Nitin Kumar

Nitin Kumar asked for ConocoPhillips' view on WCS (Western Canadian Select) spreads, considering the potential impact of Venezuelan heavy crude entering the Gulf Coast market.

Answer

Andy O'Brien, CFO and EVP of Strategy and Commercial, stated that ConocoPhillips expects minimal short-to-medium-term impact on WCS spreads. He noted that PADD 2 refiners are structurally reliant on Canadian heavy, and while Gulf Coast refiners can process Venezuelan barrels, the incremental supply will likely be absorbed as global markets rebalance to meet an annual global demand growth of approximately 1 million barrels per day, thus not materially impacting Canadian heavy.

Nitin Kumar inquired about ConocoPhillips' view on WCS (Western Canadian Select) spreads, specifically how the potential re-entry of Venezuelan heavy crude into the market might impact Canadian production and global crude flows.

Answer

Andy O'Brien, Chief Financial Officer and Executive Vice President of Strategy and Commercial, ConocoPhillips, stated that in the short to medium term, they do not expect a material impact on WCS spreads. He noted that Pad 2 refiners are structurally reliant on Canadian heavy crude, and incremental Venezuelan barrels would likely be absorbed by the annual global demand growth of approximately 1 million barrels per day, leading to a rebalancing of global flows.

Nitin Kumar of Mizuho Financial Group, Inc. asked for ConocoPhillips' perspective on the M&A landscape in the Lower 48, referencing comments from a peer about continued industry consolidation.

Answer

Chairman and CEO Ryan Lance agreed that industry consolidation will likely continue, particularly for companies facing inventory constraints. However, he stressed that for ConocoPhillips, the bar for M&A is now 'pretty high' due to the strength of its current portfolio. Lance stated the company's focus is firmly on organic execution, delivering on its major projects, and realizing internal cost efficiencies.

Nitin Kumar requested more details on the critical milestones achieved at the Willow project in Alaska and the expected spending trend for the project going forward.

Answer

Kirk Johnson, SVP of Global Operations, reported that the project team delivered on key milestones during the peak winter construction season, keeping Willow on track for first oil in 2029. He noted significant progress, with civil scopes roughly 50% complete and 80 miles of pipeline installed. Johnson confirmed that capital spending peaked in Q1 and is expected to taper down through the remainder of the year.

Nitin Kumar asked for Valero's 12-month view on crude spreads, particularly with the expected widening due to increased supply of heavier crudes from Canada and Iraq. He also inquired if there's a specific crude that Valero anticipates would be disproportionately impacted if not discounted appropriately.

Answer

Gary Simmons, Executive Vice President and COO, stated that current quality differentials are slightly inside what Valero considers mid-cycle and are expected to continue widening. Greg Bram, Vice President, added that Latin American grades typically act as swing barrels, being the first to back out when supply increases in the Gulf Coast.

Nitin Kumar asked for Valero's 12-month view on crude spreads, particularly with increasing supply of heavier crudes from Canada and Iraq. He also inquired if there's a specific crude that Valero expects to be disproportionately discounted if not priced appropriately.

Answer

Gary Simmons, Executive Vice President and COO, stated that current quality differentials are 'a little inside' what Valero views as mid-cycle and expects them to continue widening. Greg Bram, Vice President, Valero Energy Corporation, added that Latin American grades tend to be the swing barrels, likely backing out first as new supply enters the market.

Nitin Kumar asked how significant cost savings in the Permian would affect 2026 spending plans and inquired about the expected steady-state production run rate for the Gulf of Mexico in 2026-2027.

Answer

President & CEO Vicki Hollub and President, U.S. Onshore, Richard Jackson, clarified that the current focus is on optimizing activity for efficiency, not growth, and that capital could shift to high-return Gulf of Mexico waterflood projects. SVP Kenneth Dillon noted that a multi-year Gulf of Mexico turnaround schedule is in development, with more details on the 2026 plan to come later.

Nitin Kumar from Mizuho Financial Group, Inc. questioned how the recent U.S. bill mandating regular Gulf of Mexico lease sales fits into Talos's organic growth plans and asked about the company's organizational capabilities for international expansion.

Answer

President and CEO Paul Goodfellow described the new leasing bill as "incredibly positive," stating it underpins their organic growth strategy. Regarding international expansion, he asserted that while the company's current activity is Gulf-focused, the team possesses significant global deepwater experience and is prepared to bring in additional expertise as needed.

Nitin Kumar of Mizuho Financial Group, Inc. asked about the oil volume trajectory beyond the strong Q4 2025 ramp, questioning if 2026 would see more ratable volumes. He also inquired about the gas marketing strategy, asking if new deals would be met by reallocating in-basin volumes and if there's an advantage to retaining some in-basin exposure.

Answer

CEO Thomas Jorden stated that Q4 would be a 'flush' and that Q1 2026 would not be up from Q4, emphasizing the focus is on annual trends, not quarter-to-quarter fluctuations. EVP of Operations Blake Sirgo confirmed that new differentiated price deals, like the recent power agreement, are viewed as a reallocation of existing sales to diversify away from local gas prices like Waha.

Nitin Kumar from Mizuho posed a broad question on the macro environment, asking for Coterra's perspective on the potential duration of weak oil prices. He also asked how the company would prioritize between share buybacks and debt reduction if commodity prices weaken further.

Answer

Chairman, CEO and President Thomas Jorden stated that Coterra is preparing for a potentially extended period of oil price weakness due to policy volatility and is prudently redirecting capital to gas. EVP and CFO Shannon Young emphasized that debt repayment is the priority for 2025 to protect long-term shareholder returns, though opportunistic buybacks will continue.

Nitin Kumar asked when Coterra expects to reach a maintenance run-rate in the Marcellus to hold production flat, and inquired about the company's strategy regarding power generation opportunities for data centers in the Permian.

Answer

Chairman, CEO and President Thomas Jorden explained the current activity arrests the production decline and puts them on a path to reach their 2 Bcf/day target in mid-to-late 2026 or 2027. SVP of Operations Blake Sirgo confirmed they are actively engaged in discussions for power generation, particularly with Waha gas, but noted the commercial landscape is still developing.

Nitin Kumar requested a breakdown of the drivers behind Coterra's capital efficiency gains and their sustainability, and also asked about the repeatability of low well costs in Culberson County and the savings from simul-frac.

Answer

Blake Sirgo, SVP of Operations, attributed the outperformance to operational consistency, estimating that roughly two-thirds of the gains come from timing (faster execution) and one-third from well productivity. He confirmed the $860 per foot cost in Culberson is repeatable for similar projects and stated that forgoing simul-frac would increase costs by at least $25 per foot.

Nitin Kumar from Mizuho Financial Group, Inc. asked about the drivers behind the Gulf of America's estimated ultimate recovery (EUR) rates being 9% above expectations and how this performance changes the investment view of the region.

Answer

Vice Chairman Mark Nelson attributed the outperformance to staged developments on base assets, such as waterflooding and subsea pumping, citing Tahiti and Jack/St. Malo as examples. He stated this strong performance, combined with new projects, will likely sustain 300,000 boe/d production through the decade. The Hess deal makes Chevron the largest leaseholder, enhancing future tieback opportunities.

Nitin Kumar requested a breakdown of the $2-3 billion structural cost reduction target between upstream and downstream and asked if the 2025 weighting of savings was primarily due to asset sales.

Answer

CFO Eimear Bonner explained the savings are spread across all segments and stem from three areas: asset sales (impacting 2025), standardizing work processes, and deploying technology like robotics and AI. She confirmed a target of $1.5-2 billion in savings in 2025, reaching the full $2-3 billion goal in 2026.

Nitin Kumar of Mizuho inquired about the chemicals business, which was a tailwind in the quarter, asking for an outlook on the supply chain and margins, particularly in Asia.

Answer

CEO Mike Wirth noted that polyethylene chain margins have strengthened during the year, partly due to short-term supply disruptions. He described the market as a long-cycle commodity business working through oversupply but remains constructive long-term, expecting margins to improve as new projects come online.

Nitin Kumar asked about the status of the multi-billion dollar capital spending plan for theater upgrades previously mentioned by an industry group and whether there could be disruptions. He also asked for specifics on what drove the percentage rent activity in Q1.

Answer

CEO Gregory Silvers confirmed the theater upgrade process is underway and impacting some properties but does not see it being disrupted. EVP & CIO Gregory Zimmerman added the per-house impact is limited and economically beneficial. Regarding percentage rent, EVP & CFO Mark Peterson explained that $2.9 million was from prior periods, with the total Q1 activity driving an increase in full-year guidance for both percentage rent and participating interest income.

Nitin Kumar of Mizuho asked for the drivers behind the substantial increase in the full-year electricity margin guidance.

Answer

President and CEO Francisco Leon explained that the margin expansion comes from a combination of fixed, contracted resource adequacy payments and the operational flexibility of their power plant. By shifting the plant to a more efficient configuration during periods of low merchant power prices, they reduce costs and increase overall margins.

Nitin Kumar of Mizuho Securities asked about productivity expectations in the Delaware Basin for 2025, given longer laterals, and probed for more details on the potential scale and returns of the new Bahrain venture.

Answer

COO Jeff Leitzell stated that Delaware productivity will vary with well mix, but the focus is on maximizing full-cycle net present value (NPV), with shallower targets now offering comparable returns. CEO Ezra Yacob reaffirmed that the Bahrain project was selected for its potential to be meaningful in scale and competitive in returns, justifying the international investment.

Nitin Kumar inquired about the 2025 capital guidance for Carbon Capture, Utilization, and Sequestration (CCUS), asking what was included and if it assumed a joint venture. He also asked for clarification on lower-than-expected Q4 production taxes and the rationale for the current level of upstream activity given strong gas prices.

Answer

President of Upstream Eric Jacobsen clarified that the $130 million 'CCUS and other' capital guidance includes approximately $90 million for CCUS, assuming 100% BKV spend without a JV. CFO John Jimenez and executive David Tameron explained the low Q4 production tax was due to a one-time ad valorem tax true-up that should normalize. Jacobsen and Tameron added that the current upstream capital plan is based on a $3.50 gas price deck and could be increased in H2 2025 if prices remain strong.

Nitin Kumar asked about the impact of potential steel tariffs on service costs. He also sought to reconcile flat aggregate 2025 production guidance with lower gas and liquids volumes compared to 2024, despite new wells coming online.

Answer

CFO Michael Kennedy reiterated that the impact from a 25% tariff would be a manageable $5-$10 million in 2025. He explained the production mix change is primarily due to a 10,000 barrel/day ethane contract expiring. While this reduces liquids volumes on an equivalent basis, the molecules will now be sold as natural gas at a more economically attractive premium to NYMEX.

Nitin Kumar asked about current CMM operations, including equipment life cycles, in the context of potential 45Q rules. He also inquired about the current F&D cost for new CMM systems and the potential for volume growth beyond the current 17-18 Bcf per year.

Answer

Ravi Srivastava, President of New Technologies Group, stated that it is too early to comment on how existing equipment would qualify under 45Q or what F&D costs for new systems would be until the final regulatory language is released and the market develops.