SAN RAMON, CALIF. The Chevron Corp. is planning over 2,200 net new wells in the next five years while earning a return on capital employed near 30 percent and free cash flow greater than $5 billion in 2027.
“Longer term we’ve identified well over 6,000 economic net well locations that support a plateau greater than one million barrels per day through the end of the next decade,” Chairman-CEO Mike Wirth said in his company’s second quarter earnings call. “Our financials included a return on capital employed greater than 12 percent for the eighth consecutive quarter and another quarterly record in shareholder distributions of more than $7 billion.”
Heavily invested in its Tengizchevroil venture in Kazakhstan, Chevron “is making good progress with commissioning and pre-start up activities including introducing fuel gas to the new facilities,” Wirth said.
“In the third quarter we expect mechanical completion for our Future Growth Project to complete a major turnaround. Cost and schedule guidance is unchanged. Conversion of the field from high-pressure to low-pressure is expected to begin late this year and the FGP is on track to start up by mid-2024.”
Tengizchevroil is a joint venture with the Kazakhstani state oil company KazMunayGas, ExxonMobil Kazakhstan Ventures and the LukArco partnership of Lukoil and Atlantic Richfield.
Wirth said that following completion of the current projects, Tengizchevroil will produce more than one million barrels of oil per day and generate $5 billion of free cash flow.
“Chevron’s Permian production set another record in the second quarter, about five percent above the previous quarterly high,” he said. “We expect the next quarter’s production to be roughly flat before growing again in the fourth quarter on track with our full-year guidance.
“Early 2023 well performance in our company-operated assets is consistent with our plans. In New Mexico we’ve put on production at 10 wells. Before year-end we expect an additional 30 wells with higher expected production rates.”
Wirth said short-term well performance “is one measure, but we’re focused on maximizing value from our unique large resource base that’s expected to deliver decades of high-return production.
“In the deepwater Gulf of Mexico the floating production unit at Anchor is on location and the project remains on track for its first oil next year,” he said. “We continue to build on our exploration success and we were awarded the highest number of blocks in the most recent lease round.”
In the Eastern Mediterranean, he said, Chevron’s Aphrodite appraisal well at Cyprus has met expectations and a development concept has been submitted to the government.
“At Leviathan we’re expanding pipeline capacity to nearly 1.4 billion cubic feet per day,” Wirth said, referring to a gas field 80 miles offshore from Haifa, Israel. “We expect to close our acquisition of PDC Energy in August.”
Chief Financial Officer Pierre Breber said Chevron’s net debt ratio ended the quarter at 7 percent, which “was significantly below the low end of our guidance range.
“Surplus cash on the balance sheet was reduced during the quarter with cash balances ending at $9.6 billion and being well above the cash required to run the company,” Breber said. “Adjusted second-quarter earnings were down by $5.6 billion versus the same quarter last year.”
He reported primarily favorable tax items and income from non-equity investments in Venezuela and he said adjusted downstream earnings, compared to the first quarter, decreased by $900 million due to lower refining margins.
