The Permian Basin is driving U.S. oil and gas production growth for Chevron Corp., helped by low development costs, substantial efficiency improvements and low carbon intensity, management said Friday.

CFO Pierre Breber and Executive Vice President of Upstream Jay Johnson hosted a conference call to discuss the San Ramon, CA-based major’s second quarter earnings. 

Amid resurgent energy demand, Johnson told analysts that Chevron’s investment in the basin this year is forecast to be “$1 billion higher than it was last year, and we also see the number of wells that we’re putting on production going up.”

Chevron expects to turn more than 200 wells to production in the Permian this year, driving a roughly 15% year/year increase in  production to between 700,000 boe/d and 750,000 boe/d. The figure is expected to reach 1 million boe/d by 2025, according to management.

Chevron added two Permian rigs in July, bringing its rig count in the basin to 10. The supermajor expects to maintain the rig count to the end of the year, Johnson said. 

Fewer Rigs, More Production

The role of rig counts as an activity indicator has changed in only a few short years, Johnson noted. He explained that “one of our rigs today drills the equivalent of what two rigs could do in 2018.”

Each hydraulic fracturing crew, meanwhile, “is also completing roughly double the work they were doing back in 2018,” he said. For example, simultaneous fracturing, aka simul-frac operations, now allow four wells to be completed at a time, reducing cycle time by a quarter, management said. 

Annual Permian investments are set to reach $4 billion by 2024 and remain more or less flat thereafter, according to Johnson. 

There also are about nine net rigs running on Chevron’s nonoperated Permian acreage, “so that also contributes significantly to our production profile,” he said.

Chevron also is aiming to achieve net zero carbon emissions from its operated Permian assets by 2030.

Permian production is “among our most carbon efficient barrels in the portfolio,” added Breber.

“We more than doubled investment compared to last year to grow both traditional and new energy business lines,” said CEO Mike Wirth. “With Permian production more than 15% higher than a year ago and now as one of the leading renewable fuel producers in the United States, Chevron is increasing energy supplies to help meet the challenges facing global markets.”

During the quarter, Chevron closed its acquisition of Renewable Energy Group Inc. and completed forming a renewable fuels joint venture with Bunge North America Inc.

Chevron’s carbon capture and storage (CCS) efforts continued to advance during the quarter as well, with the launch of a project aimed at reducing the carbon intensity of its California operations, and the expansion of a joining venture to develop the Bayou Bend CCS hub offshore Texas.

LNG Exports Advancing

On the LNG front, Chevron signed agreements to export 4 million metric tons/year (mmty) of liquefied natural gas (LNG) from the Gulf Coast starting from 2026.

Chevron also is aiming to shore up LNG supply to a gas-starved global market via the Angola LNG terminal, and the Gorgon and Wheatstone natural gas developments in Australia.

Gorgon and Wheatstone shipped a combined 87 LNG cargoes in the first half of 2022, up 10% year/year. The Gorgon stage 2 expansion, meanwhile, is expected to achieve first gas by September.

Chevron and its partners in Angola, including Italian major Eni SpA, plan to develop two gassy fields offshore Angola to ensure supply for the terminal, which until now has relied mainly on associated gas volumes tied to oil production. First gas from the Quiluma and Maboqueiro fields is expected by 2026, with production expected to plateau at 330 MMcf/d, the companies said. 

Chevron also sanctioned the Ballymore deepwater project in the Gulf of Mexico, which is expected to require gross investment of about $1.6 billion, management said. Ballymore oil production would come from an existing facility with a capacity of 75,000 b/d.

Capital and exploratory expenditures totaled $6.7 billion during the first six months of 2022, versus $5.3 billion in the same period last year.

Net U.S. production totaled 1.17 million boe/d, versus 1.14 million boe/d in the same period last year. The U.S. total included 1.71 Bcf/d natural gas and 888,000 b/d liquids.

Worldwide production averaged 2.9 million boe/d, down from 3.13 million boe/d in 2Q2021, with the decline driven primarily by contract expirations in Thailand and Indonesia. The decline was partially offset by shale and tight production, mainly from the Permian.

Chevron reported net income of $11.6 billion ($5.95/share) for the period, versus profit of $3.1 billion ($1.60) in the year-ago period. The upstream and downstream segments contributed $8.56 billion and $3.52 billion of the total, respectively, up from $3.18 billion and $839 million in 2Q2021.