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US majors widen output gap over European rivals

US majors widen output gap over European rivals

New York, 6 May (Argus) — ExxonMobil and Chevron are seeing investments in Guyana and the Permian shale basin pay off, widening a gap with their transatlantic counterparts that could get even bigger with the completion of recent mega-deals. ExxonMobil is championing a speedy ramp-up of a massive offshore oil discovery in Guyana, where production has surged to more than 600,000 b/d of oil equivalent (boe/d) in the space of just a few years. And Chevron recorded a 35pc jump in first-quarter US output from a year earlier, buoyed by better-than-expected performance from the Permian basin, as well as the $7.6bn acquisition of US independent PDC Energy that bolstered its footprint in Colorado's DJ basin. And after years of delays and cost overruns, its highly vaunted expansion project in Kazakhstan is finally close to seeing the light of day. Even though European rivals including Shell and BP are backtracking on previous plans to scale back their reliance on oil and gas production, the US majors are poised to extend their lead after dominating a recent round of industry consolidation. ExxonMobil will become the top producer in the Permian after wrapping up its $59bn takeover of shale giant Pioneer Natural Resources. Anti-trust regulators at the US Federal Trade Commission cleared the deal after barring Pioneer's former chief executive, Scott Sheffield, from gaining a seat on the board, following allegations that he sought to collude with Opec members. And Chevron is still optimistic that its pending $53bn purchase of independent producer Hess will close by the end of the year, even though ExxonMobil has thrown a spanner in the works by claiming its right of first refusal over Hess' 30pc stake in Guyana's prolific Stabroek block, where it is the operator. Chevron's attempt to muscle in on Guyana's oil riches would answer lingering concerns over its long-term growth profile. The dispute has now been referred to international arbitration in Paris and the company hopes the transaction can be completed this year. A failure of the deal to close would not "materially" hit Chevron's near-term valuation, according to bank HSBC. "However, the strategic gap between Chevron and ExxonMobil could widen over time if the Hess deal does not happen," the bank says. Advantage Exxon Excluding the Pioneer transaction, ExxonMobil forecasts its output will grow to 4.2mn boe/d by 2027 from about 3.8mn boe/d this year. Chief executive Darren Woods has doubled down on so-called "advantaged" projects including Guyana and the Permian, which offer the most profitable and low-cost barrels that will be key drivers of revenue growth. The company's share of overall production from such assets has increased to 44pc from 28pc in recent years. Woods sees the growing cash flow from those projects as vindication of his strategy to direct "counter-cyclical" investments before and during the pandemic, which were unpopular with some investors at the time. Spending discipline remains a key priority even as new projects start up. ExxonMobil has achieved $10.1bn of cost savings from 2019 levels, and is on course to hit $15bn by 2027. And Woods says there is scope for even more savings to be found. Meanwhile, Chevron says its output from the Permian is trending better than previous guidance for a 2-4pc decline in the first half of 2024, with more wells due to come on line later this year. The company is also preparing to start up its Anchor offshore platform in the Gulf of Mexico in the middle of the year, with more projects in the region to follow. "The outlook in the US is especially strong," chief executive Mike Wirth says. Chevron is guiding for 4-7pc overall output growth this year, after pumping a record 3.1mn boe/d last year. By Stephen Cunningham Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.