Join us now for more is Mike Worth. He is the CEO of Chevron. Mike, it's great to speak to you today, and I want to talk about the fact that, of course you did beat estimates the premium basin obviously a bright spot there. But then there's the fact that what's Texas crewed, for example, can't seem to reliably break
above seventy dollars per barrel as we read. Of course you are planning cost cuts, but how do you thread the needle between bringing those costs down without sacrificing margins too much.
Well, Katie is good to be with you this morning, and we did report a good quarter. We had strong operational and financial results. We started up some key projects in the Golf of Mexico, and we returned record cash to shareholders. In fact, production was the highest third quarter ever in the history of our company. Was the highest US production we've ever seen, and highest production in the Permian. And we started a big new project in the deep water Golf of Mexico.
And have more to follow.
We're going to increase production there from two hundred thousand barrels a day to three hundred thousand barrels a day by twenty twenty six and over seven and a half billion dollars return to shareholders through our dividend and share repurchase program. In a commodity business, we need to be prepared for cycles, and so capital discipline always matters. Cost discipline always matters, and we can't control commodity price, and it's very difficult to anticipate commodity price, so we have
to prepare for down cycles. WTI and frankly, all the different commodities across our sector right now are seeing some pressure. But that's you know, that's inherent in our business and we're ready for that. We're built to win in any price environment with downside resilience and upside leverage, all.
Right, built to win. Let's talk a little bit more about the Permian basin. It was interesting to see that your production there hit a new quarterly record. I know that you have a target for a million barrels per day from the Permian. When next year do you anticipate that you could hit that?
Well, we've you know, any monthly or quarterly production is a function of drilling activity and when you bring you bring wells online.
We've got a strong track record here.
We've grown the Permian production at a fifteen percent compound annual growth rate over the last three full years. I expect will be up even more than that. Here in twenty twenty four. In the quarter we just completed, we were at nine hundred and fifty thousand barrels a day, and so it's very very clear that we'll reach a million barrels a day. It doesn't matter that much which month that occurs in or which quarter. We're on a strong ramp towards that. And the key thing is we're
getting more efficient in everything that we do. We get better growth and better response for every dollar of capital that we spend.
We're investing in new technologies.
That allow us to produce more out of every well that we drill, and so all of that accruis stronger margins irrespective of the price environment than we otherwise would have had. And one differentiating thing about the portfolio that we have in the Permian is across most of our acreage, we have zero or very low royalties that are payable to others because we own most of that property, which
is a bit unique. And so you put all that together, and the Permians a critical asset for our company and drive strong returns and a big part of the free cash flow growth story.
I also want to go to efficiency a little more. I know you've told analysts that cost efficiency is near to your heart, and you have a flagged possible job cuts in the latest plan to reduce costs as well. I know that there could be asset sales as well. You mentioned new technology, But as it pertains to jobs in particular, how should investors employees be thinking about how many jobs could be reduced in the United States.
Well, I think it's premature to speculate that. What we've talked about is two to three billion dollars in structural cost reductions over.
The next couple of years.
Some of that will come from portfolio actions where we take cost out and move some assets out of the portfolio. A good portion of that will come from productivity improveds and the application of technology to do things at lower cost, so it will come out of our supply chains. And then some of it will come from changes in how and where we execute work. That is where it could impact people. But it's early for us to be very
definitive about that. We've got work underway to define that as those projects in network is further along, we'll speak more about that first and most importantly to our workforce and then to investors. So I would say stay tuned, but don't read the intent to continue to become more cost efficient, which is inherent in a commodity business and something you can never step away from as only being about jobs.
It's about much, much more than that, and jobs are a small part of the total.
I want to also ask you about the capital return plans here, because the decision to tap into debt to return money to investors through the form of buybacks. How long can you maintain the current buyback schedule and what's the optimum debt level for you to take on in order to do so, especially in the face of volatile oil prices.
Sure, so we can sustain the current level of distributions for a long time. We've got a discipline set of financial priorities that we've had for decades. First and foremost, to grow the dividend, and we've done that for thirty seven consecutive years.
We don't cut our dividends since the Great Depression.
The second is to reinvest cash flows to grow future cash flows. The third is to maintain a strong balance sheet, which I'll come back to, and the fourth is to return access cash to shareholders once we've satisfied those first three needs. Sixteen of the last twenty one years we've returned cash through share repurchases, a very consistent and rtable program, not only when times are good, but through the cycle, and we're very under levered at this point. Our net
debt ratio right now is less than twelve percent. In the fourth quarter, it's likely to go down even further as we complete some asset sales and continue to see strong cash flow generation in our core business, could be back down into the single digits through the cycle.
We've guided to.
A range of twenty to twenty five percent net debt as something that we think is appropriate to maintain the strong double A credit rating that we currently have. And so in a commodity business, there are times when your cash flow is in excess of your dividends, your capital
and your shary purchase needs. There's other times when it doesn't meet those which is why you have a very strong balanceing and a lot of capacity so that you can stay consistent through these cycles, which is what our track record has demonstrated and certainly what our commitment to our shareholders is.
And Mike, I just counted again, we're four days away from the presidential election. So of course I have to ask you a little bit about policy here, because when Americans head to the polls, I'm curious what's at stake for the US energy industry, what's at stake specifically for Chevron, especially when you think about long term investment decisions that you might be made.
Well, the most important thing for a long cycle business like ours, where we allocate capital over years and decades and have assets that operate for many decades, is to try to seek some consistency in energy policy and to try to help shape policy that balances economic competitiveness and prosperity with energy security.
And with environmental protection, and not to.
Over index on any one of those at the expense of the others. And so good policy is balanced, It encourages investment to keep our economy strong, to keep our economy.
Secure, and to protect the environment.
And so whatever the outcome of the election, those are the messages that we will take to the new administration, and we'll sit down and engage on things that we think are good for the US economy and allow us to continue to invest in this country.
Appreciate the context there. I do also want to talk about your share price. I mean it's not just Chevron, like the entire energy industry really trades at a discount relative to some of the other sectors in the S and P five hundred, such as big tech. And that's on the cusp of of course, record oil production in a lot of cases, of course, the progress that you're making in the Permian, for example, What do you think investors are missing about the energy story or not appreciating.
Well? I think your points are very good. One.
Our weighting in the S and P is roughly half of our earnings or cash contribution to the S and P, and so multiples and valuations in the sector are low. I think a decade ago that was a function of the fact that there wasn't a lot of cash being returned to shareholders by many companies. Most of the cash or all of the cash was being reinvested in growth. I think the industry has changed. We don't see that
condition today. We see companies that have become much more disciplined, that have robust dividend and.
Share repurchase histories.
Now they're building ours has gone back over many decades, but the industry has, I think now begun to exhibit those same characteristics, and I think shareholders are beginning to take another look. The other question I think that has weighed on the market has been the duration.
Of future cash flows.
A lot of talk and a lot of interest and commitment to evolving the energy system to one that's a lower carbon energy system, but what I think investors haven't fully grasped is that that doesn't mean that the age
of oil and gas is ending anytime soon. Hydrocarbons represent more than eighty percent of global energy supply today, roughly the same number that they did twenty years ago, and as you look out many decades into the future, that mix may change, but it will change slowly, and that's against the backdrop of an energy demand that will continue to grow.
And so the duration of these cash.
Flows are much longer than I think they're being discounted into the valuations of the stock, and it's a real opportunity for investors to rewait into the sector with the strongest companies, and we're beginning to see some of that, but I think there's a long way to go.
All right, Mike, that feels like a good place to leave it. Really appreciate you taking the time to speak to us this morning. That is Chevron CEO Mike Worth