Chevron and ExxonMobil Corp. continued to plow ahead in the Permian Basin during the third quarter, where increasingly strong development for both majors helped drive overall production gains at a time when global commodity prices weighed on earnings.
For ExxonMobil, which ended the period with 55 rigs in the Permian and 10 completion crews, volumes from the play increased more than 70% year/year and 7% sequentially to hit 293,000 boe/d.
“Obviously, we feel really good about the volume growth that we see out there, the resource continues to respond very well, we’re making good progress on the development plan that we have in place, including making sure that we capture the full value of the resource, using our logistics position to bring barrels to our refineries and our chemical plants,” said investor relations chief Neil Hansen during a call on Friday to discuss third quarter results.
Hansen, who noted that the company is still early in the development of its Permian assets in Texas and New Mexico with just a few hundred wells drilled, also said the company continues to make good progress on processing and takeaway capacity, which remains a big concern for operators in the constrained play. ExxonMobil started up phase 1 of its Delaware central delivery point and pipeline to the Wink terminal in August, while construction is ongoing on other midstream projects.
Global production was up 3% in the third quarter to 3.9 million boe/d. Overall liquids production, driven largely by Permian growth, was up 4% year/year, while natural gas volumes increased just 1% in that time.
Chevron, which also reported third quarter earnings on Friday, continued to make significant headway in the Permian as well. The company’s U.S. upstream segment produced 934,000 boe/d during the period, up 103,000 boe/d from the year-ago quarter. Production increases, Chevron said, were mainly driven by shale and tight properties in the Permian.
U.S. liquids production was up 11% year/year to 726,000 b/d, while natural gas production was up 17% over the same time to 1.24 Bcf/d. Permian volumes soared 35% year/year, meanwhile, to reach 455,000 boe/d during the quarter.
Overall production was lifted as well. Chevron said global production came in at 3.03 million boe/d, or 3% more than in the year-ago period.
Still, global commodity prices hung on third quarter results, as ExxonMobil warned they would early last month.
“The broader margin environment remains challenging, as short term supply and demand imbalances continue to pressure natural gas prices and industry chemical and lube basestock margins,” Hansen said.
While earnings sank across the board for ExxonMobil, including its downstream and chemical segments, upstream income was down by more than $2 billion from 3Q2018 on lower realizations.
Chevron said much the same. In the U.S., its average sales price for crude oil and natural gas liquids was $47.00/bbl, down from $62/bbl in the year-ago period. Natural gas prices, meanwhile, were down to 95 cents/Mcf in 3Q2019 from $1.80/Mcf at the same time last year.
“Third quarter earnings and cash flow were solid, but down from our very strong results of a year ago,” Chevron CEO Michael Wirth said of the company’s overall performance. “Lower crude oil and natural gas prices more than offset a 3% increase in net oil-equivalent production from last year’s third quarter.”
ExxonMobil reported third quarter earnings of $3.2 billion (75 cents/share), compared to earnings of $6.2 billion ($1.46) in the year-ago period.
Chevron reported third quarter net income of $2.6 billion ($1.36), compared to earnings of $4.0 billion ($2.11) in 3Q2018. Both companies missed Wall Street consensus.