Chevron Eyes More Activity in Permian, Gulf of Mexico as Profits Soar

Researched by Industrial Info Resources (Sugar Land, Texas)--Many Americans are dreading their next trip to the gas station, but that's all the same to Chevron Corporation (NYSE:CVX) (San Ramon, California), whose profit more than quadrupled during the first quarter of 2022, on the back of higher oil and gas prices. Industrial Info is tracking more than $54.5 billion worth of active projects from Chevron globally, including more than $14.7 billion in the U.S.

Click on the image at right for a graph detailing Chevron's active drilling project, by country, according to Industrial Info's Project Database.

Chevron's $6.3 billion in first-quarter earnings dwarfed its $1.37 billion earnings from first-quarter 2021. Revenues stood at $54.37 billion, compared with $32 billion from the same period last year. Supply-related concerns following Russia's invasion of Ukraine--not to mention persistent inflation--drove West Texas Intermediate (WTI) crude futures to $130.50 per barrel in early March, while international benchmark Brent neared $140; both were highs not seen since 2008, although both have since returned to about $100 per barrel.

Chevron produced an average of 3.06 million barrels per day globally in the first quarter, including a record 692,000 barrels of oil equivalent per day in the Permian Basin. The company raised its 2022 guidance for the Permian Basin to 700,000 to 750,000 barrels per day, a 15% increase from last year and a reflection of where Chevron and other oil and gas giants expect to continue doing much of their business in the coming years.

Industrial Info is tracking progress at 23 Chevron-owned facilities based in the Permian Basin, ranging from crude oil-production facilities to processing plants for natural gas and natural gas liquid (NGL), along with compressor and pump stations for pipelines, among others. Many supply Chevron facilities outside the area with feedstock, such as its 100,000-barrel-per-day (BBL/d) refinery in Pasadena, Texas, which is being revamped to process only light tight crude from the Permian. Subscribers to Industrial Info's Global Market Intelligence (GMI) Oil & Gas Project Database can click here for a list of plant profiles for Chevron-owned facilities in the Permian, and read a detailed project report on the Pasadena revamp.

"Oil and gas production is expected to grow to well over 3.5 million barrels per day by 2026, with most of the growth from our Permian and Kazakhstan assets," said Jay Johnson, the executive vice president of Chevron's Upstream business, in the company's Investor Day presentation in March.

Johnson also said roughly two-thirds of Chevron's $15 billion capital-spending program for 2022 will go toward short-cycle projects, including unconventionals, infill drilling programs and delayed-development wells at existing facilities: "We're seeing very high returns come from those, and they help boost the returns from some of the initial base projects that were put in."

Deepwater drilling also is offering good returns, Johnson said, particularly in the Gulf of Mexico, although he acknowledged the company has "scaled [global deepwater projects] back and been very disciplined about it." In February, Chevron began construction on its Anchor Field development in the Gulf of Mexico, a multi-phase project that includes a $1.5 billion platform about 140 miles off the coast of Louisiana, a $500 million drilling program comprising seven wells, and about $500 million in subsea infrastructure.

The Anchor development is expected to produce about 75,000 BBL/d of crude oil and natural gas. Altogether, Chevron is pursuing $4.3 billion worth of projects in the deepwater Gulf of Mexico. Subscribers can read detailed project reports on the platform, drilling program and subsea infrastructure and click here for a full list of projects in the deepwater Gulf of Mexico.

Chevron's full-year capital spending and announced acquisitions for 2022 are expected to be more than 50% higher than in 2021, said Mike Wirth, the chief executive officer of Chevron, in a quarterly earnings-related press release.

Chevron Phillips Chemical Company (CPChem) (The Woodlands, Texas), a joint venture with Phillips 66 (NYSE:PSX) (Houston, Texas), is spearheading one of the largest and most ambitious projects under Chevron's umbrella: the $8 billion US Gulf Coast II petrochemical complex along the Gulf Coast, which includes a 4.4 billion-pound-per-year, $5.5 billion ethylene cracker; a $2 billion addition of two high-density polyethylene (HDPE) units that would produce 1 million tons per year from the ethylene cracker's feedstock; and a $500 million outside battery limits (OSBL) project to support the two units.

Executives expect Chevron to reach a final investment decision (FID) on Gulf Coast II sometime this year, following years of delays related to COVID-19 and other obstacles. "In regards to [the] petrochemical facility, although we have not FID'd the projects, we assume that in our capital and in our business plan," said Mark Nelson, the executive vice president of Chevron's Downstream & Chemicals business, in the Investor Day presentation. Subscribers can read Industrial Info's detailed reports on the ethylene, HDPE and OSBL projects.

"Demand for petrochemicals has been strong throughout the pandemic, boosted by increased sales for medical supplies, packaging, consumer goods, and more," Nelson added. "In the near-term, we expect capacity growth to gradually pressure margins back down. Longer-term, we expect middle class expansion in growing economies to support demand and margins."

Industrial Info Resources (IIR) is the world's leading provider of market intelligence across the upstream, midstream and downstream energy markets and all other major industrial markets. IIR's Global Market Intelligence Platform (GMI) supports our end-users across their core businesses, and helps them connect trends across multiple markets with access to real, qualified and validated project opportunities. Follow IIR on: LinkedIn.