Douglas Leggate

Douglas Leggate inquired about the cadence of Range Resources' DUC capacity and the factors that would lead the company to defer bringing production online if gas prices soften. He also questioned why Range continues to commit a high percentage of production to bid week rather than allowing more exposure to cash market spikes, given its strong balance sheet.

Answer

CEO Dennis Degner explained that the timing of DUC turn-in-lines aligns with mid-year infrastructure commissioning and anticipated improving fundamentals, with flexibility to adjust dry gas production. Regarding bid week, Mr. Degner detailed a multidisciplinary approach that toggles committed percentages based on pricing expectations, aiming to balance strong committed sales with opportunities for daily price fluctuations.

Douglas Leggate questioned the cadence of Range Resources' DUC (Drilled Uncompleted) capacity, asking what factors, particularly softer gas prices, might lead the company to defer bringing on production. He also probed Range's bid week strategy, specifically why the company commits approximately 90% of its production to bid week rather than allowing more volumes to float on the cash market, given its strong balance sheet and low breakeven costs.

Answer

CEO Dennis Degner explained that the DUC capacity timing aligns with infrastructure coming online in late Q2 2026, leading to production turning to sales in the second half of the year, which is complementary to improving winter pricing. He noted that approximately 900,000 lateral feet are planned to be turned to sales in 2026, with flexibility to adjust dry gas turn-in-lines if market signals warrant. Regarding the bid week strategy, Mr. Degner stated that the 90% commitment is a result of a multidisciplinary team's assessment of weather and macro factors, allowing them to toggle the percentage to capture strong pricing, as seen with 97% commitment in February.

Douglas Leggate asked for clarification on the SRE benefits, specifically why they weren't broken out as non-recurring and where they appear in the financials, and inquired about HF Sinclair's capital spending run rate and sustaining capital for the total business.

Answer

Atanas Atanasov, CFO, explained the $115 million SRE benefit as a cumulative recovery of prior expenses impacting cost of sales, while the $56 million was revenue from RINs optimization. Tim Go, CEO, stated SREs are not viewed as a one-time event. Atanas Atanasov, CFO, clarified CapEx spend timing and reaffirmed full-year guidance. Tim Go, CEO, anticipated substantial CapEx reduction in 2026, having passed the catch-up maintenance period.

Douglas Leggate asked for an update on the status of Small Refinery Exemptions (SREs) and their potential financial impact. He also sought further clarification on the long-term strategy for the lubricants business, questioning whether it is considered core or an asset to be monetized for maximum value.

Answer

CEO Timothy Go stated that while a path for SREs may exist, the outcome is highly uncertain, but noted three of their plants have received exemptions in the past. Regarding the lubricants business, Go clarified that he views it as 'independent' rather than 'core' or 'non-core,' which provides strategic flexibility for growth or monetization. The near-term focus is on capturing internal value, but all options are continually evaluated to maximize shareholder returns.

Douglas Leggate asked about the risk to HF Sinclair's mid-cycle gross margin assumption of $15/bbl, given market changes like new capacity and the TMX pipeline. He also inquired about how the renewable diesel portfolio is positioned for the upcoming shift from the Blender's Tax Credit (BTC) to a carbon intensity (CI) based system.

Answer

CEO Timothy Go and EVP of Commercial Steven Ledbetter expressed confidence in their mid-cycle guidance, viewing 2025 as a more balanced environment despite near-term pressures from TMX on crude differentials. On renewables, management stated they are preparing by increasing their low-CI feedstock mix and can pivot sales to markets less dependent on CI value. They anticipate future support from higher RINs and LCFS credit prices, including the new New Mexico LCFS program, which should provide a tailwind.

Douglas Leggate asked about the sustainability of Phillips 66's record refining utilization rates, inquiring if the approach to planned turnarounds and overall capacity management is changing, potentially leading to higher average utilization over time for the industry. He followed up by questioning why net debt reduction is not explicitly included in the company's cash return formula, despite its clear benefit to equity value.

Answer

Refining executive Rich Harbison attributed the sustained high utilization to a long-term journey of continuous improvement, focusing on world-class reliability programs and fundamental changes in cost and margin outlooks at each site, ensuring sustainability. EVP and CFO Kevin Mitchell acknowledged that debt reduction directly increases equity value and is a key part of the capital allocation framework, but explained that the company traditionally separates 'cash return to shareholders' (dividends and buybacks) from 'debt reduction' in its communication, despite recognizing the value proposition for equity holders.

Douglas Leggate asked about the sustainability of Phillips 66's high refining utilization rates, changes in turnaround management, and why net debt reduction is not explicitly part of the cash return formula despite its positive impact on equity value.

Answer

Richard Harbison, EVP of Refining, attributed sustained high utilization (99% in Q3) to a long-term journey of improved reliability programs and fundamental changes in cost and margin outlooks. Kevin Mitchell, EVP and CFO, acknowledged that debt reduction directly boosts equity value, aligning with the company's capital allocation framework, but explained that it is typically broken out separately from the 'cash return to shareholders' formula for communication purposes.

Douglas Leggate asked about the trend in Expand Energy's breakeven price, considering continued synergy delivery and a $150 million reduction in sustaining capital. He also inquired about the progress of the marketing uplift initiatives and their impact on realization, specifically asking if the breakeven is now below $3.

Answer

CEO Nick Dell'Osso highlighted tremendous capital efficiency, exceeding synergy goals, and driving breakevens lower, confirming the 2026 setup for 7.5 bcf/d production with similar CapEx. He described the marketing uplift as being in 'pregame warm-ups,' with the Lake Charles Methanol transaction as a prime example of value creation. Nick Dell'Osso confirmed the company's breakeven is now 'well below $3,' reflecting over $0.15 improvement since pre-merger 2024.

Douglas Leggate inquired about the discrepancy between Valero's strong earnings and its cash flow in Q3 2025, asking if there were transitory issues like cash taxes or other factors impacting the translation of earnings to cash flow.

Answer

Homer Bhullar, Vice President, Investor Relations and Finance, explained that a significant variance was due to items like PTC (Production Tax Credits) being booked in earnings but paid later, appearing as a deduction from net cash flow from operations. He noted that while there might be small deferred tax items, nothing substantial impacted cash flow from a tax perspective.

Douglas Leggate of Wolfe Research asked about the prognosis for the Wilmington refinery, given it was also impaired, and inquired about the future implications for capital spending and cash flow after the Benicia closure.

Answer

Homer Bhullar, an executive, confirmed impairment charges for both Benicia ($901M) and Wilmington ($230M). An executive named Greg added that historically, Benicia has had higher operating expenses and capital needs than Wilmington, and a large upcoming turnaround was a factor in the decision.

Douglas Leggate of Wolfe Research questioned the global supply outlook, suggesting that latent utilization capacity could delay a market rebalancing, and asked about the cost competitiveness and future of Valero's California portfolio.

Answer

EVP and COO Gary Simmons acknowledged the role of utilization but stated he expects additional, unannounced refinery closures due to poor economics and capital needs elsewhere. CEO Lane Riggs conceded that California is their highest-cost operation and that while their strategy has been to act as a call option on West Coast cracks, the intense regulatory environment is forcing a re-evaluation of their long-term operations there.

Douglas Leggate sought clarification on whether the $0.5 billion capital reduction was from growth or base maintenance capital and asked about the resulting impact on the company's breakeven price.

Answer

SVP Andy O'Brien clarified that the reduction is a mix of deferring non-producing items and capturing deflation, rather than altering major activities like rig counts. He stated the full-year free cash flow breakeven remains in the mid-$40s per barrel, inclusive of about $7/bbl for major projects. He reiterated that the breakeven is expected to fall to the low $30s as these projects come online.

Douglas Leggate questioned the capital efficiency trade-off of the new plan ($400M cut for a 5M barrel loss) and asked for insights from non-operated assets on how the broader industry is reacting to lower prices.

Answer

President Kaes Van’t Hof explained the production impact is nuanced by its intra-year timing, with a sharp mid-year drop affecting the annual average. He added that anecdotal evidence from conversations with private operators indicates they are broadly 'pushing everything to the right,' confirming a dramatic slowdown for the marginal U.S. barrel.

Douglas Leggate asked for Chevron's perspective on two major macro issues: the potential loss of production from Venezuela and the market share dynamics with OPEC+, particularly concerning Kazakhstan's production.

Answer

CEO Mike Wirth stated that while U.S. liftings from Venezuela have halted, the barrels are flowing to other markets like China, and discussions on license modifications are ongoing. Regarding Kazakhstan, he clarified that discussions with the President did not involve OPEC+ quotas, as TCO barrels are high-value and have historically not been curtailed.

Douglas Leggate of Wolfe Research observed the stock's underperformance since the Hess deal announcement and questioned why Chevron doesn't close the deal now, given its confidence in its legal position regarding the arbitration.

Answer

CEO Mike Wirth acknowledged that uncertainty around the Hess deal is a contributor to stock performance, along with other factors like the past TCO update. He explained that the deal structure includes a condition precedent that the arbitration must be concluded before closing, and Chevron intends to execute the transaction as written.

Douglas Leggate asked about the company's cash distribution philosophy, particularly the balance between share buybacks and dividend growth, and questioned if the company was prioritizing buying back Pioneer shares before accelerating dividend increases.

Answer

CFO Kathy Mikells described the alignment of the $20 billion buyback pace with the Pioneer acquisition as a 'coincidence' driven by incremental cash flow. She reiterated that the company's dividend philosophy is to be sustainable, competitive, and growing, highlighting their 42-year record of annual increases. She noted that buybacks also reduce the absolute dividend cost.

Douglas Leggate asked for more details on the financial impact of the new Egypt gas price agreement and for a breakdown of the moving parts in the U.S. oil production guidance following recent asset sales.

Answer

CEO John Christmann explained the Egypt gas deal aims for economic parity between new gas and oil wells on incremental volumes but could not disclose specific pricing. He clarified the U.S. oil outlook, starting with Q3's 143k bbl/d, subtracting 13k for divestitures, to reach a flat 130k bbl/d target with 8 rigs. CFO Stephen Riney added that incremental gas volumes are measured against a pre-agreed decline curve. EVP of Exploration Tracey Henderson noted Egypt's significant, underexplored gas potential.