The morning Chevron reported its results, the stock was up 2%, and the figure stood out: $1.41 per share, compared with the 95 cents the market had expected. Nearly 50% higher. Revenue, however, had fallen short.
Mike Wirth was asked what the secret was.
The answer was not financial. It was a map.
Chevron has less than 5% of its production in the Middle East. Some analyst reports place the figure closer to 1%. Several of its peers reach 20%, and much of that output is currently halted. When the chokepoint through which one-fifth of the world’s oil passes was closed, the company that made money was the one that was not there.
The rest of the quarter can be explained by the barrels Chevron does have: a third consecutive quarter above two million barrels per day in the United States, half a million more than a year earlier; global production rising from three and a half million to four million barrels per day; and record throughput at US refineries in March, precisely when the market needed it.
The cost of being close
Two weeks later, at the Milken conference in Beverly Hills, the same man provided the other half of the picture.
Volatility cost Chevron about $3 billion during the quarter. Production in Kuwait and Saudi Arabia has slowed because there is no way to move it out and storage facilities are filling up. The region’s petrochemical joint ventures have reduced activity. The only operation running at full capacity is the gas Chevron produces in the Mediterranean and supplies to Israel, Jordan, and Egypt.
“We are feeling it,” he said there. During the earnings call, that same exposure had helped explain why the company had performed so well.
It is not a contradiction. It is the difference between speaking to shareholders and speaking to a room.
Forty-four years, one company
Wirth is 65 years old, holds a degree in chemical engineering from the University of Colorado, and joined Chevron in 1982 as a design engineer. He has never worked anywhere else. He headed Global Supply and Trading between 2003 and 2006, led Downstream and Chemicals until 2015, then took charge of Midstream and Development — ships, supply, and pipelines — before becoming chairman and CEO in 2018.
What sets him apart is not his longevity, which is common at major oil companies. It is his route through the business. Most CEOs in the sector come up through exploration and reservoir engineering. Wirth spent three decades moving molecules rather than searching for them.
That background explains one of his most striking disciplines: he does not forecast prices. He works with scenarios. He says the futures curve is not useful for planning. It is worth noting that he spent three years running the trading desk that makes its living from that curve.
What he says in each setting
Venezuela is where the shift in tone is easiest to hear.
On the earnings call, speaking to investors while the stock was rising, the message was that Chevron was encouraged by the direction of events, had remained when investing was extremely difficult, was working with its partners to grow, and remained committed to the country and its people.
On Bloomberg, the same question came in different clothing. Chevron operates under an approved framework to recover an old debt. After taxes and royalties, there is no room left for an investor to earn a return. The country changed its hydrocarbons law but did not specify where the figures would fall within the announced range. Until that is clarified, the company is unlikely to put new capital to work.
The underlying position is the same in both cases. What changes is the music. Commitment to the country, yes. New money, once the numbers add up.
Thirty seconds
At Milken, as the interview was ending, Wirth was asked whether Chevron planned to increase production “in places like the Permian, like Argentina.”
The fact that an international interviewer mentioned Argentina in the same sentence as the largest shale basin in the United States, without stopping to explain why, says a great deal about where Vaca Muerta now stands in the industry’s thinking.
Wirth did not answer country by country. He gave the global figure instead: production growth of between 7% and 10% this year, in a world where demand is rising by about 2%.
Shopping for opportunities
There is one final scene, this time in Houston.
Wirth was asked whether the conflict had prompted him to reconsider Chevron’s presence in the Middle East. His answer went in the opposite direction. The company is looking for opportunities to enter.
Historically, the region had been a poor place to earn an adequate return. Now governments have begun negotiating terms that Chevron considers reasonable. The company has already signed agreements over the past two years. Over time, its exposure may increase rather than decline.
Chevron’s most valuable asset during the largest energy shock in decades was an absence. Being far away explained the quarter.
And the man who benefited from not being there is now negotiating a return, because the terms have improved.
