Chevron aims to increase cash flow by 10% annually through 2030 and cut costs even more.
Chevron announced on Wednesday its plans to increase oil and gas production and grow free cash flow annually by more than 10 percent through 2030, all while reducing costs and capital spending. Chevron announced its new guidance on Wednesday at their investor day. The company has been working to improve efficiency following a restructuring that took place earlier this year, which included the layoff of up to 20 percent of employees or approximately 8,000 people. After a delay of a year, the company completed its $55 billion purchase of Hess. This delayed it from providing long-term financial forecasts until now. Its shares are up 7.8% so far this year, but they're still behind rival oil producers Exxon Mobil & Shell.
In a press release, Chief Financial Officer Eimear Boner said that "our advantaged assets and balance sheet strength provide the foundation for us to thrive in any market environment."
Chevron expects its free cash flow to increase by 10% per year, and that earnings per share will grow by over 10% per annum if Brent crude is priced at $70 a barrel.
Chevron has stated that oil and gas production is expected to grow between 2% and 3% annually. Chevron currently produces 4.1 millions barrels of oil-equivalent per day.
Chevron shares fell 2.3% during morning trading, compared to a 1% drop in the S&P 500 Energy Index.
TECHNOLOGY AND RESTRUCTURING CAN HELP YOU CUT MORE COSTS
Chevron has reduced its planned capex expenditures to an annual range of $18 billion to $21 billion, down from a previous guidance between $19 billion and 22 billion.
The company has also raised its planned cost savings to between $3 and $4 billion before the end of the next year. This is an increase of $1 billion over the previous target.
Bonner stated in an interview that upstream divestments will result in a $2 billion cost reduction by the end of the year. She said that using technology to monitor operations remotely and across the entire business will save an additional $1 billion.
Bonner stated, "We are confident of increasing the range because we have already done half the work with what is underway."
Chevron has said that it can cover its capex costs and dividends through 2030, even if Brent crude oil prices hover around $50 per barrel.
FORGE AHEAD WITH POWER PROJECTS AND EXPLORATION
The first Chevron project that will use natural gas to power an AI Data Center in West Texas is slated for completion by 2027. Bonner stated that negotiations are underway to secure a client and make a final decision on investment early next year. The rapid AI development has resulted in a surge in the demand for electricity to power data centres. Chevron has held discussions with major tech companies such as OpenAI, Meta and Meta.
In a speech to investors in New York City CEO Mike Wirth stated that Chevron was in talks with the Iraqi Government for exploration. He added that fiscal terms are now more attractive than in previous years.
Bonner stated that Chevron would increase its annual expenditure on exploration, and use AI to analyze data more quickly. Exploration projects traditionally can take years to complete.
When asked about the markets, Wirth said that prices of liquefied gas may be under pressure for several years.
"We definitely see in the next few years a lot of supply coming on the market and no doubt demand growing." "If all the supplies in the queue arrive at the same time, the market will be oversupplied," said he.
(source: Reuters)