Paula Dittrick
Upstream Technology Editor
Mikaila Adams
Editor-News
Both ExxonMobil Corp. and Chevron Corp. separately reported plans last week to increase oil and gas production from their respective operations in the Permian basin.
ExxonMobil plans to increase its Permian production to 1 million boe/d by as early as 2024, which would be an 80% increase of its current production in West Texas and southeastern New Mexico.
Chevron’s outlook is supported by strong performance in the Permian, where the company has added almost 7 billion bbl of resource and doubled its portfolio value over the past 2 years. Permian unconventional net production is now expected to reach 600,000 boe/d by yearend 2020, and 900,000 boe/d by yearend 2023, the company said.
Other companies—including BP PLC, Royal Dutch Shell PLC, and Occidental Petroleum Corp.—also have discussed increasing their Permian activity but only ExxonMobil and Chevron have released definitive outlooks.
ExxonMobil’s plans
“We’re increasingly confident about our Permian growth strategy. Our plans are attractive at a range of [oil and natural gas] prices,” said Neil Chapman, ExxonMobil’s senior vice-president, in a Mar. 5 statement.
ExxonMobil estimates an average return of 10% at $35/bbl for its Permian production. As of Mar. 5, ExxonMobil had 48 drilling rigs working in the Permian and planned to increase its rig count to about 55 by Dec. 31.
The company expects the Delaware basin will account for much of the anticipated increased production within the Permian basin.
ExxonMobil also is counting on infrastructure development and secured transportation capacity to move oil and gas to ExxonMobil’s refineries and petrochemical plants along the Gulf Coast through the Wink-to-Webster, Permian Highway, and Double E pipelines.
The company holds contiguous acreage, enabling multiwell pads connected with gathering systems, which helps cut development costs and accelerate production growth. ExxonMobil said its scale, financial capacity, and technical capabilities also helps maximize resource value.
Plans include construction at 30 sites to enhance processing, water handling, and ensure takeaway capacity. Construction activities include central delivery points designed to handle up to 600,000 b/d of oil and 1 bcfd of gas.
ExxonMobil also plans enhanced water-handling capacity through 350 miles of existing pipeline.
“We are well positioned in processing and transportation capacity” to handle increased production, Chapman said.
Increased technology, including enhanced subsurface characterization, subsurface modeling, and advanced data analytics will help reduce costs and increase recovery, ExxonMobil said.
Chevron’s plans
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.
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.
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.