Stephen Richardson: Mike, I was wondering if you could talk a little bit about new energies. I think you’ve been clear from the beginning that build versus buy was part of the consideration in a lot of these businesses. We saw a big CO2 pipeline and EUR company transact recently. So maybe you can talk a little bit about the CCUS business as you view it and why build versus buy is maybe the better choice for Chevron? Maybe I should get ahead of it with a follow up as maybe you could give us a little bit of an update on Bayou Bend please?
Michael Wirth: I’ll put those two together actually. Look, we’ll do both build and buy, I think, in new energies. I would fully expect us to do that in renewable fuels. We have built a business, but then we also went out and acquired Renewable Energy Group. So I think you’ll see both. Certainly, the Denbury transaction is one that the market somewhat anticipated. And you can presume that multiple market players probably took a look at or had conversations with Denbury. For us, in CCUS, we look for areas that have good geology or pore space, they’re near concentrated emissions and have the right policy support to enable a business. The Gulf Coast has all of these things. And Bayou Bend, we’ve got about 140,000 acres of permanent CO2 pore space, both onshore and offshore.
We’ve got storage potential there of greater than 1 billion metric tons. In the second half of this year, we’re going to drill a strat well in the offshore acreage to further delineate and characterize the subsurface. In the first part of next year, we expect to drill a strat well in the onshore acreage and do the same. And of course, we’re in conversations with a number of customers in that region in the Golden Triangle, up at Mont Belvieu, all the way across the Houston Ship Channel. And we’ve got term sheets going back and forth. We’re in negotiations with a number of different potential customers. The commercial framework for this is still evolving. And we’re working on the other pieces you need. So classics, well injection permits. And midstream assets, we’ve got an RFP out right now, with a number of midstream providers, consistent with the way we have generally approached the midstream.
We own assets if they’re strategic. If there’s a way for us to go to somebody who’s in the business of building and operating midstream infrastructure, we certainly look at that as well. So we’re putting all the pieces together there for a phased development. We like the Bayou Bend project. And we’ll report more. But to your kind of underlying question, we’ll build organically and we’ll do inorganic, where it makes sense.
Operator: We’ll take our next question from Biraj Borkhataria with RBC.
Biraj Borkhataria: My first one is on portfolio concentration. So at your Analyst Day, you talked about just over $20 billion of free cash flow at $60 a barrel. And looking through today’s slides, roughly half of that in the medium term will come from the Permian plus TCO. So I understand that you want every dollar to go to the highest level of return, which is completely sensible. But I was wondering if you can talk about portfolio concentration because it is quite unusual for a super major to have that level of concentration in terms of free cash flow. So how do you think about portfolio diversity? And is this something you’re actively trying to address going forward? And I’ve got a follow-up on a different topic.
Michael Wirth: Biraj, if you look back over the last decade, we’ve cleaned up our portfolio. We had a lot of assets that were kind of at the smaller end of the tail that pulled capital and management time and resources. And we want to be diversified. We’ve got a diverse portfolio. But we don’t need to be diversified just for the sake of it. We want to have assets that have scale, that are material and long lived. You can start in the Far East and look at our LNG positions in Australia, which aren’t drawing a lot of capital right now, but are [Technical Difficulty] acquisition in the EG assets that can feed LNG into Europe. Obviously, you mentioned TCO. The Eastern Med is a very strong position. We’ve recently taken FID and are working on expansion projects for tomorrow, Leviathan, and have submitted a concept on Aphrodite.
So there’s a lot of opportunity in that asset. When we close PDC, we’re going to be producing 400,000 barrels a day in the DJ Basin. We’ve talked about some of our other shale and tight assets in Argentina, in Canada. We’ve got two crackers underway in CPChem that will come online middle of this decade, one in the US, one in the Middle East. We’ve acquired REG and are growing our renewable fuels business. So we have exposure across a large portfolio. And then, of course, we also have projects coming online in the Gulf of Mexico. I mentioned Anchor earlier, Whale, Ballymore. And we recently acquired more leases in this recent lease sale than the – twice as many leases as in the biggest lease sale over the last eight years. So we’re adding to our position in the Gulf of Mexico.
So this idea that we’re a two asset company, the Permian and TCO, I don’t think really stands up to careful inspection. They’re two great assets, and so they get a lot of attention, but we’ve got a lot of other strong assets in our portfolio.
Pierre Breber: If I can just build off that and go to the return of capital question that Neil asked and that’s what gives us confidence not only on the buyback, but on the track record of dividend growth. So, we guided to 10% annual free cash flow coming from all those businesses. Some are holding cash constant, some are growing cash flow that Mike covered. And that goes to leading dividend growth where we’ve grown the dividend over the last five years at rates double our closest peer and much higher than others, and where we have a buyback that is nearly 6% of our shares outstanding annually. Our business is built for $50. So part of the confidence in our ability – currently, if you look at our breakeven and adjust for working capital this quarter, if you look at the last four quarters, it’s actually probably a little bit lower than that with the strong refining margins that we’ve been seeing.
So we’re built for lower prices. Free cash flow is going to grow from this base. That should give investors confidence in our ability to continue to grow the dividend at leading rates and to maintain buybacks at also very high rates.
Biraj Borkhataria: Just following up on a different question. Through the Permian, you’ll be producing a lot more gas over time and you have expressed a desire to grow in LNG. So, you’ve signed a couple of deals as an offtaker to synthetically integrate your US gas position to global markets. I wanted to ask about the sort of – whether you’d be interested in owning liquefaction or whether you feel being an offtaker is enough because some of your peers have argued the benefits of integration and owning through the value chain. But I think in the past, you’ve noticed the returns are typically lower. And I’m particularly interested in asking that question now because a number of players have signed offtake agreements with companies such as Venture Global, and then actually they’re not receiving the gas as agreed. So it’s interesting how you’re thinking about that sort of value chain in LNG.
Michael Wirth: It’s consistent with what we’ve described earlier, and I think you’ve captured it. It depends on the circumstance. In places where you’ve got remote gas where you need to be in the entire value chain and you can create an economic model that supports the investments, we’ve done that. In other locations where you’ve got other people that will put capital into the midstream assets, we can sell gas into that, we can offtake gas off of it, but not participate in some of the very capital intensive and lower return portions of the value chain. That’s certainly a model that helps us support our aspiration to drive higher returns. Now you have to have good partners, you have to have reliable operations, and we’ll work closely with the companies that we have offtake with.
We vet them carefully and we have confidence in the people that we are working with to provide those reliable operations, but we’re really looking to drive high returns, not necessarily to own assets for the sake of control unless it creates a differentiated value proposition.
Operator: We’ll take our next question from Sam Margolin with Wolfe Research.
