Quarterly / Earnings Reports | Second Quarter (2Q) Update | Drilling Program-Rig Count

Chevron Touts 56% Jump in Permian Production YOY; One Million BOEPD by 2023

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In its Q2 2019 report, Chevron detailed its latest activity in the Permian. Similar to ExxonMobil, Chevron is looking to ramp up its Permian productivity in the next 4-5 years.

Permian Output Jumps +56% YOY; Eyes One Million BOE/d by 2023

- Q2 production of 421 MBOEPD - up +56% YOY

• The company expects Permian production to hit nearly one million BOEPD by 2023

- According to Shale Experts Rig Database, Chevron is currently running 20 rigs in the Permian - flat YOY

The company commented in its call: "Permian shale and tight production continues to track the guidance we provided at our 2019 Security Analyst Meeting. In the second quarter, production was 421,000 barrels of oil-equivalent per day, an increase of over 150,000 barrels a day, or about 55% relative to the same quarter last year. The strong performance demonstrates our track record of consistent execution and we expect to deliver 900,000 barrels per day in 2023 with a relatively steady rig count.

"Moving to the mix of crude oil, NGLs and natural gas about three-quarters of our Permian production is liquids and half of our production is crude oil. We expect these proportions to continue throughout the forecasted period. As discussed in the past, we have an advantaged royalty position across the Permian, and it's comprised of two distinct components. First, we have a royalty benefit shown on the dotted blue wedge as our actual royalty rate is lower than the standard royalty rate.

"The second component comes from the royalty barrels shown by the hashed blue wedge, which are the barrels we received from the acreage that we've leased to other producers. Of course, these barrels require no Chevron capital. In total, these royalty contributions make up about 20% of our production throughout the five-year period and contribute to delivering our expected production profile.

"Let's turn to slide 10. Our work to reduce unit cost and increase productivity continues. We're optimizing our Permian factory and maintaining our focus on delivering industry-leading returns. This slide shows the progress, we've made since 2016. As shown on the left, we continue to drive higher EURs by optimizing well spacing, landing zones, and completions. The average lateral length of our wells continues to increase and is expected to approach 10,000 feet next year as we execute our core-up strategy for our development areas.

"As illustrated in the upper right, these efforts translate into a sustained reduction in unit development and production costs. The chart on the lower right shows that the royalty benefit alone leads to returns that are about 10 percentage points higher than a comparable well subject to the standard royalty burden. As we said before, our strategy in the Permian is to be highly competitive in our execution, leverage our midstream capability and use our advantaged royalty position to make us the clear leader in financial returns."