Chevron Corp (NYSE: CVX)
With 29 rigs operating in the Permian Basin and a massive acreage position from its legacy holdings, Chevron’s operational scale in this red-hot basin, free cash flow and strong balance sheet give it’s a significant advantage over the competition. And the company isn’t shy about throwing its weight around to extract favorable terms on takeaway capacity and oil-field services. The company’s output in the region averaged 100,000 barrels per day, and management’s guidance calls for this output to grow by 30 to 40 percent annually through 2020.
On the call, management expressed a preference for ongoing investment in the Permian Basin, citing the quality of the resource and opportunities to lower development and operating costs. As for new deepwater projects, tie-backs and fields that can use existing facilities offer the best economics. However, the industry continues to focus on reducing deepwater exploration and development costs. A significant decline day-rates for offshore drilling rigs helps, but a lot of work remains. We’ll continue to monitor the industry’s progress on this front.
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Elliott and Roger on Aug. 31, 2020
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