On Friday, Chevron Corp reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.
Portfolio Management Strategy
Doug Terreson – ISI : I have somewhat of a strategic question and specifically one with regard to portfolio management where you guys have had extensive activity during the past decade in the refining and marketing business and your returns have clearly increased. But in E&P, while I realize that your returns are already about the highest in the peer group as Pat and George pointed out, it seems like that might we an area of opportunity for the Company over the next couple of years. So I just want to see if we could get an update on your thinking or strategy in this area and whether or not even consider the opportunity to be meaningful for Chevron given your return level?
Patricia E. Yarrington – VP and CFO : Doug, are you asking us about expectations for E&P, asset restructuring and portfolio divestments?
Doug Terreson – ISI : Along those lines. I mean, there is always areas of underperformance or declining strategic importance and – it seems like you have rationalized a lot more in the Downstream than the Upstream and it is an opportunity for you over the next couple of years until the big wave of growth is present?
George L. Kirkland – VC, EVP Upstream and Gas : Doug, let me take that. First off, I would take you to our earnings per barrel and where they stand relative to everyone else and what that means for our portfolio. The average of our portfolio has got a significant shift if you will to the right versus what’s out there. We always are upgrading our portfolio on a continued basis looking at the tail end of the portfolio. Looking at those pieces that are not performing that well. An example of course is Alaska. We sold over 20,000 barrels a day in Alaska, that went off our books in December of last year. So that was an opportunity that we took, but we also look at is there anything when we do that that we can do with that money that gives us better assets. I would tell you one other thing we look very carefully at, we try to make sure that anything we sell doesn’t have future opportunities related to differ stratigraphic levels on that acreage and very importantly that we – but it doesn’t have a technology opportunity to unlock more barrels. We find if you sell out of a place then you lose that opportunity, it’s really tough coming back and buying the same acreage back, because you exited it too soon. So I would tell you we are cautious. What we do? We do cut off that poor part of our portfolio and we usually get good prices for…
Doug Terreson – ISI : Now you’re clearly in high quality position, thanks a lot.
Edward Westlake – Credit Suisse : Thanks very much for all the details on Gorgon; we are going to be watching that website closely. Just you spoke out talking about releasing costs at the end of the year and we can do some math given the details you have given. But you have also spoken about weather impacts and logistics learnings, maybe if you could sort of asses for us the risk of start-up delay at Gorgon as you see it today?
George L. Kirkland – VC, EVP Upstream and Gas : There is, Ed, always risk with every project, every big projects like this is a constant mitigation of things in the project materials, equipment, contracts that could impact the critical path. I think we do really a good job trying to mitigate those issues and keeping any problem off of the critical path. We still believe we’re going to make the 2014 startup. We look at it very carefully every month, all the way through the chain, I mean me and John look – we spend a good amount of time every month on these projects with our team. So, we got great focus on it. We got good people – very good people in Australia. And our project team is focused on delivering and they are very good at dealing with mitigations to try to move us and hold us to that schedule. At this point, we still think we are on the 2014 – the late 2014 schedule.
Edward Westlake – Credit Suisse : Just to follow-on in terms of Wheatstone. Say you get to the end of 2012 and you can sort of make an update on costs for Gorgon, would we presume given the amount of effort that you have to put in that you might be able to narrow down cost and start-up timing for Wheatstone end of 2014 and then you will have substantially de-risked the CapEx and start-up for investors?
George L. Kirkland – VC, EVP Upstream and Gas : Where we are on Wheatstone is much earlier in cycle. Remember, Wheatstone is two years behind. So, in 2013, we are not going to be as far along. We will be telling you every quarter and every update where we stand on percent complete and how we are doing. We are going to provide similar kind of information on Wheatstone progress and milestones as we are on the case for Gorgon. We will be more knowledgeable at that point in time, but we won’t have the same knowledge level since Gorgon is once again two years out in front. I will tell you one other item almost specifically on Wheatstone. Wheatstone when we authorized that project for the final investment decision, we had used a different exchange rate we used parity between the U.S. dollar and the Australian dollar at authorization. So, we don’t see at this point in time the Australian dollar or the foreign exchange impact hitting us, on Wheatstone. Once again, we have made the same commitment on Wheatstone, we had on Gorgon. We are going to give you very detailed updates at every opportunity.