Chevron Corporation

Good morning. My name is Katie and I will be your conference facilitator today. Welcome to Chevron's first quarter 2021 earnings conference call. At this time, all participants are in a 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 and then zero on your touchtone telephone. As a reminder, this conference is being recorded. I will now turn the conference over to the General Manager of Investor Relations of Chevron Corporation, Mr. Roderick Green. Please go ahead.

Thank you, Katie. Welcome to Chevron's first quarter earnings conference call and webcast. I'm Roderick Green, General Manager of Investor Relations, and on the call with me today is Pierre Breber, CFO. We will refer to slides and prepare remarks that are available on Chevron's website. Before we get started, please be reminded that this presentation contains estimates, projections, and other forward-looking statements. Please review the cautionary statement on slide two. Now, I'll turn it over to Pierre.

Thanks, Roderick. This quarter, we had our best financial performance of the last year as the global economy recovers. Reported earnings were $1.4 billion, and adjusted earnings were $1.7 billion, or 90 cents per share. Included in the quarter were pension settlement costs, in legal reserves totaling $351 million. Pension settlement and curtailment costs will be a special item going forward. For comparability purposes, 2020 adjusted earnings were recast to exclude these costs. Also found in the appendix of this presentation is a reconciliation of non-GAAP measures. CapEx was down over 40% from a year ago, and we ended the quarter with a net debt ratio of 22.5%. For the first time since the pandemic, cash flow from operations, excluding working capital, exceeded our cash capex and dividend spending. Cash balances ended the quarter slightly higher due to timing considerations. We expect cash balances to come back down later in the year. Pre-cash flow, excluding working capital, was $3.4 billion, up significantly from last year and higher than the 2019 quarterly average. With old prices back up to around 2019 levels and downstream earnings still recovering, higher free cash flow this quarter is driven by the change in cash capex, less than half of the 2019 quarterly average. Maintaining and growing our dividend remains our top financial priority. Earlier this week, Chevron's Board of Directors approved a $0.05 per share dividend increase, about 4%, that positions Chevron to extend our streak to 34 consecutive years of higher annual dividend per share payouts. Since 2005, Chevron's dividend per share has grown over 7% per year, beating the S&P 500 and more than four times our peer average. When our first three financial priorities have been met, we also have a track record of repurchasing shares, 13 out of the past 17 years. As we look forward, We expect to begin the repurchase of shares when we're confident that we can sustain a buyback program for multiple years through the old price cycle. When making this decision, we'll consider the likelihood of future sustained excess cash generation and the strength of the balance sheet. Adjusted first quarter earnings decreased about $700 million versus the same quarter last year. Upstream earnings increased on higher prices and downstream earnings declined on a swing in timing effects and lower margins and volumes resulting from the pandemic. Both segments had negative impacts from winter storm URI. Other was down primarily due to employee benefit costs. Compared with last quarter, adjusted upstream earnings were up more than $1.4 billion due to higher prices. Downstream earnings increased primarily due to margins and timing effects including the absence of last quarter's year-end inventory valuation adjustment of more than $100 million. Other was down in part due to employee benefit costs. Upstream production was down 3.5% from a year ago. The increase in production due to the Noble acquisition was more than offset by a number of factors, including declines, asset sales, Winter Storm URI, and OPEC Plus curtailments. Winter Storm URI impacted both our upstream and downstream businesses, with earnings impact of about $300 million after tax in the quarter. All upstream production has been restored, and major downstream and chemical units have restarted. We also achieved first gas flow from the successful execution of the Allen Gas Modernization Project in Equatorial Guinea. This project allows gas from the Allen field to be processed through existing onshore facilities. Finally, the company announced an agreement to acquire all of the publicly held common units in NBLX. This stock transaction is expected to close in mid-May. We continue to take action to advance a lower-carbon future. Last week, we announced an MOU with Toyota to work together to develop commercially viable, large-scale businesses in hydrogen. Also, we continue to invest in emerging low-carbon technologies including announcing five venture investments this year in geothermal power, offshore wind, and green ammonia. In addition, we're in the early stages of developing a bioenergy project with carbon capture and sequestration in Mendota, California. This plan is expected to convert agricultural waste biomass, such as almond trees, into a gas to generate electricity and sequester emissions of 300,000 tons of CO2 annually. Looking ahead, in the second quarter we expect turnarounds and downtime to reduce production by 90,000 barrels of oil equivalent per day, primarily in Australia at Gorgon Train 3, where the planned turnaround and repairs of propane vessels are underway. The impact from OPEC retailments is estimated to be 40,000 barrels of oil equivalent per day, primarily in Kazakhstan. In Kazakhstan, The FGP project recently placed the final module on its foundation. Remobilization of the construction workforce achieved about 95% of the end of first quarter objective. Further workforce additions are expected this quarter. In summary, it was a good quarter with our strongest financial performance in a year, continued progress towards advancing a lower carbon future, and a dividend increase while maintaining an industry-leading balance sheet. During last month's investor day, we shared our goal of higher returns, lower carbon. This quarter was another step in that direction. As we look forward to the next few quarters and the world gets better control of this virus, I'm confident that we'll continue to deliver stronger financial performance and help advance a lower carbon future. With that, I'll turn it over to Roderick.