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Chevron sees upside for cost savings and improved productivity from new techniques it’s piloting in the Permian Basin.
Chevron Corp. is in various stages of piloting techniques and technologies to boost resource recovery from the Permian, the California-based major reported in fourth quarter 2023 earnings on Feb. 2.
Mike Wirth, chairman and CEO of Chevron, said the company is gathering field data to look at changes in well completion and fracture techniques.
Chevron is also piloting different chemicals and “using gas injection and gas lift in different ways” to improve flow in the Permian.
But the meaningful effects these pilot projects are having on Chevron’s overall Permian productivity are still relatively muted, Wirth said.
“They contribute, but I would say it’s at the margin,” Wirth said during Chevron’s Feb. 2 earnings call.
Chevron will start to understand more about how the pilots could move the needle on production when they’re moved into large-scale deployment, Wirth said.
“Right now, it’s more on the drilling and completions cycle time side that we’re seeing some of these improvements,” Wirth said. “So, there’s more to come.”
Chevron is setting aside $6.5 billion to develop its U.S. shale portfolio this year. The vast majority—around $5 billion—is budgeted for the Permian, the nation’s top oil-producing region.
Chevron has ambitious growth plans in the Permian, where the supermajor still aims to achieve production of 1 MMboe/d next year.
The company is starting the year with 12 drilling rigs and three frac crews in the Permian; a fourth crew will be added around the middle of the year, Chevron CFO Pierre Breber said.
“But at the same time, we’re becoming more efficient,” Breber said on the call. “We need fewer rigs to drill the planned lateral feet that we’ve got out in front of us.”
Chevron could realize even more drilling and completed (D&C) cost savings once it shifts from growing production to plateauing output at around 1 MMboe/d, he said.
“You can actually pull capital spending down because you’re offsetting decline—you’re not trying to offset decline and grow by significant chunks each year,” Breber said.
The D&C improvements being explored in the Permian Basin should eventually be deployed into Chevron’s other shale plays, like the Denver-Julesberg (D-J) Basin in Colorado and the Bakken in North Dakota.
Chevron bolted on additional scale in the D-J Basin through a $6.3 billion takeover of PDC Energy in a deal that closed last summer. The acquisition included PDC’s smaller footprint in the Permian’s Delaware Basin.
Chevron plans to raise its D-J Basin output by about 125,000 boe/d this year by combining a full year of legacy PDC operations with Chevron’s existing footprint in the region.
D-J Basin production is expected to hold at around 400,000 boe/d for Chevron going forward, Wirth said on the call.
And the company is entering the Bakken in a big way through its $53 billion blockbuster acquisition of Hess Corp. Chevron expects the Hess deal to close in the first half of this year.
Hess is one of the largest oil and gas producers in the Bakken, where net output averaged 194,000 boe/d during the fourth quarter; oil volumes averaged 89,000 bbl/d.
As Chevron gets deeper in certain U.S. shale plays, it’s looking to monetize assets in Alberta’s Kaybob Duvernay shale play.
Last month, Chevron announced plans to market the company’s entire 70% working interest in its Duvernay shale acreage—roughly 238,000 net acres, according to Houston-based Energy Advisors Group.
In conjunction with closing the massive Hess acquisition, Chevron plans to raise between $10 billion and $15 billion by selling off less competitive assets from its portfolio.
Wirth said pieces of Chevron’s legacy portfolio are “likely to be a greater contributor” to divestiture plans than new assets picked up through the Hess acquisition.
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