Chevron sees second-half production build in Permian

Feb. 2, 2024
The company is targeting 1 million b/d from the basin by 2025, to be sustained by about $5 billion annually in capital spending.

Chevron Corp. is targeting 2024 production growth from Permian basin operations of nearly 4%, with the second half of the year more than compensating for a small drop in the first and second quarters.

Chairman and chief executive officer Mike Wirth and his team are forecasting that California-based Chevron will exit this year with Permian production of about 900,000 boe/d, a figure projected to grow to 1 million boe/d in 2025. Driving that “strong momentum,” they said, is work to build the company’s inventory of drilled-but-uncompleted (DUC) wells and the planned addition of a fourth fracturing crew to go with its 12 rigs in the basin.

To feed those plans, Chevron will spend about $5 billion in the Permian basin this year, up from roughly $4 billion in 2023.  Total capital spending in 2024 is expected to be $15.5-16.5 billion, in line with last year’s $15.8 billion. On a Feb. 2 call with analysts, Wirth said the company intends to be “really tight” with capital—in the Permian basin and elsewhere—while noting that Chevron’s operations are becoming better at drilling and completing wells.

Wirth said the New Mexico wells the company has been drilling in greater numbers of late are generally more productive than elsewhere in the basin. Because of those factors, he doesn’t expect Permian capex to grow beyond $5 billion annually.

“We need fewer rigs to drill the planned lateral feet that we’ve got out in front of us,” he said. “As we close in on 1 million barrels per day, we’re at the capital level that I think is going to be required to get us there.”

Chevron’s worldwide production was nearly 3.4 million boe/d during fourth-quarter 2023 versus nearly 3.15 million boe/d in third-quarter 2023, the first quarter with PDC Energy Inc. in the fold. Chevron acquired PDC in August 2023 for more than $7 billion to grow its footprint in the Permian basin and the Denver-Julesburg basin (OGJ Online, May 22, 2023). Production is forecast to grow 4-7% this year.

Overall, Chevron produced a fourth-quarter profit of $2.24 billion in the last three months of 2023, which was down from nearly $6.4 billion in fourth-quarter 2022 due to lower average selling prices and higher depreciation and tax costs. Operating revenues were nearly $49 billion versus $54.52 billion.

Shares of Chevron (Ticker: CVX) rose nearly 3% to about $152 on the heels of the company’s earnings report. Over the past 6 months, however, shares are still down slightly, which has shrunk the company’s market capitalization to about $287 billion.