Chevron Favoring Cash Flow Over Increased Production

Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Though the bulk of the spending program for next year favors the U.S. upstream sector, Chevron Corporation (NYSE:CVX) (San Ramon, California) said it was favoring free cash flow over production gains for 2025.

The company said it was pegging capital spending for next year at around $17 billion on the high end, a $2 billion reduction from 2024 levels.

"The 2025 capital budget along with our announced structural cost reductions demonstrate our commitment to cost and capital discipline," said Chevron Chairman and Chief Executive Officer Mike Wirth. "We continue to invest in high-return, lower-carbon projects that position the company to deliver free cash flow growth."

The bulk of the planned expenditures, about $13 billion, will go toward developing the company's U.S. portfolio. In the Permian Basin, the largest inland oil producer in the country, the company said it was favoring free cash flow over production gains, however.

That runs counter to the agenda from U.S. President-elect Donald Trump, who said he would capitalize and build on the country's position as the world leader in oil and natural gas production. Trump's pick to lead the Energy Department, Chris Wright, is currently the chief executive officer at energy industry service provider Liberty Energy (Denver, Colorado).

The Permian is the largest inland crude oil producer in the United States. The U.S. Energy Information Administration (EIA), the statistical arm of the Energy Department, expects Permian crude oil production will average 6.5 million barrels per day (BBL/d) next year, representing about half of the total U.S. oil production.

Permian production by 2025 would show a 10% increase from year-ago levels should the EIA forecast prove to be accurate.

The rest of the U.S. spend would target the Denver-Jules Basin in Colorado and the Gulf of Mexico. This year, Chevron brought a new, high-pressure, semi-submersible floating production unit dubbed Anchor online in the Gulf of Mexico. The facility is designed for a production capacity of 75,000 BBL/d of oil and 28 million cubic feet per day of natural gas.

All told, Chevron believes 2025 production in the U.S. territorial waters of the Gulf of Mexico will be around 300,000 BBL/d, representing about 15% of total U.S. offshore production in the Gulf.

The company in its spending announcement from Friday made no reference to its recent acquisition of Hess Corporation (NYSE:HES) (New York, New York) or its holdings offshore Guyana and in North Dakota. Outside of North America, the only mention was Chevron's plans to spend $1 billion on the gas-rich Gorgon project in Australia.

Total earnings for Chevron during the third quarter were around $4.4 billion, relatively unchanged from second-quarter levels but some 20% lower than the same period last year. It recently took in $6.5 billion for the sale of its interests in the Athabasca Oil Sands Project and Duvernay shale assets in Canada.

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