(Bloomberg) — Chevron Corp.CLC) plans to slow production growth from America's largest oil field next year, the most definitive sign yet that President-elect Donald Trump faces an uphill battle to increase U.S. energy production.
Chevron will reduce its Permian Basin capital spending by between $4.5 billion and $5 billion in 2025, a drop of up to 10%, the company said in a statement Thursday. Globally, the oil explorer expects to spend about $17 billion, up from $19 billion this year in the first budget cut since 2021.
“Production growth is reduced in favor of free cash flow,” Chevron said in the release.
Analysts at Goldman Sachs and Truist Securities raised their price targets for Chevron shares after the company announced its plan. The stock fell 1.2% at 9:39 a.m. in New York as oil prices slipped for a third day.
The Permian region of West Texas and New Mexico has been one of the fastest growing sources of oil in the world over the past decade and now pumps more than 6 million barrels per day, which places it ahead of Iraq, OPEC's second largest producer. Independent drillers spearheaded the initial shale revolution, but large companies such as Chevron eventually realized the basin's potential.
The slowdown will be good news for the Organization of the Petroleum Exporting Countries and its allies, which are struggling to contain the glut of crude from the United States and elsewhere, which has sent oil prices down 18% since end of April. It's also a reality check for Trump, who has promised to unleash U.S. oil production as part of his “Drill, Baby, Drill” energy policy, which he said would cut energy prices in half.
West Texas Intermediate fell 0.4% to $68.30 on Thursday in New York, bringing the 12-month loss to nearly 5.6%. U.S. shale is profitable at such prices, but in the absence of more robust demand growth, most executives would rather return cash to shareholders and expand through acquisitions than spend money. money to increase production.
Chevron still plans to increase production in the Permian next year, but growth will slow significantly from the 15% annual increase since 2021 as the oil driller gets closer to its 1 million target. barrels per day.
CEO Mike Wirth indicated last month that the basin's production would stop growing and stabilize in the late 2020s in order to “really open up free cash flow.” The company's overall U.S. production is expected to increase between now and then, driven in part by projects in the Gulf of Mexico over the next few years.
Analysts and traders surveyed by Bloomberg last month saw the United States adding just 251,000 barrels of daily production between the end of this year and 2025, which would be the slowest pace since the pandemic-driven decline in 2020. Exxon Mobil Corp. slowing U.S. production in coming years as companies focus on profits rather than production. Exxon plans to announce its 2025 budget on December 11.
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