Exxon Mobil Corp. and Chevron Corp. plan to aggressively ramp up production from the Permian Basin this year in what could be an early sign that US oil output may surpass expectations once again, like it did in 2023.
Chevron is targeting 10% growth this year, more than twice the pace of publicly-traded independent oil companies, setting it on course to pump 1 million barrels a day from the region in 2025.
Exxon sees production growth of nearly 7%, but is expected to double its overall output once it completes the $60 billion of Pioneer Natural Resources Co. by mid-year.
“We are in the best parts of the Permian,” Chevron Chief Financial Officer Pierre Breber said during an interview. “Our growth is higher likely than the basin average but it is representative of our activity level and the activity level of our partners.”
The pace of US oil production last year surprised traders and analysts, pressuring prices and piling pressure on the OPEC+ alliance to restrain output. Exxon and Chevron’s Permian development plans are closely watched as they are already among the basin’s biggest producers, meaning their growth rates are coming on top of already high output levels, adding to global supplies.
Analysts were skeptical Chevron would meet its full-year production guidance because of several poor quarters during which the company struggled with infrastructure problems and other operational issues. But a knockout fourth quarter saw Chevron produce 867,000 barrels of oil a day, 12% higher than the previous quarter.
Production growth in 2024 will be similarly “back-end loaded” to the latter half of the year and may drop in the first half, Breber said.
IN PROGRESS
This was not supposed to happen, from the Reuters link above:
U.S. oil and gas drilling has slowed in response to the fall in prices over the last 18 months, but that has not yet translated into slower production, keeping prices under pressure.
Exploration and production firms have continued to increase output despite drilling fewer wells, by concentrating on the best sites, accelerating drilling times and boring longer horizontal sections for each well.
In the oil market, efficiency gains have frustrated efforts by Saudi Arabia and its allies in OPEC⁺ to drain global oil inventories and boost prices.
In gas, where there is no equivalent of OPEC⁺, continued production growth has kept prices close to three-decade lows in real terms.
The critical question is how much longer efficiency gains can keep driving significant output growth without an increase in prices and drilling.
The number of active rigs drilling for oil averaged 498 in November 2023 down from a high of 623 in December 2022, according to weekly counts published by oilfield services company Baker Hughes.
But production continued to increase and set a new monthly record of 13.3 million barrels per day (b/d) in November 2023, according to the U.S. Energy Information Administration (EIA).
From the Yahoo!Finance link above:
US oil production soared to a record 13.3 million barrels a day last week.
The surge in oil production comes amid heightened tensions in the Middle East. The US is the largest oil producer in the world, surpassing Russia's 9.5 million barrel a day production rate, and well ahead of Saudi Arabia's daily production rate of 9.1 million barrels a day.
What's perhaps most impressive about the steady surge in oil production is the fact that the weekly US oil rig count remains well below the 2014 peak of more than 1,600 rigs. There were just 501 active oil rigs in the US last week, representing a 69% decline from the 2014 peak. That shows just how efficient America's energy industry has become after a period of depressed oil prices from 2014 through 2021.
"Crude production is cyclical, but over the last decade and a half has registered a strong uptrend relative to operating rigs or employment in the oil and gas industry. This is a powerful form of technological progress and productivity growth," Comerica Bank chief economist Bill Adams told Business Insider in October.
There are plenty of economic benefits to America as it consistently becomes a net exporter of crude oil. Adams highlighted that it makes America's economy more resilient and reduces the chance of a recession in 2024. It also reduces the risk of 1970s-style stagflation, which was in part driven by oil supply shocks.
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