Bloomberg Audio Studios, podcasts, radio news.
We're beginning SAUNT with a look at the energy sector, President Donald Trump pledging to expand production and lower prices, with the thread of tariffs hanging overhead for the next thirty minutes. Some places said it. Joining us now is the chefron CEO, Mike Worth. Mike, good morning, It's good to see you. I promised the first question earlier on this morning. I mentioned it on air. I wanted to know whether you've watched Landman on Paramount. Have you seen the program?
I have?
Okay, how accurate is it? You have to deal with cartowns on a daily basis.
It is. It is wonderful entertainment.
Billy Bob Thornton is an amazing actor, and it's drama, right, and you need a little bit of a storyline, and so you know, there are certain aspects of it that are accurate, in others that are probably just a touch exaggerated.
It sets up this conversation quite well. I think for one specific reason, I think there's been a vibe shift in this country captured by the election in only November, and also based and the content that people are consuming right now, including Landmark and in Landman, you see a much more pragmatic approach to things like fossil fuels, oil and energy and the kind of work that your company does. Do you think we are seeing that more pragmatic approach the energy story now?
I think there's no question we're seeing that. I mean, you, you know, take a look at this administration that has come in and rather than criticizing and almost in some ways ostracizing oil and gas, it's an It's an administration that has talked about American energy abundance and using that to the benefit of the American economy, the competitiveness of American business and and but but not just oil and gas. It's you know, the grid is a big thing for
the administration, and power generation. And so I think we we're seeing a more balanced conversation. Something I've been calling for for years is uh in energy, there are three things that manage on affordability because that underpins economic prosperity, reliable supplying because that relates to security in national security, and then environmental impact. And we have to balance those
three things as we talk about energy. The conversation has become very unbalanced and focused on one of the three and not the other two. And I think we're seeing a move back towards a more balanced and you use the word pragmatic, I think that's a very good word for the shift that we are seeing.
We definitely are hearing the shift in the conversation. We heard that at Davos, even though you weren't there, we missed you. I am curious about how much that translates into actual changes that you're making on the ground, with how much you're investing, how much you're planning to expand your footprint in the United States and elsewhere.
Yeah, we grew production last year seven percent globally, almost twenty percent here in the US, the largest production we've ever had in our history, largest cash distribution to our shareholders.
So we are growing.
We're also doing it in a more capital efficient way. So we've been focused on getting more bang for dollar of capital.
You guys are talking a lot about capital.
This morning, and in a capital intensive industry, we have to always look for ways to be as capital efficient as we can be, in as disciplined as we can be, and so we're able to bring new energy supplies to the market at a lower capital investment rate than ever before. We'll go again this year in the United States another ten percent or so in the Permian. So demand for energy is at an all time high and it's only going up.
Last year, you had a record production, even under an administration that had a very different tone toward the oil and gas administration, the oil and grass industry. I just wonder how the vibe shift will change what your outlook is at a time when the rhetoric has shifted to the positive. But some of the proposals like tariffs might be headwinds in certain places.
Yeah, so I think your point's a good one, Lisa. The rhetoric kind of sets the mood music. But you actually have to see policy right, and some of that's done through executive order these days. A lot of it would be best done through legislation. And we would like to work with both sides of the aisle to implement durable, balanced, and pragmatic energy policy, things like permitting reform, which you've gotten a lot of conversation, but we really haven't seen
action yet on that. And it's difficult to build anything in this country, not just pipelines and infrastructure for our industry, but new power generation and grid modernization and other types of infrastructure. So we hope and are certainly willing to work with parties from across the spectrum to try to turn some of this vibe shift or more balanced conversation into what we think is good, durable policy.
Can you talk to us more about the permitting These are things we hear about all the time. You're running a business. Could you help us understand how much that has held back your business?
Oh, it slows things down. It's very difficult.
I mean, you know, the Keystone Pipeline is a good example that was well documented where a multi billion dollar investment that would have been good for Canada, would have been good for the United States, ultimately didn't happen because the permiting process can be hijacked by interests that are opposed to seeing investment in our economy. And so, look, everybody wants to see good protection of the environment and engagement of communities are impacted by projects. But we need
lead agencies that can take responsibility for these processes. We need timelines that are reasonable timelines to do the work, and then we need reasonable boundaries around the way these things can be litigated in the quirks and that needs to you know, that needs to be done to enable more investment in this country.
This president clearly wants to change that. Users phrases like drill, baby, drill. We're certainly drilling, not for thirteen million barwers of all the day in this country, which is phenomenal. I often sit here Lis it does too, and we'll say things like and we'll hear it from Amara as well once she's here. How realistic is it to get that number much higher than the thirteen million barwers we're out right now, you'd know it better than we do. How realistic is it?
Well?
I think production in the US is going to grow again this year. We certainly see in our business. I said, our permaning production will be up ten percent. In the deep water Gulf of America, We're going to go from two hundred thousand barrels a day to three hundred thousand barrels a day by the end of twenty twenty six. So there is production growth coming, but it's really driven by economics, a long term view on supply demand, technology, and policy.
Just to jump in that last point, a long term view on policy. How difficult is it to make these investment decisions we talk about this five shift now could change again.
It's very difficult, John, and so one of the things our company was criticized for a few years ago is we weren't jumping into some of the renewables as fast as others because the policy was unclear, and so we were doing basic research. We were investing in pilot plants. But multi billion dollar investments that are very dependent upon policy that could change quickly are something you have to think about when you're looking to deliver strong returns to
your shareholders. And so we would like to see durable, long term balance policy because that does make the investment decision a little bit easier for companies to make.
Test case for this is liquefied natural gas. US is a massive producer of it. You're one of the biggest producers of it.
There was a ban on.
Exporting to Europe at a time when Europe is really dependent on the US. That has been lifted. Now there's the potential of tariffs being placed on some of those exports. How much can you start to lean into exports versus not due to some of this confusion.
Yeah, you know, the tariff environment is obviously evolving here on a daily basis. Energy is a globally traded commodity, and LNG oil petroleum products for the most part. Now Canadian oil is a little bit different because it's really dependent upon pipelines, but those products can go to different markets. We've seen sanctions reorient trade flows. Tariffs are on other instruments that can change the economics for producers and for consumers.
And what you'll typically see, whether it's LNG or oil is flows will move to different markets as producers seek the highest price for their production and as consumers seek the lowest cost for what they're looking to buy. And as long as supply remains in the market, you have markets well supplied, you generally start to see costs go up a little bit because there's increased transportation and some kind of friction in the system, But export decisions aren't heavily affected by those prospects.
I would say, speaking of sanctions, just briefly, you have a waiver to operate in Venezuela. Is that the case we do, Sender Rubio. Now, Secretary Rubio said maybe the US should reconsider that waiver. You in contact with them on that issue.
We're in contact with the current administration. We've been in contact with the first Trump administration and the Biden administration because the sanctions on Venezuela have been in place for years and we work closely with the government, understand their objectives, to understand the limitations that are being placed through these licenses issued by OPHAK, and to stay in full compliance with the laws.
Are you anticipate in any changes in the hill or too early to say either.
Recently was a trip down to Venezuela by a special envoy who brought back some Americans from Venezuela and arranged terms for I think Venezuelan and immigrants to go back to Venezuela that are that are here illegally, and that seems to be you know, the latest the general license that we operate was unchanged. It has been changed over the years in different ways, and that still could happen.
We try to inform the government of the potential ramifications of a change like that, so they're well informed before they make changes of what would the ramifications be. Well, under the initial Trump sanctions, Venezuelan oil was not allowed to come to the US. The Biden administration changed that. Gulf Coast refiners actually run a lot of the heavy
grades that come from Venezuela. If you see sanctions on Canadian or tariffs on Canadian or Mexicano oil, that may send some of that oil to other countries, and so the Venezuelan.
Oil could be even more important.
So it's things like that, it's hot, how would this work through the system that we really try to help the policy makers.
Understand data center growth. There was a conversation only two mondays ago about whether we've been overestimating the extent of data center growth we'd see and alongside that the amount of energy we might need. Did the Deep Seek story if the last week or so change your routdlook at So.
It really didn't.
If you look at the incredible capital spending that you've been talking about and the huge demand for increased compute from all the big hyperscalers, I think they all assume you're going to find more efficiency in the development of these models, the training and inference techniques that are used, and at the same time, we're going to need a lot more computer capacity. So the two big constraints are
GPUs and interestingly electricity. We haven't seen real growth and demand for electricity for the last couple of decades in this country. We have taken a lot of reliable baseload power off the grid. Coal plants have been shut down. We've had a lot of wind and solar, which are great and very low emissions, but they're also intermittent, and
so the grid hasn't been modernized. The power generating capacity hasn't changed much, and we're poised to see demand from data centers, from the electrification of the vehicle fleet and other parts of our economy. And so there's a range of estimates, but I think nobody would tell you the demand for power isn't going to go up and probably pretty significantly over the next few years.
That feels like a year ago by the way deep seek what I mean, honestly, it's just sort of amazing how quickly this goes. What is how do you sort of gut check people's understanding of the energy use that is required for this, and how are you planning to build out your footprint, what type of energy you want to invest in, and what your budget is like for that.
Yeah, So we talked to the people that are doing the work right, and we're a customer of all the big tech companies, right, they help us in many different parts of our business. We've got relations with them, so we're looking to use these tools to improve our business performance. And over the last couple of years the conversation has flipped and they've said, how can you help us be sure we've got enough power at scale in order to
deliver the products that you're looking for. And one of the things that's very clear is the hyperscalers want to move fast. There's a bit of a land grab and you see it in the way the capital budgets are going up, and so things that are at a scale of one hundred megawats two hundred mega wants are different
than gigawants, which is really where their ambition is. What we've done recently is announced a venture with GeV Veranova and a company called Engine Number one to collaborate and bring four giga wants of power to market beginning in
late twenty twenty seven, so relatively soon. Seven of g e Vernova's biggest turbines that we've got delivery slots on, and the intent is to cite those in places that can meet the need of these hyperscalers reliable gas supply so that they can have long term confidence in the energy off the grid, so they're not going through the grid and dealing with interconnect cues and the reliability issues, and ultimately also a desire to try to integrate lower
carbon energy into this, whether it's through carbon capture, hydrogen, geothermal, and other technologies.
Something we know a lot about.
You said turbines, and those are natural gas turbines.
That's right.
How much do you think that natural gas could potentially overtake diesel and some of the gasoline that people use to fuel a lot of what currently gets generated.
In electricity, You're going to see. We've seen historically good demand for gas, and you're going to see more of it. You're going to see demand gas for exports and lergy. As we were discussing earlier.
In transportation, its use will be more limited.
It has certain advantages, but certain disadvantages when it comes to vehicle transportation. And so I think you're going to see conventional gasoline and diesel, along with electric vehicles, really power the light duty vehicle fleet and the heavy duty vehicle fleet for the foreseeable future. I think you're going to see gas more in power generation in other parts of the economy.
Before we let you go I know that the Hest thing has been messy. It's going to potentially close later this year. I know that there's a lot that it needs to get worked through. Once that's gone through, how in the market are you to potentially consolidate? So a lot of people are saying this is a market in the United States, it still has a lot of consolidating to be done.
Well, we're first and foremost focused on the Hest transaction and that will conclude later this year. We're always looking. We're a resource business. You're always looking to acquire a good quality resource that makes your portfolio stronger. We've got a great position today, so we don't need to do anything. We would only do something if it really fit for our company, if the price we're right in it would create value for shareholders.
What type of industry though, you've got natural gas, you've got oil, you have other types of forms. What would be the area you want to expand in.
Well, there's a couple of barriers that are always of interest to us. One is oil and gas resources because every day, as you produce it, you have less in your portfolio.
And so you need to replace that.
We do it through exploration by finding new fields we do it through technology to improve recoveries, and we do
it through acquisitions. The other sector that's got really robust demand growth is petrochemicals, and as we have a larger middle class in this world, as we move towards more fuel efficient modes of transportation and lighter weight airplanes and vehicles, much of that is in the materialty going to that or derived from thermoplastic petrochemical products to light they have light weight, they have good durability and other rigidity and
mechanical properties, so demand for petrochemicals will be strong that it's another sector that we'd be interested in.
This was perfect. Appreciate your time, mine worth everybody from Chevron