Chevron Corporation (CVX) Earnings Call Transcript & Summary

Good morning, and thank you for taking the time to join us for Chevron's Investor Day, where you'll learn about our financial strength, our diversified portfolio and the leading value proposition today and for years to come. I'm Jake Spiering, Head of Investor Relations. We'll start the morning off with a presentation by our Chairman and CEO, Mike Wirth; and our Chief Financial Officer, Eimear Bonner. They'll cover our corporate and financial strategy, followed by a question-and-answer session. At the end of that session, we'll take a brief 15-minute break. When we come back, our Vice Chairman, Mark Nelson; and our Vice President of Lower Carbon Energies, Jeff Gustavson, will provide a presentation on our diversified portfolio, followed by another Q&A session. The full presentation is available on Chevron's website. Before we begin, I would encourage everyone to review the cautionary statement in the provided materials as the presentation today contains estimates, projections and other forward-looking statements. Now to set the tone for the day, we'll open with a brief video, which highlights Chevron's rich history, significant accomplishments and exciting path ahead. I hope you enjoy it. [Presentation]

All right. Well, good morning, and welcome to Chevron's Investor Day. As you saw in that video, Chevron has a storied past and an even more compelling future. I'm excited to show you we're bigger, stronger and better than ever and poised to deliver even stronger cash flow and growing value. I'll start with industry-leading free cash flow growth. It's here. Now we're delivering on every milestone we set out. And as you'll see today, we view this as just the beginning. We built a resilient world-class portfolio with a premier upstream position in the industry, high margin, low breakeven and balanced across asset classes and regions. We have a highly competitive downstream and chemicals business. And we've developed diversified growth options that extend through this decade and into the next. Importantly, we remain committed to superior shareholder returns. Capital discipline is at our core, and it's what positions us to translate higher free cash flow into consistent returns for shareholders. In short, Chevron is stronger, more resilient and better positioned than ever. And we're excited to show you why we believe the best is yet to come. The foundation for performance at Chevron starts with safety. Protecting people, assets, communities and the environment is our highest priority. Producing the energy the world needs involves inherent risks. This year, we've experienced incidents that remind us how important it is that effective safeguards are always in place. We're focused on learning from these events and implementing actions that improve our ability to deliver energy safely and reliably. The world's appetite for energy continues to grow. Reliable and affordable energy remain essential for human progress. Oil and gas demand is at an all-time high. It will set another record this year, and it's expected to do so again next year. And again, the year after that and beyond. Due simply to field decline, there's a need for significant investment to close the oil supply gap, equivalent to five Saudi Arabians that would otherwise appear over just the next decade. Demand for gas is expected to grow even faster than for oil, including the critical role gas will play providing the energy backbone for data centers and advanced computing. Meeting this demand will require scale, expertise, technology, partnerships and financial strength. This is where Chevron excels. For decades, our vision has been to be the global energy company most admired for its people, partnership and performance. We've also consistently held a simple, clear objective, lower returns, higher returns and lower carbon. We've been an industry leader on capital discipline. We believe that costs always matter. We've demonstrated a track record of dependably increasing cash returns to shareholders. Our approach to new energy has been pragmatic. We'll invest only where we believe we can compete and deliver returns. This isn't about chasing headlines. It's about creating value. And we're lowering the carbon intensity of our operations, cutting the carbon intensity of our oil production almost in half over less than a decade. Some things are changing at Chevron, including our organizational model and our portfolio. What hasn't changed is our approach to creating value. As I said earlier, Chevron is bigger, stronger and better than ever. Over the last decade, we've reshaped the portfolio, grown production, become even more cost and capital efficient and steadily grown cash returns to shareholders. Production is up by over 1 million barrels of oil equivalent per day, an increase of more than 40%. At the same time, the capital spending is down by nearly 40%. Unit development costs are lower and capital efficiency is higher. Divestments and concession expirations have been more than offset by inorganic growth in the Eastern Mediterranean, DJ Basin, Guyana and the Bakken. And we've delivered organic growth in Kazakhstan, Australia, Gulf of America and the Permian. We've also built a leaner operating model, changing how and where we work while keeping a relentless focus on efficiency. All that enables us to return over 3x more cash to shareholders today versus a decade ago while keeping our share count relatively flat. And we're building on that momentum to become even better. Over the last year, we've delivered on core milestones that result in industry-leading growth in cash flow, volume and value. From 2024 to 2026, cash flow from operations is projected to grow at 3x the rate of our nearest peer. That's underpinned by an expected production compound annual growth rate of 10%, more than 40% higher than the growth rate of our next best competitor. And we'll be even better positioned to withstand the volatility of commodity markets with a breakeven price to cover both CapEx and the dividend expected to be below $50 Brent. In over 43 years in this industry, I've seen more than a few cycles and surprises. You can count on us to be prepared for the unexpected and resilient through any headwinds. And the improvement doesn't just end in 2026. Over the next 5 years, we expect annual adjusted free cash flow growth to average greater than 10% at a nominal $70 Brent price. And at real prices, escalating over time like many of our peers use, that growth would average over 14% annually. This outlook is underpinned by our world-class upstream assets, where we continue to increase capital efficiency across our shale portfolio, optimize world-scale fields in Kazakhstan and Australia and grow high-margin deepwater production. We had diversified growth through new chemicals projects and new power solutions. Never in my career have I seen a higher confidence outlook further into the future and with lower execution risk than I see today. Underlying it all is a relentless focus on lowering operating costs, using innovation and technology to expand margins and remaining disciplined on capital. And this expected growth is even higher on a per share basis. Assuming the midpoint of our buyback guide, this would add over $8 of adjusted free cash flow per share over the next 5 years, nearly doubling our expected 2025 rate. Chevron's purpose is to develop the affordable, reliable, ever cleaner energy that enables human progress today and well into the future. So before I hand it off to Eimear, let me just say a few words about the role of innovation and technology, including AI. Innovation has long been a core strength at Chevron, enabling us to work faster, smarter and safer every day. This continues in all core areas of technical focus, and we continue to see higher levels of performance in our assets as a result. We expect artificial intelligence to enable the next leg in this journey, driving improvements in efficiency, asset productivity, optimization and exploration outcomes. Both Mark and Jeff will share examples of what we're already doing with AI. We have a dedicated enterprise team focused on integrating AI into how we work every day, prioritizing the highest value opportunities across our business. We also believe Chevron has a meaningful role to play in meeting the growing power demand created by new data centers. Jeff is leading this effort and will show more in his comments. With that, I'll hand it over to Eimear to discuss our financial priorities.

Thanks, Mike. Good morning, everyone. Chevron's financial priorities are long-standing, grow the dividend consistently, invest capital efficiently, maintain a strong balance sheet and buy back shares steadily through the cycle. So let's start with the dividend. Simply put, we reward shareholders first, and our track record proves it. We have the highest average growth rate of our peers over the last 25 years, and you can see that our consistency is unmatched. We know our shareholders rely on our dividend. We don't cut it in times of pressure, and our capital discipline focus enables continued growth through commodity cycles. Our consistent approach to rewarding shareholders stands out from the competition. Our second priority is to invest capital efficiently. And over the last decade, we've led the industry in a more disciplined and efficient level of investment. Since 2021, our capital efficiency has been better than both the peer and S&P 500 averages, and we expect that leadership to continue. As Mike noted, we've reduced CapEx by 40% over the last decade. And today, we're reducing the annual CapEx guidance range by $1 billion to $18 billion to $21 billion through to 2030. This capital program supports our forecasted growth in earnings and cash flow and is balanced between short- and long-cycle projects across diversified asset classes and geographies. We believe capital discipline is fundamental to our strategy in providing long-term value for our shareholders. We also understand how important it is to our shareholders to manage volatility through commodity cycles. Our strong balance sheet is an asset that we use to mitigate risk and create value. Given strong cash generation, our debt coverage ratio is nearly twice as strong as the S&P 500 average at current prices. And even at $50 Brent, we expect it would remain better than the average. We have surplus debt capacity and hold a AA credit rating. This strong credit resulted in some of the tightest spreads across all of corporate America in our recent bond offering. With a portfolio that has the lowest upstream breakevens, a flexible investment program and a premium balance sheet, we're positioned for any price environment. Now to our fourth and last financial priority, buying back shares steadily through the cycle. We bought back shares in 18 of the last 22 years and established new records in each of the past 3, averaging a reduction of about 5% of shares annually. Given our stronger cash flow growth, we're reducing our price assumption for the top end of the range from $85 to $80 Brent. Over the period, we expect to repurchase $10 billion to $20 billion annually at average prices of $60 to $80 Brent. Our consistent approach underscores our priority of steadily returning cash to shareholders. We have a proven track record of maximizing value, consistently high-grading our portfolio by divesting assets that don't compete for capital and delivering synergies on the assets that we bring in. We announced a $10 billion to $15 billion divestment target by 2028, and we've already achieved $9 billion. Looking ahead, we expect $1 billion to $2 billion of asset sales per year through 2030. We've successfully integrated multiple quality companies that have bought great assets and great people and have created even more value than expected. The Hess integration is largely complete, and we've already delivered our initial $1 billion run rate synergy target. What was expected to take 12 months was achieved in just 3. With this momentum, we're raising our Hess synergy target to $1.5 billion by the end of 2026. Now as you've heard us say many times before, costs always matter, and they always will. We're focused on running our assets as efficiently as possible. This includes continuous improvement across all levels of the company, where we relentlessly benchmark and pursue performance that's better than the best. Recent changes to our operating model and ongoing standardization across the company are already delivering results. And we're leaning in on technology and AI to do our work safer, faster and at a lower cost. With the career progress that we've made and the actions underway, we're raising our structural cost reduction target to $3 billion to $4 billion of annual run rate savings by the end of 2026. Delivering high return volume growth while also lowering our absolute costs is expected to deliver strong earnings growth through the end of the decade. And when you combine this with our buyback program, we expect to further expand returns on a per share basis. In addition to the cash flow Mike talked about, at flat nominal $70 Brent, we expect annual average adjusted earnings per share growth of more than 10% through 2030. And at escalated real prices, it's over 14%. With this growth, along with continued capital discipline, we expect greater than 3% improvement in return on capital employed by 2030 at flat nominal $70 Brent. And at escalated real prices, this improvement would be almost double. Bringing it all together, we've got a winning combination. First, the free cash flow inflection is here. And as Mike said, we see this as just the beginning. We expect to generate more cash and keep growing through the end of the decade. Second, as I just showed you, we expect to increase earnings and returns. And finally, we remain focused on capital and cost discipline, lowering capital guidance and increasing our structural cost reduction target. So I'll leave you with this. Chevron offers a unique proposition, a commitment to shareholder returns, a strong growth trajectory and leading resiliency. No other company in the S&P 100 matches our combination of forecasted earnings and cash flow growth balance sheet strength and a market-leading dividend. At our historic dividend growth rate and the midpoint of our buyback guidance, we'd return over 45% of the current market cap to shareholders over the next 5 years. Thank you. So Mike will now join me on the stage, we'll take your questions.

We're now going to begin our question-and-answer session. I will call on you after you raise your hands as we do have a number of analysts present. Please limit yourself to one question as a courtesy to make sure we can answer as many questions in the time allotted. We'll have our first question from Neil Mehta at Goldman Sachs.

And I'm looking forward to hearing more on an asset level, but the chart that a lot of investors are anchoring to this morning is the free cash flow guide for 2030, which looks like it's $29 billion at $70 Brent at the middle of those fuzzy bars. And so I just want some -- your confidence interval in terms of actually achieving that. We noted on the slides, you talked about greater than 10% and 10% would get you to the $29 billion. So just your thoughts on how much of this has been derisked? And how much should we focus on the greater than?

So Neil, maybe I'll start and then let Eimear give you a little bit more details. What you'll see or if you've already looked ahead at the slides is at an asset level, Mark will go through and give you several numbers for the Permian, for Bakken and DJ, TCO, Australia, downstream and chemicals, and that will probably build you up to 80-plus percent of where we're going to go. The confidence is really underpinned by the fact that most of this growth is in flight. We've got projects that are online and ramping. We've got projects that are in execution and performing well. And there's very little kind of betting on the come to get there. So I can build it up for you kind of in a different way. But I'll tell you, at an asset level, we've got these battleship assets that are delivering today and ramping towards stronger performance tomorrow.

Yes, Neil, your interpretation of the graph was correct. So it's close to 30%, so between 28% and 30% is the fuzzy bar. Let's break it down in terms of the segments. So think of upstream as contributing 7% of the 10% CAGR and the rest of the portfolio contributing the 3%. And when we look at upstream, there's two main drivers there. One, there's production growth. So 2% to 3% CAGR is the production guidance that we've given. So we are growing through the time period. But in addition to growth, we're growing margins. And we're growing margins because of a few things in the upstream. Our oil weighting is higher. We're lowering costs across the system, and we also have higher entitlement percentages. So when you put all that together, we're able to increase the margin on upstream. So that gets you 7% of the TAM. And the balance is coming from downstream, chemicals, and even some power is contributing at the back end of the plan period. And within that 3%, think about 2/3 of it is really the downstream and chemicals piece. So that's how we get to the greater than 10% CAGR. And what I want to emphasize here, to Mike's point about confidence, it's -- this is a high confidence outlook. I mean we can see the building blocks, all these growth catalysts we can see. I mean my expectation -- our expectation and what we're working on internally is that it will be greater than 10%. And so that's the breakdown.

We'll take our next question from Devin McDermott at Morgan Stanley.

So I wanted to kind of build on Neil's question on the free cash flow growth. You highlight a sub $50 Brent breakeven over the course of the plan, which is a nice reduction versus where you all are right now. But I'd imagine given the free cash inflection in the near term and next year, the 10% plus free cash flow growth over the course of the plan, there's a pretty substantial reduction in that breakeven over the course of this 5-year look that you're giving us today. So I was wondering if you could just quantify that rate of change for us maybe in a more static dividend environment. How low does that breakeven go through 2030? And then how do you think about allocating that excess free cash, dividends, buybacks and sustaining that peer-leading dividend growth rate that you highlighted in the slides?

Yes. So I mean, dividend reduces through the time period. And that's because the cash flow generation that's coming from the assets that are online, so the cash engines today, TCO, Permian, Gulf of America, Australia and then the growth that's coming. So the free cash flow is growing. And so we see dividend coming down with that. Breakeven coming down with that. And so sub-50%, I think you can expect somewhere in between the 40s through that period. And in terms of what we'll use that for, obviously, we have a commitment to the dividend, so to sustain growing the dividend. That's our #1 financial priority. So we'll be guided with that. We will look then to our second financial priority, which is what investments we need to make in the business. And third, we'll maintain a strong balance sheet. And then fourth is steady buybacks through the cycle. So as we see cash generation grow through that period, you can expect us to be steady through the cycle, consistent with the range that we provided.

Take our next question from Doug Leggate at Wolfe Research.

Mike, I wanted to ask you about M&A, because the statement you made was, I think, was quite prescient when you said what hasn't changed is our approach to valuation. 10 years ago, you were exploration-led, organic led. In the last 10 years, you've been M&A led. How do you see that mix changing beyond what you've laid out today? Because obviously, today is what you've already secured. So I guess the question is, what happens next?

Yes. So Doug, the way I think about it, there are really three different ways that we bring resource into the portfolio, convert it to reserves and then produce and turn it to cash. One is through exploration. We find resources that we hadn't known was there before. The second is through acquisition. We can acquire resource. And then the third is through technology, where you unlock resource that you currently have that's not economic today, but you find ways to go out and drill in deeper water to reduce development costs in the deepwater to improve recoveries out of shale to derisk additional benches and you can use technology to bring more resource into the portfolio. Over time, we rely on all three of those, and all 3 of those have delivered consistently. At any given point in time, they won't be 1/3, 1/3 and 1/3. And so we have had times, if you go back a couple of decades ago, where we had a very strong track record in exploration and a lot of resource that way. The last period of time, we've used M&A. Through it all, technology has kind of steadily continued to march forward and contribute. Going forward, we're rebuilding our exploration portfolio. We're bringing new tools to bear, as you saw in the opening video, and Mark will talk more about that. We brought new talent in from both Hess and a new hire to run our exploration program. And I expect better exploration results. I expect more resource commitment to exploration, both human resource, technology resource and financial resource. And from that, I expect to see more contribution from exploration. On M&A, it's always a bit speculative. We've had a nice set of additions that we've done over the last several years at a company level. The thing that is interesting today is there are a number of opportunities out there in terms of new country entries. We've had discussions underway that have been reported in the media, so I can acknowledge these in Libya. We've had discussions in Iraq. The interest on the part of the government is strong. The suite of fiscal terms are more attractive today than historically they have been. And so you may see in the acquisition category a little more at the asset level or country entry level than you've seen over this last period of time because the opportunity set today there is more interesting and attractive than it was a decade ago. And so it will be a mix over time. You've got to be good at all three of those. You have to invest in all three of those. And over time, we need to see contributions from all three. Thanks, Doug.

We'll take our next question from Sam Margolin at Wells Fargo.

Thanks for all the materials. I'll ask about power. These are really unique investments in the peer group, and I think they've been enabled by some of these upstream reinvestment needs that are coming down. So I guess these are big orders on the turbine side. If you could just talk about how that capital fits into the overall CapEx framework. And then ultimately, what the value proposition is with the power assets because not only do you generate income from power, but it's transformational to some of your gas assets, too, potentially, depending on how it's put together.

Yes. So first of all, welcome back, Sam. It's good to see you. And I don't want to get too far ahead of Jeff because I think he's going to want to share some more on this in his section. But maybe at the highest level, the capital is going to fit into the range that Eimear just talked about in the range that's lower than it had been historically. So our plans account for that. We've got a partner. We may look at different financing alternatives in there, but we've accounted for it in our capital budget guidance. The value proposition is interesting because we've stayed away from power to this point other than for our own needs. And that's both traditional power as well as renewable power. We didn't want to go into the merchant power generation business. We have the unique capabilities in renewable development. What's different is the 5 gigawatts that we currently operate every day to keep our facilities operating at high levels of reliability, 24/7, 365, we've got a new customer class that has emerged that has that very same profile. And we've got a lot of experience in doing this. We've got access to resource. We've got a high-performance customer that's ourselves at Kazakhstan and Gorgon and other facilities like that. And importantly, in these places where we got this experience, we're not reliant on the grid. And as you all see every day, power prices in this country are a real issue today. And so being able to help support the very necessary buildup of data centers because it's a national imperative. It's a competitive issue between the United States and China. But doing it in a way that doesn't unduly burden the consumer is increasingly going to be important. And so we have unique experience in doing that and building at scale and operating at scale and in doing so in a way that doesn't put the cost into the rate base for the average citizen. And I think increasingly, in this country, we're going to find the imperative for speed, the desire for scale is going to bring us back to natural gas. And this issue of being able to do it without laying the cost out across the broad rate base is very important. So that's the model we're pursuing. The contracts, Jeff will talk a little bit more about it, but they'll look more like an LNG -- PPAs will look a lot like a long-term LNG contract. We'll have certainty of cash flow. We're only going to make final investment decisions if it's underpinned by a competitive return. But we think there's an opportunity there for us to be part of that. So Jeff will share more with you in his segment.

I'll take our next question from Paul Cheng at Scotiabank.

Mike, I want to go back into the one comment you made during your prepared remarks. You're talking about how the process and organization that changed that led to the much lower cost. If we look at over the past 10 years, your headcount reduction is about 1/3 and you have made a number of acquisitions and then your headcount naturally should go up. So can you talk about that, how dissect it? I mean, what percent of the improvement is really from the new technologies we've been able to do? And what percentage of the improvement is really changing the organization or the process, how you conduct business? And if you can talk about what changed that is the biggest change that lead to this kind of pretty drastic improvement.

Yes, I'll talk about it at a high level and then let Eimear talk a little bit more about some of the specifics. You're right, Paul. The slide I showed that was 10 years ago versus today, we're a much larger company on many different dimensions, and yet our costs have been relatively flat and our headcount has come down by like 1/3 over that period of time from the mid-60,000s down to the low 40,000s. Much of that is through a combination of organizational structure, technology and the pursuit of efficiency. But it was all grounded in a legacy organizational structure that was very devoted to autonomous business units around the world that had the authority on the ground to make a lot of decisions, that had the resources necessary to operate. And if you go back a long way in time, that was how our industry had to evolve, particularly in some of the far reaches of the world. We have had historically centralized some back-office functions into service centers in the Philippines and Argentina. But much of our technical work still went on very much in business units and out close to the action. We hadn't centralized as much of that. That's a big change in what we're doing today. We've also organized our upstream businesses along the lines of asset classes more than geographies. And so all the shale businesses are together, be they in Canada, the U.S., Latin America. All our deepwater businesses are together, no matter where in the world they are to drive efficiencies, best practices, standards and resource optimization. And then we're moving technical work to centers of excellence. And so we're on this journey that Eimear talked about where we will continue to see further efficiencies and reductions. And I don't we're not yet banking a lot of this on things like AI taking more costs out, which I certainly expect we will see over time.

Yes. So Paul, within the $3 billion to $4 billion program, we have three focus areas. The first one was costs reducing due to divestments. So think of that as the portfolio rationalization that we've been doing. And so we're already seeing those costs in the bottom line. We're seeing lower upstream OpEx costs given the divestments last year, for example. So think about a $1 billion of the $3 billion to $4 billion there. The second area is what Mike talked about is this operating model change where like assets that are brought together, and we were just seeing the power of procurement across common assets versus discrete decentralized assets. That would be one example. How do we bring supply boats together for offshore? How do we think about contracting differently? So the standardization and centralization as a result of the organizational change that we've been through in the last year is -- was initially $1 billion of a cost reduction target. And that focus area is actually delivering more results than we expected. So by the end of this year, we'll have already achieved $1 billion of that. So that's why we feel confident that we can raise the target because we're seeing more there. And what I would say around all of those efficiency improvements is we've got this -- this relentless focus on benchmarking. So what can we learn from other assets in the portfolio that can help assets be more effective and efficient, what we can also learn from industry. And so we've got a culture of that going on as well. So that's the second focus area. And then the final one to your question on technology, we have numerous examples of where we're seeing costs reduce. I would point to digital twins that you saw on the video. So the way we use these digital representations of our assets to do work through that digital interface versus having to send teams on the ground to do planning excursions for turnaround, example. We're seeing in our turnaround costs and in our movement around our competitiveness there being enabled by technology. Another good example would be how we're using drones and robots to inspect tanks. So previously, that is manual intensive, high-risk work, and we're using the technology. So that third focus area of technology is really an area where we're seeing the green shoots, more than green shoots, in fact, and we see much more potential there. And that gives us the confidence in raising what was a $2 billion to $3 billion target to a $3 billion to $4 billion target today.

Next question, we'll go to Arun Jayaram from JPMorgan.

You talked about the portfolio resilience of the less than $50 breakeven. Could you talk about cash return guidepost around the $60 to $65 Brent environment?

Sure. So our intent is to be steady through the cycle. So you can expect us to be buying back shares within the guidance that we provided, $10 billion to $20 billion. We've changed the price point at which we can deliver those buyback programs. So at the lower end, it's 60. But at the upper end, it's 80. And so that points to the cash generation, the growth in cash generation, we can deliver at the high end of the buyback guidance at a price that's $5 lower. So that's how to think about just overall the range and the price points that we tie to the range. And in a world that's 65, so a world like today, you can expect us to stay where we are today. I mean it's not something that we jerk around and we were normally very prudent. We look at the context, how do we see the price outlook? Is it structural? Is it more of fundamental led? Is it long term? Is it more temporary? If we were to change where we are today, given the rate that we're at $2.5 billion to $3 billion a quarter, we take that into consideration the outlook along with just cash generation and the investments that we'd be making. But you shouldn't expect us to be outside the range that we're in.

Next question, we will go to Biraj Borkhataria from RBC Capital Markets in the front.

I wanted to follow up on the resource access point you touched on, and you mentioned the sort of improving fiscal incentives and terms. So two questions related to that. One is, what do you think is driving that change, a step change? And secondly, how competitive are these sort of negotiations, tenders or processes? Because it feels like there are only a small handful of global international companies that can benefit from that step change, of which you're on. So just some reflections on that would be helpful.

Yes. So these things can kind of swing a little bit, I think, in cycles, Biraj. And I cited the Middle East because it's a place where we see the most activity and our business development team has been spending the most time. And there are any number of countries. I named two, but there are many more than that, that we've been in conversation with. One thing that I will tell you is the change in administration has sent a signal. It sent a signal relative to countries that would like to see American investments come to their countries. And of course, there have been many announcements and reports of investment from other countries coming to the U.S. And that is -- that's a real change in mindset, I think. It's a change in what we've seen in many of these places in terms of their desire to work with American companies. And so there are only a few companies with the scale. Obviously, some of these resources require technical capabilities. I mean we've mentioned TCO earlier, but you get into high pressure, high temperature, sour gas, certain types of environments, there are very few companies that have a demonstrated track record of working under those conditions. And so it's very attractive. We'll see how these negotiations play out. As I said, there are probably -- there are more of them that we're talking to and we'll be able to actually follow through on. But they're attractive. They're diverse in terms of the type of resource. We're talking about both oil and gas. We're talking onshore and offshore. Talking about some discovered resource and some exploration prospectivity. And so it's a very interesting landscape that we find out there today.

We'll take our next question from Paul Sankey at Sankey Research.

Mike, we're talking about 20 years ago, your first analyst meeting here at the [ St. Regis ] when Chevron had 2 million barrels a day of refining capacity, and you were the architect of taking that down to the 1 million barrels a day that you're at right now. In terms of the business shape, you expressed, I think, no interest in getting bigger again in refining, although that seems to be the current bottleneck globally, but an interest in getting into chemicals where we've seen all-time low margins effectively or very poor margins. Do you think that this announcement for AI to the 2,500 megawatt plant that you're talking about in Texas can be the next leg of the industrial reshaping of Chevron? Or are you going to kind of stick with this upstream focused 2% to 3% growth plus cash return as the industrial shape that you want? And I guess the follow-up is, could you see yourselves doing a mega deal in the context of the Trump White House as perhaps the opportunity to do something generational?

Yes. So I'll answer your first question, Paul. And the -- look, I love our refining business. Our refining business is highly competitive. I don't want to say that we would never do something in refining because if it were the right opportunity, we could. But we've long had a view that we want to be a more upstream weighted company, and we've shaped the portfolio accordingly. We've got a big downstream. It just sits inside a company with a much larger upstream. And so I think you can expect to see that overall portfolio weighting continue. Chemicals are in a tough part of the cycle right now, but the demand and the long-term demand for the things that we all rely on in our everyday lives is inexorable, and we'll see in a classically cyclical commodity business, petrochemicals will come through the trough. And long term, we believe there will be good returns there. The opportunity in power, I think, is to be determined. It could become a much bigger part of the industrial model for the company going forward, but I don't think we can say that today. We certainly see an interesting opportunity. We're leaning into it right now with some big commitments on equipment. As I think I mentioned earlier, we've got a site identified, some of the stuff has been reported in the media. You quoted a capacity, which is probably in the ballpark of where we would start out, which is big for power generation. And we've got more turbines than would be required to deliver that on order, firm deliveries. speed matters in this. There's a great appetite to move. There's supply chain constraints, particularly around turbines, both large and the smaller block turbines as well. So we think there's an interesting opportunity there. We're making good progress. We'll see how that unfolds. I think it's worth giving it a shot. We've laid out some other bets to create options, if you will, in things like lithium that could become part of that over time, where there is clearly natural market demand as opposed to demand that's created by some policy that may be here today and not be in the same form tomorrow. So we've got options across a number of these potential new avenues for us to build out our energy business and be part of the future of energy. But at the core, I think our upstream business, even the IEA now believes that the world is going to be using more oil and gas for longer than a lot of people thought not too long ago. And I think you have to know what you are. And at the core, that's who we are. And we intend to be very, very good at that for a long, long time to come. Thank you.

We'll take our next question from Nitin Kumar from Mizuho.

Mike, Eimear, I'm hoping you would be willing to unpack a little bit of the trajectory of the free cash flow that you're growing. If you look at it, it's about $10 billion, but you have a pretty good head start between $1 billion of CapEx coming down. I think you mentioned $3 billion to $4 billion of cost savings. TCO is -- so if you can help us just think about the trajectory like if you get to 40% or 50% of the target in the first couple of years, is that how we should think about it?

Yes. I think in the next 2 years, once you've got a year of FGP online, a year of Permian at 1 million the Gulf of America will have fully ramped up. It's 3 major capital projects to $300 million. So those 3 large catalysts, they're pretty significant. So you add those and you're at versus where we are today by 17 for the year, and you'll get to 24 pretty quickly. And so you can expect between '27 and the end of the time period to get to the 29, 30. So that's the -- how the growth breaks done. More in the next couple of years. but still steady growth through the end of the period. And that's production growth and that's only from upstream. But as I said in my previous comments, it's more than just production. It's margin growth as well because our portfolio has got more oil weighted and our portfolio is also lower cost. And so when you couple the production growth with the margin expansion and you get a significant catalyst from upstream, on the balance of the portfolio, downstream chemicals and power contribute as well to a lesser extent, 3% versus 7% from upstream. But those are the key building blocks around production cost and the portfolio.

The specific assets you might just note for that back part of the 5-year period would be 4 more FPSOs coming on in Guyana. We've got 4 online today. There will be 4 more. There'll be 2 big petrochemical plants come online, one in the U.S., one in Qatar. You'll see Eastern Mediterranean expansion projects come on. with gas, both Tamar and Leviathan in the near part of the plan with smaller increases in Leviathan with a larger pickup in there. Argentina starts to contribute more. And then the Power business will start to contribute. So there's a number of discrete projects and assets that you can look to, Jake and team can give you a little bit more to fine-tune your models on those.

We take the next question from Ryan Todd at Piper Sandler.

In the slides there, you have a chart showing the last couple of corporate transactions that you did at PDCE and it has with a 50% increase in synergies of both those. Can you talk about with -- as you look back on these last 2 transactions, what are the things that have gone well that have helped you drive synergies at higher levels? And maybe specifically, perhaps, what are the things that have been positive surprises? And whether -- what are some of the opportunities going forward that, that may open up?

I'll make a couple of comments and then let me give you some of the numbers. There have been no negative surprises. And sometimes when you unwrap an acquisition in all its glory, you find a few things you weren't banking on. We didn't -- we haven't seen anything like that with has. So it's all been positive. The thing to me, in addition to strong asset performance that has been the most rewarding and encouraging, but not surprising is the quality of the people. And they're just excellent. And whatever part of the portfolio go to Gulf of America, Bakken, the team working in Guyana, the exploration team. These are first-class individuals that bring exceptional talent to our organization. And that talent will deliver value beyond just the assets that they came with. And we're already seeing it. I'll talk about exploration, where Mark will share more about the changes. Our exploration model, our technology, our theories on play types, our assessment of some of the frontier basins that we've entered have all been interrogated and improved by a new set of eyes and a new set of experiences being brought to bear that see things differently than our team would have seen them. And so there are synergies we can quantify. We've talked about put options and net operating losses and costs, which are all very real intangible and financial and bankable. What's a little harder to build into your models or our assessment of value is what value will be created by bringing in these people in the talent. It's very real. We've seen it happen before. And to me, it's the part that is the most encouraging.

Yes. Maybe I'll build on just what we're seeing as we've integrated Hess and the increase in the synergy target that we announced today of an additional $500 million. has really come from what Mike talked about, the talent, we call it the Best of Both. So there's so much that you can see before the transaction is closed. But when you bring the teams together, that's where more insights has been developed. And specific to Hess as we've brought our Gulf of America portfolio together would be an example. We find ways to do our contracting differently to provide operational support in that area differently. And so some of the synergies that we shared -- so part of the synergy target that we updated today include some of those. And we have clear line of sight already not even a few months after closing. Another example as we brought the shale and tight businesses together. So as part of the reorganization, we pulled all of the assets together, Argentina, Permian, DJ, we're not bringing in back end. We were able to think differently about how do we source fracking for a much larger portfolio. And in the shale and tight business, we moved to a single contractor there. And immediately, we get the synergies. So we've blind sight on that, too. And then in addition to that, we've got development plans and learnings and best practices that we can share and optimize, and we are seeing some of that as well. And we're able to still develop the fields, but maybe do it differently, whether that's with longer laterals or a different development plan or a lower number of rigs. So those are real examples of why we feel so confident in adding to the initial $1 billion of synergies today and raising that to $1.5 billion. We're not hoping that it happens. We actually have line of sight on all of it. So thanks, Ryan.

We'll take our next question from Steve Richardson at Evercore ISI right here in the front.

So you're outlining a view here with a lot of opportunity upstream and a deep asset bench. And at the same time, you're holding yourself to a certain amount of discipline on the capital side. So can you talk about how you've institutionalized this view? Because I'm assuming what's implying is these other opportunities come in is that there's constant high grading going on and you're kind of holding yourself within this envelope, but at the same time, we all know commodity price opportunities, things come and targets go by the wayside. So can you talk about how institutionalized that is and how you think about that over the next couple of years?

Yes. I'll make a comment first and let Eimear follow-up. There's really 2 ways you can deal with these things. You can either expand the capital to absorb all the opportunities or you can constrain the capital to high grade the opportunities. In the past, we did a little bit more of the former than I think we probably should have. And so today, we've been very, very rigorous in terms of setting guidance around that in terms of creating a lot of transparency internally, much more than we used to have to early-stage project development and putting projects in front of a joint team of senior leaders of the company who come from all the segments, so you don't get advocacy for particular parts of the company or particular projects that goes too far. And you get to a point where it's more difficult to say, no, sorry, we're not going to do that. So there's much better early space transparency. There's much better cross-segment vetting of opportunities. And what I'm finding is that leads to higher quality project development, more honest conversations early about the potential downsides of projects. So where are we taking on a lot of risk, and we're finding that the hydrating process, when you engage people transparently with clear expectations, they actually come to the table and engage in really good conversations about the trade-offs, the priorities and where the capital should flow because at the end of the day, they're all shareholders, too, and they're all employees. And so we've really taken a different approach and enterprise approach to earlier stage project reviews and vetting and ensuring the things that are moving through the pipeline where you start to get to a point where we're making more substantive commitments are things that have seen the light of day, and [indiscernible] gets yourself to a point where you're have [indiscernible] on so many things that you start to say, well, we got to follow through on this, we got to follow up to this. There's more value destroyed if we stop. So we're killing things earlier, but there's a lot more transparency even in those meetings for years.

Yes. Yes. I would point to 2 things here. Not everything gets funded, period. There's a lot of opportunity. I mean we have more opportunities in the hopper than we fund. And it's that rigor that Mike talked about. We're returns-focused. We need to see the returns. We need to test every investment, a range of prices because that's our reality. These have to be accretive in low prices as well. And so we're really focused on that very, very rigorous. And I think the organization has got used to that. that there's a high bar for investment. So I would say that's one thing that we have institutionalized. The second thing is we also look at, so how can we get more value with less capital we put ourselves through that process. We don't just accept. And what we've learned is that there are different ways to design solutions. Some solutions can be the maximum design that covers every possible scenario that you can encounter in an asset. Others are more minimum functional. And they are actually -- they maximize value. And so what we've tried to institutionalize in addition to the discipline is discipline around, look at the minimum solution and design the minimum and then justify every enhancement beyond the minimum so that we know exactly what we're investing in and that we can see the value in all of those enhancements. And I think those things are things that we have that are alive and well in the organization today. And that's why we feel confident that we can have the portfolio we have today, we can support the investments that we have today. We can deliver the free cash flow growth. And we can do that with less capital than we had previously guided to.

Take the next question from Alastair Syme from Citi.

I know the price outlook you show on forecasts or planning assumptions, but I was intrigued about the use of $10 LNG, JKM against the $70 oil forecast, oil outlook. So maybe use that to sort of tee up your view on the LNG market. And how does LNG compared to the power opportunity in the Gulf Coast?

Yes. So LNG has been interesting over the last few years as Europe has gone through a recalibration on gas supply as the U.S. has become the largest LNG producer in the world as we've seen Qatar decide they want to step back into expansion. And we certainly see over the next several years, an awful lot of supply coming to the market and demand growing, no doubt about it. But if all the supply that's in the queue were to arrive, you see a market that's going to be oversupplied for a period of time and that would weigh on spot LNG pricing. And LNG markets years ago were tightly linked to crude markets, that's linkage is somewhat diminished, not entirely, but you're seeing a lot more gas-based LNG pricing in the world now with different indices. And so we've got a, I think, a view that fullness of time, you get out into the 2030s and LNG markets, just as I mentioned earlier, petrochemical markets, will rebalance over time because the old [indiscernible] with the cure for low prices is low prices. still holds true. But I think spot markets will be pressured for a while. 80% of our portfolio is oil-linked today. And I expect us to continue to seek out predominantly oil-linked pricing, we do some other sales within our portfolio. But crude, on the other hand, once we get all the OPEC+ supply back into the market, you're seeing non-OPEC supply grow, but you can see that growth attenuating as well. I think crude markets firm up a little bit before LNG markets -- as LNG markets cycle down. And it's unusual to see things that we've seen only maybe once or twice over the past couple of decades, where across the commodity basket, everything is tight at the same time. It's why we want to have a diversified portfolio in terms of asset class, geography, customer mix and all the rest of it. And so that's our current view, and you see it represented there. Those are not forecasts. Those are kind of planning assumptions for the purpose of guidance.

Take our next question from Lucas Herrmann at BNP Paribas.

I just wonder if I could touch on balance sheet for the moment and the way that you now think of it. I'm not quite sure where your range in gearing terms is or the objective is around the rating. Clearly, at the present time, projects are ramping, but you've got the incremental cost associated with the dividend, and there's a lot of volatility and uncertainty in the market. So I mean simply, how do we -- when we model, how do we think about the constraints that balance sheet presents to your return to shareholder approach?

Yes. Thanks, Lucas. So first of all, what I would say is maintain a strong balance sheet. It's our #1 financial priority. So a lot of focus always on the balance sheet and maintaining its strength so that we have that strength to weather all prices given just the nature of our business. That's point number one. Two, we're in a very strong position today. So the balance sheet is really strong. If you look at the coverage chart that I showed during my presentation. And so here, we're using this metric and the net debt over cash flow from operations, less than 1, less in the average of the peers, less than the S&P 500, very strong position with debt capacity, ample debt capacity. And I would give you $15 billion of capacity right now in a world that is a $60 word for 5 years. You can expect us to always be focused on the balance sheet. And overall, we have a AA credit rating. And so very, very strong. And with the credit rating that we have and the cash generation that we have today and the growth that we see greater than 10% over the planned period, we'll be able, in a $60 world with our balance sheet, to maintain $10 billion of buyback through that period and keep a AA.

We'll take our last quick question from Jason Gabelman at TD Cowen.

I had a question on the CapEx range, $18 billion to $21 billion. And I think in the past, you've been much more levered to shell growth than we've thought and less so to, I guess, exploration success. So in the past, we thought that CapEx guidance has been probably more impacted by oil price than portfolio opportunities. And I wonder, looking forward, if that's changing given there is less shale growth in the plan and more potential on your exploration backlog?

So what I would say, I think there's a slide where we show our sources and uses at different prices. And you'll see that in both of those scenarios, CapEx doesn't change. And that's because when we look at our investment choices and decisions, we test everything at high and low prices. So we don't like to move capital around. Our investments have to withstand lower prices and deliver the returns. So don't expect us to start changing our capital program just because we see prices slide a little bit below where we are today because we've already tested the robustness of those investments at lower prices. Bar something and that we would never be expecting like another COVID. I mean, we're in that scenario, we did cut capital. You should not expect us to move that around, Jason.

Okay. I think we are at the end of the first part of the meeting. So thank you for the questions. We're going to take a brief break now, I think, 15 minutes and then resume with presentations from Mark Nelson, Jeff Gustavson, followed by another Q&A session. So we'll see you back here in 15 minutes. Thank you. [Break]

Well, welcome back, Syme, welcome back. It's great to be with you all again. It's really good to be back in this room for some of us that have done this a few times. In this section, Jeff and I will take you through the key elements of our advantaged portfolio. Let's dive in. Our consistent strategy has guided our disciplined approach to optimizing and high-grading our assets. Through strong execution and returns-focused acquisition and divestments. We've built what we believe is the premier energy portfolio. Our upstream consists of high-value positions with resilient and diversified resources in some of the world's most prolific basins. In downstream, we have a high-quality portfolio with assets in premier markets where we compete and win. And in new energies, we're pragmatic, and focused on advancing solutions with competitive returns at a pace set by the market. Our Upstream portfolio is built to deliver industry-leading cash and resilience. As you can see, we lead our peers in cash margin, and we have a strong queue of opportunities that are expected to drive even higher returns on every investment dollar. We have the highest oil price exposure and hold a leading position in natural gas production versus peers. This intentional mix of commodity exposure provides significantly greater upside to Chevron in a higher oil price environment. And as Eimear showed, resilience at lower prices with the lowest breakeven among the peer group. And we're only getting started. We're driving production growth from an advantaged portfolio that's been positioned to deliver the most value for every barrel produced. We expect total upstream production to grow by a 2% to 3% compound annual average over the next 5 years. Growth is coming from our highest margin barrels resulting in an expected 10% increase in margin over the same time period at flat pricing. This anticipated production growth is an outcome of our disciplined investment and strong execution driving cash generation. And we expect this high return growth to continue well into the future, enabled by our deep opportunity queue. Chevron's commercial resource base is diversified across asset classes with approximately 50% in shale and tight and the remaining balance between deepwater, LNG, conventional and heavy oil. Over the past decade, we've unlocked more than 7 billion barrels of oil equivalent in additional resource by applying leading technology across the portfolio. With more than 20 years of combined inventory, we'll continue leveraging innovation and expertise as we aim to maximize value from our high-quality, long-duration upstream portfolio. Now let's move into the key assets, which make up the strong resource base. Starting with Australia. Gorgon and Wheatstone are performing at world-class reliability levels. With decades of remaining resource, these assets are expected to generate durable cash flows well into the future. We're focused on deploying technology to improve efficiency and sustain reliability. The use of digital twins has already realized millions of dollars in value, and we're also seeing the impact of AI tools to help plan our maintenance work, reducing critical task planning time by 25%. Looking ahead, a few of strong economic backfill projects are already underway and are expected to deliver top quartile unit development costs, sustaining strong long-term cash flow. At TCO, for more than 30 years, we've steadily grown production in one of the world's most technologically advanced oil and gas developments. We've consistently innovated to safely manage high-pressure sour gas while efficiently growing production capacity to 20% above nameplate over the last 15 years. This year, we brought FTP online and is operating reliably at rated capacity. Through the new integrated operations control center, we optimize production from the reservoir to the 3 large plants driving higher uptime and efficiency and enabling the opportunity to increase capacity over time. At $70 Brent, we estimate Chevron's share of TCO free cash flow to be approximately $6 billion in 2026 and more than $5 billion in 2027. Turning to the Permian. We have a winning position supported by resource depth and royalty advantaged acreage that delivers peer-leading returns. With a highly economic drilling inventory that is expected to sustain current production levels through at least 2040, we're focused on optimizing value over decades. Starting in 2026, we expect to further moderate capital spending to roughly $3.5 billion. As thousands of reliable base wells with lower decline rates continue to produce, fewer new wells will be required each year to maintain the plateau. And our technology leadership continues to drive further capital efficiency. We have visible results applying advanced chemical treatments to enhanced recovery in both new and base wells. Our plans include scaling these chemicals to all applicable new wells going forward with average expected recovery uplift around 10%. Grounded in capital discipline and innovation, we expect the Permian to generate $5 billion in annual free cash flow through 2030. The Permian sits within a larger shale and tight portfolio, which has been streamlined into one organization to better scale resources, technology and best practices. In the DJ, we've combined expertise from Noble and PDC Energy with our own to take our basin-leading performance to the next level. Well completions efficiency has improved 100% over just the last 2 years using frac innovations from the Permian. In the Bakken, we're already applying our expertise and technology to optimize development plans to include 3-mile or greater laterals in 40% of future wells. Together, these 2 basins are expected to generate roughly $2 billion of annual free cash flow into the mid-2030s. And our liquids-weighted Argentina position provides an attractive opportunity for growth. We're continuing to pace development and incorporate learnings from across our shale portfolio and see the potential to grow this asset over the coming decade. Now let's take a closer look at how we're applying technologies across our shale and type portfolio to drive performance improvements. [Presentation]

And we're just getting started. Being a leader in the shale business, means we have the scale to optimize natural gas to deliver the most value. In the U.S., if you look at gas production on a per share basis, we have the most natural gas exposure of our peers and we're diversifying our market exposure to create margin and balance. We secured 7 million tons per year of new U.S. LNG offtake with first cargoes expected beginning next year. This is projected to increase our global LNG portfolio by 25% and further balanced Atlantic and Pacific Basin exposure. And we expect to continue to diversify sales channels including expanding into power generation. Now turning off to our offshore portfolio to start with our newest position. Guyana is a world-class asset with industry-leading resource and meaningful production growth expected into the next decade. Its developments rank among the highest cash margin and lowest carbon intensity in the industry with 6 announced projects below $35 per barrel breakeven. With the recent Hammerhead FID, there are now 7 FPSOs in production or under development. By 2030, 8 FPSOs are expected to be online enabling over 1.7 million barrels per day of gross capacity. We're proud to continue the work Hess began in Guyana and remain committed to supporting the country and its people. In the Eastern Mediterranean, we're growing highly reliable supply to meet robust demand underpinning regional energy security. The Tamar optimization project and Leviathan third gathering line are in execution and expected to start up early next year, driving near-term production growth of 25%. We're also nearing FID for a larger expansion at Leviathan, which we expect to increase regional production by an additional 25%, contributing to doubling earnings and free cash flow by 2030. Beyond 2030, we see further potential. Engineering work is advancing on the appetite development, and we plan to drill another exploration well in the Nile Delta in 2026. Chevron brings nearly 100 years of offshore expertise, technology innovation and industry leadership to the Gulf of America, and we look for decades more. We delivered strong execution over the last few years, increasing production to nearly 300,000 barrels per day of oil equivalent. This includes the industry's first 20,000 psi deepwater development at Anchor and starting up anchor, Valleymore and Whale on time and on budget. Once these growth projects are fully ramped, we expect to generate approximately $3 billion of annual free cash flow through the end of the decade. And we're focused on debottlenecking infill and expansion opportunities. With the addition of Hess, we hold 20% more acreage in the Gulf than our closest peer with approximately 80% within tieback range. And we expect ocean bottom node seismic coverage across 70% of our exploration leases by the end of 2027. We believe our leadership in deepwater technology combined with our vast acreage position provides us with an advantage in the next phase of exploration. And over the next 5 years, we anticipate drilling at least 10 to 15 exploration wells. And we're leveraging these strengths to enhance our exploration program around the world. We're pursuing both near infrastructure opportunities as well as high impact for interior plays. Over the last 2 years, we've increased our acreage position by more than 50% and entered 10 new basins. AI is embedded across our workflows and growing an impact. from seismic processing and interpretation to inventory characterization and evaluation. We lead the industry in cloud-based high-performance computing and our proprietary imaging technology delivers ultra-high resolution subsurface images at extreme depth. Building on these capabilities, we're applying cutting-edge geophysical imaging to our new exploration areas and stepping up activity. Over the next few years, we plan to increase annual exploration spend by approximately 50%, with focus in areas like the Gulf of America, South America, West Africa and the Mediterranean. Moving to downstream. We have intentionally structured our portfolio for competitiveness, flexibility and integration. We're strategically positioned in locations where refining, marketing and retail are tightly linked and designed to drive the highest total return across the value chain. Our refining system delivers strong cash margins, and we're driving further improvements in reliability and efficiency through technology and innovation. Robotics and drones now perform critical work processes more safely and efficiently, generating more than $60 million in value over the last 2 years alone, while eliminating more than 100,000 at-risk work hours. Chevron's brand is a competitive differentiator. We're a top U.S. fuel provider with higher margin capture than any peer. We expect sustained annual free cash flow greater than $4 billion in refining and marketing at mid-cycle margins through the end of the decade. Our chemicals portfolio is anchored by feedstock advantaged assets strategically positioned to serve high-growth markets. CPChem's existing facilities are at the most competitive end of the global cost curve with 2/3 of capacity in the top quartile. Additional capacity from projects in the U.S. in Qatar both near the lowest anywhere in the world, loss cost anywhere in the world is expected to further strengthen this position. CPChem's operating performance is strong, and it keeps getting better. Despite difficult market conditions, polyethylene utilization remains above 100% due to consistent reliability and optimization efforts. And beyond CPChem GS Caltex and Oronite extend our global reach in commodity and specialty chemicals to serve attractive markets. Now I'll hand it off to Jeff to talk about our exciting new power business, how artificial intelligence is generating value and our pragmatic approach to new energies.

Thanks, Mark, and good morning, everybody. Our approach balances today's needs with tomorrow's opportunities, positioning us for long-term growth. Let's start with how we're enabling AI's growing need for reliable large-scale power. Since announcing our intent to pursue U.S. data center power solutions in January, we've made significant progress. Our position is based on 4 key differentiators: an early mover advantage with critical equipment secured, a large, low-cost natural gas position. and our proven operating capabilities in behind-the-meter power as well as pathways to lower the carbon intensity over time. Our first project in West Texas is expected to have 2.5 gigawatts of gas-fired generation expandable to 5 gigawatts. We're an exclusive advanced customer negotiations and are targeting first power in 2027. We expect mid-teen returns and anticipate leveraging partnerships and project level financing to provide capital efficiency and flexibility. We're planning for an FID decision early next year, contingent on securing a long-term offtake agreement that delivers competitive returns. As Mike mentioned, we're not just working to power the AI revolution. We're applying it across our own business to create additional value. and we're accelerating that effort. Since 2023, we've had a dedicated AI team focused on innovation and impact. We're collaborating with industry leaders reimagining key workflows starting with shale and tight and exploration. And in the Permian, we have an unmatched data advantage through our interest in one out of every 5 wells. We're building AI-driven tools that can further unlock this advantage. Let's take a closer look at Apollo. The industry has long used the traditional type curve playbook to estimate prospectivity across the basin. The warmer colors indicate higher potential. But this view lacks granularity. It yields binary outputs and relies on very few variables. Apollo uses multivariate machine learning to analyze data for more than 50,000 wells to provide a more granular view of where the most prospective areas could be. On the screen, you can see the increased detail as well as changes in predicted recoveries across the basin. After identifying a target area, the next step is the development plan. We're training Apollo to optimize key variables such as well spacing, completion design and development timing. We believe Apollo has the potential to create a competitive advantage. We're continuing to train the model and scale use across the portfolio to drive improved recoveries and returns. This is one of many tools we're developing and we're already seeing AI generate value for Chevron today with the potential for billions in annual value beyond current forecasts by the end of the decade. Let's now turn to our New Energies businesses. Renewable Fuels are a proven solution that can lower the carbon intensity of transportation for customers today. We're proud to be the second largest bio-based diesel supplier in the U.S. And in 2025, we expect to deliver record renewable natural gas production. Through our joint venture with Bunge, we capture crush margins and secure access to U.S. feedstock supply, an advantage that is anticipated to grow in 2026 with the expansion of an oilseed crush plant in Louisiana. At Geismar, advanced pretreatment technology strengthens feedstock flexibility, while El Segundo's processing capabilities allow us to shift between traditional and renewable moats. Combined with our strong West Coast distribution network, this integration facilitates advantaged market access. So we built an integrated competitive business that is structured to give us flexibility, resiliency and access to the best markets. We're advancing other new energies opportunities, too, where our early investments are positioning us to lead when policy markets and customers demand them. At ACES in Utah, we've begun production and storage of green hydrogen and an underground salt cavern for dispatchable power generation. Once fully operational, this site is expected to offer storage capacity 2 to 3x greater than all U.S. grid-connected batteries today with further expansion potential. We've also secured 125,000 acres in the Smackover formation in Texas and Arkansas to evaluate lithium development with appraisal drilling expected next year. And on the Gulf Coast, we're advancing carbon capture and storage projects at Bayou Bend and our Pascagoula refinery with engineering milestones expected in 2026. We're also investing in the next phase of energy innovation with a $1 billion commitment to lower carbon venture investments, including our third future energy funds announced last year. Through it all, we'll remain pragmatic in our approach, focused on creating value for shareholders. Every day, we work to provide the affordable, reliable and ever cleaner energy that enables human progress, reducing the carbon intensity of our own operations is key to that goal. These charts speak for themselves. We're a clear leader when it comes to delivering lower carbon intensity oil and gas with first quartile performance in both. We've reduced our upstream oil intensity by approximately 50% since 2016 and our gas intensity by about 17%. And we're not done. We're improving operations, applying technology and using marginal abatement cost analysis to help deliver the most efficient reductions for every dollar spent. We've executed more than 100 carbon abatement projects since 2021, delivering over 1 million tons per year of CO2 equivalent designed abatement. We're deploying satellite and aircraft detection programs to identify and reduce methane emissions. Over 250 facilities in Colorado have been retrofitted to reduce methane by converting pneumatic devices to operate with nitrogen instead of natural gas. And in Australia, we operate one of the world's largest carbon capture and storage systems, more than 11 million tons of carbon emissions from our Gorgon LNG facility have been sequestered so far. And we're executing work that is anticipated to further increase CO2 injection rates. So to sum it up, our approach has been pragmatic and our strategy is simple. Focus on areas where our strengths meet customer needs to deliver competitive returns. We've built a large-scale renewable fuels business that delivers lower carbon intensity fuels today and we're advancing opportunities across hydrogen, lithium and carbon capture, pacing for when markets are ready today and tomorrow. We're already a leader in the industry on oil and gas carbon intensity and executing abatement projects to lower our intensity even further. Our first behind-the-meter power project is advancing and will help to provide the power required to support U.S. leadership in AI. Our direction is clear, we'll stay consistent in our strategy, we plan to keep lowering our carbon intensity, save pragmatic on new investments and be prepared when opportunities emerge that create value for our shareholders. Now Mark will help us wrap up the session.

Thank you, Jeff. To close, our diversified portfolio and disciplined execution, provide investors with a winning investment proposition. Chevron's foundational assets, coupled with capital efficient growth, create a unique inflection point. and are poised to deliver cash flow growth through the end of the decade. And our portfolio is deep with high-return projects across our traditional businesses and pragmatic high potential opportunities and new energies. This, combined with a consistent financial framework and a proven track record position us to deliver superior shareholder returns across the cycle. As we've shown you today, we're stronger, more resilient and better positioned than ever to deliver leading performance today and into the next decade. Thank you for your time. And now Jeff will join me on stage, and we'll take questions.

[Operator Instructions] With that, we'll take our first question from Josh Silverstein from UBS.

Just for the volume, Al, can you just talk about how much is already under FID to give us confidence in that 2% to 3% growth outlook because there was a big focus on exploration here. So is that more upside driven versus what you already have locked underway?

Yes. Thank you, Josh. If you step back and look at this message about a greater than 10% CAGR on free cash flow growth, it is front-end loaded. And that's why the confidence is so high. In addition to that, we have opportunities for the future, such as run through what's driving production in the short term. We'll have a full year of our bringing our assets on. You've got the TCO that's now over 1 million barrels. Permian settled in over 1 million barrels. You've got Eastern Mediterranean starting to grow. You've got Australia steady. And you go to the back part of the decade, and you've got Guyana, Eastern Mediterranean and Argentina. So you've got a series of growth patterns over that 5-year 5-, 6-, 7-, 8-year period to give us high confidence in our ability to grow production 2% to 3%.

We'll take our next question from Jeff Jay from Daniel Energy Partners

Can you hear me okay? I really wanted to follow up on the advanced chemical treatments. So I was looking at the appendix on Slide 46. And I guess my first question is, I mean, the uplifts look impressive. But how different are these chemical treatments than what you were doing before, both on new well treatments and base well production? And how differentiated are they from what your competitors are doing?

Well, first off, thanks for getting to the appendix so quickly. Greatly appreciated. Greatly appreciate that, Jeff. If you think about how we performed in the Permian, one thing I'd want you to step back and recognize is we just continue to improve. That's the benefit of a factory and a plateau. When you think about our very, very visible results on EUR today, that appendix is placed there so that you can go back on your own, look at specific well data with inverse and others and see what difference is being made today. If you were to summarize what was on that appendix slide, it would leave you with the following a 10% EUR bump, right? It would decline reduction of 6 to 8 percent, given that we've worked this over our whole system, the ability to reduce the cost of that additive 50%, so you could get breakevens as low as 4,000 barrels. So the reality here, we are now applying that to essentially every new well in the Permian, and we're beginning to test it in some of the other basins. When you compare that to competitors, it's an industry where there are no secrets, right? Much of what we're doing today is actually proprietary from our own specialty chemical company that makes surfactants or night. So we really like the cocktail we've created to date, and I would only expect more of that to come.

We'll take our next question from Betty Jiang from Barclays.

Question to you, Jeff. So power. You guys laid out the 2.5 gigawatt in West Texas expandable to 5. I think that's a huge project and it's a huge footprint. Could you just speak to the customer base? Like do you foresee a hub of hyperscalers would that project be supplying power to your own operations. Just so speak to the scope of that project and then also the midterm return -- a mid-teens return, what's baked in and what's not baked in?

Yes. So thank you for the question, Betty. We are in exclusive negotiations with a customer on the site that we have laid out here on the slide that you see in front of you, there could be additional customers that come into this over time. We're in the midst of these commercial negotiations. But the demand in this space and customer interest has been high, leading up to these exclusive negotiations, and it still is high. We have many inbounds coming with other customers who are interested in what we're doing in this space. But we're focused on this 1 customer and concluding these negotiations that we have underway. I think in terms of supplying power for our own operations, that's not in our current plans. This would be more or less exclusive behind the meter power to very large-scale customers whose desire for this power on a short time frame. Seems to grow and grow and grow. So powering our own operations. We do use renewable power, electrified many of our rigs in the Permian, but that wouldn't be the purpose here. We're really dedicating this to this one customer. On returns, I go back to what Mike said in his comments. This is a fast-growing space, demand is far exceeding supply for power in the U.S. there are repercussions of that across the country. This is a space where we bring differentiated capabilities. We operate large-scale behind-the-meter power all around the world, where high reliability for some Mark's operations are very, very important. So we're translating some of those same skills into this space. Importantly, we think we've built a very competitive project. It is underpinned by the large natural gas resource that we have in the Permian, customers like the low-cost resource and the long duration of this resource, but it's also underpinned in our early actions to secure equipment to secure a site -- to select an EPC to start the permitting process so we can meet the customer demand that you see up there on the screen. That gives us confidence in that context as we enter these commercial as we're in these commercial negotiations, we're able to not just Target, but almost require mid-teens returns to underpin our investment. We have not concluded those negotiations yet. We will remain disciplined and value-focused like we do in all parts of our business. And hopefully, when these conclude, we'll be able to announce an FID decision, and we'll provide more details in due course. Thank you.

Take our next question from Phillip Jungwirth from BMO.

You showed Permian production at plateau through 2040. It looks like you have the sticks identified with the NPV chart, but I was hoping you could talk through the visibility here for non Chevron-operated barrels. And then how should we think about the option to grow, whether it's the magnitude? Is this kind of a call on broader Permian growth? Or is it more Chevron-operated activity that could increase at a higher oil price?

Phil, thank you for the question. When you think about the Permian in general, our confidence level in getting through 2040 at this type of plateau just grows every year as we continue to take less capital as we apply some of the EUR examples we described earlier. Despite having been at this, I mean if you step back to 2020, when we first mentioned the plateau of 1 million barrels, we've grown 75% since then. Given some of the improvements we've seen in our drilling costs and completion times, we're going to end this year at the low end of our capital range of 4.5%. So we're down to the 4.5 range of capital starting next year with 3.5 to keep that $3.5 billion to keep it -- the 1 million barrels going. That gives us a lot of room going forward. Today, we're 50% to 55% company operated, so today, and I think as you look forward, the NOJV acreage that we hold in some of the very, very best basins operated by some of the other large operators. So it gives us confidence that, that rate will continue going forward. So I think you'll see our balance between, say, 50%, 253% co-op, 30%, 32% in the NOJ holding for the remainder of this decade and into next decade. So it's all about the quality of the acreage and our ability to continue to reduce the inputs to get those outputs.

Take the next question from Devin McDermott at Morgan Stanley.

So I wanted to come back to the AI opportunity in the business. It's something that talked about some of the applications so far. And also, it's interesting that it's not yet embedded in the plan when we look out through 2030. And I think, Jeff, you quantified it for us a little bit that you see billions of dollars of potential value creation over the course of the plan. So can you talk a little bit on where you are in rolling out some of the high-impact applications that you cited? And then where should we look to see the biggest financial impact, capital intensity, operating costs, margin capture, something else?

I think we'll see impacts in all of those areas. Before I get to the kind of the high-impact opportunities, transformational opportunities, we've been on this digital journey for many years. This has been a priority for our company for a long time. We're now using some of the next-level AI tools to just scale those efforts up. I talked about creating a central AI-focused team about 2, 2.5 years ago, which really started to get into this. There's 3 kind of areas that we're focused on. One is just overall workforce productivity, getting the right tools in all of our employees hands. And already, well over half of our employees have access to cutting-edge tools. We're encouraging them to use in each and every day, you're already seeing value just in individual productivity across the company. Some of the tech relationships we have, which we're now expanding with some of our power-related work helps facilitate that. But that's 1 -- 2 is -- which is related to that is transforming some workflows, existing workflows in the company. We went through a massive operating model change that was asked in the earlier session. We have better visibility on our workflows across the company and how work gets done than we ever have. And now using AI tools not just to speed up decision-making and lower cost but to improve decision-making. And the list of areas that we're already seeing benefits in this -- in our business is too long to get into today. But what we're most excited about are some of the transformational opportunities. I think watch a few spaces. Our [indiscernible] and type business, both subsurface impacts. You saw some of that with Apollo. Taking large-scale data, we have the visibility into 1 and 5 wells unmatched in the basin, marrying that with some of these AI tools to create AI systems where you make better development systems or better development decisions, better design decisions, better when you get to the surface and moving molecules, better commercialization decisions I think that's where you really see the value expand. We've made progress in this space, but we still have a lot more work in front of us. You might speak to exploration.

Yes. Well, I was going to go actually to Emer and I were recently in our engineering center in India. And the good news and the bad news is I've been around a long time. And the -- what it used to take to go get information to plug and abandon an old well -- in the old days, you first had to go find all of that information. You had to sift through it all, create an application but the orders in, put the permits in, when Emer and I were in India here recently, the Australia team went to bed and then the next morning, the team from our India operation had the permit application, what was necessary to plug-in abandon a particular well and all the orders placed. Massively more efficient and it's repetitive. So there are these transformational activities, and it's changing our everyday work activity. When you standardize and centralize, it gives you a chance to do more of that, which is opportunity for us going forward.

We'll take our next question from Doug Leggate at Wolfe Research.

Mark, I wonder if I could kind of try and connect some of the things you've talked about on the growth, particularly in Guyana with what Emer was saying about the cash flow growth. And I want to pose a question like this, ExxonMobil has talked about 1.3 million barrels a day of production by 2030. But there's 4 incremental FPSOs at round numbers of 900,000 barrels a day of incremental capacity. My question is, what are you assuming in your 2030 targets. I just looked on the visualization side with 800,000 barrels a day of production in Guyana today. So that would mean Exxon's number is 500,000 barrels a day up from here but there's 1 million barrels of capacity coming online. It makes a heck of a difference to your 2030 cash flow numbers. So what's embedded in your assumption?

Yes. So first off, we're so excited to have Guyana as part of the portfolio. It is a world-class asset and with 11 billion barrels of resource. And our per share holdings in that, we benefit more than anybody by the upside in Guyana. Today, everything that we have shared today reflects the operator's view. Nothing different than what the operator thinks that's what a good partner would do. Do we see upside potential. When you think about 11 billion barrels, big fields getting bigger, although we haven't forecasted, I would expect upside and as a partner, we'll do everything in our power to help find that. There's still time for exploration. There are some deeper reservoirs to test, and we look forward to working with a partner to do that.

We'll take our next question from Neil Mehta at Goldman Sachs.

I wanted to flip to Slide 30 when you talk about some of the other shale basins and specifically, Mark, as you think about the back and would you characterize it as core, I think it's clearly a key part of the plan. And then Argentina's got less attention maybe during this session. I know there's a lot of moving aboveground issues there, but curious on how that competes for capital in the portfolio.

Well, so let's start with the Bakken. This is another asset that happy to have in the portfolio. And maybe the comments that Emer and Mike made is the people that are impressive. in reality. But having the Bakken in our portfolio today, the [ Hess ] team did a really good job of building production up to around that 200,000 barrel a day range. You played a certain role in the [ Hess ] portfolio. It naturally plays a slightly different role in the Chevron portfolio. So producing around that 200 million barrels a day is the target for us. At that level, we can apply all of our best practices. So today, you've already noticed is we have reduced rigs by 1. So we're down to 3 rigs versus 4 at the same production level. We have reduced the number of workover rigs by 5, allowing kind of maintenance activity to be a little bit more efficient. As I made -- as I commented in my prepared remarks, we are increasing the length of laterals in the geography in that particular basin. And you'll see us even do some 4 miles we have been catching up to do, I think, versus the competition in that regard. And we're introducing the first integrated oil control center there in the region. So all of that leads us to holding near that 200,000 barrels a day and just reducing the cost to do so. I think we're just scratching the surface in the Bakken. So more to come. And everything that we view in the Bakken includes our 38% holding of the [ Hess ] Midstream and our consolidated reports. On Argentina, we talked a long time about the quality of that acreage. In my prepared remarks, we talked about tripling to the 180,000 barrels a day. There's nobody really debating the rock. So it's between the rock and then the aboveground risks there. From a geology standpoint, we said in our materials that it was 75% oil weighted. I would also leave with you that on a lateral foot basis, EUR is 50% higher in Argentina than the average Permian average Permian well. So clearly, the geology is good. The other thing you need to do is make sure you have infrastructure to get it to markets. You have seen our action in participating with an export pipeline is under construction as we speak, getting that crude to product. And that crude with blending competes nicely with [indiscernible] so it will be a highly desirable crew. The challenge today would be kind of the overarching cost of doing business in Argentina. And the current administration is taking actions in this regard. Today, it costs us 35% more to drill a well in Argentina than it does the Permian despite the strong geology. Given some of the actions that are underway with the government, our hopes would be that capital controls would be reduced as some of the tax burden and workforce flexibility would be increased. So tax is coming down, ability to manage people and then the opportunity to bring in the absolute best technology, I think, is going to be critical to unlocking Argentina. We have the ability to accelerate like much of our portfolio. We think we've paced it right now to keep up with the reforms that the government is working on.

We'll take our next question from Sam Margolin at Wells Fargo

I wanted to ask about gas and power integration. You have the slide on gas sales mix. It looks like you got a slug of power indexed gas that you expect to come with the projects. I think that will grow after 2030 because the capacity is ramping to. So maybe it will be commensurate with that. But it has significant effects on your Delaware Basin operation. You still delineate a number of locations by oil price but if gas is higher, the number of locations will be influenced by that, too. And also like on the type curves, if you have GOR effects that aren't expressed in the type curves, you're less sensitive to that if you have gas realization tailwinds. So I mean, can you just talk about what you guys think internally about the economics of sort of your Delaware Basin asset with the gas and power integration?

Sure. Thanks, Sam, for the question. When we entered this space about a year ago when we made the announcement in January that we had secured 7 large-scale frame turbines from [ GE or Nova ] we had an idea of where you might be able to build out large-scale power in the U.S. And we knew Permian would be pretty high on that list. One of the reasons we really like doing this in this basin is given not just the large natural gas resource base. But the duration of that, you're talking about very large amounts of natural gas to deliver the power that we had on the later slide. At a very competitive cost, more competitive than, I think, almost anywhere in the country. That's been very attractive to customers, which is where all of this starts. We need to be able to attract the right customers to sign long-term power purchase agreements that meet our return thresholds. I'd say it starts with the location in this very large natural gas resource base. To get to your question, we also like the fact that we're a large natural gas producer in this basin. And as you all know, gas trading around the Waha hub, the West Texas Natural Gas Hub trades at a significant discount to Henry Hub. At times, it goes to 0 or even negative, there is an added benefit for us Mark's business in attracting new customers in the region and not having to move it to the market or to international markets. We want to do all of that, but there's an added economic benefit for us in just sourcing demand in the basin -- and so we're -- we like both of those aspects of this. I'll let Mark talk a little bit more.

To pull on the thread Sam. All it does is it makes our shale and type businesses stronger. Right? Simply because you have more options as to where to put today would be 3 Bcf of gas. We have taken some longer-term LNG offtakes in a capital-light way to create some other optionalities into the future. This is just one more option to ensure that the the net margin for all that we produce in our [indiscernible] portfolio gets to market at a higher price. And so I think it does help over time, continue to drive value into the shale and tight businesses over time.

Take our next question from Arun Jayaram from JPMorgan.

You mentioned that you expect Permian CapEx to go to about $3.5 billion next year. I was wondering if you could help us think about the trajectory of Lower 48 capital over the forecast period over through 2030?

Yes. So I think for our entire $18 billion to $21 billion of capital, about half of that happens to be in the United States in its entirety. I would expect in the Permian, in particular, getting to get going from $5 million to $4.5 million to now $3.5 billion. I would expect us to continue to try to drive that down over time. It's what we do every day, and that just means more cash for all of us. But half of our -- just over half of our capital budgets in the U.S.

We'll take the next question from Nitin Kumar from Mizuho.

Great. Mark, I wanted to touch base on one of the earlier comments you made about the LNG offtake. It's new 7 MMA, but it's also earlier than some of the other deals that we've heard of. Earlier, Mike said that you expect the LNG market to be oversupplied until the end of the decade. So just kind of curious if you could help us put the pieces together, why the offtake? And sort of how is that part of Chevron's macro view?

Yes. Thanks, Nitin. I appreciate the question. It helps to maybe step back versus a look at the context, and Mike touched on this a little bit. But our LNG portfolio today starts with world-class assets in Australia, very, very reliable now a low unit cost of production, keeping those full with the 40 Tcf of gas that's available in Australia. That's kind of the anchor of our LNG position, mostly point-to-point, mostly oil-linked contract. We now have a full plant in Angola. So Angola LNG and a small plant in Equatorial Guinea that allows a little Atlantic margin exposure. But then we have this 3 Bcf a day of gas coming out of the associated gas out of the United States. So our opportunity was in a time where we could get some of the very, very best capital-light unit cost for offtake out of the U.S. Gulf Coast to lock those in for the next 20 years to ensure that we would have options for margin in the future. On timing, how about half of these come on towards the end of this decade and the other half come on early next decade. So it's paced out a little bit over time. But maybe to reinforce the points that might make you shouldn't see us having large, large spot exposure in LNG nor should you see our portfolio shift to something other than oil weighted.

Next question will come from [indiscernible] from HSBC.

For all the information on the power gas piece. We're starting to see a lot of news flow coming out about data centers being built globally. And I was wondering if you guys have started to do the work in terms of other markets that are attractive and what type of returns you would require to maybe expand into those markets?

Thanks for the question. We have done some looking -- we've looked at this a little bit. We have gotten some customer interest in this specifically and kind of going around the world where might this work? Where do you have a very large natural gas resource base at a low cost. Obviously, there are parts of the planet where you may be able to replicate this. We are very cognizant though of some of the political realities of this data center build-out the competitiveness of it. There are additional risks, depending on where you are -- where to build some of these, especially where some of those very large natural gas resources exist. So what we're focused on today is where we think -- we can put together the most competitive project really anywhere in the world, and that is in West Texas. 5 of the 7 turbines are dedicated to this first project, and we're in exclusive negotiations with a customer on that. We're looking at options for the other 2 turbines expect those to be in the United States and expect Texas to rank pretty highly on that list.

I'll take the next question from Biraj Borkhataria from RBC Capital Markets.

I wanted to ask about the TCO debottlenecking slide because that 20% uplift over a long period of time, but that clearly adds a lot of value. Obviously, we're at a new baseline now. How should we think about debottlenecking potential going forward? And also in terms of the time line, given the concession -- the current concession ends in early 2030s, you're your willingness to pursue that.

Yes. Thank you, Biraj. I think the example of -- thinking back to what was it, 2008, when the second generation plant was built in the 20% debottlenecking that occurred before we made our recent investment, which is on the slide there. That's one of the reasons we're a partner that we think should continue on in [indiscernible] the ability to work with the Republic to maximize the value of what is a highly complex reservoir is part art and science, and we believe we deliver all of those things. Given that debottlenecking is such a high return and can happen so quickly. We think all parties are aligned to begin the journey on debottlenecking as we speak. In fact, I think we mentioned in our third quarter call, we have a pit stop and we may be happening just starting as we speak, we're going to make some adjustment on some trades to maybe even expand some capacity in one of the splitter columns. So short answer, is debottlenecking begins today, it's no different than Anchor. A platform we celebrated it earlier. Next year, we'll spend probably $9 million to $10 million at 1/3 of capacity to anchor. Debottlenecking is something that we do. It is the thing that isn't as exciting sometimes doesn't always get the headlines, but that's real barrels and it's the highest return investments we can make. So I would expect progress shortly.

We'll take the next question from Paul Cheng at Scotiabank.

Mark, on the West too Downstream, we are seeing a lot of changes. And given your position on the infrastructure, even though that you probably is balanced, you don't need to import. But when we take into consideration of your Asian position in whether you're seeing Korea or that in Singapore. Does it make sense for you trying to become a consistent importer into that business into that, even though that you don't win in the [indiscernible] supply -- or that you think that from a business case that that's not something that you want to pursue. And also there's a number of pipeline proposal, will you be willing to commit to be a shipper there.

Thanks, Paul. You can't have one of these conversations without talking about California, right? Yes. Maybe to step back just a moment, I think I would say that what you're seeing today is a result of decades of policy, right? So it wasn't all that long ago that I was a resident of California. I'm a little bit worried that it's the California Energy users that are getting punished in all of this. But the reality today is when you have 2 world-class refineries and you own a lot of your own infrastructure and you have the best brand in the market we can watch all of these things happen and choose to participate as we think it's best for ourselves. So we are advantaged today. Despite the fact that a couple of competitive refineries are shutting down, I would leave you with it took decades of policy to create what's happening today. It will take decades of policy improvement to get out of it. So we will watch pipeline activities very closely. We certainly will do our best to operate reliably and take care of the California consumer, but we're better positioned than anybody to figure out that path as it becomes as it becomes clear. And on these pipelines that you're talking about remember -- we're connecting from a market that uses that product today that has to be made in California specifications, and it has to pay tariff number one, tariff #2, then it has to land in the market to compete. And so we'll put our cost of supply up against anybody today. We'll put our cost of supply up against anybody. So it takes a -- having it come from Korea in a ship landed in California. It's hard to be a world-class refinery delivering that same product. Today, we're in a good position to do that. Could we go to imports certainly.

Take our next question from Ryan Todd at Piper Sandler

As we think about some of the technology that you talked about in [ Titan Shell, ] whether it's chemical treatments or APOLLO that you demonstrated, how should we think about the time line at which these technologies are applied across the portfolio, the time line at which we start to see improvements. And the outlook of current production -- does it include any of those assumptions in terms of uplift? And maybe finally, on the whole thing, how do you balance -- if you get greater productivity per dollar spent, how do you balance the opportunity to either exceed growth production targets or lower CapEx?

How about I start and then you close out. So I want to -- I'll kind of start where you ended. The opportunity to continue to improve, whether it's technology or other type of efficiencies, that's the advantage of a factory. That's the advantage of staying over 1 million barrels that staying in that range. We can apply those things, continue to reduce the capital that's spent or the resources required to generate more cash. That's our current view today. What's so nice about our portfolio is we have the option to accelerate that in the future. But today, it would simply drive more cash to the bottom line. That would be the way we think about it in the short term. I'll repeat some of the things I said earlier. We see this as a really big opportunity, Ryan. And we are differentiated in the data that we have we talked a lot about shale and tight and all the things you can do to drive better subsurface outcomes, including recovery, but more recovery faster and all of the development decisions and design decisions that go into a very large resource base, and that's just in the Permian. If you think of the surface implications for this over 1 million barrels a day operating footprint, not all of it operated, but a large portion of it operated. The surface implications are also just as exciting. I talked about some -- the way we can optimize value chains and moving molecules to the very best markets, but just managing our operating expenditures, moving to more a proactive approach to maintenance as opposed to reactive. And we do a little bit of both today, but these tools can take this data that we have in the space and the value to an entirely new level. We didn't get into exploration too deeply. You saw some examples of it in Mark's slide and in the opening video, you've got decades of data and a lot of it unstructured data, which is very hard to work with, almost impossible to work with now feeding that all into some of these AI tools to make better lease and prospecting decisions to increase the probability of success for every exploration well that we drill. When you -- small percentage improvements across a very large asset base, lead to significant value impacts. I think in terms of timing, we'll continue to provide updates on this. We are thinking about this like a business. We put -- we invest money and time into this. We need to get money and value out of it. We've got targets for late next year, and we've got more aspirational targets for 2 to 3 years to the end of the decade. So more to come, right?

Take our next question from Paul Sankey from Sankey Research.

Mark, you're talking about 2% to 3% volume growth. Does that mean that we anticipate more than that growth in the dividend over time? And is there ultimately a point where you reached the terminal sales for Chevron at which point with the dividend have to stop growing? And Jeff, the New Energies has basically been something of a [ check the box ] on ESG, subsidized grab the subsidies while are available. I assume that the AI investment isn't subsidy dependent. And I was wondering what cost of capital and anticipated return you have from that business, which, as I said, I guess, most importantly, isn't subsidy dependent.

That was a creative 2-part question, all well done. But I can make the first answer really, really short. Emer could not have said more clearly that the priority for our company is a sustained dividend, growing dividend over time. So no, I don't see an equation where we have a portfolio that can't continue to do that over time. And it's our job to ensure that, that happens.

And I'll repeat what we said earlier, Paul, we've been very pragmatic in this space. When we launched new energies 4 years ago, there's a number of assumptions that you're making about future policy development, technology development, customer adoption. That's what this comes on to at the end of the day, that's been slower than what was anticipated -- and we're always value driven. I think what we walked through is lowering our carbon intensity is first. And we have built a large integrated competitive renewable fuels business. We do have some options for future growth. But I think your question on the policy dependence of technological improvement on cost and ultimately, customer adoption drives value. That will drive our behaviors in this space. AI is a completely different space. Lithium could be a different space. Large-scale power for data centers seems like it's a different space. We still need to prove that out. but that's what we're focused on today. On AI, specifically, I mean, a very high return on investment that we see today. Now when you get into these next level tools, they don't come for free. And I think some of the partnerships that we've built in the power space will benefit us in the AI space. It's interesting to talk with them about how can I help you meet your power needs and how can you help us scale this. I think there's some differentiation in that as well. That won't be free, so we need to make sure we measure the return on these investments, and we'll use the same and we'll take a value-driven approach here just like we do across all of our businesses.

We'll take the next question from Lucas Herman from BNP Paribas.

Can I just go back to the Chemicals business? I'll go over to [indiscernible] it's a M&A question. It's simply. You've got a lot of capacity coming on. seems slightly later than you originally indicated, it's '27 our or than '26, but that's not really the point. The point Mark for me is to try and understand the delta to cash flow, but that's going to mean as the CapEx investment on these 2 mega projects comes out and the dividend because it ostensibly starts to come through. What should we anticipate as the potential return at deck of moving from building nonproductive to actually releasing capital? What do you anticipate in the budget you -- or the forecast you're putting.

Fair question, Lucas. Thank you. In my prepared remarks, I tried to reemphasize the strength of the CP Chem portfolio from a competitive standpoint. There are not many people in the petrochemical space that are running today over 100% utilization. So that means you have to be at the best part of the supply stack to do that. The project in Qatar and the project in the U.S. Gulf Coast, those are top decile projects. So it's important to reinforce where they will fit on the supply stack. One of the things that we chose to do with our CP Chem board positions was drive them to ensuring that they delivered safely and reliably at that portion of the supply sector they did not have to hurry given market conditions. And so that's what you're seeing right now in regard to the first half of 2027 start-up for both of those. If you think about the earnings potential or the cash flow stream into Chevron, it might be worth starting our CP Chem or Chevron ownership of these projects because of their partnerships with QE. So in Qatar, we're essentially a 15% partner in the cracker and we're a 25% partner in the one here in -- or the Orange Texas. The Board at CPChem targets of 50% of free cash flow as their dividend. And I think over the next couple of years, as the spend winds down, you should start seeing that come our way.

We'll take our next question from Jason Gabelman from TD Cowend.

I want to go back to the downstream business and ask about the free cash flow growth in the refining and marketing of $4 billion or sorry, that's the absolute number of $4 billion of free cash flow. Two parts. One, has that kind of mid-cycle assumption change from the prior Investor Day a couple of years ago. I think historically, that business had done something closer to $2 billion. And then part 2, what is driving that kind of cash flow, net cash margin growth? Because you didn't call out any discrete projects in the refining and marketing business. So I'm just wondering what's driving that cash flow growth?

Thanks, Jason. So just to be clear, the $4 billion of annual cash flow from the downstream is refining and marketing. So the Chemicals business would be separate from that. So it's really the R&M side of the equation. That's at mid-cycle margins. You could -- some would argue today that for the next. At least for the next few years, we might be above mid-cycle margins, at least in the refining sector in the United States given some demand and rationalization that's going on today. We don't have to spend a lot of money. We work hard on our downstream portfolio to keep it really, really tight. And when we do spend money, it's a high return. So the last project you might have recalled would have been a light [indiscernible] project at the Pasadena refinery, where we got up to 120,000 barrels a day of light tight oil now in that project has already exceeded expectations, both on volume and return. So we don't have to put a lot of input into the downstream business, especially refining and marketing, other than to keep it running reliably, obviously. So I think you can feel pretty comfortable about the $4 billion. The question would be is there upside with margin here in the next couple of years.

We'll take our next question from Devin McDermott at Morgan Stanley.

In Mike's remarks earlier, you talked about new country entry in the Middle East and North Africa specifically. I was in the Middle East myself last week and there was a lot of chatter around the U.S. majors coming back in to the region. Could you characterize the opportunity set a bit more for us? Is this emerging exploration opportunity? Is it stepping into existing fields that have cash flow today. And as part of that, would you all have appetite for another mega project in the region now with TCO wrapping up and having that in the rearview?

Well, I think [indiscernible] might be yes to all those things, but maybe let's step back. I'd like to take a minute and just -- because Mike mentioned it, thinking about the exploration space in general because this is about bringing new resources into the equation. And you're right, we have entered in my prepared remarks, I talked about 10 new basins. That's almost double the entries of our competitors. So this is serious about us creating more opportunities to apply this new talent that we have brought together between the [ Hess ] team, the Chevron team and our new external leader of the exploration organization. We talked about spending more and having more opportunities, right? So that kind of makes sense. When I think about the Middle East and you think of Iraq, we have both -- there's a lot of onshore opportunity. There's discovered resource. They're DROs that we can do, and there's new areas to explore. We would look at all those. The same would be true in Libya. We're active today in the partition zone. We've been doing polymer flood testing there for the last 18 months. So we're drilling some additional exploration wells as we speak, we know how to do business in the Middle East. The conditions just had to want it. And as Mike addressed the conditions that they could compete now. And so you should see us continue to focus on the Middle East.

We'll take our last question from Alastair Syme at Citi.

Actually another question on exploration. You mentioned a 50% increase in the capital budget. I mean that's a huge scale up. Can you talk about the organizational capability to do that, given I guess it's been deemphasized for some years.

Yes. I would -- first off, I think because of the kind of the world-class shale portfolio that we had, we were able to step back a little bit and now we're stepping back in. So it's 50% from a relatively small base, and that we will continue to ramp up. So if I'm going to go back to the talent that we brought in and then maybe the tools that we now have. So again, this combination of the experience that has had in looking at different basins than we were looking at in some cases. So it's really nice to bring that talent together and then our new leader. We have already gotten that group together to test the prioritization of what we're going to invest in. You should expect us work our way back up to 16 to 20 exploration wells a year. Half of that will be infrastructure base. So near existing assets and then half should be frontier over time. And I think that ramp-up will take us a year or 2 to get to that kind of level. You could expect in the next year or 2, us drilling exploration wells in Equatorial Guinea in Namibia, Nigeria. We talked about the Partition Zone, the Gulf of America. That's just the start. And so I think the way I would think about this is our ability to drill and execute wells is actually really strong. When you look at the last couple of years, every exploration well that we've drilled has been drilled on time and on budget. In some cases, they just didn't find anything. That's the outcome that we're trying to change. The data that we now have available. This is the part that gets a little bit exciting for me. When you think about one of the tools that we showed here in some of my prepared remarks. We talked about ocean bottom node seismic. We talked about -- you've heard of Elastic full waveform inversion. Those are for those who like to get technical. Those are simply 2 things that allow you to be like me [indiscernible] part of my glasses, right? I get a clear view if I look through the right part it gives you a better resolution of what you're looking at. We showed on the screen, something called Apex and spatial high-grading Apex is what Jeff mentioned that gathers all of the exploration material that we have in the company so that people can assess it given the years of experience that we've had. And then spatial high-grading, it would be like Zillow. Zillow for leases. It helps you accelerate where you would choose to make decisions about which leases you want. In addition to the new tools, we made organizational changes that make it faster for us to make decisions. And I think that's evidenced in the basin entries in the acreage that we've acquired over the last couple of years. So we're on our way, and you should keep asking about it so that we can show that we're getting the right kind of outcomes. Thank you Alastair.

All right. Well, listen, I just want to say thank you. Thank you all so much for joining us here in person and via webcast for Chevron's Investor Day. Mike said it at the beginning, and I'll leave it with you now. Never in my career have I seen a higher confidence outlook further into the future with lower execution risk. We're excited about our future, and we're happy we got to share it with you today. Thank you, and please be safe. Sure.