Despite a soft, global oil market, Chevron Corporation (NYSE: CVX) recently announced an aggressive plan to shift resources to West Texas and eastern New Mexico from other regions in a bid to triple daily crude output by 2020. The increased exploration activities improve chances for active rig counts to increase in the years ahead.
The shift in exploration strategy promoted by Chevron at its annual security analyst meeting in New York projects that up to 350,000 barrels could be pumped from the Permian Basin daily – an increase from roughly 130,000 currently produced throughout the region. An executive presentation obtained by Breitbart Texas notes that the company maintains access to “large, quality resources” in the area consisting of two million acres of land where the vast majority of parcels have low to no royalties attached.
Chevron’s meeting notes also offer insight into new efficiencies seen in the Permian Basin in recent years. Compared to 2014, the company achieved a 40 percent cost reduction when drilling horizontal wells by the end of 2015. Days spent drilling an average 7,500 foot lateral well fell to 25 in 2015, down from 50 in years past. The Delaware and Midland sub-basins are expected to see the greatest increases in activity over the next four years.
Chevron management has spun the plan to position the company for when the oil slump comes to an end.
“We believe markets will improve, and we’ll be well positioned when they do,” Chevron Chairman and CEO John Watson said in a release. “We have an excellent upstream and downstream portfolio, and we are driving operating and administrative efficiencies across the company.”
There has been little question as to what Watson meant in terms of “administrative efficiencies” made. As Breitbart Texas recently reported, Chevron has cut roughly 10 percent of its global workforce since the oil downturn beginning in mid-2014.
Tripling down in west Texas coincides with local calls from economic interest groups like the Amarillo-based Panhandle Producers & Royalty Owners Association to position the nation for increased, domestically-sourced consumption. The trade association explained to Breitbart Texas how it hopes to convince the next President of the United States to promote new import quotas that would eventually lead to only 10 percent of the nation’s oil and gas consumption to be provided from outside of North America.
Tom Cambridge of Cambridge Production, based in Amarillo, commends Chevron for sticking with the Permian Basin amid $40 per barrel pricing. He notes that other companies like Pioneer Energy Services and Matador Resources are executing similar plans to remain in the area. The Basin’s stacked shale formation allows drillers to operate in multiple zones on the same acreage.
While Chevron bets big on western Texas, other local drillers continue to file for Chapter 11 bankruptcy protection en masse. This news site previously reported that Houston-based Energy XXI and Goodrich Petroleum are the latest to join a collection of more than 50 companies with similar applications before federal courts.
Logan Churchwell is a founding member of the Breitbart Texas team. You can follow him on Twitter @LCChurchwell.
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