Chevron Expects 4%-7% Production Growth in 2018
US major Chevron February 2 reported 4Q2017 earnings of $3.1bn, well up on its $415mn 4Q2016 profit, and said it expected its Australian and US Permian assets to drive production growth this year.
The latest quarter included a non-cash provisional tax benefit of $2.02bn related to US tax changes. Chevron’s full-year 2017 earnings were $9.2bn, including that $2.02bn US tax change boost, contrasted with a 2016 loss of $497mn.
CEO Michael Wirth said: “We replaced more than 150% of the reserves we produced, and reached several significant upstream project milestones in 2017 including our first LNG shipments from Train 3 at Gorgon and Train 1 at Wheatstone in Australia. We also posted impressive production growth in the US Permian Basin.” Chevron added some 1.54bn barrels of net oil equivalent [boe] to proven reserves in 2017, the largest shares of which were from the Permian and from Gorgon.
"We expect that our 2018 production will continue to grow by 4%-7%, driven primarily by Australian LNG and the acceleration of development activities in the Permian, where investment economics continue to improve," said Wirth.
Chevron net production was 2.74mn boe in 4Q2017, up 3%, while for the year it was 2.73mn boe/d, up 5%.
In 4Q2017, that split out as 671,000 boe/d in the US (up 2%) and 2.07mn boe/d internationally (up 4%). The international figure broke down into 1.2mn b/d liquids (down 3%) and 5.24bn ft3/d natural gas (up 16%), the latter boosted by Gorgon and Wheatstone in Australia and Angola LNG. Gorgon shipped 170 cargoes in 2017, said Chevron, while Wheatstone Train 2 is due to start 2Q2018.
Gross production (so at 100% equity) from the two Chevron-operated Australian LNG ventures was 363,000 boe/d from Gorgon and 32,000 boe/d from Wheatstone in 4Q2017, while in January 2018 it reached 449,000 boe/d from Gorgon and 86,000 boe/d from Wheatstone. Chevron has 47.3% equity in Gorgon, at US$54bn the most expensive LNG export development ever, and 64.14% in Wheatstone.
In its February 2 results, the US major also said its US Permian (Midland and Delaware shales) net production increased from an average over 2017 of 181,000 boe/d to 205,000 boe/d net to Chevron in 4Q2017, with 35% production growth seen between full years 2016 and 2017. The company said it had 16 company-operated rigs and six pressure-pumping crews active on the assets, where it added that it was "working multiple deals for closing in 2018."
Average 4Q2017 prices were, in the US, $50/b for liquids (up 25%) and $1.86/’000 ft3 for natural gas (down 6%), while elsewhere it was $57/b (up 30%) and $4.93/000 ft3 (up 21%). ExxonMobil also noted the same trend for natural gas prices in its 4Q results February 2, up in Europe, down in the US. Exxon included a much larger US tax change benefit than Chevron that significantly boosted its 4Q and 2017 earnings.
Chevron's capital expenditure in 2017 was $18.8bn, of which 87% upstream. Year before capex was $22.4bn.
Earnings by segment for Chevron in 4Q2017 were heavily skewed upstream by the effect of the US tax change benefit, with $5.29bn recorded upstream, $1.28bn downstream, and 'all other' of minus $3.46bn (including foreign currency losses, plus impairments/other non-cash charges of $840mn), for a total net earnings rounded to $3.1bn.