Chevron Slows Permian Growth as ExxonMobil Plans to Expand

Falling oil prices sent second-quarter profits at two of the Permian Basin's dominant producers, Exxon Mobil and Chevron, tumbling to four-year lows. But the two multinationals are taking different approaches to the future.

Chevron, which is shedding 200 Midland-area jobs as part of a 15% to 20% reduction in its global workforce, said in its earnings report Permian Basin production has topped 1 million barrels per day, a gain of 14% from the previous year.

Having achieved that milestone, Chevron Chief Executive Officer Mike Wirth said during the company's investor call that it will begin to moderate growth and reduce capital expenditures as it focuses on generating free cash flow.

"As we deliver that free cash flow growth of $2 billion next year in the Permian, I think you should see capex drop further as we can continue to manage a sustained performance in the Permian," Wirth told investors.

He attributed the second quarter results to strong execution by Chevron's staff as well as record production not only from the Permian, but from Chevron's Tengizchevroil (TCO) affiliate and the Gulf of Mexico.

Chevron has been producing in the Permian Basin for 100 years, tracing its roots back to the Texas Pacific Land Trust and now contains more than two million net acres and an advantaged mineral interest.

While Chevron is taking steps to moderate its growth, ExxonMobil is planning for continued growth.

In its second-quarter earnings, the company reported record production of 1.6 million oil-equivalent barrels per day from the Permian, with plans to grow that to 2.3 million oil-equivalent barrels per day by 2030.

"Our Permian target remains to double resource recovery, for an industry that sits at just 6% to 8% today. We have a deep and increasing portfolio of new technologies that we have been developing for many years. Some are already being deployed, while more are on the way including our fourth generation cube development," the company reported in its earnings release.

"Deploying these innovative technologies to the largest low-cost inventory in the Permian Basin is key to our long-term growth trajectory. While others talk about reaching peak production in the near-term, we see growth continuing into the next decade," officials added.

ExxonMobil Chairman and CEO Darren Woods attributed much of the production growth to its acquisition of Pioneer Natural Resources, which "made us the undisputed leader in the Permian Basin," he said during the second-quarter investors' call. He added that the company is open to additional acquisitions.

"We're interested in building value and building volumes. And that's what we've been doing in Pioneer and what we look for in other opportunities. We're not looking to buy companies and then strip all the people out of them. Instead, we're looking to buy companies with talented folks where we learn from them and they learn from us. So that's a really important part of our acquisition strategy," he said.