When Chevron executives and top shareholders convene in New York City on Wednesday for the oil producer’s investor day, portfolio managers will be eager to hear CEO Mike Wirth’s plan to finally reap rewards from the Hess acquisition and begin a new phase of growth. The event is lining up to be a victory lap for Wirth after the company prevailed in an arbitration battle to clinch the $55 billion takeover of the smaller oil producer in July. After oil and gas reserves hit a low point in 2024, investors also want more details about exploration plans, especially with major operations in Kazakhstan and the U.S. hitting a stride. They already had some good news last month, when Chevron reported record oil and gas production for the third quarter.
“Pre-Hess, the view was that Chevron had very little room to grow. But now, with the Kazakhstan project moving into cash generation and Hess on top of that, it gives them a lot of different opportunities for growth,” said Will Su, a managing director at asset management firm BlackRock, one of Chevron’s largest shareholders. The Hess acquisition came with a key 30% stake in the Stabroek block in Guyana that is operated by Exxon Mobil. The area holds at least 11 billion barrels of oil equivalent and was a driving force behind the upbeat third quarter report.
Wirth said during the earnings call that Chevron will provide guidance through the end of this decade at the investor day, its first since 2023.
WHAT NEXT FOR EXPLORATION?
Details about Wirth’s goal to improve exploration and find new sources of oil and gas is expected to be an important part of the agenda, especially as its other flagship projects mature.
Chevron said in August it reached one million barrels per day of production from the Permian Basin, a figure it will hold steady as it reduces capital spending and focuses on cash generation. An expansion project at the Tengiz field in Kazakhstan is now operating at full capacity.
With intensive spending in the rearview mirror on two major assets, Chevron should have more capital available for exploration, said David Byrns, a portfolio manager and senior investment analyst at American Century Investments, which holds a $254 million position in the oil producer according to LSEG data.
Chevron’s cost-cutting efforts should also allow it to protect dividends and buybacks, he added.
“They leaned out the organization because there’s a recognition that the industry will need to allocate more dollars (to exploration) in the future, but it wouldn’t be wise for that to happen at the expense of cash return to shareholders,” Byrns said.
UPDATES ON KAZAKHSTAN AND OTHER PROJECTS
Byrns added that he is watching for developments in Chevron’s eastern Mediterranean assets and potential plans to monetize natural gas reserves to power data centers. Chevron is in talks with major AI companies to build natural gas-fired power plants to provide the vast amounts of electricity needed to operate data centers, which is a new business venture for the company. Some remain uncertain about the idea, however.
“I’m on the fence about their power strategy and I think a lot of other (investors) would like more details as well,” said Priyal Maniar, an investment analyst at T. Rowe Price, another major Chevron shareholder. Maniar added she hoped to hear updates about Chevron’s negotiations to extend its contract in Kazakhstan. It expires in 2033 and is already prompting regular questions from analysts on earnings calls. During the third quarter call, Wirth said the talks were off to a good start but cautioned that discussions are in early stages.
“These are going to take some time. It’s a complex contract,” he said.
(Reporting by Sheila Dang in Houston; Editing by Nathan Crooks and Chizu Nomiyama )