Chevron Corporation 2026 Q2 Earnings Call

Welcome to Chevron's second quarter 2026 earnings conference call and webcast. I'm Jeanine Wai, Head of Investor Relations. Our Chairman and CEO, Mike Wirth, CFO, Eimear Bonner, and President New Energies, Jeff Gustavson, are on the call with me today. We'll 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 of this presentation. Please review the cautionary statement and additional information presented on slide two. I'll turn it over to Mike.

Thanks, Jeanine. Amid geopolitical uncertainty and market volatility, Chevron delivered a strong second quarter driven by our consistent strategy, capital discipline, and strong execution. Global upstream production grew more than 5% quarter-over-quarter, underpinned by exceptional reliability across key assets. In the U.S., we achieved a new upstream production record of nearly 2.1 million barrels of oil equivalent per day and record refinery throughput of over 1 million barrels per day. At the same time, we maintained financial and capital discipline, achieving our structural cost reduction target six months early with $3 billion of annual run rate savings since 2024. Hess synergy benefits have also been delivered, also six months early. We continue to capture strong capital efficiencies in U.S. shale and tight and expect to spend 25% less CapEx per barrel of oil equivalent in 2026 compared to last year.

We strengthened our balance sheet to underpin long-term investment to deliver reliable energy the world will need for decades to come. This month also marks the one-year anniversary of the Hess acquisition. We pulled value forward, capturing 50% more synergies than initially targeted with $1.5 billion realized six months ahead of schedule. The Hess assets are generating strong free cash flow, which has been roughly double the incremental dividends and accretive to shareholders on a per-share basis. This reflects the quality of the combined portfolio. Guyana is a world-class asset with significant resource depth that is expected to extend high-margin oil growth into the 2030s. In the Bakken, we're leveraging best practices from our shale and tight business to drive performance improvement, drilling laterals that are on average 28% longer, optimizing workovers, and applying advanced chemicals. We're also maintaining similar production with one less rig.

Further, we're benefiting from the talented Hess employees who bring deep expertise in offshore, unconventional, and exploration. The entire organization is stronger because of this combination. I'll now hand it over to Jeff, who will share an update on power.

Thanks, Mike. The U.S. is undergoing a structural shift in electricity demand as AI accelerates and reliable power is becoming the critical constraint. Chevron is well-positioned to address this challenge. We bring a combination of assets and capabilities we believe few can match. A leading U.S. natural gas portfolio, extensive experience with large-scale behind-the-meter power, proven project execution capabilities, and strong partnerships that provide access to critical equipment and leading customers. This reflects Chevron's strategy in action. We're leveraging advantaged assets, customer relationships, execution capabilities, and partnerships to deliver reliable, affordable energy while creating long-term shareholder value. While many data center power projects have been announced, few have secured long-term customer commitments for behind-the-meter power, and only one is at multi-gigawatt scale, Project Kilby. This demonstrates our ability to execute at speed and scale.

We recently signed a 20-year take-or-pay power purchase agreement with Microsoft for 2.67 gigawatts of firm behind-the-meter capacity supporting its co-located data center complex. We're now focused on execution, with permitting and EPC activities progressing towards a final investment decision later this year. Kilby is expected to deliver mid-teens returns and long-duration contracted cash flows that are independent of commodity price cycles. Importantly, Kilby provides a repeatable model. We're already in advanced discussions on additional opportunities with existing and potential customers for future projects. We've engaged closely with local stakeholders throughout development and have been encouraged by the strong support we've received in West Texas. I'll now turn it over to Emer to discuss the financial results.

Thanks, Jeff. For the second quarter, Chevron reported earnings of $12.1 billion or $6.11 per share. Adjusted earnings were $12 billion or $6.06 per share. Cash flow from operations excluding working capital was nearly $20 billion. Organic CapEx was $4.4 billion for the quarter. We now expect to finish the year at the lower end of our guidance range of $18 billion to $19 billion.

Our net debt coverage ratio improved, reflecting a strong cash generation in the quarter. Adjusted second quarter earnings were $9.2 billion higher versus last quarter. Adjusted upstream earnings increased due to higher realizations, higher liftings, and favorable timing effects, and were partly offset by higher DD&A and tax-related expenses. Adjusted downstream earnings increased primarily due to higher refining margins and favorable timing effects. Chevron generated $19.7 billion of cash flow from operations excluding working capital and $15.4 billion of adjusted free cash flow in the quarter. We reduced debt by more than $8 billion, further strengthening our balance sheet and financial flexibility. Net debt to CFFO at the end of the second quarter was 0.6 times. Following the large build in the first quarter, working capital unwind by $2.9 billion as commodity prices decreased through the quarter.

We had our second highest quarter ever, maintaining strong operating momentum across all our key assets and growing production by over 200,000 barrels of oil equivalent per day. Reliable operations defined the quarter. In the U.S., we achieved records for total production, Permian production, and throughput at multiple facilities in the Gulf of Mexico. International production was also strong at nearly 2 million barrels of oil equivalent per day. Tengizchevroil in Kazakhstan operated at or near full rates, and the impact from the Middle East conflict remained isolated to the partition zone, representing about 1% of second quarter total production. Costs always matter, and they always will. We achieved $3 billion of structural cost reductions over the past 12 months, reaching our target six months ahead of schedule.

Thanks to the hard work and relentless focus across the organization, more than 70% of the savings came from efficiency gains, underscoring the quality of the improvements delivered. Through these reductions, we have largely offset inflationary effects while we continue to grow across key assets like the Permian, Gulf of Mexico, and Guyana. We're never satisfied and never done, we will continue to look for ways to lower costs to drive lasting value. Our plan is clear: execute safely and reliably, deliver on our objectives, and continue to expand our opportunity set for the future. Our second quarter performance demonstrates strong execution and results that can be seen in our bottom line.

We remain confident in the 2030 objectives we outlined last November, including annual production growth of 2%-3%, adjusted free cash flow growth averaging greater than 10% per year, and more than 3% improvement on return on capital employed, all at flat commodity prices that are lower than today. We also continue to develop robust growth options for the next decade, building new resource options across regions and asset classes. Achieving the power milestone, stacking multiple exploration successes, and securing strategic exploration agreements and MOUs in the Mediterranean, Africa, and the Middle East are examples of the strong set of opportunities we have for the future. We're focused on executing with excellence in the near term, meeting or exceeding our guidance through the end of the decade, and creating even more value in the decades that follow.

Consistent with our longstanding financial priorities, we intend to reward our shareholders today, tomorrow, and long into the future. I'll now hand it off to Jeanine.

All right. Thank you, Eimear. This concludes our prepared remarks. Additional guidance can be found in the appendix to this presentation, as well as on the slides and other information posted on chevron.com. We're now ready to take your questions. We ask that you limit yourself to one question, and we'll do our best to get to all of your questions. Katie, please open the lines.