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Chevron to boost Permian rigs in 2018

02 Feb 2018 18:46 GMT
Chevron to boost Permian rigs in 2018

Houston, 2 February (Argus) — Chevron said it will boost drilling in the Permian basin this year as production in the US shale formation continues to exceed expectations.

The major will add four rigs in the basin to move up to 20 rigs, said chief executive Michael Wirth while reporting fourth quarter earnings. Wirth took over the top position at Chevron this week, replacing the retiring John Watson.

Chevron's Permian production in the fourth quarter averaged 205,000 b/d of oil equivalent (boe/d), up by 60,000 boe/d from a year earlier. For the full year of 2017, Permian output averaged 181,000 boe/d, up by 35pc from 2016.

The company said that transactions in 2017 allowed it to add 600 additional long laterals to the Permian well inventory and it is currently using six pressure pumping crews.

The plan to boost Permian production comes amid strong growth projections for the basin which is in west Texas and eastern New Mexico. Rising Permian output helped US production reach 10mn b/d in November for the first time since 1970, according the latest monthly data from the US Energy Information Administration.

ExxonMobil this week said it expects its output from the Permian to triple by 2025 as recent changes in the US corporate tax structure help spur further investments.

Chevron said today that its overall North America production fell slightly despite increases in the Permian because of the impact of asset sales, normal field declines, higher downtime, and hurricane effects in the Gulf of Mexico.

North America output in the fourth quarter averaged 671,000 boe/d, down by 11,000 boe/d from a year earlier. The net liquids component increased by 2pc to 518,000 b/d while the natural gas output fell by 12pc to 920mn cf/d.

Chevron's international output in the fourth quarter increased by 82,000 boe/d from a year earlier to 2.07mn boe/d.

Production increases from major capital projects, like its massive liquefied natural gas (LNG) facilities in Australia and Angola, were partially offset by production entitlement effects in several locations, normal field declines, and the impact of asset sales. The liquids component of the total fell by 3pc to 1.2mn b/d.

Chevron said it expects its total production — including US and international operations — to increase by 4-7pc in 2018.

Chevron's refinery crude input in the fourth quarter averaged 834,000 b/d, up by 16pc from a year earlier. The increase mostly reflected the absence of fourth quarter 2016 planned turnaround activity at its 250,000 b/d refinery in Richmond, California, which was partially offset by a planned turnaround at the 275,000 b/d refinery in El Segundo, California and impacts from Hurricane Nate at its 330,000 b/d refinery in Pascagoula, Mississippi.

Chevron saw 1.17mn b/d of refined product sales in the fourth quarter, up by 3pc from the fourth quarter of 2016, primarily because of increased diesel sales. Branded gasoline sales fell by 1pc to 518,000 b/d.

Chevron this week said it made a significant oil discovery at the Ballymore prospect in the deepwater US Gulf of Mexico.

Ballymore is in the Mississippi Canyon area, about three miles from Chevron's Blind Faith platform, in water depth of 6,536ft.

Chevron also touted another recent oil discovery in the US Gulf at the Whale deepwater well. Chevron owns 40pc of Whale and Shell, the operator, owns 60pc.

"These discoveries are exciting for both their resource potential and their proximity to existing infrastructure, which offers the possibility for faster and more capital efficient development," Wirth said.

Chevron reported a profit of $3.1bn for the fourth quarter, up from $415mn a year earlier. The total included non-cash provisional tax benefits of $2bn related to recent change in US tax law.

For the full year of 2017, Chevron reported earnings of $9.2bn, compared to a loss of $497mn in 2016.