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03 Mar 2020 | 18:43 UTC — Houston
Highlights
Company's Permian output could hold around 1.2 million boe/d
Has lineup of investment targets to fund projects over next decade
Green light for US Gulf Whale, Ballymore projects eyed in 2020-2021
Chevron has upped its Permian Basin resource estimate to more than 21 billion barrels of oil equivalent, more than double the company's estimate just three years ago, its top executives said Tuesday.
The company's 2017 resource estimate for the basin, the largest source of oil output in the US and a significant source of natural gas, was 9 million boe, Jay Johnson, Chevron's executive vice president of exploration and production, said in webcast remarks at the company's annual Security Analyst Meeting in New York.
And the major expects to take final investment decisions on two 2018 deepwater discoveries in 2021 and 2022, Johnson said.
With flat prices, Chevron expects the Permian, in West Texas and New Mexico, to eventually generate more than $4 billion/year of free cash flow, he added.
Chevron's output from the play is expected to top 600,000 boe/d this year and 1 million boe/d in 2024, Johnson said.
"We believe our Permian production has the potential to grow and sustain at around 1.2 million boe/d," Johnson said.
Moreover, the production and free cash flow Johnson cited are based on development of only half the company's 2.2 million Permian acres and only a portion of the play's multiple "benches" or sub-zones, he said. Free cash flow is a key financial goal of most upstream operators in the current low oil-price milieu.
Beyond that, the company also has what Chevron CEO Mike Wirth said were future investment opportunities within its portfolio for several years and beyond.
"Many of these positions are facility constrained, meaning with backfill projects, production has little to no decline," Wirth said. "We expect successes that will result in developments during the second half of this decade."
These projects range from LNG, led by the Gorgon and Wheatstone developments in Australia, shale and tight oil anchored by the Permian and including the Vaca Muerta play in Argentina and the Duvernay Shale in Canada, the Tengiz expansion project in Kazakhstan that will raise production to 1 million boe/d in 2023 and the Gulf of Mexico, Wirth said. The company has 232 blocks in the US Gulf with 62 active prospects.
Beyond that, additional upside potential may come from increasing activity in the Permian and other shale plays, ramping up production in the Neutral Zone between Saudi Arabia and Kuwait and of heavy oil in Venezuela, Johnson said, adding importantly, these assets are already in Chevron's portfolio.
In addition, Johnson suggested the Gulf of Mexico is a brighter spot for the company than it has been in years.
Chevron continues to acquire exploration acreage in the Gulf, where it is one of the premier explorers and producers, and expects to sanction two additional projects in the next two years after green-lighting Anchor last year.
Whale and Ballymore, back-to-back finds in 2018, are expected to receive the go-ahead in 2020 and 2021. Whale, a remote field off the Texas Gulf Coast, will be a standard facility design, while Ballymore, further east off the toe of Louisiana, is envisioned as a possible tieback to an existing production hub.
Anchor, which has involved development of new technology enabling the extremely high-pressure field to prepare for production in 2024, will also benefit other such prospects.
Chevron plans to drill 11 potentially impactful exploratory wells around the world this year, including four in the US Gulf, two in the Mexican Gulf of Mexico and two in Brazil.
Also, Wirth said the previous company-wide total projected capital and exploration budget of $19 billion-$22 billion/year for the next three years has been extended to a fourth year (2024). Chevron has affirmed a $20 billion capex budget for 2020.
As the oil industry has become increasingly vocal about committing to decarbonization in the last few years, Chevron executives said they are pursuing those initiatives although not as a separate business. Instead, they are integrating and weaving it into projects where appropriate.
While the company has vastly reduced its exposure to US gas production per se, it is involved in LNG. Chevron aims to improve returns at two such Australian facilities, Gorgon and Wheatstone, and will look at other opportunities to expand its LNG portfolio, Wirth said.
"But they have to be the right ones," he said. "We're in no hurry to do anything there [in that arena]. Everybody who's looking at making final investment decisions on LNG is going to have to be pretty thoughtful about when and how they step into that market."