Geoff Jay

Geoff Jay noted the sequential margin improvement in U.S. Upstream despite lower realizations and asked about the contribution of structural cost savings and production optimization efforts, and the future pathway for these improvements.

Answer

Chairman and CEO Mike Wirth attributed the margin expansion to several factors: new high-margin production in the Gulf of Mexico, increased efficiency and productivity across the Permian, DJ, and Bakken assets, and structural cost reductions from organizational changes. He emphasized that margin expansion is a key focus, driven by value chain optimization and base business excellence, with continued results expected.

Geoff Jay noted the sequential margin improvement in US Upstream despite lower realizations and asked about the drivers, specifically the contribution of structural cost savings and production optimization efforts, and the future pathway for this trend.

Answer

Chairman and CEO Mike Wirth attributed the margin expansion to several factors: new high-margin production in the Gulf of Mexico, increased efficiency and productivity across the 1.6 million barrels per day shale portfolio (Permian, DJ, Bakken), and structural cost reductions from organizational changes. He emphasized that the focus is on continually expanding margins through value chain optimization and base business excellence, not just growing volumes.

Geoff Jay inquired about Chevron's Argentina operations, noting a significant production uptick in the quarter and the acreage size comparable to the DJ Basin, asking about the potential for Argentina production over the next 2-3 years and key gating factors for growth.

Answer

Chairman and CEO Mike Wirth highlighted Chevron's long history and strong subsurface position in Argentina's Vaca Muerta. He expressed encouragement regarding President Milei's support and improved macro signposts, such as efforts to stabilize the banking system and reduce capital controls, which could make Argentina more attractive for investment. Wirth noted modest growth this year, with 25,000 barrels/day expected in 2025, and stated that with continued policy progress, Argentina could compete effectively for capital, offering significant upside due to its scale and rock quality.

Geoff Jay inquired about Chevron's Argentina operations, noting a significant production uptick and asking about the potential for Argentina production over the next two to three years, given its acreage size similar to the DJ basin, and the key gating factors to that growth.

Answer

Chairman and CEO Mike Wirth highlighted Chevron's long history and strong subsurface position in Argentina's Vaca Muerta. He expressed encouragement for President Milei's administration and macro improvements (banking system, capital controls, inflation, infrastructure), which could enhance Argentina's investment attractiveness. He noted modest growth this year (25,000 barrels a day expected in 2025) and plans to apply lessons and technology from other basins. He stated that with continued policy progress, Argentina could compete effectively for capital, offering significant upside due to its scale and rock quality, potentially analogous to the DJ basin.

Geoff Jay from Daniel Energy Partners observed that Chevron appeared to be on the verge of a step-change down in capital intensity even before the Hess deal, due to tight oil plateaus and completed long-cycle projects. He asked how the Hess deal impacts the company's overall reinvestment and decline rates.

Answer

Chairman & CEO Michael Wirth reframed it as being on the 'precipice of a wide expansion in free cash flow' rather than a sharp decline in CapEx. He noted the larger system requires capital, and CapEx will step up with Hess's assets in Guyana and the Bakken. However, he reiterated that capital discipline remains paramount, with a focus on investing only in the best opportunities and delivering strong returns and free cash flow.

Geoff Jay asked about the number of frac fleets currently deployed with continuous pumping and the rollout plan for full deployment in the next couple of quarters. He also requested updates on base production work, including working over older wells and optimizing the PDP tail, and any observed changes or improvements.

Answer

Kaes Van't Hof (CEO, Diamondback Energy) stated two fleets are currently running continuous pumping, with plans to convert additional fleets as soon as equipment is lined up (hopefully next quarter), anticipating running four full-time fleets with a fifth as needed. He reported continued capital allocation to working over older wells, with exciting results from acidization/oxidation stimulation and encouraging early results from new chemistries. He emphasized this high-return capital could significantly lower the reinvestment rate and capital needed to replace production.

Geoff Jay asked about the current deployment of continuous pumping fleets and the rollout plan for full deployment in the coming quarters. He also inquired about updates on base production work, specifically any changes or improvements seen from working over older wells.

Answer

Kaes Van't Hof (CEO, Diamondback Energy) stated that two continuous pumping fleets are currently deployed, with plans to convert additional fleets in the next quarter, aiming to run four full-time fleets with a fifth for maintenance. Danny Wesson (COO, Diamondback Energy) added that capital continues to be allocated to working over older wells and optimizing the PDP tail, with encouraging early results from acidization, oxidation stimulation, and other chemistries. Kaes Van't Hof emphasized that successful delineation of this work could scale and potentially lower the reinvestment rate by shifting capital from D&C to post-completion work.

Geoff Jay of Daniel Energy Partners questioned the rationale for lowering activity when returns remain strong and asked if re-accelerating could lead to a loss of efficiency.

Answer

CEO Kaes Van't Hof countered that the lowest-cost operator should act prudently in an uncertain market, noting they were prepared for lower prices seen three months ago. He firmly rejected the idea that efficiency would be lost upon re-acceleration, stating that managing activity changes is a core competency and using it as an excuse for maintaining activity shows a lack of detailed business management.

Geoff Jay from Daniel Energy Partners questioned the key drivers behind BKV's well productivity outperforming its type curves and asked if this success alters the strategic mix between drilling new wells and pursuing refracs.

Answer

Eric Jacobsen, President of Upstream, attributed the outperformance to a combination of operational execution, optimized well placement using subsurface data, and engineered completion designs. He clarified that since these advancements benefit both new drills and refracs, the company plans to maintain its capital allocation of approximately 80% to new drills and 20% to refracs, as both programs remain highly competitive and accretive.

Geoff Jay requested clarification on the planned changes to rig activity for 2026, specifically whether the three San Juan rigs would be incremental and confirming that Permian rig activity would drop to zero.

Answer

CEO Tom Ward confirmed the plan is to drop the Permian rigs and add rigs in the San Juan. He stated the current San Juan rig will leave, and the plan for 2026 is to pick up two Mancos rigs and one to two Fruitland Coal rigs. This shift to gas-focused drilling would displace some oil-focused locations, depending on the price environment.

Geoff Jay asked what natural gas strip price is necessary to justify adding a second deep Anadarko rig. He also questioned whether management's outlook on natural gas for the remainder of the year had become more or less bullish compared to the previous quarter.

Answer

Executive Tom Ward explained that the decision to add the rig is driven by having sufficient operating cash flow to stay under the 50% reinvestment cap, rather than a specific gas price, as the project's returns are robust. On the commodity outlook, Ward stated he is 'less bullish' on natural gas than last quarter, foreseeing a more balanced market through the end of the year due to storage levels, new pipeline capacity, and LNG demand dynamics.

Geoff Jay from Daniel Energy Partners sought clarification on the funding for the planned third rig in 2025, asking if it was based on current strip pricing or if it assumed an increase in commodity prices.

Answer

Executive Tom Ward confirmed that the addition of the third rig is fully funded based on current strip pricing. He specified that the year-over-year increase in natural gas strip prices provided enough cash flow to add the rig while remaining within the company's 50% reinvestment rate target.

Geoff Jay asked about the specific milestones and gating factors Chord Energy is monitoring before committing to a program where four-mile laterals constitute 50% of development.

Answer

President, CEO & Director Daniel Brown stated that the primary gating factor is ensuring mechanical repeatability. He explained that while the first well was a success, the company needs to execute several more to confirm they can consistently drill, complete, and achieve contribution across the full lateral before moving to a full-scale four-mile development program.

Geoff Jay from Daniel Energy Partners asked about the specific milestones and gating factors Chord Energy is watching before committing to a program where four-mile laterals constitute 50% of development.

Answer

CEO Daniel Brown explained that the primary gating factor is ensuring repeatable mechanical success. He stated that the company needs more repetitions to confirm they can consistently drill, complete, and clean out the wells effectively and see production contribution across the entire lateral. Once this is proven, he expects a swift move toward a more full-scale four-mile development program.

Geoff Jay asked for more specific details on the changes to Murphy's well completion design in Karnes County and whether these changes were the sole driver of the recent outperformance.

Answer

President, CEO & Director Eric Hambly explained that the outperformance resulted from a combination of factors. He detailed that they adjust multiple completion design variables, and for the recent successful infill pad, they actually reduced fluid and proppant loading. He also credited an optimized flowback strategy as a key contributor to maximizing both rate and ultimate recovery.

Geoff Jay of Daniel Energy Partners asked for a breakdown of the drivers behind NFG's capital efficiency gains, specifically questioning the contribution from well productivity versus drilling and completion service cost improvements.

Answer

Justin Loweth, President of Seneca Resources, attributed the D&C cost-per-foot improvements primarily to enhanced operational efficiencies rather than service cost deflation over the past year. He emphasized that since they are in the 'early days' of this development, there is still significant opportunity to improve through better planning and execution.

Geoff Jay of Daniel Energy Partners inquired about the CapEx cadence beyond 2025 given improving well productivity, and asked if the lower LOE guidance was a function of volumes or other cost-saving measures.

Answer

Justin Loweth, President of Seneca, stated that he fully anticipates the trend of capital reduction to continue beyond 2025, driven by efficiency gains that allow for production growth with less spending. He attributed the LOE improvements primarily to a detailed focus on controllable costs by the operations team, rather than just higher production volumes.

Geoff Jay inquired about CapEx cadence beyond 2025 and improvements on the LOE side.

Answer

Justin Loweth anticipated finding additional ways to drive capital lower and attributed LOE improvements to a detailed cost focus.

Geoff Jay inquired how Ovintiv's cube development strategy lowers the long-term reinvestment rate compared to traditional methods and asked for clarification on the deployment of tech innovations in the Lower 48 versus the Montney.

Answer

President and CEO Brendan McCracken explained that cube development ensures durable returns and free cash flow by sampling across all premium inventory, insulating investors from quality degradation. EVP & COO Greg Givens added that while D&C tech is deployed uniformly, the operations control center competency is more mature in Canada but is being built out in the U.S.

Geoff Jay of Daniel Energy Partners asked about the use of Trimulfrac technology, noting it was used in 60% of Permian completions, and questioned if this rate was a good go-forward assumption for 2025 or if there was further upside.

Answer

Executive Brendan McCracken confirmed that 60% is a 'decent place to start' for 2025 planning. He noted that the company has progressively increased its use of Trimulfrac throughout the year and, while final plans are not set, it represents a reasonable baseline for the next year's program.