Sam Margolin

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 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 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 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 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 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 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 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 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 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 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.

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.