Paul Sankey

Paul Sankey asked for specifics on Kazakhstan, inquiring about the cause of the Tengiz (TCO) power outage and whether the CPC loading berth issue was due to military activity.

Answer

Chairman and CEO Mike Wirth stated that the TCO power outage investigation is ongoing, but confirmed it was a mechanical issue, not sabotage or cybersecurity. He explained that one of the three CPC offshore single point moorings was out for maintenance, and another was hit by a submarine drone in December as part of Black Sea military activity, reducing the terminal to one loading berth. Two berths are now back in service, with the third slated for maintenance later in the year.

Paul Sankey asked for specifics on the cause of the TCO power outage in Kazakhstan and whether the CPC loading berth issue was related to military activity.

Answer

Chairman and CEO Mike Wirth stated that the investigation into the TCO power outage is ongoing, but confirmed it was a mechanical issue, not sabotage or cybersecurity. He explained that one of the CPC loading berths was hit by a submarine drone in December as part of military activity in the Black Sea, which reduced the terminal to one loading berth, but two are now back in service.

Paul Sankey asked Chairman and CEO Mike Wirth to set the stage for the upcoming Investor Day by discussing how the macro environment has changed since the last meeting in 2023, citing factors like the Russia-Ukraine war, ESG shifts, the AI boom, OPEC policy, the potential for a second Trump administration, and the interest rate environment.

Answer

Chairman and CEO Mike Wirth acknowledged the constant changes in the world, noting significant shifts since 2023, including geopolitical conflicts, evolving ESG focus, the rise of AI, and changes in OPEC policy and political landscapes. He emphasized that affordable and reliable energy remains fundamental to global economic progress. Wirth stated that Chevron's strategy has withstood volatility, and the Investor Day will provide guidance to the end of the decade, focusing on consistent cash and earnings growth through capital/cost discipline, innovation, technology, and a strong, low-risk portfolio, continuing to reward shareholders with strong cash returns.

Paul Sankey asked Chairman and CEO Mike Wirth to set the stage for the upcoming Investor Day by discussing how the macro environment has changed since the last meeting in 2023, citing factors like geopolitical conflicts, ESG shifts, the AI boom, OPEC policy, and interest rates.

Answer

Chairman and CEO Mike Wirth acknowledged the significant global changes since the last Investor Day, including geopolitical conflicts, evolving ESG focus, the rise of AI, and shifts in economic conditions. He emphasized that despite this volatility, the fundamental need for affordable and reliable energy, driven by global economic growth and population increase, remains constant. He stated that Chevron's strategy has proven resilient, and Investor Day will focus on consistent cash and earnings growth through capital and cost discipline, innovation, technology, a strong and low-risk portfolio, and continued shareholder returns via dividends and share repurchases.

Paul Sankey asked a series of questions regarding the potential to operate at the low end of the CapEx range, whether Chevron is underinvested in refining, the possibility of mega-deals, and how the new power investment fits into capital priorities.

Answer

CEO Mike Wirth affirmed that operating at the low end of the CapEx range is possible, emphasizing capital discipline. He stated they are always open to the right downstream opportunity but will not overpay. He declined to speculate on mega-deals and confirmed the power investment must compete for capital within the existing budget.

Paul Sankey asked about the recent rise in oil prices to $70, its relation to the sanctioned shadow fleet, and the impact of the recent storm on U.S. oil demand, particularly heating oil. He also inquired about Valero's investment strategy post-California shutdown, its changing exposure to California, and potential for increased CapEx on a heavier crude slate.

Answer

R. Lane Riggs (Chairman, CEO and President, Valero Energy Corporation) attributed the $70 oil price to geopolitical risk, winter storm production cuts, and issues with CPC/Tengiz. Gary Simmons (EVP and COO, Valero Energy Corporation) noted a significant uplift in diesel demand in heating oil markets like Boston but less overall impact due to Valero's wholesale presence. R. Lane Riggs stated that CapEx would decrease with Benicia's shutdown, and Valero would continue to operate Wilmington. He mentioned studying incremental spending on a heavier slate but emphasized a preference for small CapEx projects over large coker expansions.

Paul Sankey followed up on potential investment changes as Valero shuts down its California operations, asking how its exposure to California will change, if it will access the market through other means, and whether more CapEx might be undertaken with heavier oil returning to the market.

Answer

R. Lane Riggs, Chairman, CEO, and President, stated that Valero's CapEx would not increase due to the West Coast changes; rather, sustaining CapEx would fall by approximately $150 million after Benicia's shutdown. He reiterated the challenges of operating in California but confirmed continued operation of Wilmington. He also mentioned that Valero would study incremental spending on a heavier slate if constraints are hit again, but any projects would likely fit into small CapEx, not large expansions.

Paul Sankey of Sankey Research asked about the reasons for sustained high U.S. refining throughput despite recent shutdowns and the outlook for the second half of the year. He also inquired about the impact of Nigeria's new refining capacity on Atlantic Basin markets.

Answer

VP of Refining Services Greg Bram attributed high throughput to strong post-turnaround operational performance and relatively mild summer weather. EVP & COO Gary Simmons noted that Nigeria's Dangote refinery is still struggling with its resid FCC unit, causing it to run lighter crudes like WTI and remain a net importer of gasoline, thus having a limited impact on Atlantic Basin product balances so far.

Paul Sankey of Sankey Research questioned why U.S. refining throughput has remained high despite shutdowns and asked about the impact of Nigeria's new refining capacity on Atlantic Basin markets.

Answer

VP Greg Bram attributed high U.S. throughput to strong operational performance, mild weather, and fewer outages, with H2 turnarounds looking average. EVP & COO Gary Simmons noted that Nigeria's Dangote refinery is still facing operational issues with its FCC unit, causing it to run light crudes and import gasoline, thus limiting its immediate market impact.

Paul Sankey requested commentary on trade arbitrages and the outlook for the Atlantic Basin, considering factors like the new Dangote refinery. He also asked for insight into how potential tariffs on crude would be practically implemented.

Answer

Gary Simmons, EVP and COO, explained that the Dangote refinery's ramp-up is primarily impacting European markets and is being offset by other shutdowns, keeping trade flows relatively stable for Valero. Regarding tariffs, Lane Riggs, CEO, stated that the impact is speculative but would likely be shared between producers and refiners in captive markets, while the Gulf Coast would price it in against alternatives.

Paul Sankey asked for ExxonMobil's perspective on the current AI CapEx boom, especially given the company's reduced CapEx guidance. He inquired about the challenges of deploying such large capital and the direct impacts of the AI boom on ExxonMobil's business, both positive and negative.

Answer

Darren Woods, Chairman and Chief Executive Officer, stated that the lower CapEx guidance reflects disciplined spending, pacing investments in new ventures with market uncertainty, not a change in activity. He acknowledged business opportunities in low-carbon data centers and significant internal deployment of AI in areas like Permian operations and optimizing production, focusing on material impacts.

Paul Sankey asked for ExxonMobil's perspective on the current AI CapEx boom, the challenges of deploying such large capital, and the direct impacts (challenges or benefits) of this boom on ExxonMobil's business.

Answer

Darren Woods, Chairman and CEO, stated that effectively swinging capital is difficult and emphasized ExxonMobil's disciplined, long-term approach. He clarified that the lower CapEx guidance reflects market uncertainty for new ventures (low-carbon solutions, data centers, carbon materials, Proxima), not a change in activity. He highlighted the business opportunity in low-carbon data centers and the internal deployment of AI in Permian operations and other sites to optimize production and learn from data, focusing on material impacts rather than a scattershot approach.