CVX
#Sure.
Base declines have actually been quite good.
The shift in strategy as we've moved from the heavy new greenfield investments into a focus on leveraging maximum value from our installed infrastructure base, our installed base business, has been paying big dividends.
So the infill drilling programs, the focus on reliability, the workover programs, have been really sustaining our production better than we would have expected, given the amount of capital and costs that we've pulled out of the system.
We have the advantage of a portfolio that has a lot of young assets.
So as we start taking advantage of things like Jack/St.
Malo and the other projects I mentioned that are coming online this year and next year, as well as Gorgon and Wheatstone, we are seeing a very young portfolio; lots of continued opportunities for infill drilling and brownfield expansions.
And there's a lot of value in that, even at today's prices.
Sure.
In the Partition Zone, the stopping of production continues.
There's been no restart activity.
There are continuing negotiations and dialogue between the two governments.
We continue to advocate for a return to the status quo, get the field back in production while the longer-term issues are addressed.
But at this point in time, there has not been any movement towards a restart.
It is somewhat perplexing to us, but we'll continue to play the role of facilitator and see if we can get the fields restarted.
I think it's in everyone's best interest.
In terms of Venezuela, we have continued to be operational.
We do not have major impacts on our operations at this point in time, and it's just a situation we continue to monitor.
Our priority is on maintaining safe operations and protecting our people and assets.
And in Nigeria, we continue to see good performance coming out of Nigeria.
There are disruptions from time to time, but it has not had a material adverse effect.
Well, I think that would be an intuitive outcome if we have a little bit less spending.
I think the larger flywheel for us here may be the timing of asset sales during the second half of the year.
As I mentioned, many of those are international transactions.
And getting a bead on exactly when they will close, whether they will close in fourth quarter 2017 or perhaps move into first quarter 2018, there's still some uncertainty around those.
When we've talked before about how we look at the Permian, we look at the whole value chain.
So everything from our development, operating costs on the front end, to the realizations we get on the back end.
And we've done a lot of good work to open up multiple pathways to get our products to market so that we can take advantage of the different variations in the markets.
So we have been working to stay ahead of our buildout curve.
At this point we don't see any constrictions on our ability to grow, as we've discussed, in the Permian.
And this is an area that we will continue to stay focused on and seek the best realizations as we move forward.
Thank you.
When we are talking about 30% returns, we're basing that on a $50 WTI price, $2.50 gas, $25 NGLs.
And what we are doing is looking at our all-in costs, so we're not cherry picking just development costs or anything like that.
But this is what we really expect to see full returns, fully burdened.
Yes.
We do completely believe that R&M should be a core part of our portfolio long-term.
We like our integrated model, not only for the hedge that it provides in terms of offsetting commodity price impacts on the upstream side, but we also leverage it to facilitate knowledge transfer between downstream and upstream for the efficient operations of plants and facilities.
So it's a core part of our business.
I think we have been very successful over the last decade improving the returns of downstream through transactions, fine-tuning, and optimizing the portfolio, plus significant efforts around cost management and cost containment.
It's also a growth opportunity for us, if you are including the chemical sector.
So I think it's a key part of our portfolio going forward.
And we would look to expand and evaluate its investment opportunities for future growth projects, just the same way we would look at other opportunities.
The chemical sector in particular would compete for capital for future investments.
Absolutely.
Yes, <UNK>.
So obviously this is a topical area.
We're certainly very much aware of the opportunity, and we have evaluated it.
But I think the best I can say at this point is we don't have any plans for anything like this.
So as we look at the different assets that we have across North America, one of the things that we are very active on is sharing the information and best practices that are being developed in each area with the other unconventional areas.
So we've seen development costs come down in the Duvernay.
We've been largely involved in an appraisal program, in a land tenure strategy.
But now with the results that we're seeing, we have a good-sized resource there.
And we are evaluating, as <UNK> mentioned earlier, our business plan at the current time on just what we want to do there, but it's very encouraging.
We'll give you more details on each of those in the SAM Meeting next year.
In terms of the Marcellus, we've also seen our cost structure come down significantly, as well as our drilling efficiency improve.
So that also has some promise, especially with the recovery in gas prices.
As to whether or not we hedge, that's something that we'll evaluate as part of putting together our strategy going forward.
Another key area for us is the San Joaquin Valley, where we continue to run a very efficient operation in that area.
The strategy there has been a drill-to-fill strategy.
So we're really utilizing the existing installed infrastructure base, and we see very good returns coming out of our San Joaquin area.
It builds on our heavy oil expertise, and provides a very good return to us.
So North America overall looks very strong in the onshore areas.
Yes, thanks very much.
It's a good question, and there are a lot of different things being tried in the Permian on a real-time basis.
And as I mentioned earlier, our strategy ---+ we've been criticized for it maybe a little bit in the past, but it's proving to be a very good strategy ---+ is to let others do some of the experimentation.
And then we watch and see what performs well, and then build that into our basis of design.
Right now our focus is on 7,500 to 10,000 foot laterals.
We will wait and see if those really turn out.
But as you get longer and longer laterals, it gets very difficult to get good returns throughout the length of the well bore.
So our focus is on getting the ultimate return for the capital invested.
And that's really what's going to drive us, more than any other single parameter.
<UNK>, I'm going to go back and just reiterate our priorities that we've had.
Dividend increase would be the first priority, as soon as we can ensure it is a sustainable increase, meaning supported by cash flow and earnings.
After that, the priority becomes the capital program, and where we have incremental opportunity for investments.
You've heard about how strong an opportunity queue we've got sitting in the Permian.
We do want to keep a strong balance sheet.
I think that's important.
And it's particularly important being in the commodity cycle, and we've learned in the past that when oil prices are high, it's good to shore up a little bit.
When oil prices are low, you use your balance sheet.
So we want to make sure that we are prepared through the thick and thin of the cycle.
I do see share repurchases as the last use of cash.
And I think those, at this point in time, with the view we have of commodity prices, are fairly remote for us.
The 20 is really based on the fact that we want to be bringing on rigs in a steady, orderly fashion so that we can continue to increase the organizational capability around those rigs, and make sure we're continuing to use each incremental rig very efficiently.
So if you think about all the work that has to go on from establishing the land position, coring up, getting ready for the design of the development area, all through the procurement and then into the offtake afterwards, we want to make sure that we're keeping the organization and the factory healthy around each incremental rig.
What we are finding is that, in addition to increasing the rigs, the amount of production each rig is generating is higher and growing as the efficiencies improve.
So part of it is increasing the rigs.
But part of it is also getting more out of each and every rig that we apply.
And the fleet is becoming more productive, so we're balancing all that.
And as I said, because we get data on virtually a real-time basis, we're able to make decisions now, look forward, and decide do we want to continue the pathway higher.
Or do we want to go ahead and hold at any particular number of rigs.
Capital is not the issue; it's really making sure that we're delivering the financial performance that we're looking for.
It's a Board call [on the dividend], and I think it's not just what current prices are, but it's the outlook for future prices as well.
It's the sustainable support level for the dividend that's important.
So it's a combination of the commodity price outlook that we have, the capital program we are expecting, and the cost structure we are seeing [that influences the decision].
And as I said, we made tremendous strides over the last couple of years to get into a much more cash balanced position.
And we're cognizant of our 29-year history, and would love to be able to take it to a 30-year history.
But we're only going to do that when we have full confidence that it's a sustainable increase.
Okay.
All right.
I think we've got time for one more question.
It's early days in terms of Tengiz.
We carry a good contingency.
And we make sure that when we run our economics, we really take into account what we think it could cost, not just what we want it to cost.
We are taking all the steps we talked about in previous calls in terms of making sure the design assurance, our contract strategies, our execution, and our quality management are all in place.
It's got our full and complete attention, so we're really working hard to manage this project.
We're off to a good start.
Projects of this nature are so large, there are always going to be challenges.
And our goal is to address those challenges and minimize the use of contingency.
But it's too early to give any other guidance than what we've given so far.
I think the best I can do is just say we're in the midst of our business planning cycle here, and we'll come out with our C&E plan for the 2018 year around December.
Typically that's when we would do it, after we've had a chance to go through the full business planning cycle.
I don't have any different guidance other than to say what we've said.
<UNK> just went through it, but for every dollar that we're spending, we're getting much better response out of the Permian.
So the capital efficiency per dollar is really increasing, and that will all be taken into account as we're doing our revised planning.
It is important for us to be cash balanced; this year with asset sales and next year without asset sales.
And so those are primary objectives that we will be trying to balance as we put next year's capital plan together.
Okay.
Thanks very much.
I'd like to thank everybody for the time on the call today.
We certainly appreciate your interest in Chevron.
And we appreciate everybody's questions on the call and participation.
Thank you.
Jonathan, back to you.
