Chevron Corporation

Good morning. My name is Katie, and I'll be your conference facilitator today. Welcome to Chevron's second quarter 2025 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 and 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 head of investor relations of Chevron Corporation, Mr. Jake Spearing. Please go ahead.

Thank you, Katie. Welcome to Chevron's second quarter 2025 earnings conference call and webcast. I'm Jake Spearing, head of investor relations. On the call with me today is our chairman and CEO, Mike Wirth, our vice chairman, Mark Nelson, and our vice president and CFO, Emer Bonner. We will refer to the slides and prepared remarks that are available on Chevron's website. Before we begin, please be reminded that this presentation contains estimates, projections, and other forward-looking statements. A reconciliation of non-GAAP measures can be found in the appendix to this presentation. Please review the cautionary statement and additional information presented on slide two. Now, I will turn it over to Mike.

All right. Thanks, Jake. In the second quarter, Chevron achieved several important milestones, continuing the momentum we've been building over the last year. The success underpins strong financial results, industry leading free cash flow growth, and superior distributions to shareholders. Production was a quarterly record for the company, both in the US and worldwide. In the Permian, production averaged more than one million barrels of oil equivalent per day, a target we introduced over five years ago and achieved right on schedule. In June, we acquired Lithium Rich Acreage in Texas and Arkansas, our first step toward establishing a scalable domestic lithium business. And we returned over $5 billion to shareholders for the 13th consecutive quarter. Two weeks ago, we achieved a favorable arbitration outcome and closed our merger with Hess, bringing together world-class assets, people, and capabilities to create a premier international energy company. Hess adds long-term, low-cost growth in Guyana, The Bakken expands our shale portfolio to 1.6 million barrels of oil equivalent per day. We're now the largest leaseholder in the Gulf of America. And our overall U.S. production is nearly 60% higher than it was just two years ago. Our combined upstream portfolio has interest in some of the most attractive basins in the world and is forecast to lead the industry in total cash generation over the remainder of the decade. We've been actively preparing for integration for nearly two years. Since the announcement, we've repurchased more than half of the shares issued for the transaction. We now expect to realize the full $1 billion in annual run rate synergies by the end of this year, six months faster than our original guidance. We anticipate the transaction to be cash flow accretive per share in the fourth quarter. Last week, we completed the sale of our interest in the Thailand-Malaysia joint development area, and this week, John Hess was elected to and actively participated in Chevron's Board of Directors meeting.

The deal was good when we announced it and has only gotten better. Now I'll turn it over to Mark to cover our operational achievements.

Thanks, Mike. Chevron's been producing in the Permian Basin for 100 years. Our unique position traces its roots back to the Texas Pacific Land Trust and now contains more than 2 million net acres and an advantage mineral interest. We produce nearly as many royalty barrels as the next three largest royalty producers combined, with mineral holdings that benefit around 75% of our total Permian acreage. Over the last five years, we've nearly doubled production organically while capturing significant efficiencies. Improved well and completion designs, reduced cycle times, and technology deployment have led to a 30% reduction in development and production unit costs. We expect costs to decline further as we shift our focus to free cash flow generation. With our advantage royalty position, we believe our portfolio is unmatched. Our scale, technological capabilities, and focus on capital discipline position us to continue leading the Basin in returns long into the future. Across our portfolio, we have a long history of taking good assets and making them better. Our large complex facilities in Kazakhstan and Australia are operating well above design capacities, and we continue to find opportunities to improve. In our deepwater assets, we have a track record of applying leading-edge technology to unlock economic projects and increase resource recovery. We also continue to deliver top quartile turnaround performance. We use real-time data analytics to complete our recent turnaround at Pascagoula on budget and ahead of schedule. And in the second quarter, we had our highest U.S. refinery crude throughput in over 20 years, despite fewer refineries today, highlighting the success of recent optimization efforts. We have strong base assets, and we're leveraging our capabilities to capture more value across our global portfolio. Just as we have enhanced our portfolio, we've also restructured our work. In upstream, we've reduced the number of reporting units by approximately 70%, bringing together similar assets such as our shale and type businesses in the Permian, the DJ, the Bakken, and Argentina, enabling us to scale best practices faster, standardize solutions, and streamline support. Our engineering hubs are designed to drive standardization, efficiency, and value. We're already seeing benefits today through centralized well design and turnaround planning. And we expect faster innovation and scaling of solutions like artificial intelligence to optimize fracs in real time and accelerate exploration data analysis, among other use cases. This improved operational efficiency and execution supports our targets of $2 to $3 billion in structural cost reductions by the end of 2026. Through deep technical acumen, operational best practices, and great people, we expect to drive continued performance improvement across all asset classes. Now I'll turn it over to Emer to discuss the financials.

Thanks, Mark. For the second quarter, Chevron reported earnings of $2.5 billion, or $1.45 per share. Adjusted earnings were $3.1 billion, or $1.77 per share. Included in the quarter were special items related to the fair value measurement of HES shares, company pension curtailment costs, and the gain on sale of assets, resulting in a net charge of $215 million. Foreign currency effects decreased earnings by $348 million. Organic CapEx was $3.5 billion, our lowest quarterly total since 2023, while delivering significant volume growth. Inorganic CapEx was approximately $200 million, primarily related to the acquisition of lithium acreage. Chevron generated cash flow from operations excluding working capital of $8.3 billion. Adjusted free cash flow, which includes equity affiliate loans and asset sales, was $4.9 billion, representing a 15% increase quarter-on-quarter despite 10% lower crude prices. These results were driven by our organic, high-margin production growth, strong reliability, and continued commitment to capital discipline. Adjusted second quarter earnings were down $760 million versus last quarter. Adjusted upstream earnings decreased due to lower realizations, higher DDNA from increased production, and unfavorable tax impacts. Adjusted downstream earnings were higher due to improved refining margins and higher volumes. Second quarter oil equivalent production was up over 40,000 barrels per day from last quarter. Due to strong performance in our base business and solid execution in our growth assets in the first half of the year, we now expect production growth to be closer to the top end of our 6% to 8% guidance range, excluding HES. Over the last year, we've consistently delivered key project milestones that we expect to drive industry-leading free cash flow growth. A TCO FGP is producing at full rates. In the Gulf of America, we're ramping up production from recent major project startups. In the Permian, we achieved a significant production milestone and are beginning to moderate growth, reduce capex, and increase free cash flow. And we're already realizing structural cost benefits and expect to lock in $1.5 to $2 billion of annual run rate savings by year end. The integration of legacy HES assets is expected to contribute additional free cash flow. more than covering the incremental dividend from the merger share issuance. All of this leads us to increase our 2026 additional free cash flow guidance to $12.5 billion. We're building on our strong momentum to deliver sustained long-term value. I'll now hand it off to Jake.

That concludes our prepared remarks. Additional guidance can be found in the appendix to this presentation as well as the slides and other information posted on Chevron.com. And we look forward to sharing more with you at Chevron's Investor Day on November 12th in New York City. We are now ready to take your questions. We ask that you limit yourself to just one question, and we will do our best to get all of your questions answered. Katie, please open the lines.

Thank you. If you have a question at this time, please press star 1 on your touchtone telephone. To allow for more questions from more participants, we ask you limit yourself to one question. If your question has been answered or you wish to remove yourself from the queue, please press star 2. If you're listening on a speakerphone, we ask you please lift your handset before asking your question to provide optimum sound quality. Again, if you have a question, please press star 1 on your touchtone telephone. Our first question comes from Baraj Borkataria with RBC.

Hi, thanks for taking my question. So firstly, congratulations again on the arbitration win. Nice to get that uncertainty behind you. I wanted to ask and pick up on the comments you made in the Permian. You obviously hit a milestone in the second quarter with the production at a million barrels of oil equivalent and now talking about moderating spending. Are you able to give us a sense of what we should expect in terms of 26, 27 budget and capital spend versus what you're spending in 2025? Thank you.

Barrage, thank you for your recognition of the arbitration outcome as well as the performance of our Permian team. I think I would start just by reminding everybody of the foundation of that performance. And it's that large acreage position that we have that has very low break-evens and a royalty advantage that, quite frankly, is very tough, if not impossible, to replicate at a reasonable price today. And that allows us to structurally have better returns and allows us to sustain performance and cash flow generation. With this intentional shift, you'll remember that we put peak capex well behind us here not too long ago, and we talked about in 2025 having capital spend between $4.5 to $5 billion. You should expect us to be in the lower end of that range as we finish 2025, given the efficiencies we brought to bear. As we deliver that free cash flow growth of $2 billion next year in the Permian, I think you should see that drop further as we continue to manage a sustained performance in the Permian. So more to come there in our investor day, but we're definitely drawing down our capex and generating a lot more free cash flow.

Thank you. We'll go next to Neil Mehta with Goldman Sachs.

Hey, good morning, Mike and team. Again, congrats on HESS. We really appreciate the updated waterfall here. And so, Mike, maybe you could just spend some time, you know, talking about how much of the $10 billion and the standalone you feel like you've de-risked and your confidence interval on each of those four buckets. And then maybe some of the key assumptions that went into the $2.5 billion for HESS and recognizing you're going to pack more of this for us on November 12th.

Yeah, Neil, thanks. In a word, our confidence level is high. I'm going to let Emer walk you through each of the buckets.

Morning, Neil. Yeah, so starting with the $10 billion, if you look at the waterfall and the upstream catalyst, starting with TCO, I mean, TCO is ramped up. It's producing at full rates, and so we've de-risked that production profile significantly. Next, we've got Permian. Mark talked about this significant milestone over the second quarter. So we've ramped up and are producing at those rates. That's de-risked as well. Gulf of America, our three projects, our major capital project startups are behind us. Those assets are ramping up, so some additional ramp to go between this year and next year. And then the balance is really the cost reduction program. We're on track. to deliver our capital program consistent with our budget. And our $2 to $3 billion of cost reduction, that's on its way. We have made a lot of progress. We're anticipating that to show up more in the bottom line at the back end of the year and into the year. So all in all, the $10 billion is de-risked and on track. The incremental $2.5 billion that we guided to this morning associated with HESS is coming from two places. First, the synergies. Mike talked about that. The synergies, we are committed to delivering $1 billion of run rate synergies by the end of the year. And then the balance is coming from production growth over the next couple of years with a fourth FPSO coming online this year and a fifth next year. So that's the wrap-up. of the $12.5 billion, and in summary, a lot of these big milestones are behind us on our own track. Thanks, Neal.

We'll take our next question from Devin McDermott with Morgan Stanley.

Hey, good morning. Thanks for taking my question. So, Mark, I wanted to dive in in a bit more detail to some of the business reorganization. I appreciate the comments you gave in the prepared remarks and the slide on the new structure. I was wondering if you could contrast this new organizational structure versus what Chevron currently has. How did you arrive at the conclusion that these were the right adjustments to make? And I think the cost reduction improvements that come along with it are pretty clear, but what are some of the other tangible benefits you're expecting, areas like operational execution, major project delivery, or turnaround efficiency?

Yeah, Devin, thanks for the question. To put the changes we're making in context, you'll recall that our portfolio certainly has more scale over time and more scale in specific asset groups or asset classes. And of course, technology continues to evolve. So with With that backdrop and the fact that we come from a decentralized kind of operating model where we really get things done locally and have very strong relationships locally, we wanted to build on that to unlock incremental value. And maybe the safest way to think about it would be in three ways. First, we're gathering like businesses together. So the traditional phrase would be asset classes. But think of our deep water well design. We've reduced costs in the Gulf of America by 30%, and now we're applying that same approach very quickly into the Angolas, Nigerias, and other deep water locations around the operation. So it's an opportunity to accelerate the application of best practices. And then standardizing and grouping work to fully leverage scale and technology. I think of our digital twins and the ability to do turnaround planning anywhere in the world for a facility that could be on the other side of the world and demonstrating world-class performance. We have multiple examples of that. And then finally, although we are reducing our total number of headcount, the ability to enable our people to get things done in a simpler way is all part of this. And I expect to see more than just cost reductions. I expect to see performance improvement across the system.

Thank you, Devin.

Thank you. We'll take our next question from Steve Richardson with Evercore ISI.

Hi, good morning. Thanks. I was wondering if we could zoom out a little bit. I appreciate the previous comments from Mark about the Permian, but I was wondering if we could talk about the broader tight oil portfolio now that you're in process on integrating Hess. How should we think about the Permian, DJ, Bakken as a whole, balancing growth and free cash generation and the role of tight oil in the broader portfolio on a go-forward basis?

Yeah, Steve, we really have a position that a few years ago, I'm not sure we could have imagined as we were ramping up in the Permian at a few hundred thousand barrels a day. If you take the Permian at a million a day, the DJ at nearly 400 a day, the Bakken at 200 a day, that's 1.6 million barrels a day. That's larger than a lot of companies. And now as we consolidate HESA's production, we're going to be pushing up close to 4 million barrels a day. So that's 40% of our production in shale and tight. So a substantial portion of our overall upstream. Certainly one of the criticisms of operators in the shale over the years has been all the cash goes right back into growth. And investors didn't see a lot of it. At 1.6 million barrels a day, if we can apply the capital efficiencies that Mark has described, operating efficiencies and drilling and completion efficiencies as well to hold production at a plateau for years and years and years, the amount of cash that that can throw off for investment across the rest of the portfolio is very meaningful. And that cash also, of course, supports balance sheet strength, the dividend, and the share repurchase. And so we want to see a balanced portfolio with both short and long cycle investments. Those of you that have been around for a while remember a decade ago when we were overweight on long cycle. It was a long wait to see some of that production arrive. And so we intend to have a nice balanced mix within our portfolio across geographies, across asset classes, across segments of the business. with a real focus on using that to deliver steady, predictable, reliable cash that, you know, a large portion of it will be returned to shareholders. So we're very pleased to have such a large shale portfolio. And at some point, you know, growth is less the objective than free cash flow.

And, you know, we're approaching that point. Thanks, Steve.

We'll take our next question from Doug Leggett with Wolf Research.

Good morning, everyone. Mike, I still haven't got the whiskey, but I'm holding out hope, so congratulations again.

All right. Well, I'll hold out with you.

We'll take it offline. I have a very specific question, actually. It's a follow-up to Steve's question on the Bakken. Hess was kind enough to report their U.S. business separate from international, and even with the synergies, the U.S. business under their reporting would still be free cash flow negative. And the reason for it, of course, is they pay out significant dividends or tariffs, rather, to HSM. My question is, is this a core business for Chevron? Because a few years ago, they talked about a 10-year inventory. Today, it's probably a five-year inventory. But it is free cash flow negative. So in the context of what you're prioritizing, what is the role of the back end specifically in your portfolio?

Yeah, I'll let Mark talk about that. Thanks for the question, Doug. Listen, stepping back, I would say we're excited to add the position in North Dakota to our shale and tight portfolio, as Mike mentioned. Our view is today it generates solid cash flow when you look at the entity in total. And we've learned from our experience today integrating Noble and PDC, that you need to step back and look at both the talent and the assets that we're acquiring here. And we've come to know the HEST team very well. They do some things very well in the Bakken. And we've obviously got our own capabilities in Unconventional. So we look forward to bringing those together. We haven't made any long-term development plans just yet, but we'll talk about that more in our investor day. I think your comment is linked to HEST's And obviously, that is a bit of a unique financing structure, and my personal belief is that that can be more efficient. It's different than some other midstream elements that we have divested of. It's different in its size and its structure, and obviously, its logistic linkage to the Bakken will be value-driven in regard to how we handle that over time, and we can talk about that more in our Investor Day in November. Thanks, Doug.

We'll take our next question from Jean Ann Salisbury with Bank of America.

Hi, good morning. Can you just recap how things stand in Venezuela for you today? Are the production levels and contract structures basically as they were prior to all the movement there year to date?

Yeah, Jean Ann, thanks. You know, just a reminder, we've been operating in Venezuela for over 100 years and believe our presence here has played an important role in regional energy security as well as maintaining American economic interests. Since our license changed in May, we've been engaged with the U.S. government, working closely with the administration to ensure our compliance with our country's policies towards Venezuela. This month, it looks like there will be a limited amount of oil that will begin flowing to the U.S. from the Venezuela operations that we have an interest in, consistent with U.S. sanctions policy. And crude from Venezuela is sought after and very valuable to U.S. Gulf refiners that are specifically built to process heavy grades like that. And so it serves as a reliable source of supply for the American economy. We don't expect the flows from Venezuela will have a material impact on our results here in the third quarter, although it will at the margin help satisfy some of the debt we're owed. And over time, we hope to continue recovering that. And I'll just end by saying, you know, as in all countries where we have a presence, we'll continue to operate in accordance with all applicable laws and regulations in a U.S. sanctions regime or policies, and that includes Venezuela.

Thanks, Jean-Anne.

We'll go next to Ryan Todd with Piper Sandler.

Great. Thanks.

Congratulations on a strong quarter and, in particular, strong operational performance right now. I think if you look across the portfolio with, you know, the timing and the ramps, successful ramps on multiple projects from the Gulf of Mexico, Permian hitting the million barrel a day target, an impressive ramp at Tanguy's, and even Australian LNG, which hasn't always been the greatest operations operating at 7% above nameplate right now.

what has worked well of late as you look across the operational portfolio and how do you continue to build on on that momentum going forward ryan thanks for the acknowledgement that that's um all that improvement you described on the on the backs of a lot of people across our our portfolio so thank you thank you for that i would step back on two things i would say um operational efficiency when it comes to production and turnaround management are two areas that have driven a lot of our improvement over time so You'll note that in our downstream portfolio, our refinery throughput hit a new record, which was mentioned in the formal remarks. That was driven by the startup of a light tide oil project in Pasadena that quickly ramped up to nameplate capacity. It was also linked to some very, very successful turnarounds. In fact, 14 of our last 16 turnarounds on our major assets, both in The refining sector and in our LNG facilities, 14 out of 16 have been top quartile performance in regard to duration. So the team is doing a really good job of driving our turnaround performance to kind of competitive leading benchmark activity. And then the final thing would just be efficiency on all of our base assets. So in the Gulf of America, our base assets continue to perform well as we leveraged previous assets. In fact, our production efficiency for the whole portfolio is up 1% to 2% year-to-date. So we'll continue pressing forward, and you should expect more of the same.

Thank you, Ryan.

We'll go next to Paul Cheng with Scotiabank.

Hey, good morning. Mark and Mike. If we look at today, as you say, I mean, that Post has about 40% of your production from the U.S. shell, and they have a different risk profile and everything. So I try to understand that how important going forward the exploration fit into your overall portfolio. I think that many years ago that we would say, oh, exploration, you want to be targeting that organically. We pay 100% of your resource. that your production, but with 40% of your production basis on there, what is the right target going forward for you guys? And do you think that you have the right program? Because frankly, that the last several years, that exploration program from you may not have yield the result that you may want. So I want to see that, do you happy with the result? And if not, what changes that you think you need to make over there? Thank you.

Yeah, Paul, thanks for that. I'm not happy with the results out of exploration over the last few years, but I want to acknowledge our exploration team has been operating in a pretty narrow range. We've reduced our investment for the reasons you point out. We're seeing big resource and reserve ads from our shale business for many years and And we were really serious about capital discipline. And so as we're ramping up the spending on that, we pulled back and focused into a pretty narrow range of activities. As we move towards a plateau, and as earlier I talked about the need for a balanced and diversified portfolio, exploration needs to play an important role. And we are making some changes to our program and our approach. And I'll let Mark give you some highlights on that.

Yeah, thanks Mike. And Paul, thanks for the question. You know, exploration will continue to play an important part in building our future portfolio. I think in the past, Paul, we've talked about ensuring that we have a balanced portfolio for exploration. That means, you know, mature areas near existing infrastructure and early high entry or early entry high impact frontier areas. So one's about replenishing resources for investments we've already made, and the other would be resources for the future. That philosophy hasn't changed. We've just opened the aperture a bit to lean in a bit more. And I think you have seen us have success in our infrastructure-enabled exploration here over the last few years, thinking about the Gulf of America, Nigeria, the partition zone, and Angola. And then we've been restocking the cupboard, if you will, when it comes to frontier acreage. We've increased our portfolio by over 20%. as you look over the last couple of years. And as you look towards the end of this year, you'll see us put down wells in the Suriname, Namibia, and Egypt in those frontier type of offerings. And so when you think about that, applying more attention to it, as well as us making some operational changes where we've streamlined our exploration organization and it brought in the talent of the HESS team as well as some others, I think you'll start to see us build on the positive momentum that we have on our infrastructure finds. Thanks, Paul.

And it will be an area, Paul, maybe just to tack on one other thing. Mark talked earlier about some of the more centralized decision-making and execution. That's another thing is we'll bring some of that decision-making into a tighter group with an enterprise focus.

Okay, thank you.

We'll take our next question from Arun Jayaram with J.P. Morgan.

Yeah, good morning. I was wondering if we'd get a brief update on your eastern med gas strategy and thoughts on potentially upgrading or doing an expansion project at Leviathan as well as where Aphrodite sits in terms of your thoughts.

Yeah, thanks, Arun, for the question. Given all that's been going on in eastern Mediterranean, our focus has been on keeping our people safe and maintaining energy supply to the region that so desperately needs needs it, the teams have done really good work on Tamar and Leviathan to keep our growth projects there moving. And so we do expect those to come online late this year, early next year. And you'll recall that those two projects essentially increase our production capacity by about 25% over the next couple of years. And we see more growth potential in the region in general. Cyprus is part of that equation. Our Aphrodite project where we're doing front-end engineering today, we've made good progress with the government there, and we've got approved plans to push ourselves towards FID. The initial development in Cyprus was for an FPU, and I think we'll build something that leverages the Egypt market as well over time as maybe the regional market. So more to come in regard to but we'll make sure we have competitive returns before we proceed on the Aphrodite project. Thanks, Arun.

We'll take our next question from Josh Silverstein with UBS.

Hey, thanks. Good morning, guys. You highlighted the strong operational performance at TCO and producing 18% above nameplates. Is this just at FTP or the whole project? And maybe if you can give us kind of the forward outlook here, is it kind of sustainable at this level and any sort of other debottlenecking opportunities? Thanks.

Yeah, Josh, thank you. We are very pleased with the performance of our whole Tengiz operation there. The team's worked hard. You know, I think the Starting all the way back to the 30 days ramp up of FTP to nameplate, the team just has built on that momentum. And maybe the thing that excites me the most, and it gets to maybe your question, is the integrated operation control center that was a part of our future growth project investment allows both the previous investments all the way back to our first generation investments to the recent projects that were commissioned and started up. It allows that whole system to be optimized. So wells, plants, everything. And I think we're just scratching the surface as to what potential that has over time. When I talked in my prepared remarks about the performance being above nameplate, that's obviously the first and second generation projects, which are, as you described, 18% above nameplate. We see the same type of opportunities as we now look at the whole integrated system. And in the fourth quarter, we're planning a pit stop for maintenance activities that allows us maybe to continue to improve our our operations there and build on the positive momentum we have.

Thanks, Josh.

We'll go next to Betty Jiang with Barclays.

Hi, morning. Thank you for taking my question. I actually want to ask about the affiliates distribution and that actually ties to the TCO outperformance as well. Second quarter really stood out from how strong the cash flow generation was. The part of that is the affiliates distribution much higher, highlighting the outperformance in TCO. Just wondering how you see that evolving, especially with the performance you're seeing at the asset cohesiveness side to that distribution number for 25 and 26.

Yeah, morning, Betty. It's Emer here. I'll take that one. Yeah, to Mark's earlier point, The ramp-up on TCO went really well in the first quarter, much faster than anticipated. And so over the second quarter, we had higher production sustained for the entire quarter. Coupled with the prices that we saw, I mean, at the beginning of the quarter, prices were lower when we gave the guidance. I think they were in the low 60s. And we saw higher prices in during the quarter. So the combination of both higher prices and higher production is the result of that of the higher distributions that you saw in the second quarter. Going forward, what I point out is in the third quarter, we'll see the first loan repayment, and we'll see that coming through in our adjusted free cash flow metric that now includes distributions from equity affiliates. So that's what you can expect to see in addition to the guidance around affiliate distributions that we've shared today. Thanks for the question.

Thank you. We'll go next to Lucas Herman with BNP Paribas.

Yeah, thanks very much. Ima, sorry, just going back to the last question before I come on to what I wanted to ask you. Just to be clear, the billion of loan repayment you're saying will go through CFFO. I will be included in the affiliates line.

No, Lucas, it goes through distributions, more or less equity affiliates is what the operational distributions go through. The loan repayment goes through cash from investing. But in the adjusted free cash flow metric that we shared today, we will be combining both of those. So they're flowing through different parts of the cash flow statement, but the combination will be in the adjusted free cash flow.

We'll take our next question from Nitin Kumar with Mizuho.

Hi, good morning, and thanks for taking my question. Maybe I'll take advantage of Mark being on the call. You talked about EURs in the Gulf of America being 9% above what you expected. Could you maybe talk a little bit about what you're seeing there? Is it reservoir? Is it operations? And does that change the view of the Gulf of America within your portfolio in terms of investment?

Yeah, thank you for the question. We're actually very pleased with our performance in Gulf of America. The strong performance will take that 300,000 barrels a day that we've talked about in 2026 and likely put that through the remainder of the decade. And it's really a combination of two things. It's the ramp up of our anchor whale and Baltimore investments, and it's the performance and full leverage of our base assets. So I'll focus on that. We've been in the Gulf of America for nearly 100 years. And the improved recovery that you're seeing from our base assets is really from stage developments, either water flood, subsea multi-phase pumping, and or well stimulation programs. And I'll use Tahiti as an example. The Tahiti project has actually reached its nameplate capacity twice in its history, over four different stage developments. And then Jack St. Malo has had six development over its period of existence. And so the reality here is we're committed to fully leveraging our base assets to take them as far as we can be. And with the addition of Hess, we become the largest leaseholder, as Mike mentioned in his comments, in the Gulf of America. And 80% of those leases are adjacent to or within distance of tieback range for further investments over time. So we have an opportunity to have a continued high cash flow generating operation in the Gulf of America going forward.

And I think what Mark just described, you can expect projects like Anchor, Ballymore Whale, all to have this type of follow-on development. And those fields are likely to yield a very similar story to what Mark just described.

Thank you. We'll take a question from Lucas Herman with BNP Paribas.

Welcome back, Lucas. Thanks very much. Thank you. Sorry, I've got a couple, but let's just start on this. LNG, I mean, one of the things that you've highlighted in your summary slide this morning is that you've increased your LNG offtake capacity to 7 million tons per annum. And a lot of that comes on stream quite late this decade. So really, the question is simply, you know, the approach of strategy, because what I haven't seen from yourselves is placing that, should we say, with end markets. So there's a question around how much risk you're willing to take on. and the extent to which the $7 million that is going to be flowing into the portfolio will largely be used, how do you see balancing it? How much will end up being long-term placing back-to-back? How much of it do you want the flexibility to play more short-term?

Yeah. Look, we've executed some off-take agreements that you might not be aware of, and so we're actually placing – some of that volume out there, but there's more to be done. I'm going to let Mark talk to you a little bit about how we think about a larger LNG system and optimizing that.

Yeah, Lucas, I think in the past when we've talked about this, we've talked about us kind of building a globally connected LNG portfolio. And remember, you know, we're generating, what, 2.7 BCF of gas out of the United States, and these offtake arrangements that we've built up out of the U.S. Gulf Coast. I think it's up to now about seven metric tons per year. It allows us to expose ourselves to multiple margin sets over time. So this is a balanced offering when you think of our winning positions of gas generation in Australia and the U.S. Gulf Coast in particular. It allows us to serve the global system and move product to where the margin best suits us over time. So appreciate the question.

Thank you. We'll go next to Jason Gableman with TD Cowen.

Hey, morning. Thanks for taking my question. I want to ask about capital distribution and specifically as it relates to the guidance that you provided when the HES deal was announced. And this was discussed on the sell-side call, but I'm still a little confused on the buyback outlook for next year. Should we expect a step-up from the current rate by that $2.5 billion that you guided to when the HES deal was announced, or is this kind of the rate we should expect in 2026? Thanks.

Yeah, Jason, that was a long time ago. And at the time, we anticipated a prompt approval and closure of the transaction. And we intended to retire shares on an accelerated basis to reduce the outstanding shares. In the interim, we've been delayed through the actions of others, and we've now actually purchased more than 50% of the shares that were issued for the transaction. We bought them back during the interim period of time and effectively accomplished what the increased buyback rate was intended to do. We also bought 5% of Hesse's outstanding shares at about $10 a share lower average price than what we closed the transaction at. So we were able to affect a little bit of a different strategy to retiring those shares than we had envisioned originally. We also were in a bit of a stronger commodity price environment at that time, and we outlined a range. And so I think what I'd point you to is our investor day in November, where we will have had a chance to bring together all the information now as we've integrated HESS. And as part of that, of course, we'll review our forward outlook and guidance for share repurchases.

And we'll update you on that at that point in time.

We'll take our next question from Phil Jungwirth with BMO.

Thanks. Good morning. On Kazakhstan, the country has announced significant petrochemical investment and capacity growth plans through the decade. So more broadly, can you talk about the importance of domestic oil and gas production to contributing to these or other power ambitions? And how untapped is the gas resource at Tengiz?

Yeah, the Republic of Kazakhstan has been looking to diversify their economy and to broaden out the ways they can utilize their energy, wealth, and abundance to participate in other parts of the value chain. Refining petrochemicals, gas, all I think are of an interest to them. We engage in discussions regularly. with the Republic and with our partner, the multiple state companies actually in the different segments there. And so I do think you're likely to see a continued appetite for further investment on the part of the Republic. There's a lot of gas that's associated with our field and other fields. We re-inject a large portion of that gas today. And then the other reality that the Republic deals with is some of the gas production volumes are not necessarily where the gas consumers are. And so they will tend to maybe sell the gas into the market or to their neighbor, Russia, and then buy back in another location. And so investment in domestic infrastructure to better connect production and markets, I think, is another thing that is likely to happen over time. And so... We try to be a good partner. We try to work closely to help evaluate these kinds of opportunities. We haven't participated in a petrochemical plant there, for instance, although our affiliate, Chevron Phillips Chemical, has taken a look at that in the past. And I think you'll continue to see us look to help the republic achieve their economic and energy diversification goals.

Thank you. We'll take our final question from Jeff Jay with Daniel Energy Partners.

Hi, guys. Thanks for taking the question. You know, it just seems to me that Chevron was kind of at the precipice of a multi-year, I guess, step change down in the capital intensity to feed the beast on the upstream side even before Hess, you know, with tidal oil hitting plateau levels and spend for several low-decline, long-cycle projects kind of in the rearview mirror. It seems to me that Hess deal kind of makes that even better. And I'm just curious, how do you think about Chevron's overall reinvestment and decline rates over the next few years as a result of the deal closing?

Yeah, thanks, Jeff. You're right. I might say we're on the precipice of a wide expansion in free cash flow rather than a sharp decline in CapEx. We've got a business that a couple of years ago was 2.9 million barrels a day in the upstream. We're going to end this year close to 4 million barrels a day. So a larger system does require a certain amount of capital to keep it running. But you've characterized the approach to shale well, which I touched on earlier. We've got a portfolio that's deep with opportunities around the world. It's a mix of near-term growth and longer-dated resource options. We intend to be active in exploration, as Mark said, in the Gulf of America, West Africa, Egypt, Suriname, Namibia, other places. We've got projects like the Eastern Meds opportunity that we talked about. We're investing in petrochemical projects in both the U.S. and the Middle East. And so I think from a capital standpoint, what you should expect, CapEx will step up a little bit with Hess because the Guyana development and the Bakken are both going to require capital to support them. But overall, our MO or our reputation for capital discipline is will remain. And so I think you can expect us to challenge ourselves to only invest in the best opportunities, to divest the assets of the portfolio that don't compete for capital in a tight capital environment and might fit better for others, and really be focused on delivering strong returns and free cash flow to support distributions to shareholders across a really advantaged portfolio, which, of course, we will continue to look for opportunities to make even stronger. Thank you for that question. I don't know if you're going to sign us off, Jake, or our operator will, but I just want to thank everybody for your questions and interest today and remind you that, as Jake noted up front, we will have another Investor Day. It's been a while. But on November 12th in New York City, back at the St. Regis, for those of you that have been with us for a while, we will be holding our Investor Day, and we look forward to sharing with you how we view our new and stronger portfolio, our differentiated portfolio, to reiterate the consistency in our strategy and our fundamental commitment to capital discipline and superior shareholder returns, and how we intend to continue to deliver growth and shareholder value into the future. So I guess we'll have one more of these calls before we see you at Investor Day, but mark that on your calendar, and I look forward to seeing everybody in person.

We appreciate your interest in Chevron and your participation on today's call. Please stay safe and healthy. Katie, back to you.

Thank you. This concludes Chevron's second quarter 2025 earnings conference call. You may now disconnect.