Chevron Corporation announced a 2020 organic capital and exploratory spending program of $20 billion. In a statement, the California-based company informed that the year’s budget supports a solid portfolio of upstream and downstream investments.
The development of the Permian Basin is among the company’s main work areas. This also includes its major capital project at TCO in Kazakhstan and a queue of deepwater opportunities in the Gulf of Mexico.
Forecasts in the Permian Basin
In the upstream business, Chevron Company plans to earmark $11 billion to sustain and grow currently producing assets. This includes about $4 billion for Permian unconventional development and about $1 billion for other international unconventional development.
This shale oil basin is approximately 400 kilometers wide and 500 kilometers long and covers parts of western Texas and southeast New Mexico. Additionally, it includes the highly prolific sub-basins of Delaware and Midland.
The unconventional crude of the Permian Basin increased to twice its value from 2017 to 2019, according to Executive Vice President of Chevron Upstream Jay Johnson. “When you combine our royalty advantage with the good rocks and competitive execution performance, it translates to compelling economics and a deep queue of opportunity,” he explained.
Projects for growth
The company will also earmark approximately $5 billion of the upstream program is planned for major capital projects underway. About 75% of this amount is associated with the Future Growth Project and Wellhead Pressure Management Project (FGP-WPMP) at the Tengiz field in Kazakhstan. Global exploration funding is expected to be about $1 billion.
The FGP-WPMP are designed to further increase daily production at the Tengiz and maximize the final resource recovery. In detail, the FGP will use the latest sour-gas injection technology in approximately 260,000 barrels per day.
At the same time, WPMP maximizes the value of the existing TCO installations by extending the production plateau and maintaining the existing plants, producing at full capacity. The first oil extraction is scheduled for 2022.
Approximately $2.8 billion of planned capital spending is associated with the company’s downstream businesses. These programs include the fuel refine, market, and transport areas; also associated with the manufacture and distribution of lubricants, additives, and petrochemicals.
— Chevron (@Chevron) 7 de enero de 2020
In terms of capital allocation, Chevron Corporation made a downgrade revision of its longer-term commodity price outlook, according to Chevron president and CEO Michael Wirth. The executive added that this initiative seeks to guarantee proper profitability.
Wirth indicated that the company will reduce funding for various gas-related opportunities. This includes Appalachia shale, Kitimat LNG, and other international projects. Chevron is evaluating its strategic alternatives for these assets, including divestment.
On the other hand, the revised oil price outlook resulted in an impairment at Big Foot. This program focuses on deepwater production in the Gulf of Mexico.
CEO mike wirth shows cost discipline, telling @SquawkCNBC this morning: “business is good…but good isn’t good enough.”
watch the full interview: https://t.co/Qx6u9BzaR5
— Chevron (@Chevron) 11 de diciembre de 2019
“We believe the best use of our capital is investing in our most advantaged assets,” Wirth continued. “With capital discipline and a conservative outlook comes the responsibility to make the tough choices necessary to deliver higher cash returns to our shareholders over the long term,” said Chevron Chairman and CEO Michael Wirth.
Furthermore, he adds “we are positioning Chevron to win in any environment by ratably investing in the highest return, lowest risk projects in our portfolio. This will be the third consecutive year with organic capital spending held flat at $20 billion, continuing our capital discipline through the cycle. Our emphasis on short cycle investments is expected to deliver improved returns on capital and stronger free cash flow over the long-term,”
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