Good morning. My name is Jennifer, and I will be your conference facilitator today. Welcome to Chevron's conference call to discuss its announced acquisition of PDC Energy. At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question and answer session, and instructions will be given at that time. If anyone should require assistance during the conference call, please press star and then zero on your touch-tone telephone. As a reminder, this conference call is being recorded. I will now turn the conference call over to the General Manager of Investor Relations at Chevron, Jake Spiering. Please go ahead.
Thank you, Jennifer. Good morning, welcome to this special call to announce an important proposed combination. I'm Jake Spiering, General Manager, Investor Relations at Chevron. With me today are Chevron's Chairman and CEO, Mike Wirth, PDC Energy's President and CEO, Bart Brookman, and Chevron CFO, Pierre Breber. We will refer to the slides and prepared remarks that are available on Chevron's website. Before we begin, please be reminded that this presentation contains estimates, projections, and other forward-looking statements. Please review the cautionary statement on Slide 2. Now I'll turn it over to Mike.
All right. Thanks, Jake. I'm pleased to announce that Chevron has entered into a definitive agreement to acquire PDC Energy. PDC is a strong strategic fit with Chevron's portfolio. This transaction is aligned with our objective to safely deliver higher returns and lower carbon through a disciplined use of capital. The combination is expected to strengthen our position in the DJ Basin and add high return investment opportunities that also lower our overall upstream carbon intensity. We expect PDC's Delaware Basin acreage to be efficiently integrated into our leading position in the Permian. The transaction is expected to be accretive to all important financial measures in the first year after closing, assuming strip prices. We anticipate Chevron's annual free cash flow to increase by about $1 billion, including cost synergies and CapEx efficiencies.
We'll raise our annual CapEx guidance by $1 billion to a range of $14 billion-$16 billion per year through 2027 after achieving about $400 million in CapEx efficiencies post-closing. Our Investor Day guidance for compound annual growth rates in production and free cash flow through 2027 is unchanged from what will now be a higher combined base. There's also no change in the company's recently announced, you know, recently increased share buyback guidance. Each PDC shareholder will receive 0.4638 Chevron shares as total consideration, which represents a 14% premium on the 10-day average closing price. They'll have continued ownership in the business through shares of a much larger, more diversified company with long-standing financial priorities of dividend growth, disciplined capital investment, a strong balance sheet and share buybacks through the cycle.
Chevron shareholders should benefit from the incremental value that we expect the high-quality assets and synergies to realize over time as part of a global integrated company. I believe this is a compelling deal for shareholders of both Chevron and PDC. The value of the deal is supported by PDC's leading position in the DJ Basin, which is largely contiguous or adjacent to existing Chevron operations and significantly de-risked with regulatory approval to enable development at current levels in Weld County into 2028. Our go-forward plans will include a development approach focused on capital efficiency and returns. The Permian is an addition to our premier existing position, adding 25,000 net acres in the core of the Delaware Basin. The acreage is held by production, and development will be optimized within our broader Permian portfolio.
After closing, Chevron's proved reserves will increase by 10%, our Colorado business will be one of our top five assets in terms of production and free cash flow. The addition of PDC's assets and leading capabilities is expected to further lower Chevron's carbon intensity. In closing, we're constantly looking to add good resource at good value. This transaction does both. PDC's assets strengthen our position in important U.S. basins and will compete for capital in our diversified portfolio as we drive for higher returns, we're doing it through a transaction that we expect to be accretive across key financial metrics. We have a track record of successfully integrating companies, we look forward to welcoming PDC employees to join us in safely delivering lower carbon energy to a growing world. Now I'll hand it over to Bart to say a few words.
Thanks, Mike Wirth, it's great to be with you today to discuss this transaction, which was unanimously approved by the board of directors, an exciting day for PDC Energy. Let me begin by expressing my sincere gratitude to all the PDC Energy employees. It is their dedication and extraordinary talent that launched PDC Energy on its trajectory of excellence and positioned us for a transaction of this magnitude. I am exceptionally proud of our team. From our early roots in West Virginia, PDC Energy has grown and evolved into a company with a strong track record of operational credibility in the DJ and Permian Basin. This credibility, along with our tremendous asset quality, has led us to this announcement. We are excited about this transaction for many reasons.
It brings significant diversification in Chevron's long-standing financial priorities that include returning capital to shareholders through dividends and share repurchases. We are incredibly proud to maximize value both with this transaction over the long term for all PDC shareholders. As Mike mentioned, the combined Chevron PDC assets in the DJ represent an extremely compelling opportunity. This transaction will bring two of the best-in-class operators together and ensure continued output growth, lower operational costs, environmental stewardship, and value creation for years to come. Both companies have excellent reputations as responsible operators who prioritize people, communities, and the environment. A winning combination by any account. I look forward to working with the Chevron team to ensure a smooth transition. With that, I'll turn this call back to Jake.
Thank you, Bart. That concludes our prepared remarks. We are now ready to take your questions. Please limit yourself to one question and one follow-up. We will do our best to get all of your questions answered. Jennifer, please open up the lines.
Thank you. If you have a question at this time, please press star one on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press star two. If you are listening on a speakerphone, we ask that you please lift your handset before asking your question to provide optimum sound quality. Again, if you have a question, please press star one on your touchtone telephone. Our first question comes from Nitin Kumar with Mizuho.
Hi, good morning. Thanks for taking our question. Perhaps my first one for Mike. In terms of scale, this deal is additive but not transformative to Chevron's asset position. Could you perhaps expand on the strategic rationale, particularly why target a predominantly Wattenberg-focused operator while there seem to have been some deals and assets in the Delaware and the Permian recently? Also just from a higher level, is this deal an indication that Chevron thinks it's time for consolidation in U.S. shale?
Nitin. Look, this clearly supports our objective of delivering higher returns and lower carbon. The quality of the assets is very high. It's a complementary fit with our current DJ Basin operations. We've been very pleased with those assets since the Noble acquisition. PDC is respected in that basin for their operational capabilities and their ability to deliver energy safely and responsibly. They've got a very strong record of lowering the carbon intensity of their operations. It adds 1 billion barrels of reserves to our books at less than $7 per BOE. Both companies have a real commitment to managing our engagement with the regulatory process in Colorado at the county level and at the state level. It's good for shareholders.
You know, it's immediately accretive across all the key measures, and as we mentioned, there's $1 billion in incremental free cash flow. This is a transaction that has strong strategic rationale, strong, you know, value creation for the shareholders of both companies, and we just think makes a lot of sense. you know, I'm not gonna comment on the broader M&A trend. This was a unique opportunity between our two companies that both of us see in a similar fashion, and we're very pleased.
Great, thanks. It was worth a shot. If I can ask Bart a quick one. As you know, we've been fans of the story for some time. Your stock was trading at a discount to peers. Why was this the right time or multiple for you all to sell at? Is it getting harder to be a standalone midcap company, in your opinion?
Yeah, Nitin. At the end of the day, a great opportunity for our shareholders. We looked at world-class assets, diversification, Chevron's strong shareholder return, focus on their dividends and their share repurchase program. In all honesty, as we have worked with the team, we also saw it as a great organizational and cultural blend. As Mike discussed and I discussed, an opportunity to create a bull's eye 600,000 acre position in the DJ for long-term growth in the basin in improved efficiency. It was the right deal at the right time for us, fully supported by our board.
Great. Thanks, Bart.
We'll go next to Neil Mehta with Goldman Sachs.
Yeah, good morning to you.
Good morning.
Congrats, Bart, and great to talk to you, Mike. I guess the first question is around the $400 million of capital efficiencies and synergies. Can you talk a little bit about where those are coming from and the confidence interval around those?
Look, we've got, you know, these large adjacent positions in the DJ Basin and the intention to optimize our development plan now across that 600,000 acre position, you know, so both drilling and completion activities. We expect to be able to keep on a similar production trajectory with a reduced level of D&C activity and really focus on returns. The companies have slightly different bases of design on spacing, on frack intensity. We'll take a look at that across the portfolio and kind of go with best in, you know, best in class to drive returns and efficiency. I think we just, you know, you put these two together, and you get that those kind of scale opportunities.
You go to the Permian and, you know, our position there, as you know, is very large. We're always looking for ways to core up acreage. The PDC acreage in the Delaware Basin is held by production, so there's no real timing pressure there. We'll optimize that into our overall Permian portfolio and development plan. We think the, you know, we've got a pretty clear line of sight to the CapEx efficiencies.
It the only add I would make, Neil, is, you know, we're baking it into our CapEx guidance, right? PDC's CapEx is notionally around $1.4 billion per year. We're increasing our CapEx guidance by only $1 billion. It's baked into our guidance. That reflects the high level of confidence that Mike just talked about.
Yeah. Thanks, Mike and Pierre. The follow-up, you know, as it relates to Colorado. A couple of years ago, regulatory risk was top of mind, and it was acute. Maybe you can just step back and just give us a state of play around sort of permitting risks as you see it in the state. Do you have the all clear, and how should we as an investment community evaluate any potential risks around that?
Yeah, maybe I'll start and then invite Bart to add his perspective, Neal. You know, both companies have, I think, demonstrated a commitment to constructive engagement with regulators, as I said, both at the local level, at the county level, at the state level. A few years back, there was a new permitting framework established. We've received these Comprehensive Area Plan approvals, as has PDC. There are years and years' worth of approved development plans now in place in both companies. As we bring those together, we've got years of inventory that's already permitted, which allows us to optimize the capital as we just discussed.
I think both companies have demonstrated a respect for the higher expectations that have been expressed by the citizens of Colorado, by the elected officials in Colorado. Frankly, our industry is holding itself to a higher standard as well. Our expectations for our own operations have risen. So, rather than view this as some sort of a confrontation, I think, you know, we've viewed it as a way to, you know, to raise our own game as we're looking to do so, and do that in a way that is constructive and allows, you know, this good engagement with stakeholders and to continue to invest in the economy of Colorado. Bart, you might wanna add a little bit of the perspective from your point of view.
Yeah. Yeah, Neil, Mike, you were spot on. The regulators, I can tell you that the state of Colorado view these two companies as kind of the gold standard right now. We bring a great team. I know Chevron has a great team. We have all the confidence we'll continue to navigate some of the challenging regulations at time, in all honesty. Just a reminder to everybody, we've been successful in the process of obtaining approximately 1,000 permits here in the last nine, 10 months. We have success, we understand the system, we're managing our way through it, and we've got a great reputation with the regulator. I think we're in a really good position.
The acreage position, as Mike noted in his, in his comments, 100%, pretty much 100% Weld County. You know, our perspective on this is, there is not a better company probably in the world to be the champion of energy in the state of Colorado than Chevron. I think, that was something we had good discussions with the board about, and I think it's a great, a great move for the state of Colorado.
Thank you, Bart.
Our next question comes from the line of Jason Gabelman with TD Cowen.
Hey. Thanks for taking my questions, and congrats on the deal. I guess my first question is just, you know, you had discussed over the past six months at least, that you thought commodity prices were too high to execute upstream M&A, and obviously, this deal suggests otherwise. Maybe I was hoping you could talk about if something has changed in terms of that commentary that you've previously provided and any outlook on the M&A environment in light of this deal. My second question is just specifically on the US natural gas markets. The PDC has a higher gas split than I guess what Chevron has in the Permian Basin.
I wonder, as you look out with, Henry Hub being relatively low now, but, do you expect natural gas prices to strengthen over the next few years with new LNG capacity coming online? Is that part of the strategic thought process behind this deal? Thanks.
Jason, you know, prices are lower today than they were six months ago. I don't know where they're gonna be six months from now. You know, when prices were in the, you know, the eighties and nineties, and higher, it felt like we were, you know, certainly at the top end of the market, and it's harder to do deals there. We're down at a different point in the market right now. Look, we're always looking for good resource at good value. This was somewhat of a unique combination and an opportunity for us to acquire this position that we've been talking about in the DJ Basin, at a value that works for both companies and provides the accretive financials that we've talked about.
We've tested it in different price environments. You know, we've given you the, you know, some guidance at the forward strip, but it's still a good deal at a lower price deck than that. We, you know, we feel good about it at this point. I can't you know, project what else might happen in M&A. I'll just, you know, let you engage in the conjecture on that one. On natural gas markets, look, the gas oil ratios are a little different between the two positions. They're not hugely different. We look at all the commodities here, so it's oil, it's NGLs, and it's gas.
We've got our own long-term views that we use to run the economics, and we test them at lower price cases than that. There is, you know, there's gonna be stronger global demand for gas growth than there will be for oil. We see over, you know, the next decade and beyond as the world looks to decarbonize. Certainly, there's gonna be more LNG projects sanctioned in the U.S., and that's gonna add to that demand. You know, the full basket of prices, the profile and the commodities fits with our views, and it passes all of our lower commodity price tests.
The only thing I'd add is, we'll update our commodity price sensitivities when we close. I mean, you'll see a bigger impact on our Henry Hub natural gas sensitivity than you will on our liquids just at, you know, because of our global portfolio. Mike affirmed our production CAGR and free cash flow CAGR, both off of, you know, now a higher base. We're doing that at $3.50. I know we got some questions at our Investor Day about using a higher Henry Hub price. We're using a lower price now than we showed just at our Investor Day a couple months ago, aligned with where the futures are trading right now for 2024. Thanks, Jason.
Thanks, guys.
We'll go next to Josh Silverstein with UBS.
Yeah, thanks. Good morning, guys. just wanted to talk about the financing of the transaction. You mentioned the value gap and the multiples. I get for wanting to use stock for at least a portion of this. Why not use the, you know, portion of the cash balance to try to make this at least a little bit more accretive on a per-share basis? Thanks.
Josh, you know, typically in our industry, you know, there's a lot of commodity price volatility, as you know. If you have a significant amount of cash in a deal, and it takes, let's just say, six months to close the deal, you're gonna have commodity prices higher or lower when you get to closing. You know, we're in a roughly, you know, call it a $70 oil price world today. If we get to closing, and we're in a $90 oil price world or a $50 world, you know, the cash price that we agreed today is gonna look like you've got a winner and a loser.
If you do it in equity, you lock in the exchange ratio, and that creates, you know, essentially a hedge against moves in either direction on commodity price. It's really something that, we find when we talk to people on deals, it's a way to take that out of the equation and get to a, you know, an agreed value for the transaction. The other thing, just to point out, you know, we're buying back our shares at $17.5 billion a year. The shares that would be issued for this transaction, are repurchased in less than two quarters.
You know, if you're, if you're looking for accretion, and you're worried about dilution, those shares are gone in less than two quarters. Another way to look at it is, if it takes us two quarters to get through the regulatory process, we will buy back more shares than it takes to complete this transaction. You're still gonna be through the buyback. You're gonna have a lower share count out there.
Hey, what I would add is, you're right. Your accretion metrics look better when you use cash. For all the reasons that Mike said, we prefer to use equity. This is a transaction that is really strongly accretive, and particularly on cash flow metrics. Free cash flow, we talked about $1 billion. It's solidly accretive on earnings per share at strip pricing. You can go to below pricing and still get earnings per share accretion. It's ROCE accretive modest, but we know that's a very high bar to pass.
You know, this is the harder test when you use all equity, and we do it for all the reasons said. This is a transaction that you could say is maybe modestly sized, but it punches above its weight in terms of its financial accretion. I'll just say, we think there's a lot of upside in Chevron shares, and we think PDC shareholders will enjoy that over time.
Yeah, that's helpful. Just as my follow-up, Mike, you mentioned the six months in the regulatory process. I am curious on your thoughts. There's a deal smaller in terms of dollar amount, but one that's being held up by the FTC right now. This transaction further consolidates a basin where there's only a couple of large players to begin with. Just any thoughts there as far as how you've gotta factor that into the transaction as well? Thanks.
Yeah. You know, each transaction is unique. We're confident this transaction is pro-competitive. It's purely an upstream production transaction. We don't see. You know, there's no midstream, there's no downstream. We don't see any competition issues being involved. Obviously, we'll work through the process with the regulator. We don't believe there's any reason that this, you know, should not ultimately be approved.
Thanks, Josh.
We'll go next to Paul Cheng with Scotiabank.
All right. Thank you. Good morning, guys.
Morning, Paul.
Maybe two question, please. First one is for Pierre. $100 million on the OpEx saving, that seems low. Just looking at the potential saving in G&A and interest expense, seems like we already can get there. Can you tell us a bit that what's the split in that OpEx saving between at the field, the G&A and interest expense? That's the first question.
Paul, I'll take that. Look, we do due diligence, you know, really based on material information. There's limited details we can get into because everything is disclosed in the filings. As we have with Noble, once we are allowed to work together and see more, we expect to beat that number, and we did. We doubled our Noble synergies by the time we were done. This is primarily G&A. There's very limited interest expense to some insurance. There's obviously, some corporate functions that are redundant. The operational synergies, the procurement synergies, we need to see contracts.
We need to get into, as Mike said, kind of, you know, looking at both what we both do and taking the best of what both PDC and Chevron does. We expect more. We'll update you as we go along. It's the best estimate we have now based on what we can see. We'll see more. We expect that number to increase over time.
Pierre, you're saying that it's not including much of an interest cost saving, right? Because that both bond will be redeemable from the PDC.
That's right. There's some short term that you can do, but the bonds, you know, are... The way they're structured is they're difficult to call early and book those savings. It's the nature of how bondholders structure them. Over time, we will realize that. We're doing everything kind of in the first year after closing. We're using 2024, so it's pretty modest by 2024. You'll see more savings over time.
Okay. Mike, after you close the deal, can you share that what is the pace of development for DJ? Will DJ become a growth platform for you guys going forward? If it is, what kind of pace of growth that you are expecting? Thank you.
Yeah. Paul, there's a there's a slide that we showed production. You know, our our production at DJ last year was just a little bit over 140,000 bbl a day. On Slide 7 in the deck, you can see, you know, in 2024, that number is in the 400,000 bbl a day range. We've got a bar on there for 2027 that shows it kind of in that same ballpark, maybe just a touch higher. You know, our current view is that we grow into that range, and then we really focus on efficiency and capital and returns. You know, you could kind of think of it, you know, kind of plateauing in that range, which is a way for us to generate strong free cash flow, high efficiency and strong returns.
Mike, once you get to the $400, is the $1 billion CapEx is still a, roughly a good one to use?
Hey, Paul, we're gonna wrap you up on this. But again, we're taking $400 of CapEx efficiencies. I think that was an earlier question. It's about half in the DJ, half in the Permian. We've given multi-year production guidance. We'll continue. We've updated our CapEx guidance. I think it's all included in our updated guidance. Thanks, Paul.
All right. Thank you.
We'll go next to Sam Margolin with Wolfe Research.
Morning, Sam. Jennifer, it sounds like we may have lost Sam. Why don't we go to the next one, and if Sam pings back in, you can stick him back in the queue.
Understood. We'll go next to Roger Read with Wells Fargo.
All right. Hopefully, my mute button didn't kill me here.
I can hear you, Roger.
All right. Good morning, guys.
Good morning.
Let me ask just one question. I know this will come out later in some of the documents, but breakup fees or anything we need to be watching here? I know that can be a little sensitive, but I just feel like we ought to ask the question.
Yeah. Standard breakup fee. You'll see it when the S-4 is filed, but it's.
When the merger agreement is filed.
The merger agreement is filed, which is in a couple.
Next day or two, I think. Yeah.
Okay.
Okay. Then you addressed the CapEx question, which was one for me. I guess one thing else I'd be curious about putting the companies together here, is there anything we should think about changing on the disposition side? One of the reasons I ask is obviously you're putting two companies together, less CapEx. You've got a better, you know, GHG emissions footprint with this than obviously exists as an average across your overall portfolio. I was just wondering, is there anything else we should expect to change as a result of this or maybe accelerate a, you know, a change elsewhere?
You know, it's pretty straightforward, Roger. It's the big position in the DJ. Then, you know, it's the addition of the 25,000 acres in the Permian where, you know, it's not as evident, I think, to, you know, people that follow us, but we're constantly in the Permian, you know, creating more contiguous drilling acreage through swaps, through purchases, through sales. So we've just got so much currency with our 2.2 million acres. This adds a little bit more of it into that. So you can think of it going into that optimization of our Permian development plan.
I wouldn't expect us to come out with some sort of an asset divestment target or a number like you might have seen on some other transactions. It just, you know. I think in the Permian, we have to understand how this really fits into our development plans. There's a lot of cases where we've got something that works better for somebody else, they got something that works better for us, and you can create value through those things at a level that doesn't really rise to a lot of visibility to how you're looking at it.
No, I appreciate that. Thank you.
Okay. Thank you, Roger.
We'll go next to Paul Sankey with Sankey Research.
Morning, everyone.
Morning.
If we look at the PDC, for example, proof reserves, future free cash flow calculation, we get a number in the 10-K of $15 billion value, and you're doing the deal at $7.6. I wondered, could you give each of you the perspective on why PDC trades so cheap? Thanks.
Well, first, I'll just comment. I think you, I think you're referring to the oil and gas tables in the 10 K. That's done at year-end pricing, which, you know.
Sure
...which is probably higher than what people would expect.
Yeah, much higher.
Mid-cycle.
I mean, I think even like for that, it's still... I mean, we can look at any metric and say it's cheap, right? Especially if you can see-
Yeah, Paul.
Chevron not to be cheap.
Yeah. you know, look, it's, you know, I might ask Bart to comment on it. It's a bit of a conundrum, I think, as I look at it, in that these are high-quality assets that, you know, the de-risking through the permitting has occurred. The market, the market assigns a certain kind of concentration risk, if you will, to players that have exposure, you know, concentrated in this part of their portfolio or the perception of some of these things. On the diversified nature of our portfolio, allows us, you know, allows that risk to be diversified away with the larger and other segment exposure that we bring along with it. I think that's probably a primary driver. There have been, you know...
I'd read analyst reports where there was, you know, maybe speculation about would PDC go out and try to do a deal? Would that be, you know, dilutive? I think there was conjecture in the market that may have weighed on that. Fundamentally, I think that the premise of your question is these are high-quality assets are at good value. We agree with that, and this is a way for us to unlock that value for the shareholders of PDC. Bart, would you have anything you'd like to add? I mean, it's probably a question that better goes to you than to me.
Yeah. Paul, we could spend a lot of time on this one. I think when we look at PDC relative to our peers in the SMID space, it's, you know, a chronic problem of multiple compression that we've been experiencing for quite a while. I think it's more of an industry trend. Yes, there was good value here, but this is a great opportunity for the PDC shareholders to complement Chevron's DJ position with our position, add accretive to them on almost every measure, and then for us to get the diversification in their assets long-term. The scale and the world-class assets, like I said, is just a great opportunity.
Right. I mean, I guess the perspective would be that the political risk is excessively discounted.
I don't know, That's always a consideration for any Colorado operator, yes. I think when we look at ourselves relative to our peers, it doesn't show that trend. There is a compression of multiples, for pretty much all the DJ.
Thanks, guys. It's a tricky question. Thank you.
Yep.
All right. Thanks, Paul.
We'll go next to Irene Himona with Soc Gen.
Good morning. Thank you very much. Mike, you referred to slight differences in well designs in the DJ. I wonder if you could talk a little perhaps about, current well productivities, how these compare between the two companies?
Hey, Irene. I think I'll refer you to Jake to kinda get into some of those details if you're okay. I mean, again, we talked about, you know, looking at what both companies do. We have CapEx efficiencies built into the acquisition economics, a premise that we can drill fewer wells per section and do larger fracs, but we just have more work to do. I think particular as we do our integration planning, just like we talked about synergies, we're gonna do a lot of operational work, and then we'll have more to say over time.
My second question, for you, Pierre. Should Henry Hub remain closer to $2.50, could you perhaps indicate how we should think around the $1 billion free cash flow guidance, please?
I mean, the sensitivities, again, we wanna update them, but you can think of it as lowering about $100 million, roughly. It's still strongly free cash flow accretive. Again, as Mike said, we've tested at a variety of oil and gas pricing. You do these transactions with upside in mind, clearly, and there's upside, but you test the downside. And this works at a $2.50 Henry Hub natural gas. Of course, it depends on your liquid pricing and all that. If you look at it $60 Brent, take $4 off for WTI, look at $2.50 Henry Hub, you'll still see accretion in earnings and free cash flow. ROCE gets, you know, it's right on the ragged edge. It might go slightly diluted on ROCE at those prices.
Thank you very much.
Thanks, Irene.
We'll go next to Lucas Herrmann with Exane.
Yeah, thanks very much. Good afternoon, gents. Brief one. I mean, Mike, strategically, more U.S., when does the weighting that you have towards the U.S. onshore, I appreciate this is, you know, different basin, but, when does the weighting that you have towards the U.S. onshore start to play on how you think about portfolio and, yeah, structure at Chevron? It's another 10% add obviously to the production profile, but, it's also another, you know, very material add, 20%.
Yeah
... 25% or so to the U.S. position.
Yeah, look, you know, the US is a very attractive oil and gas province. It's got tremendous resources, it's got a tremendous service sector, deep liquid markets, the ability to execute, you know, at very good capital efficiency and generate strong returns. We're not concerned about adding to our US exposure. In fact, you know, the president has called for more investment in the US to increase supplies in the US, this is certainly consistent with that. We're not going to, you know, kind of pull back only to the shores of the United States. We've got big positions in, you know, all the other basins around the world, right? The Middle East, Asia, Africa, Australia.
Yeah
Latin America. We'll continue to look for, you know, value-creating, high-return, opportunities in those areas. This is one that's high returns and low carbon, and it fits with our strategy. That's the primary driver. You know, we manage geopolitical risk all around the world and it's been part of this industry since its inception and always will be. You know, that's not a reason for us to shy away from a deal that creates value for shareholders just because it increases our U.S. weighting.
Okay. Thanks very much. Congratulations.
You bet. Thank you.
Our last question comes from Neal Dingmann with Truist.
Thanks guys. Thanks for getting me in. My first question just on spacing. I'm just wondering, will you all plan to stay with PDC's, I think they're around 16-24 well spacing, or will you turn more towards the, I think, the eight to 10 spacing you're seeing at Mustang and Wells Ranch?
Pierre said we'll, you know, as we get into the detailed integration planning, we'll look at things like well spacing, we'll look at frack design. I don't wanna speculate on the conclusions other than to say we're gonna drive at high returns. That becomes, you know, you've got, you know, the levers of how much capital you put in and how much production you get out at a given price. We'll optimize our development plan accordingly. We wanna be sure we understand what PDC's doing and how those, how those wells are really delivering returns and performing.
When we went through the Noble acquisition, I have to tell you, as proud as we are of the great work that our people do, we also benefited from some of the great work that was going on in Noble Energy. We learned things that have improved our operations in other parts of the world, particularly things that were going on in Colorado. I wanna be sure that we've given full consideration to everything that PDC is doing as we look at our go forward development plan. It's just premature for me to give you anything real specific on that until we've done the work.
Yeah, that makes sense. If I could just a follow-up maybe for Bart. Bart, I'm just wondering when this kind of deal came to be, you started going to the board, was this fully shopped or was this just exclusive with Chevron? Because again, obviously the price does look reasonable from Chevron's side, so I'm just wondering how this was, you know, once this came to be on the side, how you all looked at it to the board and the bankers fully shopping?
Yeah. Neal , I can't give you a lot of details, but I can promise you the board undertook a rigorous process as we looked at the merits of this deal and other pathways that we could go down. It was unanimous that this is the best deal for our shareholders. The process was thorough, I can promise you.
Okay. Congrats on the exit, Bart. Thanks.
Yep.
Thanks, Neal. I would like to thank everyone for your time today. We appreciate your interest in Chevron and your participation on today's call. Please stay safe and healthy. Jennifer, back to you.
Thank you. This concludes Chevron's conference call. You may now disconnect.