Core Insights - The New Zealand energy market is experiencing a structural supply squeeze, exacerbated by weather conditions leading to a significant reduction in hydro generation, which has dropped from 60-70% of the power mix to around 40% [1] - Wholesale electricity prices surged from NZ$300 (US$175)/MWh to NZ$800 (US$467)/MWh between July and August 2024, while gas prices also increased significantly due to supply constraints [1] - The government has initiated steps to revive upstream gas investment by repealing the 2018 offshore exploration ban and committing up to NZ$200 million (US$116.5 million) over four years [7] Supply and Demand Dynamics - New Zealand's gas market has shifted from self-sufficiency to structural tightness, with domestic output nearly halving from 415 million m³/month in 2017 to 215 million m³/month in 2025 [4] - The closure of the Taranaki Combined Cycle gas-fired power plant in late 2025 will reduce national gas generation capacity from 1,385 MW to 1,000 MW, increasing market sensitivity to hydro outcomes [5] - The chemical sector accounts for over 40% of New Zealand's total gas demand, with Methanex being the largest consumer, significantly impacting the national gas demand [6] Policy and Investment Landscape - The 2018 Crown Minerals Amendment Act and the introduction of perpetual decommissioning liability have led to a significant slowdown in exploration, with only five wells drilled since 2019 [2] - Recent policy changes aim to stabilize the market, but challenges remain due to reserve confidence and the long lead times required for offshore discoveries [8][9] - The government has approved new applications for offshore exploration, with decisions expected in early 2026, but the first incremental supply may arrive too late to address the anticipated tightening in 2027 [7][9] Future Outlook - LNG imports are being considered as a potential solution, but the timeline for establishing import infrastructure could extend to 2028-2029, leading to continued price volatility and industrial demand curtailment in the interim [10] - The industrial sector, particularly Methanex, may face economic pressures if domestic gas is replaced by higher-priced imported LNG, while residential and commercial demand is expected to be more resilient [11] - The New Zealand gas market will remain sensitive to weather conditions until new domestic supply or import capacity is established, with dry winters likely leading to higher prices and industrial curtailment [11]

Core Viewpoint - Chevron Corporation has approved the Final Investment Decision for the Gorgon Stage 3 project, which is expected to enhance gas supply and support LNG exports from Western Australia [1][5]. Project Details - The Gorgon Stage 3 project has a budget of AU$3 billion (approximately $2 billion) and will connect the Geryon and Eurytion gas fields to existing subsea infrastructure and Barrow Island processing facilities [2][3]. - This project will include the addition of three subsea manifolds, a 35-kilometre production flowline, and the drilling of six wells in waters approximately 1,300 meters deep [3]. Production Capacity - The Gorgon facility can supply up to 300 terajoules of gas per day and produce 15.6 million tonnes of LNG annually, contributing significantly to the Western Australian market [4]. Management Insights - Chevron Australia President Balaji Krishnamurthy emphasized that the project will sustain output at Gorgon, ensuring long-term domestic gas supply and supporting LNG exports to Asia [5]. - The development of the Geryon and Eurytion fields will enhance gas supply reliability and maintain thousands of skilled jobs in Australia [6]. Financial Outlook - Chevron expects an organic capital expenditure range of $18–$19 billion for consolidated subsidiaries in 2026, with upstream investments around $17 billion [6]. - Nearly $6 billion of the upstream investment will be allocated to U.S. shale and tight plays in the Permian, DJ, and Bakken basins, supporting U.S. production of over two million barrels of oil equivalent per day [7].

Financial Data and Key Metrics Changes - In Q1 2025, the company's revenue was $391 million, with adjusted EBITDA of $76 million, representing 20% of revenue, marking the highest first-quarter performance since merging with Frank's in October 2021 [6][32] - Revenue decreased by $46 million or approximately 11% compared to Q4 2024, but increased by $7 million or approximately 2% year-over-year compared to Q1 2024 [31][32] - Adjusted EBITDA decreased by $24 million or 24% sequentially from Q4 2024, but increased by $9 million or 13% year-over-year compared to Q1 2024 [32] Business Line Data and Key Metrics Changes - The North and Latin America (NLA) segment reported revenue of $134 million, down $5 million quarter-over-quarter, with an EBITDA margin improvement to 23% from 22% in Q4 2024 [33][34] - The Europe and Sub-Saharan Africa (ESA) segment saw revenue of $112 million, a sequential decrease of $30 million or 21%, with an EBITDA margin at 26%, down 11 percentage points sequentially [35] - The Middle East and North Africa (MENA) segment delivered revenue of $94 million, up 1% sequentially, with an EBITDA margin of 37%, up 1% quarter-over-quarter [36] - The Asia Pacific (APAC) segment reported revenue of $51 million, a decrease of $12 million, with an EBITDA margin at 21%, down from the prior quarter [36] Market Data and Key Metrics Changes - The company secured $272 million in new contract awards in Q1 2025, with a backlog of approximately $2.2 billion at the end of the quarter [7][8] - The macro outlook indicates significant near-term uncertainty and volatility in global oil markets due to tariff announcements and OPEC+ production increases [9][10] - Global oil consumption is forecasted to increase by 900,000 barrels per day in 2025, with demand reaching an average of 103.6 million barrels per day [14] Company Strategy and Development Direction - The company is focused on organic investment and a successful M&A strategy to enable margin expansion and improve customer relevance [7][22] - The long-term outlook for international onshore and offshore markets remains positive, with a shift towards offshore activities expected due to cost and carbon advantages [12][16] - The company plans to maintain cost and capital discipline while adjusting CapEx based on customer-sanctioned projects [22][30] Management's Comments on Operating Environment and Future Outlook - Management anticipates a transition year in 2025, with expectations for revenue to be generally flat compared to 2024, but with improved activity mix and operating efficiency gains [45][46] - The geopolitical and oil supply disruptions have introduced market uncertainty, but the company remains bullish on long-cycle development driven by economic growth and energy security considerations [46] - Management acknowledges that while there is uncertainty in the market, they believe 2025 will be a better year than many investors currently assume [29][30] Other Important Information - The company has a zero net debt balance sheet, providing strategic and financial flexibility [22] - The Drive 25 efficiency campaign is expected to help protect margins and improve operating leverage [37][38] - The company plans to use about one-third of its annual free cash flow for share repurchases, with approximately $66 million available under the current repurchase program [39] Q&A Session Summary Question: Insights on MENA segment growth and margin sustainability - Management highlighted strong anchor contracts in Saudi Arabia and Algeria, indicating stability and growth potential in the MENA region [50][52] Question: Thoughts on buybacks versus inorganic opportunities - Management is considering share repurchases due to depressed valuations but remains open to exploring inorganic growth opportunities [56][58] Question: Factors influencing full-year guidance and sensitivity - Management noted cautious customer sentiment and ongoing engagement to assess project timelines, indicating a wait-and-see approach [63][64] Question: Potential delays in offshore FIDs - Management clarified that anticipated delays in FID sanctioning are based on customer caution rather than explicit indications from clients [78][79] Question: Impact of tariffs on business - Management believes the potential impact of U.S. tariffs will likely affect activity more than costs, estimating a less than $5 million impact from tariffs [85]