Sam Margolin

Sam Margolin asked if the HG acquisition had a positive impact on Antero's corporate decline rate and requested quantification. He also inquired about commercial or fixed gas supply opportunities for the industrial sector along Antero's firm transport destinations, given the growth prospects in that category.

Answer

Michael Kennedy, CFO and SVP of Finance, explained that Antero's corporate decline rate was in the low 20s, while HG's was slightly higher in the mid-20s, but HG's production profile is flatter in the first couple of years due to prior midstream constraints. Justin Fowler, Senior Vice President of Natural Gas Marketing, stated that Antero's 2 Bcf firm transport to the Gulf Coast passes by 4-6 Bcf of potential demand from industrial end-users, including data centers and power projects, and that Antero continues to engage in conversations and receive RFPs for these supply opportunities.

Sam Margolin asked if the HG acquisition had a positive impact on Antero's corporate decline rate and requested quantification if accurate. He also inquired about commercial or fixed gas supply opportunities in the industrial sector along Antero's firm transport destinations, beyond just power generation.

Answer

Michael Kennedy, CEO and President, stated that Antero's decline rate was in the low 20s and HG's in the mid-20s, but HG's production profile is flatter in its initial years due to midstream constraints, making the overall impact fairly similar. Justin Fowler, Senior Vice President of Natural Gas Marketing, reiterated Antero's 2 Bcf firm transport to the Gulf Coast, identifying 4-6 Bcf of potential industrial demand along that path, and noted increasing competition for southbound volumes.

Sam Margolin asked for a breakdown of the free cash flow contribution progression in 2027-2028, prior to Willow, specifically detailing the LNG projects' cash flow and spending roll-off, and the context of European gas inventories.

Answer

Andy O'Brien, CFO and EVP of Strategy and Commercial, outlined a $1 billion annual free cash flow improvement from 2026-2028. He noted that 2026 is driven by OpEx and CapEx guidance, while 2027-2028 will see a significant $2 billion contribution from LNG projects (NFE, Port Arthur, NFS) through a combination of new revenues and CapEx roll-off. ConocoPhillips is confident in LNG prices, having placed Port Arthur Phase One volumes in Europe and Asia, and is more exposed to Henry Hub natural gas prices (2 BCF/day, $400M sensitivity per $1 HH) than to compressing LNG margins.

Sam Margolin asked for a decomposition of the free cash flow contribution progression in 2027 and 2028, prior to Willow, specifically framing the range of LNG contribution from both cash flow and spending roll-off, and considering the market context of European gas inventories.

Answer

Andy O'Brien, Chief Financial Officer and Executive Vice President of Strategy and Commercial, ConocoPhillips, detailed the $1 billion annual free cash flow improvement for 2026-2028. He explained that 2026 is driven by OpEx/CapEx guidance, while the subsequent $2 billion in 2027-2028 largely stems from LNG projects (NFE, Port Arthur, NFS) due to combined revenues and capital expenditure roll-off. He expressed confidence in LNG prices and noted ConocoPhillips' greater exposure to Henry Hub natural gas prices than LNG margins.

Sam Margolin asked about Phillips 66's midstream growth opportunities extending beyond the 2027 EBITDA target, specifically how the company plans to frame capital spending for these long-term gas opportunities. He also sought the latest strategic thoughts on the chemicals business, particularly after new projects come online, and how the company is mitigating near-term commodity challenges.

Answer

Don Baldridge, EVP of Midstream and Chemicals, described an organic opportunity flywheel generating low-capital, high-return projects, with chunky build-outs like a gas plant and fractionator annually, sustaining mid-single-digit growth beyond 2027. Kevin Mitchell, CFO, added that the Western Gateway project, if it proceeds, would further enhance post-2027 growth. Mark Lashier, Chairman and CEO, stated that CP Chem is focused on commissioning new accretive projects and that the industry needs large-scale rationalization (20 million tons/year) to reach 85% utilization, with most expected in Asia Pacific and Europe.

Sam Margolin asked about Phillips 66's midstream growth opportunities extending beyond the 2027 EBITDA target, specifically how the company plans to frame capital spending for these long-term opportunities. He also sought an update on the latest strategic and near-term outlook for the chemicals segment, given new capacity coming online.

Answer

Don Baldridge, EVP of Midstream and Chemicals, described an 'organic opportunity flywheel' generating low-capital, high-return projects beyond 2027, including gas plants and fractionator additions, as well as optimization projects in the crude-to-clean value chain. Kevin Mitchell, CFO, added that the Western Gateway project, if it proceeds, would further contribute to post-2027 growth and is not included in current projections. Mark Lashier, Chairman and CEO, stated that CP Chem is focused on commissioning its new projects (Golden Triangle, Ras Laffan) which are expected to be accretive. He noted that CP Chem demonstrated resilience in 2025, generating $845 million in EBITDA, and highlighted the need for global rationalization (20 million tons/year) to reach 85% utilization, with U.S. assets running at 90% while Asia Pacific and Europe are at 65%.

Sam Margolin inquired about the impact of increasing Permian productivity and capital efficiency on Chevron's decision-making process and its overall Permian strategy.

Answer

CFO Eimear Bonner confirmed that the Permian is achieving its goal of holding production at 1 million barrels per day while optimizing cash generation, with capital efficiency improving faster than expected. She noted that the new consolidated shale and tight organization is extending these efficiencies to other basins, reinforcing the focus on growing cash flow rather than just production, with no change to the current strategy.

Sam Margolin revisited the Permian, noting the inflection in productivity and capital efficiency, and asked how this momentum impacts Chevron's decision-making process and overall Permian strategy.

Answer

CFO Eimear Bonner stated that the Permian is performing as expected, holding at 1 million barrels a day and optimizing cash generation, with capital efficiency improving to $3.5 billion in CapEx. She highlighted doubled drilling efficiency since 2022 and the extension of capital efficiency across the entire shale and tight portfolio. The current strategy remains focused on growing cash flow, not production, with no change in decision-making.

Sam Margolin inquired about ExxonMobil's battery initiative, its connection to the carbon business, lithium, and lightweight materials like Proxima chemicals, seeking clarity on the underlying strategy and synergies.

Answer

CEO Darren Woods explained that the battery initiative leverages ExxonMobil's expertise in hydrogen and carbon molecules, developing a carbon-based molecule for battery applications that offers significant performance improvements. He noted synergies with lithium and Proxima, which also have diverse applications from rebar to battery holders. The strategy focuses on producing high-demand products at a low cost of supply, ensuring a robust business irrespective of pricing.

Sam Margolin inquired about ExxonMobil's carbon business, battery contribution, lithium initiatives, and lightweight materials like Proxima chemicals, seeking clarity on the battery initiative's inputs and potential outcomes.

Answer

CEO Darren Woods explained that ExxonMobil's new applications leverage existing capabilities within its hydrogen and carbon molecule business, creating synergies. He highlighted the technology organization's development of a carbon-based molecule for battery applications, delivering significant performance improvements, and noted ongoing work with OEMs. Woods also discussed lithium's promise, contingent on developing a cost-competitive extraction process, and detailed Proxima's diverse applications in rebar, coatings, and battery holders. He emphasized understanding where these applications bring the most value and building businesses around them.

Sam Margolin asked if ExxonMobil's strong capital efficiency and balance sheet allow for an increase in inorganic activity to set the stage for additional opportunities beyond the current pipeline.

Answer

Darren Woods, Chairman and CEO, reiterated that their strategy focuses on strengthening core competitive advantages to leverage them in inorganic transactions, aiming for a '1+1=3' outcome, citing the Pioneer acquisition as an example. He stated that the drive for such opportunities is constant, not tied to commodity cycles. Kathryn Mikells, Senior Vice President and CFO, added that they evaluate many opportunities but only transact on very few that meet high criteria for strong returns, scale, integration, and technology synergies, emphasizing buying value over volume.

Sam Margolin inquired about ExxonMobil's inorganic strategy, noting its accommodation by capital efficiency and a strong balance sheet. He asked if the company plans to step up inorganic activity further and set the stage for additional opportunities beyond its current pipeline.

Answer

Darren Woods, Chairman and Chief Executive Officer, reiterated that the inorganic strategy is a constant focus, leveraging core competitive advantages to create unique value, as exemplified by the Pioneer acquisition. Kathryn Mikells, Senior Vice President and Chief Financial Officer, added that while they evaluate many opportunities, they only transact on those that meet strict criteria for strong returns and significant synergies.

Sam Margolin followed up on heavy crude, asking for a ballpark estimate of how much heavy crude globally has been overvalued from a refinery economics perspective and where it might normalize.

Answer

Gary Simmons, EVP and COO, stated it's difficult to give a precise value but recalled that in 2025, sour differentials were narrow, making Valero indifferent to running sweet versus sour crude. He noted that currently, with better differentials, Valero is firmly focused on maximizing heavy and medium crude processing to fill its downstream units.

Sam Margolin asked about Valero's moderated growth CapEx, the role of inflation in its gated process and project returns, and the implications for buy versus build decisions. He also inquired about the headroom for incremental heavy crude barrels, global heavy crude overvaluation, and where differentials might normalize.

Answer

R. Lane Riggs (Chairman, CEO and President, Valero Energy Corporation) explained the reduction in strategic CapEx, particularly in renewables due to policy uncertainty. He noted inflation makes projects more difficult due to increased building costs and that Valero is always interested in existing assets for arbitrage opportunities. Gary Simmons (EVP and COO, Valero Energy Corporation) found it difficult to quantify heavy crude overvaluation but noted that current differentials firmly incentivize maximizing heavy and medium crude processing, unlike 2025 when sweet and sour were indifferent.

Sam Margolin inquired about the global refining capacity additions scheduled for 2026, seeking insights into their timing, expected reliability, and the potential changes in supply-demand balances after several years of lagging demand.

Answer

Gary Simmons, Executive Vice President and COO, projected tighter supply-demand balances for 2026, with light product demand growth exceeding net capacity additions. He noted that new capacity often fails to reach nameplate production and anticipated delays in Russian capacity ramp-ups, suggesting a tighter market than many forecasts.

Sam Margolin asked about the impact of TMX barrels on West Coast crude values, the overall availability picture for 2026, and the dynamics of quality differentials. He also inquired about the global capacity additions scheduled for next year, their expected timing, reliability, and the potential shift in supply-demand balances.

Answer

Gary Simmons, Executive Vice President and COO, expressed disappointment with TMX's impact on West Coast crude values and noted the widening of quality differentials for WCS, Maya, and medium sours. He discussed OPEC+ production, increased Iraqi crude offers, and the influence of Canadian production and Chinese SPR demand. Regarding capacity, Mr. Simmons indicated that net capacity additions for 2026 are expected to be less than light product demand growth, suggesting tighter balances, and highlighted that new capacity often doesn't reach nameplate production quickly, with Russian capacity being a significant wild card.

Sam Margolin asked about the potential for data center customers to prefer fixed gas pricing structures and how EQT's basis hedging strategy might evolve given the marketing team's success and tightening diffs.

Answer

Toby Rice, President and CEO, suggested that hyperscalers might prefer fixed gas pricing to simplify their cost structure, creating opportunities for EQT to increase cash flow durability. Jeremy Knop, CFO, indicated a reduction in traditional basis hedging (previously up to 90%) due to the marketing team's optimization capabilities and the ability to tactically curtail production, shifting from a defensive to an opportunistic strategy.

Sam Margolin asked if the shift in turbine customer mix (hyperscalers directly ordering turbines) is a catalyst for changing gas supply pricing structures, with hyperscalers preferring stable pricing. He also inquired if basis hedging would be reduced given the marketing team's success and tightening diffs.

Answer

Toby Rice (President and CEO, EQT) suggested hyperscalers might prefer simplified, fixed-rate power costs, creating opportunities for EQT to offer structured pricing and increase cash flow durability. Jeremy Knop (CFO, EQT) confirmed that EQT will likely reduce basis hedging significantly in 2026 and beyond, shifting to an opportunistic strategy through tactical curtailments, which effectively hedges basis.