Chevron Ramps Permian Basin Oil Growth With 10% Target for 2024
Feb 05, 2024
A Chevron operation in the Permian Basin in Texas, Bloomberg

(Bloomberg) -- Exxon Mobil Corp. and Chevron Corp. plan to aggressively ramp up production from the Permian Basin this year in what could be an early sign that US oil output may surpass expectations once again, like it did in 2023. 


Chevron is targeting 10% growth this year, more than twice the pace of publicly-traded independent oil companies, setting it on course to pump 1 million barrels a day from the region in 2025. Exxon sees production growth of nearly 7%, but is expected to double its overall output once it completes the $60 billion of Pioneer Natural Resources Co. by mid-year. 


“We are in the best parts of the Permian,” Chevron Chief Financial Officer Pierre Breber said during an interview. “Our growth is higher likely than the basin average but it is representative of our activity level and the activity level of our partners.”


The pace of US oil production last year surprised traders and analysts, pressuring prices and piling pressure on the OPEC+ alliance to restrain output. Exxon and Chevron’s Permian development plans are closely watched as they are already among the basin’s biggest producers, meaning their growth rates are coming on top of already high output levels, adding to global supplies. 


Analysts were skeptical Chevron would meet its full-year production guidance because of several poor quarters during which the company struggled with infrastructure problems and other operational issues. But a knockout fourth quarter saw Chevron produce 867,000 barrels of oil a day, 12% higher than the previous quarter. Production growth in 2024 will be similarly “back-end loaded” to the latter half of the year and may drop in the first half, Breber said. 


Exxon, which will become far and away the Permian’s biggest producer once it buys Pioneer Natural Resources Co., grew in-basin production by 12% in 2023, exceeding its 600,000 barrel-a-day guidance. Excluding Pioneer, the Texas oil giant expects to ramp up to 650,000 barrels a day this year. 


Exxon CEO Darren Woods said Friday the company plans to treat its massive Permian operation like a factory by building a robust inventory of drilled wells but holding off on fracking them — a practice known as drilled-but-uncompleted oil and gas wells, or DUCs.


“The trick is to get that inventory level right. You don’t want a bunch of capital sitting there that isn’t earning its return,” Woods said on an earnings conference call with analysts. 


--With assistance from Mitchell Ferman.


View on the Bloomberg website

Oil eases on higher US crude output, hopes of Israel-Hamas ceasefire

By Emalee Springfield • 02 May, 2024
HOUSTON, April 30 (Reuters) - Oil prices fell 1% on Tuesday, extending losses from Monday, on the back of rising U.S. crude production, as well as hopes of an Israel-Hamas ceasefire. Brent crude futures for June, which expired on Tuesday, settled down 54 cents, or 0.6%, at $87.86 a barrel. The more active July contract fell 87 cents to $86.33. U.S. West Texas Intermediate crude futures were down 70 cents, or 0.9%, at $81.93. The front-month contract for both benchmarks lost more than 1% on Monday. U.S. crude production rose to 13.15 million barrels per day (bpd) in February from 12.58 million bpd in January in its biggest monthly increase since October 2021, the Energy Information Administration said. Meanwhile, exports climbed to 4.66 million bpd from 4.05 million bpd in the same period. U.S. crude oil inventories rose by 4.91 million barrels in the week ended April 26, according to market sources citing American Petroleum Institute figures on Tuesday. Stocks were expected to have fallen by about 1.1 million barrels last week, an extended Reuters poll showed on Tuesday. Official data from the EIA is due on Wednesday morning. Gasoline inventories fell by 1.483 million barrels, and distillates fell by 2.187 million barrels. Expectations that a ceasefire agreement between Israel and Hamas could be in sight have grown in recent days following a renewed push led by Egypt to revive stalled negotiations between the two. However, Israeli Prime Minister Benjamin Netanyahu vowed on Tuesday to go ahead with a long-promised assault on the southern Gaza city of Rafah. "Traders believe some of the geopolitical risk is being taken out of the market," said Dennis Kissler, senior vice president of trading at BOK Financial. "We're not seeing any global supply being taken off the market." Continued attacks by Yemen's Houthis on maritime traffic south of the Suez Canal - an important trading route - have provided a floor for oil prices and could prompt higher risk premiums if the market expects crude supply disruptions. Investors also eyed a two-day monetary policy meeting by the Federal Reserve Open Market Committee (FOMC), which gathers on Tuesday. According to the CME's FedWatch Tool, it is a virtual certainty that the FOMC will leave rates unchanged at the conclusion of the meeting on Wednesday. "The upcoming Fed meeting also drives some near-term reservations," said Yeap Jun Rong, market strategist at IG, adding that a longer period of elevated interest rates could trigger a further rise in the dollar while also threatening the oil demand outlook. Some investors are cautiously pricing in a higher probability that the Fed could raise interest rates by a quarter of a percentage point this year and next as inflation and the labor market remain resilient. U.S. product supplies of crude oil and petroleum products, EIA's measure of consumption, rose 1.9% to 19.95 million bpd in Feb. However, concerns over demand have crept up as diesel prices weakened . Balancing the market, output from the Organization of the Petroleum Exporting Countries has fallen in April, a Reuters survey found, reflecting lower exports from Iran, Iraq, and Nigeria against a backdrop of ongoing voluntary supply cuts by some members agreed with the wider OPEC+ alliance. A Reuters poll found that oil prices could hold above $80 a barrel this year, with analysts revising forecasts higher on expectations that supply will lag demand in the face of Middle East conflict and output cuts by the OPEC+ producer group. View on the Reuters Website

Oil and gas industry’s “strong” free cash flow to support increasing production targets

By Emalee Springfield • 01 May, 2024
Last year, the demand for loans from oil and gas companies fell 6% year-on-year, and that followed a decline of 1% in 2022. Oil and gas companies don’t need a lot of loans because they’re generating so much money these days from their underlying businesses, said Andrew John Stevenson, senior analyst at Bloomberg Intelligence. And that trend is likely to continue through the end of the decade, he said. “The oil and gas industry has experienced a number of booms and busts over the past few decades, but for now, it appears to be flush with cash,” he said. The healthy balance sheets reflect the boost that companies have received from rising oil prices, buoyed by robust demand and OPEC+ production cuts. The sector’s free cash flow is so strong that the group’s leverage ratio, which measures a company’s net debt relative to earnings before interest, taxes, depreciation and amortization, fell to 0.8 in 2023 from 2.4 in 2020, Stevenson said. The ratio will likely slide below zero by the end of the decade, he said.
Share by: