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ExxonMobil, Chevron see slightly lower 2022 Permian output than expected from SNL Energy Finance Daily ExxonMobil, Chevron see slightly lower 2022 Permian output than expectedByline: Starr Spencer Exxon Mobil Corp. and Chevron Corp. each foresee lower respective Permian Basin production profiles for 2022 than earlier stated, although both are still producing high volumes, the majors' CEOs said during separate third-quarter earnings calls Oct. 28. ExxonMobil, during much of 2022, had touted 25% growth in the West Texas and Southeast New Mexico basin this year, above the 2021 average output of 460,000 barrels of oil equivalent per day. But the company has reduced the growth target to about 20%, CEO Darren Woods said in a webcast. Woods said one of ExxonMobil's challenges in the Permian is maximizing recovery of its large resource base in the basin. Chevron expects its Permian production growth profile to tilt toward the low end of its earlier guidance of 700,000 boe/d to 750,000 boe/d, CEO Mike Wirth said during the company's earnings call. Whereas the CEOs offered varying reasons for lowered expectations, analysts noted that ongoing supply chain and labor shortages are big obstacles to output growth. "The entire industry is suffering" from those constraints, said Reed Olmstead, executive director of North American upstream research for S&P Global Commodity Insights. "Costs for new labor (needed to increase rig counts and frac crews) are skyrocketing, turnover is huge. Labor is a real challenge." "Equipment is being run super-hard, so maintenance costs are rising, but only if you can get the parts," Olmstead added. "So that slows things down, too." Jefferies analyst Lloyd Byrne, citing a top company source, said Permian inflation is running at about 10% to 15% annually. Role of drilled, uncompleted wells Wirth suggested that besides supply chain issues, the number of drilled but uncompleted wells, commonly known as DUCs, also may have thrown off Chevron's Permian guidance. DUCs await completion for weeks, months or often years, for many reasons. The operator might not want to produce its high-volume wells into a low-priced market; an exploration and production company might not have completed drilled wells, which is usually done in batches; or an operator may want to optimize production by producing certain wells sooner than later. The number of DUCs increased during the COVID-19 pandemic, when operators slashed their budgets but typically still paid to lease rigs. They used the time to drill wells but did not complete them, since the market did not need more oil. Instead, the operators deferred well production to a period of higher oil and gas prices. That is what Chevron did, Wirth said. "As we went back to work, the first thing we did was send completion crews out and start to bring the DUCs online" in late 2021 and early 2022, Wirth said. "[That] may have misled a little bit in terms of the rate of growth because this was this kind of surge capacity." Chevron's DUC inventory is now more modest, and the company's Permian production is leveling out to a more steady growth rate, Wirth said. "So we likely will be towards the lower end of the [output guidance] range," Wirth said. "But we're not changing guidance for this year or our forward guidance." Chevron plans to add three to four rigs in 2023, up from the estimated 10 at year-end 2022, to achieve an approximate target of greater than 1 million boe/d by 2025, Guidance and results For ExxonMobil, a 20% target growth rate would put its 2022 Permian production at about 552,000 boe/d, compared to the 575,000 boe/d that would have resulted from a 25% year-over-year growth rate, Woods said. Woods added that in 2021, ExxonMobil achieved a 25% Permian growth rate. ExxonMobil's third-quarter 2022 production included 2.4 million barrels per day of oil and 7.9 Bcf/d of natural gas. Chevron produced 708,000 boe/d in the third quarter of 2022 from the Permian, Wirth said, adding that the total is up about 15% from the first three quarters of 2021, which was "just a touch" over 600,000 boe/d. The CEO noted the company produced 646,000 boe/d from the Permian in the third quarter of 2021. Chevron's total third-quarter 2022 production averaged 3.03 million boe/d, flat with the same period's year-ago output, but up nearly 5% sequentially. Third-quarter 2022 production included 1.7 million b/d of net liquids output and 7.92 Bcf/d of natural gas. For the third quarter of 2022, Chevron posted net earnings of $11.2 billion, or $5.78 per share, compared with $6.1 billion, or $3.19 per share, in the third quarter of 2021. ExxonMobil reported earnings of $19.7 billion, or $4.68 per share, for the third quarter of 2022, up from $6.75 billion, or $1.57 per share, in the same period in 2021. |
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