Doug Leggate: A lot of options. Thanks so much. Thanks for the answer.
Operator: We’ll go next to Josh Silverstein with UBS.
Josh Silverstein: Thanks. Good morning, guys. Going back to the Permian you’re stepping up the CapEx this year to about $5 billion versus $4 billion last year to help you deliver the year-over-year growth. As you continue to ramp towards the million BOE per day target, what’s needed from a CapEx standpoint to deliver this growth? Can you stay closer to the $5 billion range or does that step up towards $6 billion in 2025 because you have an accelerating pace to hit that? Thanks.
Pierre Breber: Yeah no. Appreciate the question Josh. We’re starting this year with 12 rigs and three frack crews. I mentioned we’ll add a fourth frac crew around the middle of the year, but at the same time, we’re becoming more efficient. We need fewer rigs to drill the planned lateral feet that we’ve got out in front of us and so as we as we close in on a million barrels a day, we’re at the capital level that I think is going to be required to get us there and then the really nice thing about this is when you’re trying to hold the plateau as opposed to grow from seven to eight to nine hundred 700, 800 to 900 to a million a day, you actually can pull capital spending down because you’re offsetting decline. You’re not trying to offset decline and grow by significant chunks each year and so inflation has moderated and that has been a challenge.
We’ve talked about some of the things we’re moving water around a little bit more, but that’s embedded in our plan now going forward. So I would not anticipate that we’re going to have to go towards $6 billion in order to get there and you know as we as we get to each year, we’ll give you an updated guide on it, but when we plateau production capital spending and capital discipline really matters. I just want to emphasize this. We intend to live within our capital means and be really tight on capital and that applies to the Permian along with every other asset.
Operator: We’ll go next to Paul Cheng with Scotiabank.
Paul Cheng: Thank you and first I want to congratulate Pierre and thank you for all the years that actually all over the past couple of decades that all the help. We may appreciate.
Pierre Breber: Thanks Paul.
Paul Cheng: Michael and Pierre, I think Michael when you when you first become the CEO, I think one focus is that course method for you and that full for the last several years, there’s a lot of acquisition and change in portfolio. So it’s very difficult for us from the outside to see where’s your cost structure compared to let’s say before the pandemic in 2019? Is there any way that you can help us in terms of what is the structural cost base that for you today compared to say a number of years ago, especially during the early part of the pandemic. You guys did have a restructuring effort. Thank you.
Mike Wirth: Yeah Paul, I don’t have all that stuff right on the top of my head to go back to 2019. It’s a fair request, but look I think we showed a chart in here over the last several years that our unit costs are relatively flat in fact. I think we’re number two on that chart. We don’t break out each of the competitors. Our unit OpEx last year was about $15.80 a barrel which is about 5% lower than the year before and we still have outstanding unit optics reduction targets going out to 2026 at mid-cycle. We’ve had some inflation along the way, but you’re right. We took a lot of costs out of the business in 2020 and 2021. So, as we bring together, Hess, and this gets a little bit to the question that Doug was asking as well, we will come out with, an update to investors that talks about the portfolio updates, guidance on all the metrics that matter and I assure you that I have not changed my view that cost control, excuse me, cost control always matters, and capital discipline always matters.
So, we will update you on those numbers specifically, Paul.
Operator: We’ll go next to Sam Margolin with Wolfe Research.
Sam Margolin: Hi. Good morning. Thanks for taking the question, and thanks for everything, Pierre. Maybe this one will be an easy or a hard one for you, depending on what you were planning for, but it’s about, it’s a follow-up on TCO in Kazakhstan and the affiliate dividend guidance and what’s interesting about it is that it’s flat year-over-year with a commodity assumption that maybe a little bit lower than the prior year and within affiliates, there’s also some LNG exposure, which isn’t as strong as it was last year, ex-TCO and so, I guess the question is like, you’ve given this really robust technical update on Tengiz and where we stand, but are we already at a point where TCO is sustaining a level of dividends that’s a little bit more stable than it was kind of at the peak of the construction process or the installation process and we’re sort of in a progression to this pro-forma, very stable cash flow profile from TCO, or is that number, am I reading too much into that affiliate guidance number?
Thank you.
Mike Wirth: Thanks, Sam. Absolutely, TCO dividends are on a higher trajectory just because capital is wound down and as we’ve said, when we get the incremental production from FGP, it goes even higher. There are some puts and takes. So we talked in last year that TCO had held some surplus cash and released that last year. This year, they’re going to have to build some cash as they head into debt payments, which as you recall, we co-lent. So we’ll be receiving that. So there are some — there’ll be some timing variation, but your point around the trajectory is absolutely right because CapEx is winding down. So this has been largely self-funded as an affiliate company. As CapEx goes down, there’s more cash available. It does depend on commodity price assumptions.
You’re right, LNG is in there and also petchem. And so those are the major drivers, a little bit of refining are the major drivers of our affiliate dividend. So it’s a roughly flat with the prior year. We’ll update that as we go along during the year, but absolutely, TCO, we’ve been investing in that project for eight years. It’s going to generate a lot of cash when it comes on next year.
Pierre Breber: Thank you so much and maybe, Sam, just one more point and what you’re going to see too is because it’s tricky as an affiliate that that line that’s affiliate earnings less dividend, that’s going to flip, and until you’ll see it, it’ll be hard for everyone to model it, but what has been historically a line where affiliate earnings are higher than dividends, you will see that flip in time as we pull out more cash out of TCO in particular than the earnings than the book earnings are.
Operator: We’ll go next to Nitin Kumar with Mizuho.
Nitin Kumar: Hi, good morning, everyone and thanks for taking my question. So it’s a party in Part A and Part B type of question, but really on the Permian, Mike, in your slides, you highlight that optimize well spacing and maybe coring up where you were drilling in 2023 help the well productivity. At the Analyst Day, you had talked about some technologies and I’m just curious where any of the improvements you saw in ’23 related to those and then Part B very quickly, you’re growing almost 200,000 barrels from here until in the next two years. Last core, you had some infrastructure issues. What are you doing to get ahead of those infrastructure issues that don’t resurface over that plan period?
Mike Wirth: Yeah Nitin, what I would say on technology, I reference the fact that we’re drilling more feet out of the same rig fleet, we’re improving on completions and so there are a lot of small things that are contributing to the performance that we’re seeing right now. The improved recovery technologies are in various stages of being piloted out in the field and so to the extent some of those pilots are in the production, they contribute, but I would say it’s at the margin, because we’re gathering field data to look at changes in completion and fracture techniques using gas injection and gas lift in different ways using some different chemicals to improve flow. So as we get those into large scale deployment, we’ll start to talk about that and we’ll help you understand how they’re contributing, but I would say right now it’s more on the drilling and completions cycle time side that we’re seeing some of these improvements and so there’s more to come.
