Chevron Corp. said an advantaged portfolio supported by the Permian basin underlies its expectation of strong production growth with lower execution risk, cash flow growth, and disciplined spending over the next 5 years.
Chevron is among a group of oil and gas companies looking to increase Permian activity. Most recently, ExxonMobil Corp. announced plans to increase its Permian basin production to 1 million boe/d by as early as 2024 (OGJ Online, Mar. 5, 2019).
The production numbers, outlined during its annual security analyst meeting Mar. 5, are up from the 650,000 b/d by yearend 2022 noted at a meeting last year.
Further, “the higher production comes with higher capital efficiency and will be delivered by the same 20 operated rigs contemplated last year (supplemented by a similar 7-10 net non-operated rigs),” said Jefferies analysts in a Mar. 5 note. “Assuming no inflation—and any signs of inflation are currently being offset by efficiency gains—the incremental growth should be accomplished with the same $3.6 billion capital budget allocated to the Permian in 2019,” the analysts continued.
The company has refocused its investment priorities, said Michael Wirth, chairman and chief executive officer, who said Chevron expects 70% of this year’s spend to deliver cash flow within 2 years (OGJ Online, Dec. 7, 2018).
An annual capital and exploratory target of $19-22 billion during 2021-23 is expected to deliver a 3-4%/year compound production growth rate through 2023.
Chevron’s outlook is supported by strong performance in the Permian basin, where the company has added almost 7 billion bbl of resource and doubled its portfolio value over the past 2 years. Permian unconventional net oil-equivalent production is now expected to reach 600,000 b/d by yearend 2020, and 900,000 b/d by yearend 2023, the company said.
The company’s position in the Permian is “characterized by long-held acreage, zero-to-low royalty on more than 80% of our land position, and minimal drilling commitments,” said Jay Johnson, executive vice-president, upstream.
Chevron expects some $30 billion of cash generation at $60/bbl Brent in 2019 to be used to fund the 6%/year dividend increase, a ratable and high-return capital program, and $4 billion of expected share repurchases.
Contact Mikaila Adams at [email protected].