Chevron said on Wednesday that it plans to grow free cash flow by more than 10% annually through 2030 and increase oil and gas production, while further reducing costs and capital expenditure. The fresh guidance announced on Chevron’s investor day is the culmination of an effort by the U.S. oil producer to operate more efficiently following a restructuring earlier this year that included layoffs of up to 20% of employees, or about 8,000 people. The company closed its $55 billion acquisition of Hess in July after a year’s delay, which had prevented it from giving long-term financial guidance until now. Its shares have risen 7.8% year-to-date, underperforming rival oil producers Exxon Mobil and Shell.
“Our advantaged assets, balance sheet strength and disciplined capital program provide the foundation to thrive in any price environment,” Chief Financial Officer Eimear Bonner said in a statement.
Assuming Brent crude prices of $70 per barrel, Chevron said it expects to grow both free cash flow and earnings per share by over 10% annually through the end of the decade.
Oil and gas production will grow by 2% to 3% per year, Chevron said. The company currently produces 4.1 million barrels of oil equivalent per day.
Shares of Chevron were down 2.3% in morning trading compared with a 1% decline in the broader S&P 500 energy index.
TECH AND RESTRUCTURING TO HELP CUT MORE COSTS
Chevron is reducing planned capex spending to a range between $18 billion and $21 billion per year, down from the previous guidance of between $19 billion and $22 billion.
The company also increased planned cost reductions to between $3 billion and $4 billion by the end of next year, up by $1 billion from the previous target.
Upstream divestments and efforts to simplify the business will result in $2 billion in cost reductions at the end of this year, Bonner said in an interview. Using technology across the business, including to remotely monitor operations, will help save another $1 billion, she said.
“We’re confident in increasing (the range) because we’re already halfway there with the work that’s underway,” Bonner said.
Chevron said it will be able to cover its capex and dividend through 2030 even if Brent crude prices are around $50 per barrel.
FORGING AHEAD ON POWER PROJECT AND EXPLORATION
Chevron’s first project to power an AI data center using natural gas will be built in West Texas with the goal of start-up by 2027. Negotiations are under way to secure a customer and reach a final investment decision early next year, Bonner said. Rapid AI development has led to a boom in electricity demand to power data centers. Chevron has had discussions with major tech firms such as OpenAI and Meta.
During a presentation to investors in New York City, CEO Mike Wirth said Chevron is in discussions with the Iraqi government for exploration, adding that fiscal terms on offer are more attractive today than they have been historically.
Bonner said Chevron will increase annual spending on exploration and also use AI to more quickly analyze data, as exploration projects can traditionally take years to complete.
Wirth, meanwhile, when asked about markets, said that prices for liquefied natural gas could be pressured for a few years.
“We certainly see over the next several years an awful lot of supply coming to the market, and demand growing no doubt. If all the supply that’s in the queue were to arrive, you’ll see a market that’s going to be oversupplied during that time,” he said.
(Reporting by Sheila Dang in Houston; Editing by Nathan Crooks, Muralikumar Anantharaman and Nick Zieminski)