Chevron Investor Day puts the spotlight on post Hess strategy
Portfolio managers will be interested to hear what CEO Mike Wirth has planned to reap the rewards of the Hess purchase and start a new growth phase when Chevron executives, top shareholders and the oil producer gather in New York City for its investor day on Wednesday. Wirth will be celebrating a win at the event after winning the arbitration to secure the $55 billion acquisition of the smaller oil company in July. Investors want to know more about the exploration plans after oil and gas reserves reach a low in 2024. This is especially true now that major operations in Kazakhstan, and in the U.S., are in full swing. Last month, Chevron announced record production of oil and natural gas for the third quarter.
"Before Hess, it was thought that Chevron didn't have much room for growth. Now, the Kazakhstan project is moving to cash generation, and Hess has been added on top, they have a variety of opportunities for growth," Will Su, managing director of asset management firm BlackRock (one of Chevron’s largest shareholders) said. Hess acquired a 30% stake in Exxon Mobil's Stabroek Block in Guyana. The area contains at least 11 billion of barrels of oil-equivalent and was the driving force behind Exxon Mobil's positive third quarter report.
Wirth stated during the earnings conference that Chevron would provide guidance to the end of the decade at its investor day, which is the first since 2023.
WHERE GOES EXPLORATION NEXT? The agenda will include details about Wirth’s goals to improve exploration, find new sources of gas and oil.
Chevron announced in August that it had reached a production rate of one million barrels a day from the Permian basin. This figure will remain constant as it reduces its capital expenditures and focuses more on cash generation. The expansion project in the Tengiz oil field, Kazakhstan is now fully operational.
Chevron will have more money for exploration now that two major assets are no longer in its rearview. David Byrns is a portfolio manager at American Century Investments and a senior investment analyst. According to LSEG, the company holds a 254 million dollar position in the oil-producing company.
He added that Chevron should be able to preserve dividends and buybacks as a result of its cost-cutting initiatives.
Byrns explained that "they leaned out the organisation because it's recognized that the industry needs to allocate more money (to exploration) for the future. But, that wouldn't be prudent if that happened at the expense cash returns to shareholders."
UPDATES ON KAZAKHSTAN PROJECT AND OTHERS
Byrns said that he will be watching developments in Chevron’s assets located along the eastern Mediterranean and any potential plans to use natural gas reserves as a source of power for data centers. Chevron has begun talks with AI companies about building natural gas-fired plants that will provide the huge amounts of electricity required to run data centers. This is a brand new venture for the company. The idea is not universally accepted.
PriyalManiar is a T. Rowe Price investment analyst, a major Chevron shareholder. She said, "I am on the fence regarding their power strategy, and I believe a lot of others (investors), would also like more details." Maniar said she wanted to know more about Chevron’s negotiations to extend their contract in Kazakhstan. The contract expires 2033, and analysts are already asking about it on earnings calls. Wirth stated that the talks are off to a great start, but warned that they are still in the early stages.
These are going to be a long process. He said it was a complicated contract. Sheila Dang reported from Houston, and Nathan Crooks edited the story.
(source: Reuters)