Douglas George Blyth Leggate

Douglas George Blyth Leggate followed up on RVO and RIN prices, which have spiked, asking about the mid-cycle earnings capacity of the DGD (renewable diesel) segment at current RIN prices.

Answer

Eric Fisher, EVP and CCO, stated that defining a mid-cycle for RINs is difficult due to the new PTC framework, which depends on CI (Carbon Intensity) and income tax credits. Brian Donovan, Head of Investor Relations, noted that the government's suggested obligation range for 2026-2027 (5.2-5.6 billion gallons) is well above domestic production, and combined with tariffs and credit elimination for foreign imports, points to higher D4 RIN prices. He concluded that 2026 is likely to look better than 2025 for the segment, especially for those with low CI and ability to run waste oils.

Douglas Leggett asked about the dynamics of heavy oil in the Gulf Coast, including the impact of Mexico, WCS, and Venezuela, on Valero's coker utilization and heavy crude throughput. He also inquired about the RVO and RIN prices, seeking insight into the mid-cycle earnings capacity of the DGD (renewable diesel) segment at current RIN price levels.

Answer

R. Lane Riggs (Chairman, CEO and President, Valero Energy Corporation) explained that Valero optimizes its crude diet and purchases outside resids to keep cokers full, expecting to fill them sooner with increased Venezuelan and Canadian crude availability. Eric Fisher (EVP and CCO, Valero Energy Corporation) stated that defining a 'mid-cycle' for RINs is challenging under the new PTC framework. He anticipates higher D4 RIN prices due to high obligations and reduced generation, suggesting 2026 will be better for the segment, particularly for those running waste oils and exporting.

Douglas Leggate asked about Valero's extraordinary throughput performance, questioning if there's a shift in how the business is run, such as just-in-time turnarounds or the use of AI/machine learning, and if this sustainability could extend to the broader industry. He also sought clarification on the translation of earnings to cash flow, specifically why strong earnings didn't fully reflect in cash flow, inquiring about transitory issues or cash tax.

Answer

Greg Bram, Vice President, explained that the journey for improved turnaround planning has been ongoing for a decade, yielding benefits. He expressed cautious optimism about AI for further availability improvements, noting Valero's advantage with high-quality operational data collected over many years. Homer Bhullar, Vice President, Investor Relations and Finance, clarified that the discrepancy in cash flow was partly due to Production Tax Credits (PTC) being booked in earnings but paid later, appearing as a deduction from net cash flow from operations, with no substantial temporary tax issues.

Douglas Leggate asked about the potential second-order effects of tariffs on Canadian heavy oil, such as impacts on refinery utilization and yields, and questioned if the U.S. refining industry could sustain its recent high reliability and utilization rates.

Answer

Gary Simmons, EVP and COO, and Greg Bram, an executive, confirmed they have developed response scenarios for potential tariffs, acknowledging that limitations on heavy feedstocks could reduce throughput by as much as 10%. Gary Simmons also expressed confidence that the U.S. refining industry will continue to run at high utilization rates due to cost advantages and improved mechanical availability.

Douglas Leggate of Wolfe Research asked for clarification on the strategy for accelerating deleveraging, including whether the midstream business (WES) could be considered for disposal, and if capital spending will see a sustained reduction after major projects are completed.

Answer

Vicki Hollub, President and CEO, confirmed the goal is to pay off 2026 debt maturities, potentially ahead of schedule, without committing to specific divestitures. She also stated that overall capital spending is expected to be lower next year and that the company would not fully replace the capital from completed projects with new spending.

Douglas George Blyth Leggate of Bank of America inquired about Occidental's macro outlook for oil, its impact on 2025 capital plans, and the company's deleveraging capacity and strategy amid significant low-carbon and chemical investments.

Answer

President and CEO Vicki Hollub stated that while 2025 may see a surplus, the company is preparing a conservative capital plan focused on maintaining activity in CrownRock assets while slightly lowering it elsewhere. She emphasized that OXY has multiple levers for deleveraging, including a large asset portfolio for potential divestitures. Richard Jackson, President of U.S. Onshore, detailed early CrownRock synergies in supply chain and water management, projecting significant cost savings and efficiency gains.

Douglas George Blyth Leggate of Wolfe Research, LLC pressed for details on the cost savings, asking what assumptions were originally embedded in the $350 million target. He also asked about the Alaska discovery, inquiring about its potential resource size and how APA would fund development, suggesting a possible monetization of its Suriname assets.

Answer

CEO John Christmann stated that the savings were part of the original target but are being realized much faster than expected, particularly on the capital side. Regarding Alaska, Christmann and EVP of Exploration Tracey Henderson highlighted the discovery's superior reservoir quality. Christmann clarified that significant capital spend in Alaska would not be required until after Suriname comes online, mitigating funding concerns. Henderson added that the focus is on seismic reprocessing and appraisal strategy.

Douglas George Blyth Leggate questioned the significant underperformance of APA's stock despite strong free cash flow, asking about management's confidence in guidance and the rationale for prioritizing share buybacks over debt reduction.

Answer

CEO John Christmann expressed confidence in the company's transformed portfolio and cost-cutting initiatives, noting recent success in meeting guidance. He and CFO Stephen Riney defended the capital return framework, stating they are addressing both debt and share repurchases, viewing buybacks as a value-accretive tool for shareholders.

Douglas Leggate of Wolfe Research asked about the relative capital allocation between oil and gas given a constructive gas outlook, and challenged the capital structure strategy, questioning the focus on buybacks over more aggressive debt reduction to lower equity volatility.

Answer

Executive Brendan McCracken explained that capital allocation prioritizes shareholder returns over growth, with buybacks currently offering a better outcome than drilling incremental wells. CFO Corey Code defended the balanced approach, stating that strong free cash flow allows for both meaningful debt reduction and opportunistic share repurchases, making the 50/50 split appropriate.

Doug Leggate of Wolfe Research posed two philosophical questions: First, whether future efficiency gains would lead to higher production or lower capital. Second, he asked how Ovintiv plans to gain relevance and compete for investor capital at its current scale, and if they were engaged in M&A talks.

Answer

Executive Brendan McCracken responded that the choice between higher production and lower capital will be driven by value and free cash generation, considering the macro environment. On scale, he expressed confidence in their current investor relevance and the role of strong independents in driving innovation, while noting the ultimate driver is shareholder value. He declined to comment on any specific M&A discussions.

Doug Leggate asked if the strong Q1 capture rate of 104%, achieved despite heavy turnarounds, represents a structural upward shift due to the commercial organization's efforts. He also sought clarity on the comfortable net debt level for MPC, beyond the stated cash target.

Answer

CEO Maryann Mannen and executive Rick Hessling confirmed the strong capture rate reflects sustainable commercial improvements, with an ongoing objective of approaching 100%. Hessling noted the performance was structurally sustainable and broad-based across all regions. Regarding debt, CFO John Quaid specified that MPC is comfortable with a stand-alone gross debt level of around $7 billion, supported by the growing MPLX distribution which covers MPC's dividend and capex.

Douglas Leggate asked about Marathon's contingency plans for potential tariffs on Canadian heavy crude, specifically how the company's refinery diet would adapt. He also requested clarification on the strategic comment to "optimize our portfolio."

Answer

CEO Maryann Mannen and executive Rick Hessling explained that while they expect cost increases from tariffs, they believe the producer would bear most of the impact. They stated MPC is well-prepared through extensive scenario planning and can leverage its integrated system and logistics to pivot to alternative crudes like Bakken and Utica, particularly in the Mid-Con region, potentially creating a competitive advantage. Regarding portfolio optimization, Mannen reiterated the long-standing strategic pillar of ensuring every asset meets cash flow expectations and fits into the company's long-term operational plans.

Douglas Leggate asked about the extent of balance sheet tolerance, specifically the net debt limit at the MPC level, to sustain cash returns during a potentially soft margin environment. He also requested clarification on the phrase "optimize our portfolio," questioning if a strategic review of assets was underway.

Answer

CEO Maryann Mannen stated that MPC is comfortable with a minimum cash balance of around $1 billion and a gross debt-to-capital ratio of 25% to 30% at the parent level, supported by durable cash flows from MPLX. She clarified that the "optimize our portfolio" comment refers to the ongoing commitment to ensure all assets remain competitive and cash-flow positive, not a new or different strategic review.

Douglas Leggate asked if the recent capital reduction was a strategic move to protect the company's 3-year cumulative free cash flow target. He also sought clarification on how the $6 billion CapEx plan, which results in flat oil production, aligns with the previously stated sustaining capital figure of around $4.5 billion, and where future capital flexibility might come from.

Answer

CEO Ezra Yacob confirmed the move was directionally aligned with protecting shareholder value and free cash flow targets. He clarified that the current plan is not a maintenance case, as it includes significant investment in gas growth and emerging assets. Capital was reduced in flexible legacy plays, and any further significant cuts that would let volumes decline would require a dramatic market event similar to 2020.

Douglas Leggate from Wolfe Research asked if ExxonMobil would maintain its $20 billion share buyback pace, regardless of commodity prices, to repurchase shares issued for the Pioneer acquisition, and also inquired about the startup timing for Golden Pass LNG.

Answer

Chairman and CEO Darren Woods confirmed that repurchasing Pioneer shares is a key objective, and he views lower stock prices as a buying opportunity. CFO Kathy Michaels added that the company's financial plan is resilient, projecting $110 billion in surplus cash flow through 2030 even in a lower price scenario. Regarding Golden Pass, Woods expects first LNG by the end of 2025, with a potential slip into early 2026.

Questioned the company's cash distribution philosophy, particularly the balance between buybacks and dividends. He suggested the current buyback pace seems aimed at repurchasing shares from the Pioneer acquisition and asked if the company is delaying a more significant dividend increase until that is complete.

Answer

The CFO clarified that the increased buyback pace coinciding with the Pioneer acquisition was driven by incremental cash flow, not a strategy to buy back specific shares, calling it a coincidence. The company's dividend policy remains focused on being sustainable, competitive, and growing, and they are committed to their 42-year track record of annual increases.

Douglas Leggate questioned the company's cash distribution philosophy, specifically 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 described the alignment of the $20 billion annual buyback pace with the Pioneer acquisition as a coincidence, though the deal's cash flow did enable the increase. She reiterated that the company's dividend philosophy is to be sustainable, competitive, and growing, highlighting their 42-year track record of annual increases and its importance to their large retail shareholder base.

Douglas Leggate asked to what extent Shell would lean on its balance sheet to maintain its buyback pace if the oil price outlook weakens, and requested an update on progress toward the $5-7 billion cost savings target.

Answer

CEO Wael Sawan and Executive Sinead Gorman both confirmed a willingness to lean on the balance sheet, which has been positioned for this purpose with low gearing. They emphasized that the free cash flow growth target is resilient due to self-help measures. Regarding costs, Sinead Gorman noted that the divestments of Singapore and Nigeria will contribute several hundred million in OpEx reduction over the course of the year, adding to the structural changes driving toward the larger goal.

Douglas Leggate of Wolfe Research, LLC asked for an update on the visibility of asset disposals for 2025, including in Nigeria and Singapore, and questioned when dividend growth might be prioritized over share buybacks to enhance shareholder value.

Answer

Executive Wael Sawan stated that the Singapore divestment is nearing completion while the Nigerian deal is under review, noting the power strategy is shifting to support trading. Executive Sinead Gorman reiterated the commitment to a progressive dividend but emphasized that buybacks remain the preferred use of marginal capital due to the shares' attractive valuation.

Douglas George Blyth Leggate questioned the sustainability of TotalEnergies' share buyback program, asking about the trade-offs involved if it requires leaning on the balance sheet and what macroeconomic conditions would trigger a reduction in capital spending.

Answer

CEO Patrick Pouyanné affirmed the company's commitment to its shareholder return policy, stating the 40% of cash flow payout is a "strong guidance" and not in question. He noted the Board considers current market conditions "reasonable" for maintaining the $2 billion quarterly buyback and monitors a "normalized gearing" metric, which stands at a comfortable 11%. Pouyanné explained that a significant spending reduction would only be considered in a severe downturn, like oil below $50/barrel, but that U.S. tariffs could lead to pausing specific renewable projects if their profitability is impacted.

Douglas George Blyth Leggate from Wolfe Research asked about BP's increased divestment target, questioning if the $20 billion goal could be exceeded given the quality of assets. He also sought clarification on the recent BPX joint venture resolution with Devon, its impact on capital costs, and the 650,000 barrel-a-day target for 2030.

Answer

Executive Murray Auchincloss expressed confidence in hitting the $20 billion divestment target, citing strong progress and interest in assets like Castrol, but refrained from guiding to an upside. On the BPX-Devon JV, he confirmed no impact on the 2030 production target and stated BP is focused on maximizing NPV per dollar, not just minimizing cost. He contrasted BP's approach of using three strings to capture more resources with Devon's two-string, lower-cost philosophy, asserting that benchmarking will ultimately validate their value-focused strategy.

Douglas Leggate from Wolfe Research sought clarification on the $40 breakeven price, the nature of a $917 million one-off cost, and whether financing charges are included in the breakeven calculation.

Answer

CFO Katherine Thomson clarified the $917 million was a non-cash technical accounting remeasurement related to the step acquisitions of bp bioenergy and Lightsource bp. CEO Murray Auchincloss confirmed that financing costs, including hybrid interest, are included in the balance point calculation.

Douglas George Blyth Leggate inquired about the Board's perspective on strategic alternatives, specifically the separation of the Midstream business as proposed by activist investors, and the rationale for maintaining an integrated structure.

Answer

Mark Lashier, Chairman and CEO, provided a comprehensive defense of the company's integrated strategy. He emphasized the Board's extensive experience with major corporate separations and their diligent review process, which includes third-party analysis. Lashier detailed significant dissynergies, a potential multi-billion dollar tax burden on a sale, and diseconomies of scale that would result from a spin-off. He asserted that Phillips 66 is a deeply integrated hydrocarbon processor, not a conglomerate, and highlighted recent strategic actions as evidence of the Board's proactive value creation.

Douglas Leggate asked for clarification on new asset disposal targets, noting that while the previous target was met, management's language suggested new goals. He specifically inquired about the status of the European retail system and whether Phillips 66 would ever consider separating the Midstream business to unlock its value.

Answer

CEO Mark Lashier clarified that no new firm disposal target has been set, as it can be counterproductive during negotiations, but confirmed active discussions for the European retail assets. Regarding a Midstream separation, Lashier and CFO Kevin Mitchell stated that while the option exists, the current belief is that more value is created by keeping the business integrated. Mitchell added that the near-term plan is to better articulate the value of the integrated model to investors and noted the German-Austria business has about $300 million in EBITDA.

Douglas Leggate of Wolfe Research asked for the EBITDA impact of recent asset sales and the company's view on whether a higher mid-cycle for refining is still achievable.

Answer

Chairman and CEO Mark Lashier stated they would provide a revised mid-cycle earnings capacity outlook early next year to account for portfolio changes. He also expressed a bullish medium-term outlook for refining beyond 2025, believing global demand growth will outpace net capacity additions, supporting their enhanced earnings capability.

Douglas George Blyth Leggate inquired about the Olympus acquisition's impact on EQT's levered breakeven price and sustaining capital. He also asked for a comparison of Olympus's inventory depth to EQT's existing assets and questioned the company's future gas pricing strategy regarding the mix between bid-week and spot sales.

Answer

CEO Toby Rice emphasized that the Olympus acquisition is accretive with a high-quality, low-cost asset base. CFO Jeremy Knop specified the post-deal levered breakeven at approximately $2.35 for 2025 and noted the deal is modestly deleveraging. On inventory, Rice stated the deal was underwritten on Marcellus assets, with the Utica representing long-term upside. Regarding pricing, Knop explained that as leverage decreases, EQT will have more flexibility to sell into daily markets to capture volatility, a strategy enabled by the stability of its integrated midstream assets.

Douglas George Blyth Leggate inquired about the timeline and risk associated with achieving both the base and upside synergy targets from the Equitrans acquisition. He also sought clarity on the flexibility of EQT's gas curtailment strategy in response to price volatility, particularly given the removal of minimum volume commitments (MVCs).

Answer

CEO Toby Rice confirmed the integration is ahead of schedule and that operational synergies will be detailed in the 2025 budget. CFO Jeremy Knop elaborated that EQT's low-cost structure and removal of MVCs allow for a highly tactical curtailment strategy, enabling them to turn up to a Bcf/day on and off daily. This strategy improved Q3 price differentials by $0.10/Mcf by avoiding sales in low-price environments while preserving upside exposure.

Douglas Leggate asked for Range's outlook on regional gas pricing given potential new in-basin demand from data centers, and questioned the long-term implications of its stated $600 million sustaining capital level for maintaining 2.6 Bcf/d of production.

Answer

CEO Dennis Degner responded that new in-basin demand projects should strengthen regional basis pricing over time. CFO Mark Scucchi clarified that the $570-$600 million capital figure represents a maintenance level that preserves a low reinvestment rate and high margins. He described future growth as 'modular,' allowing Range to add production efficiently as demand materializes without altering its fundamental low-cost structure.

Douglas Leggate requested elaboration on opportunities related to takeaway capacity and in-basin demand, particularly from data centers. He also questioned the long-term sustainability of Range's best-in-class capital efficiency, given the historical benefit of developing on previously established pads.

Answer

CEO Dennis Degner pointed to near-term in-basin demand growth from industrial projects, coal-to-gas switching, and rising power burn, referencing the recent PJM auction price spike as an indicator of future needs. CFO Mark Scucchi addressed capital efficiency, explaining that since half of the wells are drilled on new pads each year, the program develops across the entire acreage footprint. This approach avoids exhausting specific areas, ensures consistent results, and allows for ongoing optimization of the gathering system, supporting decades of inventory life.

Douglas Leggate of Wolfe Research asked about the future production volume trajectory, given that Suncor has nearly achieved its three-year growth target in the first year. He also requested that management frame the company's long-term Asset Retirement Obligation (ARO) liability and its annual financial impact.

Answer

CEO Richard Kruger identified Firebag and Fort Hills as the two areas with the greatest potential for further growth beyond the initial target. Regarding ARO, CFO Kris Smith described it as a "very long-term ratable spend" averaging $400-$500 million per year, not a large balloon payment. EVP, Oil Sands, Peter Zebedee, added that standardizing engineering assumptions and driving mining efficiencies have helped reduce the overall ARO liability.

Douglas Leggate of Wolfe Research, LLC challenged the company's capital allocation, asking why share buybacks are prioritized over more aggressive debt reduction. He also asked what natural gas price would be required for gas-directed drilling to compete with liquids projects.

Answer

CFO Jeff Ritenour defended the 'all of the above' strategy, noting 30% of free cash flow is allocated to the balance sheet. COO Clay Gaspar stated the company plans to rejuvenate its inventory, not operate in a 'blowdown mode,' and that even at higher gas prices, the portfolio's oil projects currently generate more robust returns.

Douglas Leggate challenged the capital allocation strategy, asking why share buybacks are being prioritized over more aggressive debt reduction given the company's $8 billion debt load and commodity price uncertainty. He also questioned how the value of the Grayson Mill acquisition holds up at the current forward strip compared to when the deal was announced at a higher oil price.

Answer

Chief Financial Officer Jeff Ritenour defended the strategy, stating Devon's financial strength allows it to balance both debt reduction and shareholder returns, especially when the equity is viewed as discounted. President and CEO Richard Muncrief addressed the Grayson Mill deal, noting it was evaluated on long-term, mid-cycle pricing. He also pointed out that the final transaction value was closer to $4.6 billion, not the $5 billion headline number, due to the stock component and market pullback, and expressed "no regrets" about the acquisition.

Douglas Leggate of Wolfe Research highlighted the exceptional performance in the Lower 48 and asked about the company's philosophy: whether to accept the resulting production growth or to reduce activity and capital in response.

Answer

Chairman and CEO Ryan Lance credited the performance to significant drilling and completion efficiencies. He explained that production growth is an outcome of their plan, which prioritizes operating within an efficient window to avoid whipsawing the organization. Lance noted that instead of adding rigs as once thought necessary, efficiency gains have driven growth. The Marathon acquisition provides further opportunity to optimize plateaus in the Bakken and Eagle Ford, and the focus remains on capital efficiency and returns rather than targeting a specific production growth number.

Douglas Leggate asked how the newly announced $1 billion in synergies from the Marathon acquisition would impact the company's portfolio breakeven price, both before and after the dividend.

Answer

Andy O'Brien, SVP of Strategy, stated that the company's long-term free cash flow breakeven, previously in the mid-$30s, will be lowered by a couple of dollars to the low $30s due to the Marathon transaction and increased synergies. He added that the dividend represents about another $10 on top of that figure, and this low breakeven underpins the recent 34% ordinary dividend increase.

Douglas Leggate asked a two-part question comparing the new 2026 free cash flow guidance to the prior 2027 outlook and requested commentary on reports of Kazakhstan seeking revised terms for the TCO concession extension.

Answer

CFO Eimear Bonner stated the guidance is aligned with and reaffirms the previous outlook. CEO Mike Wirth addressed the TCO concession, noting the immediate focus is on the FGP ramp-up and that any future extension must be competitive and mutually beneficial, acknowledging the complexity of such negotiations.

Douglas Leggate from Wolfe Research asked about Imperial's current breakeven oil price and its expected evolution, which could create more room for dividend growth. He also questioned the company's willingness to leverage its strong balance sheet to fund a Substantial Issuer Bid (SIB) for share repurchases.

Answer

SVP of Finance Dan Lyons reiterated the company's low breakevens: under $25 WTI for cash flow and under $35 WTI including the dividend and sustaining capital. He noted that continued volume growth and cost reductions provide headroom for future dividend increases. Regarding the balance sheet, Mr. Lyons stated that while borrowing for a buyback is possible, it is not their current practice; they prefer to use leverage for accretive investments and return surplus free cash flow to shareholders.

Douglas George Blyth Leggate from Wolfe Research asked how changes in maintenance scheduling are enhancing Kearl's long-term production capacity. He also asked for the company's current dividend breakeven WTI price.

Answer

Bradley Corson, Chairman, President and CEO, detailed improvements at Kearl, moving from ~70 days of annual turnarounds to a single, sub-20-day event, driving higher production and lower costs. Dan Lyons, SVP of Finance and Administration, confirmed the dividend breakeven is around the $35 WTI mark disclosed at the last Investor Day, supported by volume growth and lower OpEx.

Douglas Leggate questioned whether the planned 60% liquids weighting for 2025 turn-in-lines represents a new normal for the company's production mix and asked for details on the pressure management program.

Answer

President and CEO John Reinhart confirmed that the shift towards liquids will be a continuous part of Gulfport's portfolio for years to come, aiming to improve margins. He described the pressure management program as a portfolio-wide philosophy of managing early flowback to improve reserves and lower declines, which is transferable across both gas and condensate wells and adjusted based on commodity prices.

Douglas Leggate challenged the valuation presented on the mid-cycle free cash flow slide, questioning how $100 million in free cash flow from the EOP supports the illustrated equity value. He also asked about the strategic options available to unlock the embedded value in Delek Logistics (DKL).

Answer

President and CEO Avigal Soreq defended the valuation by stating the $100 million from the Enterprise Optimization Plan (EOP) is a minimum target and is already in execution, ensuring significant future free cash flow. EVP of Corporate Development Mark Hobbs added that DKL deconsolidation is a top priority, and recent high-valuation midstream transactions in the Permian support the value Delek has built, with all options for value creation being evaluated.

Douglas George Blyth Leggate asked why Coterra would not commit to continuing its highly efficient simul-frac program in 2025 and questioned the broader capital allocation strategy across its assets given its significant operational flexibility.

Answer

Tom Jorden, Chairman, CEO and President, explained that while continuing simul-frac is the likely path, the company maintains flexibility to pivot towards natural gas if market conditions warrant. He reiterated Coterra's disciplined capital framework, which involves reinvesting 40-70% of cash flow into projects that offer attractive returns even under draconian price scenarios, with production growth being an output of this value-driven process.

Douglas Leggate asked about the fundamental supply-demand dynamics in California, particularly for diesel given the rise of renewable diesel, and posed a philosophical question about the decision to raise dividends and buy back stock during a depressed cycle, suggesting it could increase net debt at the expense of equity value.

Answer

President and CEO Matthew Lucey and executive Paul Davis addressed the California market, noting that while renewable diesel is a factor, the overall product slate is becoming shorter, especially for gasoline and jet fuel, which will increase reliance on logistically complex imports. On capital allocation, Lucey countered the "lower for longer" thesis, stating that management's medium- to long-term outlook is very constructive due to pending refinery closures and PBF's competitive position, justifying the shareholder returns.