00:00So let's talk about, of course, this AI data center power project, because I have to imagine this decision wasn't taken lightly to enter the energy or the power business, that is.
00:11So walk us through the decision tree there.
00:13Sure. Well, first of all, we had an investor day today, our first one in almost three years.
00:17Congratulations.
00:19We had a chance to talk about Chevron being bigger, stronger and better than ever with growing free cash flow and earnings over the next five years,
00:27free cash flow growing at greater than 10 percent compound annual growth rate, driven out of our core business and then supplemented by opportunities like the one that you refer to.
00:36We started working on this at least a couple of years ago.
00:40As we could see the coming boom in AI and the need for more power to support the data center build out and anticipated that grid connected power could become increasingly problematic
00:54as people saw their electricity rates go up.
00:57And so our project is disconnected from the grid.
01:00It will serve only a dedicated customer for AI.
01:04And, of course, the customers in this sector want large scale.
01:08They want it soon.
01:09And so we've made commitments to several large turbines, a lot of engineering work underway, site acquisition and permitting work underway.
01:16And we shared that with investors today.
01:18And so this, of course, will be operational by 2027.
01:22That's the plan.
01:23Who knows what the world will look like?
01:25And you think about Chevron, obviously synonymous with oil and gas.
01:29But should we see this AI boom really continue and maintain sort of the trajectory that it's on?
01:36How big do you think that the power business within Chevron could be?
01:40Yeah, it's hard to say.
01:41This is a first step.
01:43It's not been a core part of our strategy historically.
01:47And we have great respect for people that generate power, that serve utilities and customers today.
01:52That's not the market that we're going into.
01:54We're really talking about something that we do to support our own business.
01:58We have five gigawatts of power generation.
02:00We run 24 hours a day, 365 days a year to support facilities in remote locations that don't have access to the grid.
02:08This is a very similar concept where we will set up a facility that will have natural gas supply for the turbines and data center customers clustered around it that it can serve at a high degree of reliability, just as we do for our operations around the world.
02:24And so if it works for us, we would like to extend that and see if it can become a larger part of our business.
02:30This first step, I think, is one that we'll learn a lot.
02:33And just to be clear, I mean, most of this gas you more or less have, right?
02:36I mean, it's there on your own properties, right?
02:39This is in West Texas, the heart of the Permian Basin, where not only is there a lot of oil production, there's a lot of gas that comes with that.
02:46Often this gas can be discounted because it's far away from the market center.
02:51We need to get it into pipelines and move it.
02:53So to create a demand hub close to where all this gas is and will be for many decades is a way to use that and not need access to all that transportation.
03:01Is the connectivity there, though, the idea of being able to transport that where it needs to go, is that there or will it be there soon?
03:07Well, one of the interesting things is it's actually easier to build fiber networks than it is pipelines.
03:13And so you can locate the data centers close to the gas and the power.
03:16You can connect into the fiber infrastructure.
03:19And moving electrons is easier than moving molecules.
03:22If you say so, yeah.
03:23And so that is that is kind of at the heart of this location and the reason we're looking at West Texas.
03:29And let's talk about where else you're looking outside of West Texas, because I know that you've said that you're going to increase exploration spending by about 50 percent.
03:38I know that you went into a little bit of detail in the Investor Day about where in the world you're looking.
03:43But where do you think that the most promising locations are at this point?
03:46Well, we've acquired a lot of new acreage around the world in South America, where there's been a lot of success in Guyana, in Brazil.
03:57We've acquired acreage in West Africa, where there's been success in Namibia.
04:01We're the largest leaseholder in the Gulf of America today, where there's a long history of success.
04:06And we're one of the largest producers.
04:08And we're also interested in the Mediterranean, where there are some areas that remain underexplored.
04:13So we're exposed to a number of interesting basins around the world.
04:15And I think over the next several years, you'll see increased exploration activity in all of those.
04:20And when it comes to new countries, entry into new countries, you think about Iraq, you think about Libya.
04:26Does the Trump administration play any role in helping to guide along those negotiations?
04:33I would say there's a role in guiding the negotiations, but there's certainly been a role in opening the door.
04:39I think we see countries around the world have a renewed interest in doing business with the U.S.
04:44That's both bringing investment dollars to the U.S.
04:47and also opening up their countries to investors from the U.S.
04:51And I have any number of examples where we have operations around the world.
04:55And we've seen new opportunities that have developed for our industry and others to invest in both directions.
05:02And so I think the Trump administration has played a critical role in opening doors and creating an environment where people are looking to do these kinds of deals.
05:11Based on what you can see, how far out you can see, are economic conditions going to be supportive, not only to what you were just talking about there,
05:17but also some of the projections that you gave investors today with regards to free cash flow, et cetera?
05:22Absolutely. Demand for energy will only grow into the future.
05:27In fact, the International Energy Agency today updated their scenarios, including laying out a scenario based on current policies that shows demand for oil and gas growing to 2050.
05:39Very different than what some of their prior scenarios have indicated.
05:43We've long held a view that that is more likely than some of these other scenarios.
05:47So the underlying demand is very strong. Our portfolio was resilient.
05:52Even at a lower oil price, we can generate strong free cash flow.
05:55We've increased our dividend to 38 years in a row.
05:58Yeah. We've repurchased shares, 22 or 18 of the last 22 years.
06:02So we've got a very strong track record of distributing free cash to shareholders.
06:06And at any price, we're well positioned to do that.
06:08Well, well, not at any price. I mean, I mean, we're at a reasonable price.
06:11I mean, we're at 60 bucks more or less for Brent and WTI.
06:14Is the idea that if that for some reason came down into the 50s or even below, is that still doable?
06:20Oh, yeah, absolutely. Our dividend, we increased our dividend during COVID when prices were, you know, in the teens and went negative for a while.
06:28And so we've got to prepare for the volatility of a commodity business.
06:33That's the business that we're in.
06:34And we built a portfolio that will withstand the cycles of this business.
06:38Well, with that in mind, I mean, you talk about demand. It looks pretty good there.
06:42But then you think about the supply side of the equation.
06:44I know that you said earlier today that LNG spot prices in particular are going to be pressured due to high supply.
06:51How does that sort of dynamic overall look going into 2026?
06:55Does it ever come more into balance?
06:58Well, I think oil prices in 2026 are likely to feel more pressure than LNG prices.
07:04There's a lot of oil supply that's coming back from the OPEC plus countries that had been holding supply back.
07:09And so that has brought crude prices lower than they had been for the prior period of time.
07:15LNG is a little bit of a longer dated story where there are a lot of new projects underway in the Middle East and in the United States that will add supply in large chunks over the second half of this decade.
07:28And demand tends to grow in a linear fashion and you get a step change of new supply.
07:34And so there's a period of time when it would appear we're going to see more supply coming into the market that demand will be able to absorb.
07:40That probably results in lower spot prices.
07:43That's the commodity business that we're in.
07:46Are there any sort of technological improvements that you see that actually makes the supply side of it a little bit more efficient?
07:52Well, one of the things we talk a lot about today was not the power demand of AI, but what we can do with AI to improve our business, to make our business safer, to reduce emissions, to improve asset productivity, to improve efficiency, to improve our ability to explore for and find resources.
08:07And I think the story of technology in our industry is it only goes in one direction.
08:13It helps us do things at lower cost, at higher efficiency.
08:16And I think that story will be rewritten again with AI leading the next leg of that journey.
08:20With regards to leading Chevron, and you've done a great job and investors seem to be rewarding you, your plans right now to stick around?
08:30I'm happy.
08:31I've got a full plate and my plans are to stick around as long as the board will have me.
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