(Bloomberg) – Chevron Corp. (CVX) plans to slow production growth at the nation’s largest oil field next year, as President-elect Donald Trump faces an uphill battle to boost U.S. energy production. This is the most definitive sign yet that it is.
Chevron said in a statement Thursday that it will reduce capital spending in the Permian Basin by up to 10% in 2025, from $4.5 billion to $5 billion. Globally, oil exploration companies expect to spend about $17 billion this year, compared with $19 billion this year, in the first budget cuts since 2021.
“Production growth has been constrained in favor of free cash flow,” Chevron said in a statement.
Analysts at Goldman Sachs and Trust Securities raised their price targets on Chevron stock after the company announced its plans. As of 9:39 a.m. New York time, the stock price fell 1.2% as crude oil prices fell for the third day in a row.
The Permian region of West Texas and New Mexico has been one of the world’s fastest-growing oil sources over the past decade, now pumping more than 6 million barrels per day and ranking as OPEC’s No. 1 producer. It is ahead of second place Iraq. Independent drillers drove the early shale revolution, but mega-corporations like Chevron eventually narrowed their eyes on the basin’s potential.
The slowdown would be welcome news for the Organization of the Petroleum Exporting Countries and its allies, which are struggling to contain an 18% drop in oil prices since the end of April due to a glut of oil supplies from the United States and other countries. It’s also a reality check for President Trump, who promised to free up U.S. oil production as part of his “Drill, Baby Drill” energy policy, which promised to cut energy prices in half.
West Texas Intermediate fell 0.4% to $68.30 in New York on Thursday, bringing its 12-month decline to almost 5.6%. U.S. shale is profitable even at these prices, but without more robust demand growth, most executives are willing to return cash to shareholders and pursue acquisitions through acquisitions rather than spend money on expanding production. likes to grow.
Chevron plans to increase production from the Permian again next year, but growth will slow significantly from the 15% annual increase since 2021 as the oil driller approaches its 1 million barrel per day goal.
Chief Executive Officer Mike Wirth suggested last month that production from the basin will stop growing and hit a plateau in the late 2020s, allowing for “a real expansion of free cash flow.” The company’s overall U.S. production may increase until then, in part due to projects in the Gulf of Mexico over the next few years.
A Bloomberg survey of analysts and traders last month found that U.S. production will only increase by 251,000 barrels per day from the end of this year through 2025, the slowest pace since the pandemic-induced decline in 2020. It will be. Exxon Mobil said last week that U.S. production will slow in the coming years as companies focus on profits over production. Exxon Plans will release its 2025 budget on December 11th.
Chevron expects to spend less than $1 billion on the Tengiz field next year as its expansion project in Kazakhstan nears completion. The project will increase Chevron’s free cash flow and provide critical support for its $17.5 billion annual stock repurchase program, despite a series of delays and cost overruns. The $45 billion development will be 50% owned by Chevron, with Exxon and state-owned Kazmunaigas holding 25% and 20% stakes, respectively.
(Updates market reaction in 4th paragraph.)
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