Chevron Corporation (CVX) Earnings Call Transcript & Summary

Okay, thank you so much, Pierre. So we have a lot of great questions from shareholders that have come in. I think it's helpful to bucket it into a few different themes, and typically, starting with macro really helps set the stage, and it's certainly been a dynamic environment for the oil and gas industry over the past few years.

I wanted to start with one of the areas that's getting a lot of investor focus right now, and that's the global natural gas market, where things have tightened up significantly over the past 2 years post the COVID-19 pandemic. The first question here comes from [indiscernible], and it's, how did Chevron play to invest in the natural gas demand surge as expected globally?

Yes, it's a great question and it's very timely. Chevron has a lot of strength in the natural gas business, primarily in the U.S., producing in the U.S. and delivering to U.S. customers and in the Pacific Basin, coming out of our projects -- large projects in Australia and serving customers primarily in North Asia. And what's happened with the war in Ukraine is, the European Union has made a policy decision to reduce or get off entirely Russian natural gas who have been a very large supplier to the European economies. And so what that has done has created more opportunity in what we'd call the Atlantic Basin. We currently serve European customers out of some liquefied natural gas projects out of West Africa. So we are positioned currently to help serve those markets. But now that it looks like a longer-term change because this will happen over years very likely, we've taken several actions to position ourselves to be a bigger player in the Atlantic Basin. So one thing that was done recently is, we signed a couple of large export agreements out of the U.S. Gulf Coast. So these are liquefaction of plants that will export natural gas, and it will be supplied by our growing natural gas that we have in the Permian Basin and as we increase activity in the Haynesville, which is in the Eastern Texas. And then we have a great asset, which we acquired through our Noble Energy acquisition in the Eastern Mediterranean, it's currently supplying markets in Israel, Egypt and Jordan, but it can be expanded either with floating LNG, liquefied natural gas facilities or go into some existing infrastructure in the area, and that would be another way that we could deliver more gas to Europe. Now both the U.S. Gulf Coast exports and Eastern Mediterranean, that's going to take a number of years to come together, but we are strengthening our position in the Atlantic Basin.

Makes a lot of sense. It sounds like some exciting opportunities ahead that also can help address this global supply crunch that we're seeing at the moment. I wanted to shift from the global story and talk a little bit more about the domestic business here in the U.S. And the next question comes from [ Travis Seet ] on that topic, that is, what is Chevron doing to increase domestic energy production?

Another timely question. We are doing our part. Our U.S. oil and gas production was up 7% in the first half of the year versus the first half of last year. Our sales of U.S. refined products, so that's gasoline, jet fuel, diesel and others is up 10% in the first half of the year versus last year. If you look at our total investments in the U.S. in the first half of this year and you include our acquisition of Renewable Energy Group, we more than doubled our investments in energy in the United States. So some other examples, our Permian production, where we have an advantage position and a leading position, we expect our Permian production to be up more than 15% in 2022 in this year compared to last year, and it will grow about -- by about 50% by 2025. We're a big investor in the U.S. Gulf of Mexico, so offshore, Texas and Louisiana. We expect production to grow by 50% in our operations in the Gulf of Mexico by 2026. And those 3 businesses I just referred to, Renewable Energy Group, Permian, Gulf of Mexico, they're all great examples of assets that help us deliver on our objective of higher returns and lower carbon. There are lower carbon energy solutions. In fact, our Gulf of Mexico production has some of the lowest carbon intensity of any barrels in the world. So we are doing our part. We're doing a lot to grow energy supplies in the United States.

That's great and really helpful overview, Pierre. Maybe we shift away from Upstream and talk about the Downstream environment, which has been another area. We think it tightened up over the past few quarters, and I was wondering if you could just give us an overview of what you're seeing in the Downstream space? Maybe speak a little bit to the current pricing environment and margin environment for your Downstream assets.

We've seen a strong demand response really coming out of COVID, and it's been across all the products. If you think of what really happened through COVID, diesel demand was pretty resilient because, again, there's still a lot of commercial industrial activity. Obviously, jet fuel decreased significantly as air travel was significantly reduced. And then gasoline had a response initially. And then we've seen really all gradually recover or fully recover or strongly recover except for jet fuel. So we still see domestic air travel pretty much back to where it was. Lots of people getting out and about. International air travel to Europe increasing and recovering as restrictions have been loosened. But we have a West Coast presence, and clearly, international air travel to Asia is still a little bit restricted because of the travel requirements. And of course, there are big parts of Asia and big parts of China where there still are restrictions on movement and that's impacting demand. So we've seen fundamentally a very strong and quick demand response as the economy has reopened. And we still have a little more demand still to come. The other part of the equation has been we've seen reductions in supply. And so across the industry, there have been a number of refinery closures or conversions to biorefineries. When a refinery is converted to a bio use, it gets de-rated. So it means it produces less as a biorefinery than it does as a conventional refinery. So that tightens up that reduces supply. And then we've seen China who's historically a pretty large exporter of refined products. We've seen them lower their exports. I think it's really important for me to say that Chevron has not closed any refineries since COVID. In fact, we added a U.S. refinery in Pasadena, Texas in 2019 right before COVID. And we also are not doing any permanent conversions of our refinery. So we are -- and we'll talk about renewable fuels, we are making conversions to certain units in our refineries, but their conversions that give us the flexibility to go back and forth between conventional use and renewable production depending on economics and demand and other factors. And with the catalyst change, we can go back and forth between conventional and renewable fuel use. So margins are strong. They're down from the peaks in the second quarter, but they fundamentally reflect a market where there's been a strong demand response with more demand increase is likely to come and some reductions in supply that have tightened the market, and we'll just see where it goes.

Great. Very helpful. I'm saying that to me that there is still now another leg of this recovery and as you noted, on the demand side. And it's an interesting and differentiated strategy as well on the renewable space, and I do want to come back to that. Before we go into renewable, I want to talk a little bit about financials and just longer-term strategy for Chevron. And one of the key factors when we think about attractive investment opportunities here at Morgan Stanley's shareholder returns, in particular, stable dividends and to focus from any of your shareholders as well. So I want to ask the next question on that topic, and it comes from [ Taneda ]. And the question is, how much of a priority is it to continue to consistently grow the dividend for Chevron?

It's our #1 financial priority. We are really clear about that, and we have been for a very long time. In fact, we've grown the annual dividend paid out for 35 consecutive years. We haven't cut the dividend since the great depression. We've increased the dividend 20% since COVID, while a number of others in our industry have cut their dividend or at best, kept their dividend flat. And if you go back to 2010, we've doubled the dividend. And clearly, our shares, although they've gone up some, they haven't doubled. So we now have a dividend yield of 3.5%. That's more than double the dividend yield of the S&P 500, so the average dividend yield of the market. And in an environment with rising interest rates, our dividend yield is very competitive with other fixed income products. I think this is a good time to talk about our other financial priorities. So we're very clear that the dividend is our #1 financial priority and has been for a long time, and that's reflected in that track record of performance. But we've also been clear and consistent about what the other financial priorities are. So the second financial priority is to reinvest in the business to support that growing dividend. We've talked about some of those businesses, and I'm sure we'll talk more about it. The third financial priority is to maintain a strong balance sheet. We operate in the business that is cyclical. We know commodity prices go up and they go down, and we have to manage that risk for our shareholders. And we do that by having a very strong balance sheet. So we've reduced debt for 5 consecutive quarters. Our net debt ratio at the end of the second quarter was 8% and that compares to what we provide for mid-cycle guidance of 20% to 25%, which is a very strong balance sheet. So we're much stronger than even our strong guidance. And then the fourth priority, which is when we have cash in excess, we've already met the first 3 priorities, is to repurchase shares. We've bought back shares [ 15 now ] in the last 19 years. We've done it at about an average price of $90 a share. Our shares are currently trading at around $160. We've done more than [ 50 billion ] of shares during that time. And our current repurchase rate is about -- is $15 billion a year, which is about 5% of our shares outstanding that we'll buy back every year at current prices. I think what's important to point out is that we've built our business and our financial framework to work at a $50 Brent oil price, which means that we can cover our dividend and our capital reinvestments and maintain a strong balance sheet all at $50. So when prices are higher than that, and they clearly are with Brent oil prices in the [ $90s ], we generate excess cash, and that's what enables us to repurchase shares. So we really are in a position where we can do it all, but it's on a foundation of consistent, simple and clear financial priorities.

Great. Very helpful. So resilient in a lower price environment with attractive upside leverage in the current commodity price backdrop. It's a very clear, and I think well thought-out strategy. So let's talk a little bit about what are the points you made and that's on investing to expand the business and grow. You alluded to some points on this before talking about the macro as well, let's expand on that. And I'm going to use a question here from John T. I mean the question is, what is the company doing to expand the business into other areas to increase profit longer term?

Devin, you're absolutely right, and John, great question. We can only grow the dividend to grow cash flow. When we increase the dividend, we do it with the intent of its in perpetuity, right? That again, we haven't cut it since the great depression. So we need to have a business that's healthy and growing so that we continue to grow that dividend. So we provided guidance at our Investor Day in March, which at $60 Brent oil price, we would grow our cash from operations per share at a compounded annual growth rate of 10% per year. So that gives you a good idea of the rate that we can grow cash flow, which can translate into future dividend increases. And of course, that's a $60 Brent oil prices. So our growth rate would be even faster at higher prices. And so where does that cash flow growth come from? It comes from -- well, it comes from several assets we've already talked about, a leading and advantaged position in the Permian, where we're going to double production over this decade, but more importantly, it generates free cash flow every single year, growth in the Gulf of Mexico, which I mentioned, Renewable Energy Group, which has a big expansion at one of its renewable diesel plants that will come on here over the next couple of years. We talked about international natural gas and the first question, where again, there's growth opportunities as Europe weans itself and reduces its dependence on Russian natural gas. One project we haven't talked about is a major project we have in Kazakhstan. This is a multiyear project during the -- we've invested in it before COVID and through COVID. And in fact, it was -- so we are investing $3 billion to $4 billion our share in this project during the depths of COVID. And at a time when we were pulling back capital on short-cycle production because we didn't think the world needed more short-term supply. We maintained our investment in this project because it's a long-cycle project. And it's going to come on -- the first phase will come on the second half of next year and then the second phase in the first half of the year following. So by reducing capital to that project as it starts up, and then as it expands, we will generate more cash flow. If you step back, we're a better company than we were just a few years ago. We're more capital efficient. We say, we're more than 20% capital efficient than we were, again, just pre-COVID. And you can see it in our guidance. So our current guidance that we just shared in March of this year is to grow traditional oil and gas production at a 3% compounded annual growth rate through 2026. That's the same growth rate that we shared in 2020 right before COVID hit, but we're doing it with 20% less capital. We're more cost efficient than we were before. We provided guidance in March that will reduce our cost per barrel by 10% a year by 2026. And I think it's important is that we have 2 major acquisitions that were well-timed that are really contributing to our greater capital and cost efficiency. We were the first company in the industry in July of 2020 to announce a major acquisition not too far after oil prices famously went negative in late April of 2020. And then we saw others in the industry follow on. And then in March of this year, we announced the acquisition of Renewable Energy Group, and that was a time where as interest rates that were starting to go up a little bit and growth stocks traded off a little bit, we saw an opportunity there. We are really pleased to welcome Noble employees who've been here now for almost 2 years and employees from Renewable Energy Group, who have been here for only a few months and those great assets, which we've talked about already. So the combination of a really strong organic portfolio, being more capital and cost efficient and then really making the most of 2 major well-timed acquisitions. All of that is what's contributing to growing cash flow and a growing dividend going forward.

Great. And I will say, Pierre, if someone that follows a wide set of the industry here, the improvement in capital efficiency that you've been able to realize really does stand out versus the peer group over the last few years. So let's shift even longer term from here. And both Nicholas K and [ Jose Ricardo S ] have questions about the medium to very long-term future of Chevron. And I'll start with Nicholas' question first, and that's, Pierre, where do you see this company in 5 to 10 years?

It's a great question, Nicholas. And we have to think forward in next decades. We've been around as a company over 140 years. I've been in the company 33 years, and we're working for the next generation of employees and other stakeholders. So if I look forward and we look forward 5 to 10 years, we expect to be aligned with our objective to be the higher return company with lower carbon energy. And we provide a lot of guidance to paint a picture of what it looks like over the next 5 to 10 years. I've already referred to our Upstream production guidance of 3% compounded annual growth rate. Again, exactly what it was pre-COVID, underpinned by great investments in the Permian and Gulf of Mexico and Kazakhstan, Argentina, other shale and tight assets. So we really have a strong profile. And we showed actually in March a 10-year outlook that shows us going beyond and continuing at similar growth rates to where we could be in that time frame, producing over 4 million barrels per day of oil and gas. We've also provided guidance on how we'll lower carbon intensity. We have 2028 targets for our traditional oil and gas business. That will be 35% lower in carbon intensity by 2028 relative to 2016, which was the year the Paris Agreements were signed. And we are currently a top quartile producer, which means that 75% of the oil and gas that's produced in the world has a higher carbon intensity than the average of our portfolio's carbon intensity. And we believe by shooting for that target by 2028 will maintain being a top quartile producer. In 5 or 10 years, I think we'll have a more profitable Downstream business with growing renewable fuels. I've mentioned earlier that the Geismar facility, which was acquired through REG, has an expansion that will come on in the next couple of years. We have a Bunge joint venture. We'll talk more about that, I'm sure, and other activities that will grow in that time frame. And petrochemicals, which is a growing source of demand, another product that held up very well through COVID. In fact, many -- although there were switches maybe from appliances and cars early into health, PP&E and others, but demand for petrochemicals and plastics very resilient through COVID, and we're seeing it grow from there. And then our Downstream team and our Upstream team are continuing to work on self-help. How can we optimize across our value chains, how can we make turnarounds more efficient, how can we become more cost efficient, more capital efficient? So a lot of self-help. And of course, I expect we will have bigger new energy businesses in 5 to 10 years. It was a year ago, just about a year ago yesterday that we had our Energy Transition Spotlight. We provided guidance that -- we expect that these businesses will generate more than $1 billion in cash -- operating cash flow by 2030, and they would earn double-digit returns. And we gave specific guidance in our 3 business lines. 100,000 barrels a day of renewable fuels capability by 2030, 125,000 tons per year of low-carbon hydrogen production and 25 million tons per year of carbon capture and offsets. And those are all 2030 guidance. So I think our current investor communications really paint a picture of what the next 5 to 10 years could look like. There will be surprises along the way. There will be uncertainties. We talk in Chevron about being consistent, prepared and adaptive. And so consistent is, again, having a plan, having a commitment to like the dividend, which you can count on, prepared -- as we know oil prices, they can go up, they can go down. We had a pandemic. We were prepared for that. There'll be other surprises and then adapt it because we know we can have our best plan, but the loyalty prices us along the way. But I hope that paints a picture of what Chevron can look like in the next 5 or 10 years.

No, it certainly does. And if I sum it up and still you're phrasing in the process, it sounds like the future is higher returns and lower carbon. Let's go even longer term here with Jose Ricardo S. question, and that is, with the environmental concerns around fossil fuels and Chevron's primary business being an oil and gas company, how well-positioned will Chevron be, say, in 20 years in the energy sector? What's that longer-term future look like, Pierre?

Yes. As we go out further, the uncertainty clearly increases. But again, we are thinking in terms of decades, and that's what you would expect us to do. And we are a business that makes investments that endure for decades. We've been in a number of our assets for decades, if not 100 -- over 100 years, including our refineries here in California. Our strategy is to leverage our strengths to deliver lower carbon energy to a growing role. So what do we know about the next 20 years? Well, pretty much know that population is going to grow. We're about 7.5 billion people on the planet right now, and we expect that will grow to 9 billion. We hope certainly that economic prosperity will continue. That's been what we've shown now for decades as we've seen hundreds of millions, if not billions, of people across the globe get to higher standards of living. And we hope that will continue because there still are billions of people, unfortunately, who don't enjoy the standard of living that so many of us do. And that -- what that means is, we expect that energy demand will be higher in 20 years. So those are the things we have pretty good confidence and know about. What we don't know is, how fast will policy, technology and other factors -- how they might change the energy mix? And so our strategy is to be a leader in both traditional and new energy markets because we really don't know how fast the energy transition may be because there's just uncertainties in those areas that I talked about. And then we're very clear that we need to continue to focus on leveraging our capabilities. So what are the things that we have unique talent and a track record of doing that we need to continue to maintain and develop advantaged assets. Investors have choices, and we need to have assets in our portfolio that we know -- we are confident can be better than our competitors. And then we need to continue to provide lower carbon solutions to our customers. The airlines are looking for lower carbon fuels like sustainable aviation fuel. Trucking companies that are delivering products to our houses are looking for lower carbon fuels, and they're looking to companies like Chevron to deliver. So our intent and plan over the next 20 years is to do all that, leverage our capabilities, maintain advantaged assets, deliver lower carbon solutions to customers, do that with excellence, do that better than others. And I'm confident that we will do that, and I'm confident about our future.

Great. Very thoughtful and helpful overview, Pierre. Let's talk a little bit more about low carbon and energy transition. And our next question here comes from [ Pedro M. ]. And the question is, are you investing in clean energy? And if you are, where and how? And Pierre, you already alluded to a few areas where you're making investments, I wonder if you could elaborate further on that here.

Yes, Pedro, thanks for that question, and again, all these questions got a lot of votes. So thanks everybody for asking the questions and then for upvoting them. Yes, it was a year ago yesterday that we had our Energy Transition Spotlight, and that was a multi-hour full event dedicated just to our energy transition strategies with all of our investors. And we had some new information that was provided there, including increasing and more than tripling our total capital going to lower carbon, and that's guidance that we provided through 2028. And it's really going into 2 main areas. First is to lower the carbon intensity of our traditional business. And so as I said, we're a top quartile producer of oil and gas based on carbon intensity. We've set 2028 targets where we can make -- where we believe we'll maintain that top quartile status. And for the Upstream, we set a net zero aspiration by 2050. So we have a portion of that $10 billion are going to projects, and we described a number of those projects in our Energy Transition Spotlight that are reducing the carbon intensity of our traditional business, and that can be having wind and solar supply, our Permian operations as an example. That's eliminating methane emissions from our operations, it is energy efficiency. So there's a lot that we can do in our traditional business as we work to make it, again, 35 -- or the Upstream make 35% more carbon efficient by 2028. And they'll continue after 2028, but that's a portion of it, how do we lower the carbon intensity of our traditional business. And then the majority of it was to grow new energy businesses in 3 business lines: renewable fuels, hydrogen and carbon capture and offsets. So let's talk about progress and what are we doing really since that was a year ago. Well, we made an acquisition of Renewable Energy Group, $3 billion. It's the -- makes us Chevron now the second largest producer of bio and renewable diesel in the country, third largest in the world. It moves us more -- about halfway towards our guidance of 100,000 barrels a day of renewable fuel capability. And more importantly, it really marries a leading company in the renewable fuel space with great marketing strength that Chevron has in particular in the California market, where there's a lot of policy support for renewable fuels, and we've seen some more policy support recently out of the Inflation Reduction Act. So we're very excited by what Renewable Energy Group provides and it will grow in the future. We announced and formed a joint venture with Bunge. And I guess I should have said for Renewable Energy Group, over 70% of its feedstock and now our feedstocks are waste oils. And so that means it's used cooking oil, distillers corn oil, beef tallow, these are waste products, and so it's not competing with land use. And so we really like that part of the REG portfolio. With Bunge, we're working on with -- right now, at least with virgin oils, and we have exposure to the crush margin in the value chain on that and provide more feedstocks that again, help us get to our 100,000 barrels a day of capability. And we're working with Bunge to look at next-gen feedstocks, things like cover crops that you could grow that wouldn't compete with land use, but could grow within crops and then supply feedstock for renewable fuels. And then at our Los Angeles refinery, we are -- by the end of the year, we expect it to convert a unit there -- a diesel unit there to have renewable fuel capability. And again, this is a unit that depending on economics, policy demand, other things, it can be in renewable production mode, but it can also flip back to conventional. And so it really depends on what's happening with demand, margins and other factors. So lots of progress on renewable fuels, again, halfway towards the 2030 guidance, more to do. In hydrogen, we're working on developing hubs on the West Coast. We have excess hydrogen at our Richmond refinery. We're working with original equipment manufacturers because part of developing out the hydrogen infrastructure is having the engines for heavy-duty trucks, for marine vessels, for railroads, and we're working with those companies to test hydrogen in their engines. We are increasing the number of hydrogen stations in California with a partner company. So lot of progress there. We're working on the Gulf Coast with a number of partners to advance a project there, and we're working with Asia with one of the largest Japanese utilities. And then carbon capture and storage, a key part of the value chain for carbon capture and storage is having the acreage to store the CO2. We call it the [ core ] space. And so in partnership with Talos, we're in a joint venture that has the first offshore block in the United States that's dedicated to carbon capture and storage. It's in the Texas state waters. And so that's one piece of the puzzle to put together a project, but a very important piece because as you can imagine, you need certain geology and a certain structure to be able to store the CO2, which you're storing forever, and so we're very happy to be in partnership on that. And we were recently awarded 3 blocks in Australia, again, in partnership with others, but again, acreage that we believe that will be dedicated to carbon capture and storage which has the characteristics that we believe will be good for storage. We're also working with a number of companies, both as an investor and in partnership with them to pilot and test technologies in the field on how to capture the CO2. So the -- a key enabler of growing this business is reducing the cost in all parts, but one of them is reducing the cost of the capture. So if you think of an emission out of a stack, CO2 might only be 10% of all the flows because it comes out with water, steam and nitrogen. And of course, you want to separate the CO2, the 10%, because you don't want to reinject the 90%. So we need to get the cost down of that capture, and we're an investor in companies like Carbon Clean and Svante and partnering with them, testing their technology, working to see how we can scale up their technology and reduce the cost of capture. So again, we're putting together the pieces of what that business will look like. So again, I feel like we're making good progress. If you think of that our Energy Transition Spotlight was just a year ago yesterday. At the same time, we know there's much more work to do. Maybe the last point, Devin, is we've also been clear that we don't intend to put our shareholders' capital to work on wind and solar, and that's because there's a lot of companies that are in that space. We don't have strength in that value chain. At the same time, though, we will buy a lot of renewable power from wind and solar providers to lower the carbon intensity of our traditional business and then to supply the new energy businesses. Hydrogen will require wind and solar and other low-carbon sources and carbon capture storage will benefit from low carbon power also. So again, I feel like we're making good progress, consistent with what we laid out a year ago, but we still have more to do.

Yes, definitely seems like great progress so far and an exciting set of opportunities that you have had as well. So sticking with similar theme here, but shifting a bit more towards the policy front. We had a similar question from both [ Engel R. ] and [ Joseph L. ]. And the question is about car manufacturers. And you've seen many announce that they plan to take their fleet of vehicles to fully electric over time. And the question is, how do you see this affecting Chevron? And what plans do you have to take advantage of these changes?

I think we just start first with global oil demand, and 40% of it, it doesn't go to transportation. It goes to petrochemicals. We've talked a bit about that. It goes to some industrial applications. It goes to off-road vehicles like tractors, like farming equipment, construction equipment, mining trucks and all that. And then it goes to cooking and heating and other applications. So you start with about 100 million barrels a day of oil and liquids -- petroleum liquids, and again, 40% doesn't go to transportation. And then when you look at the transportation piece, less than half of that remaining 60% or so goes to gasoline. I think it's good to think of and look at 2020, which, of course, was COVID hit, and it was a year for many of us in most parts of the world where we almost didn't leave our homes for a good portion of the year. For sure, essential workers were going to their jobs, health care and others and essential products were moving, but it was a year of really reduced activity. Demand for oil and petroleum liquids in 2020 was down 8%. So more than 90% demand for our products is necessary just to house us, feed us and the basic living that many of us had for a good portion of 2020. So it just shows how essential our products are to modern life in the economy. And as the economy has recovered and opened up, I mean, we've seen demand come back basically to that 100 million barrels a day. So that last 8% is really going on vacation is traveling and seeing others. It's some of the discretionary activity that we did not pursue in 2020. So we expect that there will be hundreds of millions of EVs over the next 2 decades. That's both from the manufacturers that you've talked about, that's also policies in certain parts of the world. Put that in context, there's about 1 billion light-duty vehicles on the road right now, and of course, they last 15 years. And if you look at -- of the 80 million or 90 million vehicles -- light-duty vehicles that are sold every year, I think it's less than 10% currently that are EV. So it really is a good example of an energy transition. And if I can just go sustainable aviation fuel for a moment, too, the spec for sustainable aviation fuel for airlines in Europe is 98% conventional, 2% renewable. And then it goes to [ 95%, 5% ] in 2025 and maybe it's [ 90%, 10% ] in 2030. Again, it's an example of a transition happening. So we will see a lot of electric vehicles on the road. That's -- I think that's been clear for a number of years, and it's certainly been in our long-term planning for a number of years. At the same time, there's lots of conventional vehicles and there'll continue to be conventional vehicles and they last a long time. When you then look to other sources of demand growth, right? So petrochemicals has been growing, air travel around the globe will grow as more and more people get to a higher standard of living. And then if you look to the other sources of demand, like heavy-duty transport, where there aren't alternatives, you look to the nontransportation part of demand, you can see that there's still -- there's a very, very big business and big opportunity in traditional oil and gas. We're 2% -- Chevron is 2% of oil and gas demand based on our production. And so -- and we're among the strongest, most responsible, the best engineers, the best -- strongest balance sheet to all this strength. So there's lots of places -- even in a world where demand declines, we can grow within that either organically because we have advantaged assets or unique capabilities are the best customers have developed, and we are delivering those lower carbon solutions or we can grow inorganically like we have through those well-timed acquisitions that I referred to. So again, we know EVs are coming. We've known that for a long time. That's in our plans. There is still plenty of opportunity for Chevron in that future.

Great. And Pierre, it's a very helpful way to think about it. The next question has come from Steve T. and it is on the policy front. And the question is, do you know if the Biden administration is going to make it easier for oil and a gas companies to drill and explore in the United States? Can you talk a little bit about the regulatory backdrop there?

Those discussions are happening in D.C. right now, so I don't want to speculate about them. You can read about them. It's clearly important. It's important for both traditional and new energy. For sure, we need to have leases in the recent Gulf of Mexico or last year's Gulf of Mexico lease was just awarded, I believe, yesterday, so that we have future sources of energy. It's important for new energy, too. So we talked a bit about carbon capture and storage. And what that's going to look like is, capturing CO2 at the source where it is being emitted, transporting it on a pipeline and then reinjecting it into some acreage like I talked about core space. Well, this -- we're going to require permits for that. We're going to require permits for hydrogen and renewable fuels, too. So it is really important, and it's true not just at the federal level, but also at the local and state levels, too. With societies -- and I think we're seeing this in particular as we look to Europe, but really, this has been true for a long, long time is that society needs affordable, reliable, ever cleaner energy, lower carbon energy. And it's essential to modern life to progress, to better health outcomes, better education outcomes, just a higher standard of living. And if -- we take for granted in this country because we are blessed with a lot of affordable, reliable and lower carbon energy, but there are other parts of the world that are not in that same position. So whether it's in the United States or in other countries around the world, having really sound policy that encourages affordable, reliable, ever clean and lower carbon energy is key. Now it's not by itself. We need to have continued technology advancements that. Again, Chevron is working with a lot of startups and other venture firms to figure out how we can reduce the cost of some of these new energies and how we can lower the carbon intensity of our traditional energy business. And then we need large economies of scale going from 7.5 billion people to 9 billion people. Energy is going to grow. And so these solutions need to be able to scale up. And when they scale up, their costs need to go down. So policy is a critical enabler, but there's other parts that are also essential. And we're going to work with governments at the federal, state, local level in this country and a number of countries around the world and other stakeholders to do our part to deliver lower carbon energy to a growing world.

Great. Very helpful. We've covered a lot of topics, a lot of great questions here. We're getting close to the end of our time. So I wanted to take a moment here, Pierre, just to thank you for your time and also to our audience for attending and for Chevron shareholders submitting a great list of questions that we have here today. Before we wrap, Pierre, I'll turn it to you for any closing remarks.

Well, I want to first thank you, Devin, for your time and Morgan Stanley. You're one of the best analysts on the Street. So I encourage everybody listening to look to your research, your thoughtful and forward-thinking, and we value the work that you do and other financial community does also. I want to thank the investors who ask questions, who uploaded questions and who listened in. This is something new that we are doing. We're trying to directly interact with our retail investors, and we hope you found this valuable, and we'll look for some feedback. But again, we appreciate your time. If you step back, I hope what you can take away from today's Chevron Exchange, very -- our objective is very clear and very simple, straightforward, safely deliver higher returns and lower carbon. It's something we're working on. We're making progress. We still have more work to do. I hope you take comfort in our track record of success. So when we talk about our objective going forward and the guidance we provide, look to our track record of delivery of results, a dividend that's grown 35 years in a row, 2 recent well-timed acquisitions. Again, the first in the industry to do a major acquisition when oil prices were in the low 40s and now in the 90s. Advantaged assets like in the Permian or Kazakhstan or in other locations. So we have, I think, a track record of delivering, so you can have confidence in the guidance we provide. And it is an uncertain future, we don't know. And I really appreciate those questions as we look out decades because that's how we have to think here as a company. Hopefully, a picture -- we painted a picture of how we'll sustain higher returns in a lower carbon future. We don't know exactly how the energy system is going to adapt and evolve going forward, but we're positioned in both our traditional and new energy businesses to, again, deliver higher returns in a lower carbon future. So I'll wrap up by saying, we really value your investment in Chevron. As I said in the opening, retail investors, individual investors are a large and important part of our shareholder base. We sincerely appreciate the confidence you have in our company, in our employees. We take that to heart, and we're working really hard to reward all of you and help you achieve your financial goals. So with that, I want to thank Devin McDermott again. This completes our first Chevron Exchange, and I look forward to next time.