ExxonMobil and Chevron, the two largest US oil groups, have sharply lifted their expectations for production in the Permian Basin, the heartland of the shale boom, in the first half of the 2020s.
In a presentation to analysts this week, Exxon is revising up its projection of oil and gas production in the Permian region of Texas and New Mexico from 600,000 barrels equivalent a day to 1m in 2024, while Chevron has lifted its estimate from 650,000 b/d to 900,000 b/d in 2023.
The revised projections demonstrate the company’s confidence in the continued growth of US oil and gas production, and also reflect the way that the shale industry, which was pioneered by small and mid-sized companies, is increasingly being dominated by larger players.
The growth plans mean that both companies expect approximately to triple their Permian production from 2018 levels over the next five to six years.
Both companies said they expected their Permian production to be profitable and generate free cash flow, despite the shale industry’s record of needing continual infusions of capital to finance drilling programmes.
Chevron highlighted what Jay Johnson, its head of oil and gas production, described as the company’s “unique position” in the Permian, because it owns most of its land outright, rather than having to pay landowners for drilling rights.
Michael Wirth, Chevron’s chief executive, said that overall the group’s “advantaged portfolio is driving strong production growth with lower execution risk, higher cash flow and increased cash returns to shareholders.”
However Exxon also expects to be able to be profitable in the Permian Basin even at lower oil prices, saying it can earn an average return of more than 10 per cent there even with crude at $35 a barrel.
Neil Chapman, a senior vice-president at Exxon, said in a statement: “We’re increasingly confident about our Permian growth strategy due to our unique development plans.”
The company has been buying drilling rights in the Permian to build up large contiguous areas, allowing it to drill longer horizontal wells and have more efficient development.
It is also investing in pipelines and other infrastructure to address some of the challenges created by the breakneck pace of development in the Permian region, including water shortages and a surplus of gas, produced as a byproduct along with the oil.
