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Chevron grows Permian production 80% year-on-year in Q3

Highlights

Permian output rises to 338,000 boe/d

Attributes high growth to well design tweaks, high-density fracs

Chevron USGC oil export capacity to triple in early 2019

Houston — Chevron's production from the Permian Basin pole-vaulted 80% in the third quarter over the same period in 2017, based on tweaks made to its method of drilling and completing wells in the prolific US play, the company said Friday.

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Chevron's tight oil and natural gas production from the Midland (eastern) and Delaware (western) sub-basins of the West Texas/eastern New Mexico play totaled 338,000 b/d of oil equivalent in the period, Chevron Chief Financial Officer Pat Yarrington said during a company earnings conference call.

"That's the equivalent of adding a midsized Permian pure-play E&P company in a matter of months," Yarrington said. "We're operating off a new basis of design and finding that has been incredibly successful."

Chevron's US liquids production averaged 654,000 b/d in Q3, up 25% from 525,000 b/d in the same period in 2017. The company's natural gas production rose 14% on the year to 1.061 Bcf/d in Q3.

Global Chevron production was 2.956 boe/d, up 9% from Q3 2017.

Chevron expects its total 2018 production to rise 7%, at the high end of the 4% to 7% guidance given earlier this year.

The company has pursued high-density hydraulic fracturing in the Permian, which involves a wide range of materials and services, and experimentation to achieve the right mix of sand and water that holds open "fracs," Yarrington said.

MAY PAUSE RIG ADDS

Chevron, which has said for a couple of years it would ramp up to 20 Permian rigs, reached that target in Q3. With that goal behind it, the company may "pause" its rig additions in the basin to assure its Permian wells are capital- and operationally efficient at that level, said Yarrington.

Moreover, "I think over time, we're going to try to move what we consider to be a critical performance metric away from just rigs to something that would be a [better] efficiency measure," she said.

Many companies have paused their Permian programs, but for different reasons. Takeaway capacity from the basin, where production is around 3.5 million b/d, is currently about full although a limited amount of new capacity will come online in the first quarter to alleviate a growing bottleneck. The biggest tranche of new Permian pipeline capacity, totaling upwards of 2 million b/d, starts coming online in second-half 2019.

Chevron has adequate takeaway capacity to stay ahead of its growth in the basin, Yarrington said.

In addition, because some Permian production is being exported, Chevron has dedicated export capacity along the US Gulf Coast of about 25,000 b/d, and should rise to 80,000 b/d early next year, she said.

"So far, we've exported about 8 million barrels, I believe," she added. "So we feel that we are investing appropriately for our flow, but we don't think, in general, over time, that there will be a risk of flow assurance in the Permian because of export capacity."

-- Starr Spencer, starr.spencer@spglobal.com

-- Edited by Jeff Mower, newsdesk@spglobal.com