Published: March 16, 2021 |

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Chevron Corp. revived aspirations to pump 1 million barrels a day in the Permian Basin after drastic budget and job cuts trimmed operating costs.

Chevron plans to ramp up investment in North America’s biggest oil field through 2025, reversing the pandemic-driven production decline, the company said in an investor presentation Tuesday. Chief Executive Officer Mike Wirth surprised investors by restoring the million-barrel Permian target only a year after it disappeared from the company’s guidance as Covid-19 crashed energy markets.

The California oil titan expects its Permian wells to generate $3 billion in free cash flow by the middle of the decade, assuming international crude prices average $50 a barrel. The region straddling West Texas and New Mexico incurred the deepest spending cuts in last year’s pullback amid the oil market’s unprecedented collapse.

Chevron plans to double returns on capital employed and expand free cash flow by 10 percent a year, more than twice the cash-flow growth rate promised by Exxon Mobil Corp. last week. Chevron’s dividend isn’t imperiled even if crude falls to $40.

The main question for investors monitoring the virtual presentation on Tuesday is what Wirth plans to do with the windfall from this year’s rally in oil prices. The company has a lower debt burden than its big oil rivals and has shown an unwillingness to take on major growth projects. Still, Chevron has bought back shares in recent years and pursued takeovers such as the $5 billion purchase of Noble Energy.

“We’re investing in only our best projects, funding those that meet our high-return expectations. This improvement is anchored in self help. We’re not betting on higher prices to bail us out,” Chief Executive Officer Mike Wirth told analysts.

Demand Recovery

Though Chevron may be in a better place than its peers, the trauma of 2020 will be evident for some time to come. The company’s debt increased by 64 percent to $44.3 billion due to the double blow from low oil prices and weakening refining margins.

Chevron also announced:

• New targets to lower carbon intensity 35 percent by 2028 and eliminate routing flaring by 2030
• Cost savings from the Noble deal to double to $600 million
• U.S. Gulf of Mexico will have two final investments decisions by 2022
• Anchor development expected to begin pumping oil in 2024

Chevron sees an extra 1-2 billion cubic feet per day “export potential” from its Israeli gas fields

The Covid-19 pandemic had a profound impact on big oil, accelerating the push by some down a path away from fossil fuels, while others rowed back on long-term growth plans. Chevron was in the latter camp, pledging to spend about 27 percent less than pre-pandemic levels all the way through 2025.

Despite the new carbon intensity goals, Chevron has yet to follow its largest European rivals in announcing a long-term net zero target. Like Exxon, the California-based oil giant is focusing on reducing emissions from its own operations and small-scale joint ventures in novel technologies.

Chevron has committed to spend about $300 million on such investments this year, or 2 percent of its annual budget. Wirth has sounded caution on soaring valuations of clean-energy startups in recent months.

Source: Bloomberg

About Chevron
Chevron Corporation is one of the world’s leading integrated energy companies. Through its subsidiaries that conduct business worldwide, the company is involved in virtually every facet of the energy industry. Chevron explores for, produces and transports crude oil and natural gas; refines, markets and distributes transportation fuels and lubricants; manufactures and sells petrochemicals and additives; generates power; and develops and deploys technologies that enhance business value in every aspect of the company’s operations. Chevron is based in San Ramon, California.

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