Chevron Corporation (CVX) Earnings Call Transcript & Summary

Good morning, and welcome to the 2021 Annual Stockholders Meeting for Chevron Corporation. We deeply apologize for the delay this morning, and thank you kindly for your patience during that time. I will now turn the meeting over to Mary Francis.

Good morning, ladies and gentlemen. Welcome. I'm Mary Francis, Corporate Secretary and Chief Governance Officer of Chevron Corporation. Again, we sincerely apologize for the technical delays that delayed the start of the meeting, but we thank you for attending Chevron's 2021 Annual Meeting of Stockholders being held virtually this year, providing convenient access for all our stockholders and significant cost savings and also mitigating the health concerns around the ongoing COVID-19 pandemic. The agenda posted on the virtual annual meeting portal outlines today's order of business and the rules and procedures we will observe for the meeting. On behalf of the Board of Directors, I move all items of business and nominate the persons listed as nominees for Director. Now I would like to advise you that we have met the legal requirements for today's meeting. First, the Board of Directors declared March 29, 2021, as the record date for determining stockholders entitled to vote at this meeting. Second, we mailed or made available a proxy statement and annual report to all stockholders entitled to vote as of the record date. An affidavit of mailing these materials has been filed with the corporation's records. Third, we have met the required quorum to proceed with the meeting. The Inspector of Elections reports that 1.6 billion shares, representing approximately 83% of Chevron's outstanding common stock are present by proxy today. Fourth, you may vote today by clicking on the voting button on the virtual annual meeting portal. The voting polls are now open. They will close immediately following the preliminary report on voting and before the question-and-answer session. Since the items of business and nominations have been moved and the legal requirements reviewed, today's meeting has been duly convened and will be adjourned pursuant to the rules of conduct and procedures posted on the virtual annual meeting portal if we are not able to proceed due to a technical malfunction. Please be reminded that forward-looking statements and non-GAAP financial measures may be shared during today's meeting. We ask that you review the document titled Cautionary Statement, Legal Notice and Reconciliation of non-GAAP financial measures on the virtual annual meeting portal. We have been in contact with the presenters of stock proposals regarding how to access the meeting and present their proposals today. All presenters have elected to provide an audio recording of their statement to be played. During the matters to be voted on period, the operator will play the prerecorded statement for the presenter. Following the presentation of the stockholder proposals and the report on preliminary vote results, we will have a question-and-answer session where we will take questions submitted before the meeting through proxyvote.com and submitted during the meeting through the virtual annual meeting portal. I will state the name of the stockholder submitting the question, if provided by the stockholder. As noted in the rules of conduct and procedures, we may summarize the question in the interests of time and clarity. If we are not able to get to every question submitted, we will post a summary of the remaining questions and answers on Chevron.com. Thank you so much for our annual -- for attending our annual meeting. It is now my great pleasure to introduce our Chairman and Chief Executive Officer, Mike Wirth.

Thank you, Mary. I'll begin by acknowledging the challenging times we're in. Please accept my best wishes for safety and good health to all of you. This is our second virtual Annual Meeting of Stockholders. Our Board is pleased the virtual meeting format facilitates attendance for all stockholders. We expect to have a high level of participation again this year. We've also had 85 direct engagements with stockholders over the past year, a number of which included one or more Chevron Directors. Your input and feedback are valued as we continually seek to improve our business. Today, I'll provide a summary of our performance before moving to matters to be voted on and finally, the question-and-answer period. Before I turn to those matters, I'd like to acknowledge the nominees for our Board of Directors who are joining us for today's meeting. They've achieved excellence in their fields, and they expect excellence from us. It's my honor to work with them. Wanda Austin, former President and CEO of the Aerospace Corporation; John Frank, Vice Chairman of Oaktree Capital Group; Alice Gast, President of Imperial College London; Rick Hernandez, Chairman and CEO of Inter-con Security Systems; Marillyn Hewson, former Chairman, CEO and President of Lockheed Martin Corporation; Jon Huntsman, Vice Chair, Policy of Ford Motor Company and former Governor of Utah; Wick Moorman, former Chairman and CEO of Norfolk Southern Corporation; Dambisa Moyo, CEO of Mildstorm; Debra Reed-Klages, former Chairman, CEO and President of Sempra Energy; Ron Sugar, former Chairman and CEO of Northrop Grumman Corporation; and Jim Umpleby, Chairman and CEO of Caterpillar Inc. We count on our Directors for guidance and with the depth and breadth of our current Board, Chevron is in good hands. Now I'd like to acknowledge Douglas Parker, a partner from PricewaterhouseCoopers, and Wendy Shiba, the Inspector of Elections, who are also joining us for today's meeting. And now turning to our business. The world has begun to recover from a year unlike any other. I'm proud of how our people have risen to this challenge, providing the energy to keep global supply chains moving and ensure essential products are available to frontline workers and those in need. Looking forward, our objective is summarized in 4 words: Higher returns, lower carbon. A simple statement of what it takes to succeed in the future of energy and to invest in ways that are good for both our stockholders and the environment. We remain in a different place than others in our industry with unmatched financial strength and flexibility, underpinned by the industry's leading balance sheet. We have a solid track record of returning more cash to stockholders and a strategy to be a leader in advancing a lower carbon future. Our portfolio is now further enhanced by last year's Noble acquisition, which added complementary assets and high-quality people. After operating as a combined company for several months now, we've doubled our estimate for Noble synergies as we found more cost efficiencies, procurement savings and even lower exploration costs. We began this year with our best quarter since the start of the pandemic. The company reported adjusted earnings of $1.7 billion, cash flow from operations of $4.2 billion and adjusted return on capital employed of 4.4%. We maintained our capital discipline with capital spending down 40% from first quarter last year, and we increased the dividend payout to stockholders. We took action to advance the lower carbon future by announcing plans with partners to develop a carbon-negative bioenergy power plant and commercially viable businesses in hydrogen. We also invested in companies, developing new technologies for geothermal power, floating offshore wind turbines and green ammonia. We've navigated the past year better than most in our industry, relying on our culture and our financial priorities as our guide and we remain well positioned to win in any environment. We'll now consider the matters to be voted on. I direct your attention to Item 1 on the agenda, your Board's proposal to elect 12 Director nominees. The persons who have been nominated are named in Item 1 on the proxy card. You can read a short biography of each Director in the proxy statement. I now direct your attention to Item 2 on the agenda, your Board's proposal to ratify the Audit Committee's selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm for the company. You can read more about this in the proxy statement. I now direct your attention to Item 3 on the agenda, an advisory vote on the compensation of the named executive officers identified in the proxy statement. You can read more about this in the proxy statement. I will now invite a presentation of Item 4 on the proxy card regarding the stockholder proposal to reduce Scope 3 emissions. I understand [ Martin Van Ball ] of [ Follow This ], has submitted a prerecorded statement for this proposal.

Dear Mr. Wirth, fellow shareholders, esteemed members of the Board. Today is an important day, not just for Chevron, not even for the oil industry, but for the world at large. Today, with shareholder Proposal #4, investors can vote about emission reductions at a U.S. oil major. We need big oil. Big oil can make or break the [ perilous ] course to limit climate change. So we need Chevron as well, and we look forward to continuing our engagement with Chevron. Mr. Wirth, as a CEO of one of the world's largest oil majors, you are in a unique position. You are one of the few people in the world who can curb climate change. The decisions you will make during your tenure will define how Chevron and the world look like over the coming decades. By that time, your grandchildren will realize what position their grandfather held, and they will surely ask you What did you do about the climate crisis? Chevron possesses the brains and the billions to drive the energy transition. Fellow shareholders, this would not only save the world's economy or [ reverse ] climate change, but also save our company of disruption by new technologies. Mr. Wirth, your shareholders and future generations count on you to take bold and brave decisions now. Shareholders, members of the Board and all 44,000 employees at Chevron, I will conclude with the final words of our climate proposal. You have our support.

Thank you, Mr. [ Van Ball ]. Your Board of Directors recommends a vote against this proposal for the reasons indicated in your Board's response in the proxy statement. As indicated in that response, Chevron shares the view that managing climate change-related risks and energy transition opportunities is vital to delivering superior long-term value. Chevron is taking actions that support achieving the goals of the Paris Agreement as efficiently and cost effectively as possible. Chevron has established Scope 1 and Scope 2 greenhouse gas intensity reduction targets for upstream oil, gas, flaring and methane. Achieving these emission reduction metrics is linked to most Chevron employees' variable compensation. Chevron believes the world's continued demand for oil and gas should be supplied by the most carbon-efficient producers. Chevron addresses Scope 3 emissions by supporting a price on carbon through well-designed policies, transparently reporting Scope 3 emissions from the use of our products and enabling customers to lower their emissions through increasing our renewable product offerings, including offsets and investing in low-carbon technologies. You can read more about Chevron's approach to the energy transition on Pages 33 through 34 and Page 82 of the proxy statement and our recently released Climate Change Resilience report. I will now invite a presentation of Item 5 on the proxy card regarding the stockholder proposal to report on impacts of net zero 2050 scenario. I understand Lila Holzman, of As You Sow, has submitted a prerecorded statement for this proposal.

Good morning. My name is Lila Holzman, and I want to thank you for the opportunity to present Proposal #5 submitted by As You Sow. This proposal asks Chevron to issue an audited report assessing how a significant reduction in fossil fuel demand, as set forth in the IEA's net zero emissions by 2050 scenario, would affect the company's financial position and underlying assumptions. Increasingly, we are seeing reports of governments, investors, banks and companies aligning their enterprise plans with Net Zero by 2050 greenhouse gas emission reduction targets. One in 5 of the world's 2,000 largest publicly listed companies have now adopted a net zero emissions target. Given this growing global commitment to rapid greenhouse gas reductions, marginal climate action by companies is increasingly out of step with the norm. It is therefore reasonable to ask that Chevron examine the IEA's Net Zero by 2050 scenario and report to shareholders how that scenario is likely to impact the company's financial statements. Under the IEA's net zero scenario, global demand for oil and gas falls drastically by 2050 and no new oil and natural gas fields are required beyond those already approved for development. This past year with COVID has given us insight into the impacts of substantial decreases in demand for oil and gas, including significant declines in company value and write-downs of assets. Chevron was no exception. Chevron recognizes in its nonaudited sustainability reporting that climate change must be addressed, but that assumes business as usual in its financial statements despite the clear contradiction. Investors are asking Chevron to integrate these positions with more robust climate-related financial assessments, disclosures and auditing with the goal of enabling investors to better understand the company's risks under a dramatically carbon-constrained future. We look forward to working with Chevron to address this critical issue. Thank you.

Thank you, Ms. Holzman. Your Board of Directors recommends a vote against this proposal for the reasons indicated in your Board's response in the proxy statement. As indicated in that response, Chevron believes the future of energy is lower carbon and works to stockholders with data and facts so they can make informed choices as the world pursues the global net zero ambitions of the Paris Agreement. Our 2021 Climate Change Resilience report published in March outlines Chevron's approach to the energy transition, including testing the resilience of Chevron's portfolio against the International Energy Agency's Sustainable Development Scenario and the then available data for their net zero scenario. The recent IEA net zero scenario was only released last week. It illustrates one of many different potential pathways to pursue the goals of the Paris Agreement, which we support. Chevron uses scenarios to test its portfolio and evaluate business risks to ensure it can deliver results under a range of potential futures. Chevron routinely uses external views to inform and challenge its internal analysis. This includes scenarios forecasting pathways to [ keep ] global warming to well below 2 degrees C above pre-industrial levels as well as scenarios forecasting net zero emissions by 2050. We believe Chevron's portfolio is resilient in its governance structure, risk management strategy, actions and asset mix enable your company to be flexible in response to potential changes in supply and demand, even in lower carbon scenarios. You can read more about Chevron's approach to the energy transition on Pages 33 through 34 and Page 84 of the proxy statement. I will now invite a presentation of Item 6 on the proxy card regarding a stockholder proposal to shift to a public benefit corporation. I understand Natasha Lamb of Arjuna Capital has submitted a prerecorded statement for this proposal.

Good morning. My name is Natasha Lamb, Managing Partner at Arjuna Capital and I move Proposal #6, requesting the Board to convert Chevron from a conventional corporation to a public benefit corporation. In 2019, Chevron's Chairman and CEO signed a statement on the purpose of the corporation, committing Chevron to all stakeholders, including protecting the environment by embracing sustainability practices across our businesses. Yet inconsistent with Chevron's commitment, Chevron has not developed business goals consistent with limiting global temperature rise to 1.5 degrees and unlike peers, has not set net zero-emission goals for 2050. Despite the severity of the climate crisis, Chevron intends to lower its carbon emissions only to the extent it can do so while preserving higher financial returns to its shareholders. As the proponents of Items 4 and 5 have demonstrated, this is not acceptable. If higher returns mean that Chevron cannot align with the 1.5-degree scenario, that is bad for Chevron's diversified shareholders, almost all of whom rely on the stable climate and healthy economy to support their many investments. Yet in a conventional corporation, Directors may fear that they will breach their fiduciary duties if they make decisions that might undercut the individual company's financial returns for the sake of broader market and systemic concerns. Universal investors with highly diversified portfolios representative of the broad economy are exposed to growing and widespread climate costs generated by some companies, including Chevron, and ultimately incurred by other companies. It is therefore in investors' interest to reduce climate externality to protect long-term returns. As a public benefit corporation, Chevron could do what is necessary to align with planetary warming of no more than 1.5 degrees and deliver the highest returns available within that framework. Thank you for your time and support.

Thank you, Ms. Lamb. Your Board of Directors recommends a vote against this proposal for the reasons indicated in your Board's response in the proxy statement. As indicated in that response, Chevron has a long track record of success in each of the 5 areas in the business roundtable statement on the purpose of a corporation and remains dedicated to these principles because they have always contributed to the long-term sustainable health of our company. Chevron engages with stakeholders, including investors, civil society organizations, customers and others to inform its approach to its social and environmental responsibilities. Our partnerships in health, education and economic development strengthen communities where we operate. Our ability to continue to create value for stakeholders depends on maintaining financial and operational strength, and we're committed to doing so. Chevron addresses the risks and opportunities presented by the transition toward a lower emissions energy system, as outlined in detail in our Climate Change Resilience report and consistent with my comments on the prior 2 proposals. You can read more about the Board's view of this proposal on Pages 33 through 34 and Page 86 of the proxy statement. I will now invite a presentation of Item 7 on the proxy card regarding a stockholder proposal to report on lobbying. I understand [ Maureen O'Brien ] has submitted a prerecorded statement for this proposal.

Good morning. My name is Maureen O'Brien. I'm here on behalf of the City of Philadelphia Public Employees Retirement System and 6 co-filers. I hereby move Item 7, asking our company to provide a report on its state and federal lobbying expenditures, including indirect funding of lobbying through trade associations and social welfare groups. Chevron's current disclosures are incomplete. It does not issue a comprehensive report of its lobbying to shareholders, disclosing its direct and indirect lobbying expenditures. Specifically, this proposal requests disclosure of funds paid to intermediary organizations or often what's known as dark money, where there are no limits or disclosure requirements. Chevron fails to disclose the amounts paid to trade associations that lobby indirectly on its behalf. Chevron is a member of the U.S. Chamber of Commerce, which has spent more than $1.6 billion on lobbying since 1998, yet stockholders have no way to know how much of Chevron's payments are funding that lobbying. Chevron also fails to disclose its payments to 501 C4 social welfare organizations, such as the Consumer Energy Alliance, an advocacy group for fossil fuel companies. Chevron does not disclose its payments to the American Legislative Exchange Council, a controversial 501 C3 organization. ALEC has attracted negative attention through its promotion of bills that undermine regulations to address issues like climate change, workplace safety and workers' rights. Proxy adviser ISS supports this proposal, noting that Chevron is facing significant controversy, particularly with its lobbying against sanctions on Myanmar. Full disclosure of Chevron's payments to trade associations and social welfare groups will allow stockholders to evaluate potential reputational risks while ensuring Board and management oversight.

Thank you, Ms. [ O'Brien ]. Your Board of Directors recommends a vote against this proposal for the reasons indicated in your Board's response in the proxy statement. As indicated in that response, Chevron believes it's essential to engage with policymakers and express the company's views on pending policy proposals through direct and indirect lobbying and participating in a diverse range of business and policy organizations that advocate for free markets and responsible energy policy. We agree that transparency and accountability are important. That's why Chevron provides extensive disclosure of these activities on its website by listing all jurisdictions where we're registered to lobby with links to access our reports, membership and organizations using a portion of the dues toward lobbying activities, federal lobbying contributions and information about Chevron's philosophy toward lobbying and oversight mechanisms. This disclosure goes beyond what is required by law. In December 2020, in response to stockholder interest, Chevron published a special report on climate lobbying. This report further describes Chevron's lobbying strategies and governance to oversee its trade association memberships with respect to climate change issues. Our political activities are subject to thorough review and oversight. The Public Policy and Sustainability Committee reviews the policies, procedures and expenditures for Chevron's political activities, including political contributions and direct and indirect lobbying. We also review contributions and lobbying activity through the lens of current and past events. You can read more about the Board's view on this proposal on Page 88 of the proxy statement. I'll now invite a presentation of Item 8 on the proxy card regarding a stockholder proposal for an independent Chairman. I understand a number of representatives of the proponent will present this proposal.

Good morning. We are young leaders from around the world working with the Economy of Francesco. And today, we speak on behalf of Newground Social Investment to move the independent share Proposal #8, which seeks greater objectivity, responsibility and judgment in the Board's operations.

The Economy of Francesco was chartered by Pope Francis to transform the economy [ related to new soul ]. Its community consists of economies, entrepreneurs and change makers from around the world.

In 2018, Pope Francis invited fossil fuel industry leaders to a conference to discuss energy transition and care for our common home.

Three years later, we urged Chevron to make meaningful progress on reducing climate change and to remediate the harm caused by oil extraction, including the monumental pollution of the Ecuadorian Rainforest.

In support, 68 Nobel Prizes laureates have signed a letter that urges cleanup in Ecuador and for legal actions against Ecuadorians attorney, Steven Donziger.

Six members of Congress recently petitioned the U.S. Attorney General to investigate and take over the case.

We ask Chevron to meaningfully contribute to a transition by meeting the renewable energy target by 2030 as many other oil firms are pledged.

We remind today's audience that Chevron faces a $9.5 billion liability for past pollution in Ecuador, and has reportedly spent $2 billion on legal maneuvers, but only $30 million on cleanup.

The shared enemy is pollution, not human rights lawyers, the afflicted people or their advocates.

Pope Francis highlighted this to energy executives in 2018 when he said.

It is my hope that having demonstrated your aptitude for innovation, you will use those skills in the series of 2 great needs in today's world, take care of the poor and the environment.

The Pope's attention and that of the world is focused on these social justice issues.

Separating the roles of CEO and Board share can foster the kind of renewed vision that will allow the Board to address more fully its environmental, social and governance duties.

Therefore, we encourage a vote for Item #8.

Thank you.

Well, thank you. Your Board of Directors recommends a vote against this proposal for the reasons indicated in your Board's response in the proxy statement. As indicated in that response, the Independent Directors review our leadership structure and elect the Chairman annually. The Board should have flexibility to determine the best person to serve as Chairman, whether that person is an Independent Director or the CEO. The Board recognizes the importance of independent oversight of the CEO and has empowered the lead Independent Director with important responsibilities, including leading executive sessions of the Independent Directors following each Board meeting and providing feedback to the CEO; consulting on an approving Board meeting agenda, schedules and information sent to the Board; calling meetings of the Independent Directors; and leading the Independent Directors in the annual CEO performance evaluation. Although the proposal purports to relate to the Board's leadership structure, its supporting statement shows that it actually is a vehicle to discuss the Ecuador litigation. Ecuadorian judgment against Chevron has been thoroughly rejected by every court and tribunal outside of Ecuador that has reviewed the matter. Several prominent U.S. and international courts and tribunals have confirmed that the Ecuadorian judgment was procured through fraud, bribery and corruption. Even Ecuador admitted publicly last year that the judgment against Chevron is fraudulent. The presenters indicate they support Pope Francis' messages on sustainability. I had the opportunity to participate in a thoughtful and constructive discussion with Pope Francis and others in 2019 as part of our ongoing efforts to engage with a wide variety of stakeholders to understand their perspective to help inform our actions. I plan to attend another session at the Vatican later this year to continue this engagement. You can read more about the Board's views on its leadership structure on our website and Pages 21 through 22 and Page 90 of the proxy statement. I will now invite a presentation of Item 9 on the proxy card regarding a stockholder proposal to set special meetings threshold at 10%. I understand Khin Ohmar will present this proposal.

Good morning. I'm Khin Ohmar of Progressive Voice, standing on behalf of Newground Social Investment to move special meeting Proposal #9. As Chevron will state, the conduct our business in a socially and environmentally responsible manner, respecting the law and universe of human rights to benefit the communities where we work. But Chevron's actions in Ecuador and Myanmar show those lofty words to be false. In both cases, Chevron chose to acquire companies Texaco in Ecuador and Unocal in Myanmar, with a greatest record of environmental pollution and human rights violations. Chevron Myanmar pipeline provides the Myanmar military with the money it needs to claim to power. The U.S. government is considering ways to cut off this flow of oil money, but the New York Times reports that Chevron is helping the Myanmar military to lobby against those sanctions. How does management [ square ] its Chevron [ way ] with support of a military that is on trial for charges of genocide? Protests are being monitored outside Chevron facilities from Myanmar to California. It is apparent that the company's support of the Myanmar military is harming Chevron's reputation with both customers and shareholders. The Board recommends a vote against several proposals on issues ranging from climate risk and lobbying to petrochemical risk, human rights and this proposal on special meetings. However, in each case, management is harming Chevron's reputation and threatening shareholder value. For all these reasons and more, I encourage a vote for proposal #9. Thank you.

Thank you, Ms. Ohmar. Your Board of Directors recommends a vote against this proposal for the reasons indicated in your Board's response in the proxy statement. As indicated in that response, in 2010, stockholders representing 80% of common stock outstanding approved our current bylaw, establishing a 15% threshold to call special meetings. Our bylaws contain appropriate and reasonable requirements for calling special meetings. This proposal would eliminate these. The right of stockholders to be apprised of and vote on significant matters is protected by the existing threshold as well as by state law and other regulations. As with the prior proposal, the supporting statement shows that it is a vehicle to discuss the fraudulent Ecuadorian litigation. As I said earlier, multiple courts and international tribunals have confirmed that the Ecuadorian litigation is the product of fraud, bribery and corruption. With respect to Myanmar, we support the people of Myanmar on their journey to a modern, peaceful and prosperous democracy and stand with the global community in urging for a peaceful resolution that respects the will of the people. We also support today's decision to suspend monthly dividend payments to shareholders in the pipeline that was announced by Yadana project operator, Total. You can read more about the Board's view on this proposal on Page 92 of the proxy statement. That concludes the presentation of matters to be voted on. Next, we'll have a preliminary report on voting. I'll ask Mary to present the report. Mary?

Thank you, Mike. I'd like to remind our stockholders that the polls will close at the conclusion of my report on preliminary vote results. So please lodge your votes if you have not done so. The preliminary report from the Inspector of Elections is based on proxies received prior to the start of this meeting. I want to emphasize that the following results are preliminary. Following today's meeting, our Inspector of Elections will verify the vote results and certify final vote results to us. We will report final results on Chevron.com and in a filing with the United States Securities and Exchange Commission on Form 8-K in the next few days. The report of the Inspector of Elections is as follows, and these items are as listed in order on your agenda. Item 1, an average of 96% of the votes cast were voted for the 12 nominees for election to the Board of Directors. Item 2, 97% of the votes cast were voted for the ratification of the appointment of PricewaterhouseCoopers LLP as the company's independent registered public accounting firm for 2021. Item 3, 94% of the votes cast were voted for say-on-pay. Item 4, 61% of the votes cast were voted for the proposal to reduce Scope 3 emissions. Item 5, 48% of the votes cast were voted for the proposal to report on impacts of net zero 2050 scenario. Item 6, 3% of the votes cast were voted for the proposal to shift to a public benefit corporation. Item 7, 48% of the votes cast were voted for the proposal to report on lobbying. Item 8, 29% of the votes cast were voted for the proposal for an Independent Chairman. Item 9, 33% of the votes cast were voted for the proposal to set special meetings threshold at 10%. The Board will take into consideration the results of today's vote and the thoughtful discussions the company has had with its stockholders. This concludes the preliminary voting results. I will now turn the meeting over to Mike.

Okay. Thank you, Mary. That concludes the items of business for the meeting and the polls for voting are now closed. Next is the Q&A portion of the meeting. We'll address questions received from stockholders in advance of today's meeting and questions received today on the virtual annual meeting portal. Please note, we'll attempt to answer as many questions as time allows but only questions that are germane to the meeting will be addressed. Any questions that we do not get to will be addressed on Chevron.com. Mary is going to read the questions as they've been coming in. So Mary, let's get started.

Okay. Mike, the first question. Well, we actually received a number of questions on climate change. So we'd like to -- how we -- the question is how we plan to transition to a lower carbon future and what that means to our business. For -- here's a representative question. With the push for reduced use of fossil fuels, what is the future for Chevron for profitability and dividends?

Thanks for that question. I'll start by going back to our financial framework and the continued discipline that delivers results that work in both downside and upside commodity price scenarios and across a range of potential climate scenarios. Our financial priorities haven't changed as we've gone through the pandemic, unlike those of many other companies in our industry. First priority is to protect the dividend. We haven't cut it since the Great Depression, and our recent increase puts us on track to make 2021 the 34th consecutive year with an increase in the annual dividend payout to our stockholders. Second priority is to invest in the business. And we're now able to sustain the enterprise at a lower reinvestment rate because of greatly improved capital efficiency. Third priority is to preserve our balance sheet, which has really been important as we've gone through this most recent cycle. It was an industry leader pre-pandemic and it's an industry leader today, even after completing a major acquisition. And when those first 3 financial priorities have been met, we also have a track record of repurchasing shares, which we've done in 13 of the last 17 years. So I would tell stockholders, we've got a track record you can count on, based on 3 core elements of Chevron's DNA: consistency, preparation and adaptability. Consistent values because the world changes, but our foundation doesn't; staying prepared because our business has cycles, and they can be tough; and adaptive because we live in a dynamic world. So we're a company you can count on in good times and in tough ones, now and into a lower carbon future where these same attributes and the same priorities will secure the future for the company and for our stockholders.

Okay. Mike. The next question is from [ Chris Colberg ], who follows up on this topic of energy transition. The question is, what is Chevron doing to expand beyond being exclusively a fossil energy company?

Chris, thanks for that question. We're taking actions to drive meaningful progress toward a lower-carbon future. We plan to invest more than $3 billion over the next few years to advance our energy transition strategy by really focusing on 3 specific areas. Number one is reducing the carbon intensity of our operations and assets, which reduces the carbon emission from today's energy system. Number two is increasing the use of renewables and offsets in support of our business, which helps our customers reduce their emissions. And then three, investing in low-carbon technologies that can enable commercial solutions. Many of these are technologies that could provide dramatically different opportunities to mitigate emissions and meet future energy demand. We announced earlier this year that we exceeded our 2023 upstream greenhouse gas intensity reduction targets, 3 years ahead of schedule. And we then announced even lower targets for 2028, which is the next Paris stocktake period and also the targeting of Zero Routine Flaring. These are targets on an equity basis. So whether we operate or not in any particular project, if we have an ownership interest, we believe we should be accountable for the reductions. And so they apply across everything that we report, earnings, production floor as well. I'll reiterate something I said earlier, which is we believe the world -- the future demand for oil and gas, whatever that is, and there are different opinions about what the trajectory of that will look like, that, that demand should be met by the best and most carbon-efficient producers, which we are today and we intend to be into the future and even better. So we appreciate the feedback we received from investors and from other stakeholders, several of whom we heard from today on the proposals. It helps inform and shape our point of view, and we look forward to working together with all stakeholders to help create a lower carbon future and a strong future for our company.

Okay. Mike, here's another question on the topic of energy transition. But since it relates to California and we're headquartered here, I'll ask this, what will happen to our California assets when all fossil fuels are banned in that state by 2035?

California has been our home since we were founded in 1879, and we've been on the journey with the growth of the economy and also California's leadership in reducing emissions and addressing the protection of the environment. And we've got a great relationship with all the different bodies in California that work on this. I think it's important to understand the recent announcements we've seen from the Governor of California. And he's asked the Air Resources Board to study and develop plans to evaluate the ban of internal combustion vehicles and eventually to phase out oil production. But these are -- these studies and plans can take several years to develop. They'll involve extensive public participation. We've not seen any documents yet on that. And really, we're reserving judgment about these announcements until more information is available. I'll just reiterate, we've been on this journey with the state for a long time and intend to continue to work closely with them as they pursue their policy objectives. One of the other goals that the Governor has identified relates to hydraulic fracturing and banning that. We don't believe bans are the right approach. Hydraulic fracturing has been [ done ] safely in California for many years under the state's very comprehensive regulations. And so we'll continue to engage with state officials on that in order to ensure their very high standards for safety in hydraulic fracturing as well as every other practice that we employ.

Okay. Switching topics. Mike, the next question is what does management do to ensure there is no gender or racial feeling?

A topic that's been getting a lot of attention as of late because of external events and certainly one that has been a priority at our company for a long time, is diversity and inclusion. We strive to create a diverse and inclusive culture. That drives innovation in our business, which is essential to improve lives and power the world forward. It's a core value. It's integral to how we treat our employees. We're committed to expanding the diversity of our workforce and creating an even more inclusive culture. For over 20 years now, we've had employee networks or some places they're known as employee resource groups that serve various affinity groups within our company, whether it's age or gender or racial and ethnic identity, a number of different of these organizations. They include nearly 40% of our workforce and really have been a driving force in building a more inclusive culture through innovative programs, initiatives, dialogue. And my executive leadership team and I meet multiple times a year with employee network leaders to hear what they see, the issues that they encounter, their suggestions for how we continue to move forward. We've received the Catalyst Award, which is a prestigious honor for companies that have made progress advancing women in the workplace. A number of other similar recognitions externally, which are good, but they don't mean you're done. And so we're committed to continuing to work on this. We monitor the sentiment of our workforce through surveys. And I'll just close by saying our business success depends on leveraging the experiences, the different ways of thinking, the different backgrounds that our workforce brings to the office with them every day or to the plant or a drill rig and having an environment where everybody's voice is heard and every voice matters. And it's an absolute commitment to our culture. It's a high priority for me and our senior leadership is absolutely committed to it as well.

Okay. The next question up is -- has to do with our business operations. What is the status of the Gorgon project production due to cracks and heat exchangers? And what is the estimated internal rate of return for Gorgon and Wheatstone projects? Have changes been made to ensure we don't get -- have huge cost overruns and project delays in the future?

Okay. There are several questions here. Let me try to catch all of them. First on Gorgon and heat exchangers. We have seen some wells that had some cracking in what are called the propane heat exchangers. No risk to safety or the environment, but discovered during normal inspections. Repair work at Trains 1 and 2 are done. Repairs on Train 3 are underway right now, and we expect those to be completed around the end of this quarter and expect all 3 trains to be operating at full capacity in the second half of this year. We know what this facility can do, and we're excited to get back to normal operations in the second half of the year. There was a question about returns. The returns will reflect the price environment that we're in and the capital that's employed there. We did invest more capital than was originally envisioned on that project. And so I think the returns will reflect that. But these projects will expect strong -- will generate strong cash flow for decades to come. Finally, on projects execution, we're committed to improving the way we develop and execute projects. In fact, there's a topic on the Board agenda today. And 3 areas we're really focusing on, one is taking more ownership of engineering and design, shifting concept engineering in-house, so we can standardize designs, better leverage digital technologies and then focusing on condition-based progress as we move through the various stages of a project as opposed to schedule-based alone. So improvements that we're committed to there, and I'm encouraged by the work that I see underway. We still have to -- we have to prove we can deliver.

Okay. The next question goes to something you've already touched on, but I'll ask it. Why does the corporation continue to support the Myanmar government via the Yadana gas field?

Yes. I mean, we're saddened by the events that we've seen in Myanmar, and we condemn the human rights abuses that have been reported there. And we absolutely support the people in Myanmar and the global community in their efforts to seek a peaceful resolution. I'll provide a little bit of additional context here just to help all of our shareholders understand the situation. We're an investor in a natural gas production offshore field and then pipeline in Myanmar. It supplies both Myanmar and Total with natural gas that's used to generate electricity. It's operated by the French company, Total. We have a nonoperated shareholding in that. There are 2 other partners. One is the state-owned company of Thailand and other, the state-owned company of Myanmar. And as a nonoperating partner in the venture, we don't direct or control physical operations or financial transactions. As I said earlier, we support today's decision to suspend dividend -- monthly dividend payments to shareholders in the pipeline, which includes all of the shareholders I mentioned earlier, who will no longer see those monthly dividend payments. From 2014 to 2016, we partnered very closely with the Obama administration, including now Secretary of State Blinken, in developing the corporate sustainability reporting standards for Myanmar as the U.S. administration was preparing to lift its then effective sanctions. And we continue to work closely with the U.S. government to meet the humanitarian and democratic interest of the people in Myanmar. So we look forward to a resolution to this matter and our thoughts are with our employees. We have national employees in Myanmar that are involved by this right now, and of course, all the citizens of Myanmar. Thanks for the question.

Okay. Mike, the next question is from [ Susan Rutherford ]. And her question is, I would like to know more about the Saudi government approving the agreement with Chevron, allowing crude production to resume in the Neutral Zone.

Well, thank you, Ms. Rutherford, and thanks for your long-term shareholding. We're happy to be back up and running in the partition zone in partnership with both Saudi and Kuwait. We appreciate both the governments' support to achieve this status, which follows an MOU that was signed late in 2019 between the King of Saudi Arabia and Kuwait that resolved or put in place a framework to resolve some differences between the 2 countries and -- that led to about a 5-year shutdown of operations there. We expect to see production ramp up to full capacity levels later this year. And we've also reached an agreement with the Kingdom of Saudi Arabia that recognizes the lost production time during the shutdown and grants us an extension to continue to explore and operate within the partition zone on behalf of the Kingdom for the next 25 years.

Okay. We've received a number of questions on political donations and here's one that's representative. It's from [ David Woodruff ]. He asked, has the company and -- have the company and its political action committee made any policy changes or taken other actions in response to the January 6, 2021, capital insurrection or to address reputational risk associated with political contributions?

Yes. Thank you, Mr. Woodruff. The violence in Washington, D.C. earlier this year tarnishes a 2-century traditional respect for the rule of law and peaceful transitions of government and we publicly condemned the violence as -- immediately when it occurred. As it relates to our Political Action Committee, we regularly review policies, procedures and expenditures for all political activities, including contributions. We support candidates from both parties who represent districts where we have employees or operations, representatives who have influential roles on key committees and who support markets and free enterprise and have a track record on issues that are important to our company and our industry. Recent events, including those in January 6, will be part of that review process.

Okay. This question has just come in and it's from [ Gillian Lion ]. We appreciate the opportunity to engage with Chevron. In 2020, Chevron tweeted that Black Lives Matter, that faces reputational risk if its practices conflict with its own statements. How does Chevron ensure that its practices and operations do not perpetuate systemic racism and inflict harm on communities of color in the United States?

Well, Gillian, thank you for the question. We're committed to enabling human progress and benefiting the communities where we work. I spoke about that earlier. We believe that meeting rising expectations demands performance and accountability from our company at the highest level. And we work to demonstrate these beliefs through our values and our work globally to engage with communities and stakeholders, fenceline communities in particular, everywhere we operate, not just here in the United States, but frankly, around the world, where we have a track record of engaging with our neighbors of understanding the issues that they face; of working to ensure that our environmental and social performance is aligned with their needs and their priorities; and avoiding or reducing potential impacts of our operations. So engagement and dialogue is a really key part of this to understand the priorities of our communities. And we have systems and processes -- very systematic processes in place for community engagement for environmental protection, including requirements to identify and address potential environmental or social or health impacts across the life cycle of our assets. So regular engagement with stakeholders to understand their needs and priorities is core to how we operate and contribute to the economic and social well-being of our communities. Okay. Mary, I think we've got time for about maybe 2 more questions.

Okay. This question is, what is Chevron doing to protect its operations from disruptions from ransomware and other malicious software attacks such as those that have crippled the 2021 Colonial Pipeline -- crippled the pipeline this year and a Saudi refinery in 2018?

Yes. These have been very newsworthy events as of late. We have been on a journey for many years, as organizations and individuals both have been, to address one of the downsides of all the technology that makes our lives better today and our business better today, and that is the risk for a cyber attack. The cybersecurity realities of our business are very real. It's a topic again on our agenda for the Board meeting today. We take the integrity and security of our systems very seriously. We have multiple safeguards in place to prevent impacts to our operations. We review our critical IT systems regularly using risk management controls that reflect best practices, which continually evolve. We conduct an annual review and testing of business continuity and disaster recovery plans. We use ethical hackers to try to penetrate our systems. We have a host of detection systems that work around the clock. We have a cybersecurity center, which works 24 hours a day, 365 days a year to detect and respond quickly. And our mission-critical systems are designed for high availability and disaster recovery. So this is a moving target and an evolving risk environment where you never can feel complacent or satisfied. We continually invest in this and monitor and to this point, we've got safeguards that have proven effective. But they're only as good as they are today, and we need to keep improving them and are continually working with very talented people across the company to ensure we do so.

Okay. The last question will go to [ Gary Allen ], who asks, did Chevron invest in Zap Energy because of the potential financial benefit from nuclear fusion? Or was this merely an exercise in public relations? If this was a serious investment, why did Chevron invest so little?

Okay. So for people who might not know, we have a venture capital company that invests in start-ups, particularly with a focus on energy transition technologies that could provide breakthroughs that can help us address the climate challenges. We've invested in a company called Zap Energy, which is one of these start-ups, which is developing a next-generation modular nuclear reactor that has a very innovative approach to advancing cost-effective, flexible and hopefully, commercially scalable fusion technology. Fusion has been kind of the holy grail of nuclear energy for many decades and Zap Energy has some very interesting work that they've done. So it's an opportunity for us to support and learn about a promising low-carbon technology. It adds to Chevron's portfolio of these start-up companies that we think may have a role in the energy transition. And it allows us to learn as they learn and hopefully invest more. Our investment was appropriate for the early stage of development at this company and the amount of money they were trying to raise at the time. And like our other venture capital investments, we will consider increasing commitment based on how the technology performs, how the company evolves, what their capital needs are. So this is the model for venture investing, our early-stage investments that hopefully you continue to increase as the technology matures and proves out. So Mr. Allen, thank you very much for your question. Look, we're at the end of the meeting here. Again, I want to really apologize for the delay. We test these things ahead of time. We use suppliers that -- providers of the conference platform that we have confidence in, that have a high degree of reliability and their track record. So we will investigate what happened today and address it. But I apologize for the delay at the start of the meeting. We've actually pushed our Board meeting back, so we did not have to cut into the Q&A time today, and I'm glad that we did that because we got some really, really good questions there. We'll post, as we said earlier on our website, responses to any questions that we haven't been able to get to during today's meeting. And I'll close by just encouraging everyone to read our most recent climate change resilience report, which has been out now for a few weeks and also our sustainability report, which just came out this week. There is a lot of detail in these reports. It addresses the topics that were raised today and many others in more detail than we had the time to go into today, and they're available on the website you used for the meeting today or at Chevron.com. Thank you for joining us. It's always good to hear from our stockholders. I hope you're leaving today with a better understanding of how we've advanced our business over the past year and our plans to be part of a lower carbon future and a long-term viable source for your dividends and destination for your future investments. Thank you very much. I now declare the meeting adjourned.

Thank you for attending the 2021 Annual Stockholders Meeting for Chevron Corporation. You may now disconnect.