Doug Leggate of Wolfe Research, LLC followed up on BPX, questioning if the Devon Energy transaction provided a one-time volume boost, and asked how much of the $4-5 billion in structural cost cuts would flow to the bottom line after accounting for growth-related cost offsets.

Answer

CFO Kate Thomson explained that while the goal is for material cost reductions to reach the bottom line, it is difficult to quantify the exact net amount due to unpredictable factors like inflation. EVP Gordon Birrell clarified that the production volume from the Devon transaction was very small and does not represent a significant change to the growth baseline.

Doug Leggate of Wolfe Research followed up on BPX, asking if the Q2 volume increase from the Devon Energy asset swap was a one-off, and questioned how much of the $4-5 billion structural cost savings target would ultimately flow to the bottom line.

Answer

CFO Kate Thomson stated that while the goal is for material cost savings to reach the bottom line, it is difficult to quantify the net impact due to unpredictable factors like inflation. EVP - Production & Operations Gordon Birrell clarified that the production gained from the Devon transaction was 'very, very small' and does not establish a significant new baseline for growth.

Doug Leggate asked for clarification on why the $115 million and $56 million SRE benefits were not broken out as non-recurring, where they appear in the financials, and if the $115 million was a single-quarter or cumulative recovery. He also inquired about the capital spending run rate relative to the full-year guide and sustaining capital for the total business.

Answer

Atanas Atanasov, CFO, explained the $115 million as a benefit to cost of sales (cumulative reimbursement of prior expenses) and the $56 million as revenue from optimizing RINs strategy. Tim Go, CEO, stated they do not view SREs as a one-time event, expecting continued entitlement. For capital spending, Atanas Atanasov attributed the run rate difference to timing, reaffirming full-year guidance and hinting at a $100 million go-forward benefit. Tim Go added that the company has passed its catch-up maintenance period, peaked in 2024, and anticipates substantial CapEx reductions in 2026.

Doug Leggate of Wolfe Research, LLC noted the strong performance in renewable diesel and asked about the sustainable EBITDA potential for that business, assuming the producer's tax credit continues. He also asked for the company's view on Small Refinery Exemptions (SREs) and how their potential negative impact on RIN prices would affect the renewables business.

Answer

CEO Timothy Go began to address the question, expressing pleasure with the renewables business's positioning. However, the call was disconnected due to a technical issue before he could provide a complete answer on sustainable EBITDA or the company's stance on SREs.

Doug Leggate asked about the trend in TotalEnergies' upstream margin as the production mix evolves, specifically mentioning Iraq, and sought clarity on the company's priority for allocating excess cash flow—whether to the balance sheet for deleveraging or to higher share buybacks.

Answer

Patrick Pouyanné, Chairman and CEO, confirmed that any better-than-expected cash flow would primarily go towards strengthening the balance sheet through deleveraging. He clarified that Iraq contracts are favorable, reactive to oil prices, and contribute accretively to upstream margins, with new barrels generating significantly higher cash flow per barrel than the base portfolio, leading to upstream free cash flow growing faster than production.

Doug Leggate asked about the evolution of TotalEnergies' upstream margin mix as production grows, specifically regarding projects like Iraq, and what would be the first call on cash if cash flow exceeds expectations.

Answer

Patrick Pouyanné, Chairman and CEO, clarified that Iraq contracts are reactive to oil prices and contribute accretively to upstream margins, with new barrels having a CFPO of $30-40/barrel, higher than the base portfolio's $19-20/barrel. He stated that any excess cash flow would primarily be directed to the balance sheet for deleveraging, with a potential revisit of the buyback scheme for 2026 if free cash flow continues to grow significantly.

Doug Leggate from Wolfe Research sought more visibility on the disposals planned for the second half of the year to meet the net investment guidance, and asked about the impact of acquiring a stake in Suriname's Block 53 on the Grand Morgue project.

Answer

Patrick Pouyanné, Chairman & CEO, provided specific details on planned disposals, totaling approximately $3.5 billion from assets in Nigeria (Bonga and onshore), Argentina, and farm-downs in the Integrated Power portfolio. On Suriname, he stated the Block 53 acquisition was a good opportunity to connect a small discovery to the Grand Morgue infrastructure, potentially extending and enhancing the production plateau, with first oil still targeted for the first half of 2028.

Doug Leggate of Wolfe Research inquired about the potential cash flow impact from the accelerated Suriname project in 2028 and whether the company has sufficient hedged U.S. gas exposure for its LNG needs.

Answer

CEO Patrick Pouyanné confirmed that the accelerated timeline for Suriname, targeting first oil in mid-2028, will have a significant cash flow contribution from 2028 onwards and will be part of an extended guidance to 2030. He also stated that the company does not yet have enough U.S. gas exposure and is actively working on another deal to increase its upstream integration, with more details to be shared in September.

Doug Leggate (Wolfe Research) questioned Range Resources' prognosis for pricing realizations and how basis might change with its growth strategy, also asking why the company has not achieved investment-grade credit status despite a strong balance sheet, addressing peer suggestions about its impact on long-term supply agreements.

Answer

CFO Mark Scucchi clarified that Range Resources' marketing strategy, with 90% of revenue from outside Appalachia and existing long-term international deals, prioritizes margin over speed for new supply agreements, stating that credit rating has not been an issue in customer conversations. CEO Dennis Degner added that basis has shown durability since MVP's service, with demand potentially outstripping supply. Mark Scucchi further explained that rating agencies' targets have evolved, and Range expects to organically meet investment-grade criteria through its growth plan, viewing it as a 'nice to have' rather than a 'need to have.'

Doug Leggate questioned Range Resources' prognosis for realizations, how basis might change with its growth story, and the factors preventing the company from achieving an investment-grade credit rating despite its strong balance sheet.

Answer

CFO Mark Scucchi emphasized that Range's marketing strategy, with 90% of revenue from outside Appalachia and existing long-term international deals, prioritizes the best long-term margins. He stated that Range's credit rating has not been an issue in customer conversations, and its leverage is below investment-grade peers. CEO Dennis Degner added that basis is expected to remain durable, with in-basin demand potentially outstripping supply, further strengthening basis. Scucchi concluded that Range is checking all the boxes for rating agencies, and an investment-grade rating will naturally follow from operations and growth.

Doug Leggate inquired about Range Resources' strategy for new in-basin supply agreements, particularly for AI-driven demand, and the associated risk of regional oversupply. He also asked when the company might increase capital spending to accelerate growth beyond its current three-year plan.

Answer

CEO Dennis Degner stated that Range is well-positioned to capture new demand due to its vast inventory and proven reliability, and that inventory exhaustion from peers should mitigate oversupply risks. CFO Mark Scucchi added that future growth will be disciplined and tied to clear demand signals, with a focus on driving per-share value through a combination of production growth and share repurchases.

Doug Leggate asked about EQT's marketing optimization performance, how domestic gas marketing translates to international LNG marketing, and the priority between net debt reduction and share buybacks.

Answer

Toby Rice, President and CEO, highlighted the positive impact of Jeremy Knop's focus on commercial aspects and EQT's competitive position in LNG due to scale. Jeremy Knop, CFO, detailed the marketing team's proactive optimization, correlating profitability with market volatility. He reiterated a $5 billion maximum debt target to reduce equity volatility and enable opportunistic share buybacks during market pullbacks, emphasizing low leverage for conviction during down cycles.

Doug Leggate asked about EQT's marketing optimization performance, whether it represents a 'new normal,' and the company's confidence in translating domestic gas marketing success to international LNG marketing. He also questioned the priority of EQT's net debt balance sheet versus share buybacks amidst expected gas price volatility.

Answer

Jeremy Knop (CFO, EQT) stated that the marketing team is in its 'early innings,' correlating performance with market volatility and expecting consistent optimization. Toby Rice (President and CEO, EQT) added that EQT's scale and global networking position them competitively in LNG. Jeremy Knop reiterated the $5 billion maximum debt target, emphasizing that low leverage enables aggressive buybacks during stock price pullbacks, creating long-term shareholder value.

Doug Leggate of Wolfe Research asked about the capital expenditure cadence for EQT's new growth projects and whether the company can fund this growth while continuing to build cash and deleverage. He also inquired about the macroeconomic conditions that would prompt EQT to grow production rather than reallocating existing volumes.

Answer

President and CEO Toby Rice explained that the ~$1 billion in midstream CapEx is back-weighted to 2027-2028, allowing for continued deleveraging in the near term. He noted EQT can reallocate 2 Bcf/d of existing production, providing significant flexibility. CFO Jeremy Knop added that by the time spending ramps up, debt will be very low, and at strip prices, the company will generate over $3 billion in annual free cash flow. Regarding production growth, Mr. Rice stated they will be thoughtful about market pricing but highlighted that just 1 Bcf/d of growth could add approximately $9 billion in value.

Doug Leggate from Wolfe Research asked about EOG's ultimate objective for the Utica asset, its growth potential under the current rig count, and any midstream constraints. He also posed a philosophical question on capital return priorities, specifically dividend growth.

Answer

CEO Ezra Yacob positioned the Utica as a long-term growth asset with no major bottlenecks, but stated that investment levels will remain disciplined and responsive to the macro environment. He affirmed that growing the regular dividend is the #1 priority, supported by a pristine balance sheet, with buybacks favored for excess cash returns as the stock appears undervalued.

McHenry Trusseller, on behalf of Doug Leggate from Wolfe Research, inquired about the company's capacity to grow its dividend following recent acquisitions and asked for the current post-dividend WTI breakeven price.

Answer

CFO Victor Durell and President Scott Seltz both affirmed the company's commitment to the dividend, citing a 25-year track record and incremental cash flow from acquisitions as supportive of future growth, pending Board approval. Victor Durell confirmed the company's post-dividend WTI breakeven remains comfortably in the $40 to $45 per barrel range.

Doug Leggate from Wolfe Research asked for more visibility on APA's Permian inventory life and the associated run-rate capital required to maintain the current production levels, particularly heading into 2026.

Answer

CEO John Christmann stated that core Permian inventory now extends well into the 2030s, a significant extension from previous estimates. President Stephen Riney elaborated on how improved capital efficiency is enabling denser development, increasing resource recovery, and lowering breakeven prices to the low $40s. For 2026, CFO Ben Rodgers suggested that annualizing the capital spend from Q2-Q4 2025 would provide a reasonable proxy for the sustaining capital required.

Doug Leggate from Wolfe Research questioned Devon's experience with the challenging Wilcox sand in the Eagle Ford, which a partner cited as a reason for their acreage selection, and asked about the long-term cash tax outlook.

Answer

President & CEO Clay Gaspar described the Eagle Ford situation as a 'win-win,' stating that while drilling is more challenging in their retained acreage, significant cost savings of $2.7 million per well now make it highly economic. EVP & CFO Jeff Ritenour confirmed the plan is to use cash windfalls for debt reduction. He added that the long-term tax rate will be significantly lower, around 5% in 2026 and 10% in 2027, not returning to high-teens levels for 6-7 years.

Doug Leggate from Wolfe Research asked for Devon's perspective on operating in the eastern Eagle Ford, given a partner's comments on geological challenges, and inquired about the long-term cash tax outlook.

Answer

President & CEO Clay Gaspar described the Eagle Ford situation as a 'win-win,' stating Devon is confident in its ability to manage the more challenging drilling, which is now economically viable due to achieving $2.7 million in per-well cost savings. EVP & CFO Jeff Ritenour detailed the tax outlook, projecting a ~5% rate in 2026 and ~10% in 2027, with rates not returning to prior high-teens levels for 6-7 years. He also confirmed the plan is to use excess cash to accelerate debt reduction.

Doug Leggate from Wolfe Research asked for Devon's perspective on operating in the eastern Eagle Ford, given a partner's comments on geological challenges, and inquired about the long-term cash tax outlook and use of the tax windfall.

Answer

President & CEO Clay Gaspar described the Eagle Ford situation as a 'win-win,' stating Devon is confident in its ability to manage the geology and that significant well cost savings make the acreage highly value-accretive. EVP & CFO Jeff Ritenour confirmed the tax windfall will be used to accelerate debt reduction and projected the company's tax rate would remain low for the next 6-7 years.

Doug Leggate sought clarification on the company's exposure to the Alternative Minimum Tax (AMT) and asked about the drivers of improving sustaining capital, including any changes in production mix.

Answer

CFO Michael Kennedy clarified that Antero is not subject to the AMT. He further explained that maintenance capital continues to improve due to longer laterals and a naturally declining base production decline rate. He noted the production mix continues to favor liquids-rich targets, despite temporary gassiness from completing some DUCs.

Doug Leggate inquired about the tracking and sustainability of PBF Energy's cost-cutting initiative and asked for evidence of widening light-heavy crude differentials.

Answer

President & CEO Matthew Lucey and SVP & Head of Refining Michael A. Bukowski explained the cost savings program, noting that approximately 70% of the savings will appear in OpEx and 30% in capital, emphasizing the sustainability of the initiatives. Regarding crude spreads, Lucey and SVP Thomas O'Connor stated that while widening has been masked by seasonality, they expect differentials to widen in the coming months as more heavy crude barrels return to the market.

Doug Leggate asked for clarity on the duration of the guided 70% deferred cash tax rate for 2026 and questioned the company's appetite for continued net debt reduction versus other capital returns.

Answer

CFO Mohit Singh stated that the duration of tax savings is 'fairly long,' contingent on maintaining a similar cadence of capital investment. CEO Domenic Dell’Osso added that strengthening the balance sheet during strong markets is a priority to create equity value and position the company to enhance shareholder returns, like buybacks, during weaker market cycles.

Doug Leggate of Wolfe Research asked about the duration of the guided 70% deferred cash tax rate for 2026 and questioned the company's appetite for continued net debt reduction versus other forms of shareholder returns.

Answer

EVP & CFO Mohit Singh explained that the tax savings have a "fairly long" duration, supported by ongoing capital investment and tax planning. President, Director & CEO Domenic Dell’Osso affirmed the strategy of strengthening the balance sheet during strong markets to create equity value and be prepared for opportunistic share buybacks when markets soften.

Doug Leggate inquired about the duration of the guided 70% deferred cash tax rate for 2026 and the company's appetite for continued net debt reduction versus other forms of cash returns to shareholders.

Answer

EVP & CFO Mohit Singh explained that the tax savings have a long duration, supported by ongoing capital investment and tax planning. President, Director & CEO Domenic Dell’Osso added that strengthening the balance sheet during strong markets creates equity value and positions the company to opportunistically repurchase shares when markets soften.

Doug Leggate pressed on capital efficiency, asking where the capital budget could ultimately go while maintaining flat production, and challenged the 50/50 capital allocation framework, questioning why the company wouldn't more aggressively pay down debt.

Answer

President and CEO Brendan McCracken acknowledged the significant capital efficiency gains but did not set future guidance, emphasizing that current gains flow to free cash flow. Both McCracken and EVP & CFO Corey Code defended the balanced capital allocation, stating that both debt reduction and share buybacks at the current yield are attractive uses of capital and that the company is making progress on both fronts.

An analyst on behalf of Doug Leggate asked for a projection of Ovintiv's net debt by the end of 2025 and for color on the path to achieving the company's long-term $4 billion target.

Answer

Executive Brendan McCracken projected that net debt would be 'well underneath the $5 billion mark' by year-end 2025, likely in the $4.6 to $4.7 billion range at current prices. He noted this puts the company 'within spitting distance' of its $4 billion target in 2026 and confirmed that share buybacks would resume in the second quarter.

Doug Leggate of Wolfe Research, LLC asked for an explanation of Valero's high distillate yields despite processing more light sweet crude, and whether this contributed to strong capture rates. He also questioned if the Diamond Green Diesel (DGD) business is free cash flow positive for Valero on a sustainable basis.

Answer

VP of Refining Services Greg Bram explained that the company has been operating in 'max distillate' mode, adjusting downstream operations to maximize diesel and jet fuel yields, which has positively impacted capture rates. SVP Eric Fisher confirmed that DGD is expected to be sustainably free cash flow positive for Valero once policy clarity allows for the separation of credit and feedstock prices.

Doug Leggate of Wolfe Research asked for an explanation of Valero's high distillate yields despite increased light crude throughput and questioned if the Diamond Green Diesel (DGD) business is sustainably free cash flow positive.

Answer

VP of Refining Services Greg Bram clarified that the company has been operating in 'max distillate mode' to optimize for higher-margin products, which also boosts capture rates. SVP Eric Fisher affirmed that DGD is expected to be sustainably free cash flow positive for Valero, pending regulatory clarity from the EPA, citing its advantages in low-CI feedstocks and market access.

Doug Leggate asked about the impairment charge taken on the Wilmington refinery and the forward-looking implications for capital spending and free cash flow from the West Coast assets following the Benicia closure decision.

Answer

Homer Bhullar, an executive, confirmed an impairment loss was recorded for both Benicia ($901 million) and Wilmington ($230 million) after an analysis concluded their book values were not recoverable. An executive named Greg added that historically, Benicia has had higher operating expenses and capital needs compared to Wilmington, and the prospect of a large turnaround contributed to the decision to close.

Doug Leggate of Wolfe Research asked for an update on the DKL sour gas project's progress and whether there is a pipeline of other potential asset sales to unlock value.

Answer

Reuven Spiegel, EVP and CFO, confirmed that the sour gas plant project at Delek Logistics is on time and on budget for a Q2 start, which will add a new dimension to their gas capabilities. Avigal Soreq, President and CEO, added that the company's Enterprise Optimization Plan (EOP) is progressing well, with confidence in reaching the upper end of the previously stated cash flow improvement guidance range.

Asked about the evolution of inventory depth across the company's U.S. plays and the linearity of earnings sensitivity to commodity prices in Equatorial Guinea, particularly in a high-price scenario.

Answer

Inventory is managed at an enterprise level and replenished through a four-pronged strategy (organic, bolt-ons, exploration, M&A). In Equatorial Guinea, the earnings sensitivity to commodity prices is expected to be largely linear due to the nature of their LNG contracts.