Chevron Reports ‘Strong’ Permian Output Growth in Q4


  • Permian 2022 growth may be better than prior target
  • 50% more Permian wells seen drilled year over year
  • Q4 output from the basin was 681,000 boe/d

Chevron’s Permian Basin production showed “strong” production growth in fourth-quarter 2021 which was just shy of the landmark 700,000 boe/d level, and 50% higher activity levels are projected this year for the company’s operation in the giant West Texas/New Mexico basin, reports Platts.

The company is targeting full-year Permian production growth of 10% in 2022, which is “a little bit better” than earlier projected, CEO Mike Wirth said during Chevron’s quarterly earnings call.

Permian is healthy and getting better

In Q4, Chevron’s Permian production of 681,000 boe/d from unconventional West Texas/New Mexico reservoirs was up 11% year on year and 9% sequentially. The company’s full-year 2021 production from the basin averaged 608,000 boe/d, up 6% year on year.

Permian output growth of 10% year over year in 2022 would would place full-year production around 670,000 boe/d. Wirth anticipates “a little bit over 200 wells” are anticipated to be placed on production this year in the basin, which would be up about 50% from 2021.

Activity in the Permian is really increasing aligned with the guidance that we’ve issued previously and spending this year up from $2 billion to $3 billion,” he said.

Broadly speaking, the Permian is healthy and getting better,” he said. “That is the largest piece of what we would anticipate in terms of production growth” over the coming year within the company’s portfolio.

‘Ongoing efficiencies’ in Permian

The heightened activity reflects “ongoing efficiencies that we continue to see in the field and just the quality of this asset, which endures as we go through cycles like the one we just went through,” he said, referring to the coronavirus pandemic which caused oil demand to plummet from early 2020 through much of that year.

A brutal freeze ad ice storm for a week in February 2021 also caused production shut-ins in many US fields, particularly the Permian, and producers spent months afterward trying to recover output levels from that event.

It’s really quite nice to have an asset in your portfolio that is this large, that’s this flexible when it comes to capital and that we can demobilize, remobilize … when conditions call for it,” Wirth said. “We’ve been able to exercise that flexibility here over the last couple of years.”

Inflation in the Permian was “modest” – in the low single digits – when Chevron announced its $15 billion capital and exploratory budget for 2022 in December 2021, Chevron Chief Financial Officer Pierre Breber said. “And while we might be seeing a little bit more than that in the Permian, it’s very manageable and we think we can offset it with efficiencies.”

Rig rates below pre-pandemic levels

Rig rates are up but still below where they were pre-pandemic and the same is true for oil and gas equipment and services, Breber said.

Chevron’s total oil and gas production in Q4 averaged 3.117 million boe/d, down 5% year on year for the same period but up nearly 3% sequentially.

The company expects its 2022 total oil, natural gas and NGL production to be up 2%-5% versus the year before, excluding contract expirations and asset sales over the year. It will be led not only by the Permian but lower turnaround activity at its TCO asset in Kazakhstan and LNG facilities in Australia.

Including contract expirations in Indonesia and Thailand, 2022 production would be flat to down 3%. Those are not being extended since Chevron was “unable to do so in terms competitive with our alternatives,” said Breber.

Chevron’s net liquids production in Q4 totaled 1.83 million b/d worldwide, down 7.5% year on year for the same quarter but up 4% sequentially. The quarter’s liquids output included 929,000 b/d from the U.S. which was up 5.5% year on year and up 10% sequentially, aided by Permian growth.

Natural gas output was essentially flat in Q4 at 7.7 Bcf/d both sequentially and year on year.

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Source: Platts


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