ExxonMobil and Chevron saw double-digit percentage production increases in the Permian Basin during the second quarter, and expect growth continuing over the next several years as they focus on longer-term value, the companies said during their respective earnings calls Friday.
ExxonMobil said Friday that its oil-equivalent production in the Permian averaged 274,000 boe/d in Q2, a 21% increase from Q1 and a 90% jump from Q2 2018, as it looks to average 1 million in the basin within five years.
"We have moved the total ExxonMobil capability into this basin and we're applying all of our drilling capabilities from all around the world to this very, very important area," Neil Chapman, an ExxonMobil senior vice president, said during an earnings call Friday.
The company has 51 rigs and 12 frack crews in the Permian and brought 67 wells to sale in Q2, Chapman said.
Chapman said the company is taking a "different approach" to the Permian, leveraging capital discipline and the sheer size of the oil major to grow Permian output over several commodity cycles.
"Our unique development plans, which are focused on maximizing long-term value of the resource and leveraging the scale of ExxonMobil to drive capital efficiency are delivering encouraging results," he said.
The company is looking at the long-term value of drilling several wells over time rather than a single well with higher intensity completions which may yield higher initial production rates, but lower ultimate recovery.
It is also examining drilling multiple horizontal benches at one on its large, continuous acreage.
"Given the portfolio that we have, we can be patient, we can be opportunistic," said Neil Hansen, ExxonMobil's vice president of investor relations.
The company expects Q3 volumes in line with Q2 and Permian crude differentials to narrow as additional takeaway capacity comes online, Hansen said.
ExxonMobil, which has 29 rigs in the Permian's Delaware Basin and 22 in the Midland is seeing slower drilling times in the Delaware, which the company is attempting to improve.
Still, Chapman said it was too early to conclude where ExxonMobil was headed in the Permian, considering it had only drilled about 100 wells of the roughly 6,500 in its inventory.
"This is such an early stage to jump to conclusions," he said. "It's very tough to extrapolate where you're going to be from 100 wells when you have 6,500."
Hansen said that Permian growth has balanced global supply following supply cuts from OPEC, Russia and other producing nations and lost barrels from Venezuela and Iran.
CHEVRON GAINS
Likewise, Chevron produced 421,000 b/d of oil equivalents in the West Texas and New Mexico basin, an increase of 155,000 boe/d, or 55%, over the same period in 2018, Jay Johnson, executive vice president of upstream, said during the company's Q2 earnings conference call.
"This strong performance demonstrates a track record of consistent execution," Johnson said.
The company expects to deliver 900,000 boe/d in the Permian by 2023, with what Johnson called a "relatively steady rig count" of 20 company-operated rigs and about seven to 10 net non-operated rigs.
The company said it is also increasing the lateral length of its horizontal Permian wells, and these should approach 10,000 feet next year in development areas -- a length that is standard for many independent Permian producers.
Johnson said Chevron's older wells are also performing "quite well."
One thing Permian-focused companies like to tout is their initial production, or IP rates since they are often quite high, although with steep decline rates for horizontal wells that can be 70% in the first year, output yields drop off fairly rapidly.
However, too high initial rates can damage wells and contribute to decline curves, Johnson said. As a result, Chevron is "very careful" in its drawdown rates in the early months to avoid damaging its wells or the rock in the geological formations from which it produces.
"When we see our base production continuing to [rise] ... we feel very good about how our wells are performing," he said.
Companywide, Chevron produced 3.084 million boe/d of total output, up 9% from the same year-ago period. That included 1.863 million b/d of liquids, up 8% year-on-year for the same periods. Of liquids production, 710,000 b/d came from the US, up from 35% from 575,000 b/d in the same 2018 quarter.
EARNINGS DOWN, PRODUCTION UP
ExxonMobil reported earnings of $3.13 billion in Q2, down 21% from Q2 2018, but up 33% from Q2. The company's total production averaged nearly 3.91 million boe/d in Q2, up from about 3.65 million boe/d in Q2 2018. Total liquids production increased 8% from Q2 2018, while natural gas volumes increased 5%.
ExxonMobil's total refinery throughput averaged 3.93 million b/d in Q2, down from about 4.11 million b/d in Q2 2018.
The company is looking to sell off about $15 billion in assets by the end of 2021, including assets in the Gulf of Mexico, Norway and Azerbaijan.
The company recently increased it recoverable resource estimate offshore Guyana, from 5.5 billion boe to over 6 billion boe, following three discoveries earlier this year.
ExxonMobil's first Guyana floating production storage and offloading unit, the 120,000 b/d Liza Destiny, is expected to start up in Q1 2020, while Liza Phase 2, with 220,000 b/d, is expected to start up in 2022. The company has three drill ships in the basin and is adding a fourth in Q4.
