Chevron Corporation

Good morning. My name is Jonathan, and I will be your conference facilitator today. Welcome to Chevron's second quarter 2019 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's remarks, there will be a question-and-answer session, and instructions will be given at that time. If anyone should require assistance during the conference call, please press star, then zero on your touchtone telephone. As a reminder, this conference call is being recorded. I will now turn the conference call over to the General Manager of Investor Relations of Chevron Corporation, Mr. Wayne Bourdon.

Please go ahead. Thank you, Jonathan. And welcome to Chevron's second quarter earnings call and webcast. On the call with me today are Jay Johnson, EVP of Upstream, and Pierre Brever, CFO. We'll refer to the slides that are available on Chevron's websites. Before we get started, please be reminded that this presentation contains estimates, projections, and other forward-looking statements. Please review the cautionary statement and important information for investors and stockholders on slide two. Turning to slide three, and Pierre.

Thanks, Wayne. We had another solid quarter. The company delivered record production led by continued strength in the Permian Basin and at Wheatstone in Australia. Jay will provide more detail shortly. First, an overview of our financial results. Earnings were $4.3 billion, or $2.27 per share. This is the highest reported quarterly result since the third quarter 2014, when Brent was over $100 a barrel. The quarter's results include special item gains totaling $920 million from the Anadarko termination fee and a tax rate change in Alberta. Foreign exchange gains for the quarter were $15 million. Excluding special items and FX gains, earnings were $3.4 billion, or $1.77 per share. A reconciliation of non-GAAP measures can be found in the appendix to this presentation. Cash flow from operations was almost $8 billion, excluding working capital changes. We also maintained a strong balance sheet with a low debt ratio. Importantly, our continued strong cash flow allowed us to deliver on our commitment to return significant cash to our shareholders. During the quarter, we paid over $2 billion in dividends. And after terminating our agreement with Anadarko, we resumed buybacks and repurchased $1 billion of shares during the quarter. Going forward, we expect share buybacks at the $5 billion annual run rate, or $1.25 billion per quarter, in line with our updated guidance stated in May. We also continue to maintain capital discipline with a focus on increasing returns. Year-to-date organic CapEx was $9.6 billion, a little less than half of our $20 billion budget. Total CapEx, which includes acquisition costs that are unbudgeted, such as the purchase of the Pasadena Refinery, totaled $10 billion. Turning to slide four, cash flow was strong, and the trend is in line with full-year guidance. Cash flow from operations, excluding working capital, increased this quarter due to growing production volumes and higher liquids realizations, as well as the termination fee received from Anadarko. Free cash flow, excluding working capital, increased to $4.3 billion and supported the dividend, debt reduction, and share buybacks. The company's cash flow breakeven remained in the low 50s on a Brent basis year-to-date. Asset sales proceeds added to our positive cash flow and further lowered the breakeven while high-grading our portfolio. Since the beginning of 2018, asset sales proceeds have totaled $2.9 billion and we remain on track to divest $5 to $10 billion of assets by 2020. Turning to slide five, second quarter 2019 earnings of $4.3 billion increased about $900 million versus the prior year. Excluding special items and FX, upstream earnings were relatively flat as higher production was offset by lower realizations. Downstream earnings also were relatively flat as timing effects were offset by lower margins. The variance in the other segment was primarily the result of lower corporate charges. Turning to slide six, compared to the first quarter, second quarter earnings increased by about $1.7 billion. Excluding special items and FX, upstream results were roughly flat as higher liftings in crude realizations were offset by lower gas realizations, higher DDNA, and other expenses. Australia gas realizations were lower primarily due to lower LNG spot prices and a higher ratio of spot LNG sales, while U.S. gas realizations reflected weaker Henry Hub and Waha pricing. Downstream earnings excluding FX improved by about $520 million due to stronger U.S. West Coast refining and marketing margins and timing effects, partly offset by the impacts of planned downtime. The variance in the other segment largely reflects lower corporate charges. I'll now pass it to Jay.