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Chevron CEO Says European Natural Gas Outlook ‘Less Dire,’ Markets Calmer
The legacy Permian Basin operations guided Chevron Corp. to record U.S. production in 2022, with natural gas and oil output from the play rising 16%, the supermajor said Friday.
CEO Mike Wirth led a conference call with the executive team to discuss fourth quarter and full-year performance.
“We delivered record earnings and cash flow in 2022, while increasing investments and growing U.S. production to a company record,” Wirth said. Investments increased by more than 75% year/year, with U.S. production increasing to 1.2 million boe/d.
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“We’re also investing to grow both traditional and new energy supplies to meet increasing demand for affordable, reliable and ever-cleaner energy,” Wirth said.
The CEO, whose firm has LNG prospects around the world, including two liquefied natural gas export facilities in Australia, took a few minutes to discuss with analysts the up-and-down market.
“We certainly have seen a very unusual and volatile year in ’22, which has settled out here as we’ve come into the winter,” he said of natural gas. “Primarily, we’ve seen a bit milder winter in the Northern Hemisphere than is typical…
“And in Europe, the successful build of inventories for this year and the reduction of industrial demand have both resulted in an outlook that is less dire for the European economies than it may have looked like several months ago,” Wirth told investors. “I think the market reflects all of that.”
China’s economy has been slow, too, but it may be turning around, the CEO said.
“I think it’s good that markets have calmed. I mean, the high prices really were creating a lot of stresses out there and that is not good. And I hope we see these prices stay in a more moderate range as we enter 2023.”
Chevron’s natural gas is “primarily contracted on the oil index pricing,” with the “biggest piece, obviously out of Australia…We ran really well in Australia last year with a record number of cargos. And there were some spot cargoes in the mix out of Australia, out of West Africa.”
Permian Still Growing
The Permian boosted overall domestic output, but worldwide, net upstream natural gas and oil production in 4Q2022 fell by 3% year/year to 3.01 million boe/d. Output averaged 3.00 million boe/d for the year, also down 3% from 2021. International production decreased 7% in 2022, while U.S. production increased 4% from 2021, mainly because of the Permian.
“After adjusting for lower prices and portfolio changes, primarily the sale of our Eagle Ford asset and the expiration of a contract in Thailand, we expect production to grow, led by the Permian, and other shale in tight assets,” CFO Pierre Breber said during the conference call. “We remain confident in exceeding our long-term production guidance.”
Wirth explained that the production outlook for 2023 is based on an average oil price of $80/bbl, with output growing 0-3%, to between 3.0-3.1 million boe/d.
“We’ve got some downtime plans,” he said, which shifted to 2023 from 2022. “And then our Permian growth would be a little bit lower in ’23.”
Chevron benefited in the Permian last year because of its backlog of drilled but uncompleted wells, or DUCs. When the DUCs turned to sales, they “goosed early production in ‘22 a little bit more. And then we also are optimizing some of our development plans to factor in some of the things we continue to learn relative to interactions…about how we space laterals and do single- or multi-bench development.”
Overall, U.S. production in 4Q2022 was 1.19 million boe/d in the fourth quarter of 2022, down slightly from a year earlier as decreases in the Gulf of Mexico were partially offset by Permian increases. The net liquids component of domestic production decreased 4% to 895,000 b/d.
Specifically for global natural gas, net output in 4Q2022 was 7.58 Bcf/d from year-earlier output of 7.74 Bcf/d. U.S. gas output trended 4% higher from a year earlier to 1.79 Bcf/d net. International gas production dropped to 5.79 Bcf/d from 6.01 Bcf/d in 4Q2021.
Global natural gas sales ticked up slightly to 9.96 Bcf/d in 4Q2022 from year-earlier sales of 9.34 Bcf/d. U.S. gas sales were nearly flat at 4.22 Bcf/d. International sales increased to 5.73 Bcf/d from 5.08 Bcf/d.
Chevron fetched an average U.S. natural gas sales price of $4.94/Mcf in 4Q2022 versus $4.78 in 4Q2021. Crude oil and natural gas liquids (NGL) sales prices averaged $66/bbl from $63 a year earlier.
For international gas, the average sales price was $10.35/Mcf in 4Q2022 from $7.90 a year earlier. Crude and NGL prices averaged $78/bbl from $74.
Chevron has launched several big projects in the past few months to boost its traditional natural gas and oil output, as well as build a backlog of alternative energies.
To that end, Chevron acquired Renewable Energy Group Inc., becoming the second largest producer of bio-based diesels in the United States. Chevron also launched a joint venture with Bunge North America Inc. to develop renewable fuel feedstocks.
In addition, the San Ramon, CA-based producer “advanced multiple carbon capture opportunities. They include the Bayou Bend carbon storage project, which would be offshore the Gulf Coast, and it received permits to assess carbon storage offshore Australia.
Meanwhile, Integrated polymer projects were sanctioned in Texas with Qatar through a half-owned affiliate, Chevron Phillips Chemical Co. LLC. Chevron also approved the Ballymore project in the deepwater Gulf of Mexico with design capacity of 75,000 b/d.
Net earnings were $6.4 billion ($3.33/share) for 4Q2022, compared with $5.1 billion ($2.63) in 4Q2021. Full-year 2022 earnings rose to $35.5 billion ($18.28/share), up from 2021’s $15.6 billion ($8.14).
U.S. upstream operations earned $2.62 billion in 4Q2022, compared with $2.97 billion a year earlier. The domestic downstream arm reported earnings of $1.18 billion in the latest quarter, versus $660 million in 4Q2021.
The company also has raised its quarterly dividend an additional 6% to $1.51/share. In addition, the board approved a new $75 billion share repurchase program.
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