Paul Chang

Paul Chang followed up on Valero's refinery utilization rates, asking if the company now believes it can achieve better maximum full-cycle utilization than the historical 94%-95% due to improved operations, and if the entire industry is also improving, along with any noticeable downtime from the recent winter storm.

Answer

Gary Simmons, EVP and COO, confirmed a record year for mechanical availability in 2025, which should lead to better utilization, but found it difficult to quantify. He noted that strong margins and moderate temperatures allowed higher utilization in Q4 2025, but December's 95.4% is unsustainable. He also stated that Valero fared well during the winter storm, with no material downtime impacting the quarter's guidance.

Paul Chang asked about the decline in octane value compared to Q2, seeking insights into the cause and whether the trend is expected to continue. He also inquired about the role of robotic technology and AI, asking if these advancements represent an evolution or a transformative shift in how Valero conducts business across refining, back office, and trading, drawing a comparison to cost reduction efforts in the upstream sector.

Answer

Gary Simmons, Executive Vice President and COO, explained that octane value tends to trade inversely to Naptha. He noted that Naptha strengthened in Q3 due to reduced Russian supply, US Gulf Coast Naptha flowing to Venezuela, and increased Asian petrochemical demand, which lessened the incentive to blend Naptha into gasoline. Greg Bram, Vice President, stated that Valero has been using and expanding robotic automation and AI techniques for efficiency and inspection (e.g., tank cleaning, drone inspections) for some time, viewing it as a continuous evolution that will bring further improvements, especially given Valero's strong operational data.

Paul Chang sought clarification on the 2026 CapEx, specifically if Low Carbon Ventures (LCV) spending would be zero after redirecting $250 million, and the expected production contribution from the $400 million QuickPayback onshore projects. He also asked about the role of exploration in the company's program over the next several years.

Answer

Sunil Mathew, SVP and CFO, clarified that LCV CapEx for next year would be around $100 million. Richard Jackson, SVP and COO, explained that the $400 million is for maintaining activity, with EOR being capital efficient. Ken Dillon, SVP and President, International Oil and Gas Operations, stated that exploration in Goa is being deferred, and Oman projects are step-out wells, not large-scale exploration.

Paul Chang asked about ConocoPhillips' exploration strategy, questioning if the company still needs to increase exploration efforts given its strong Lower 48 portfolio and maturing shale, or if it can rely on existing resources to increase production long-term.

Answer

Ryan Lance (Chairman and CEO) acknowledged a broader industry question about exploration investment but stated that ConocoPhillips has historically spent $200-$300 million annually on exploration, redirecting it based on opportunities. He noted a current focus on Alaska to support Willow infrastructure for decades, and recent activity in Australia and Norway. Lance emphasized that this allocation has been sufficient for their needs, positioning ConocoPhillips as a resource-rich company without needing significant ramp-ups in exploration capital compared to peers.

Paul Chang questioned ConocoPhillips' long-term exploration strategy, asking if the company's extensive Lower 48 portfolio negates the need for increased exploration, or if maturing shale oil and growing global demand necessitate a ramp-up in long-cycle exploration efforts.

Answer

Ryan Lance, Chairman and CEO, acknowledged the industry-wide question about exploration investment. He stated that ConocoPhillips has historically spent $200-300 million annually on exploration, redirecting it based on opportunities. Currently, much of this is focused on Alaska to support Willow's infrastructure for decades. He mentioned recent activities in Australia and Norway, emphasizing that the company's resource-rich position allows it to meet exploration needs within existing capital allocation, unlike many peers.

Paul Chang inquired about the strong performance of Chevron's base operations over the past year or two, asking if management has changed its approach, if the improvements are repeatable, and if the underlying base decline rate (currently around 3%) could be lower in the future.

Answer

Chairman and CEO Mike Wirth attributed the strong base operations to a focus on meticulous execution and the company's restructuring, which aligns the upstream organization by asset class to drive best practices and technology adoption. He highlighted the use of information technology for automation and faster decision-making. He also pointed to portfolio effects, with more production from facility-limited assets (TCO, Gorgon, Wheatstone) and capital-efficient unconventional plays (Permian, DJ, Bakken) leading to shallower declines and reduced capital intensity to maintain production.

Paul Chang asked about the strong performance of Chevron's base operations over the past year or two, inquiring if management has changed its approach, if the improvements are repeatable, and whether the underlying base decline rate (currently around 3%) could be even lower in the future.

Answer

Chairman and CEO Mike Wirth attributed the performance to a focus on doing 'all the little things right' and the company's restructuring, which aligns operations by asset class to drive best practices and technology more effectively. He highlighted the application of information technology for automation and faster decisions. Wirth also pointed to portfolio effects, with more production now in facility-limited positions (like TCO, Gorgon, Wheatstone) or unconventionals managed for plateau at efficient capital (Permian, DJ, Bakken), reducing the need for massive capital investment to offset decline.

Paul Chang inquired about the size of TotalEnergies' AI investment over the next few years, the availability of talent, and the expected targets from AI adoption. He also asked about the security situation in Iraq, bottlenecks for production increases, and concerns that Iraq's potential growth could depress oil prices.

Answer

Patrick Pouyanné, Chairman and CEO, stated that the AI programs represent over EUR 300 million or $350 million in worldwide investment. He noted that talent is sourced from the company's 300-person digital factory and through growing competencies in India, aiming for additional revenues (e.g., 1% more from oil fields/refineries). For Iraq, he confirmed good security in the Basra area, where TotalEnergies operates, and identified investment as the primary bottleneck for production increases, not expecting Iraq's growth to depress oil prices in the short to medium term.

Paul Chang asked about the size of TotalEnergies' AI investment, talent acquisition for AI, the target benefits from AI over the next 2-5 years, and the situation in Iraq regarding security, production bottlenecks, and its potential impact on future oil prices.

Answer

Patrick Pouyanné, Chairman and CEO, stated the AI program investment is over $350 million worldwide for data platforms (with Amazon) and software deployment (with Cognite). He noted leveraging internal digital factory talent and exploring competency centers in India for talent, aiming for additional revenues from enhanced process control. For Iraq, he confirmed security is good in the Basra area, allowing full EPC contract signing. He believes Iraq's production growth will not depress oil prices for many years, as the development cycle is long (8 years), and future investment depends on maintaining attractive risk-reward terms.