ExxonMobil, Chevron to Increase Guyana, Permian Oil Production Amidst $100 Billion M&A Spending
04.30.2024 By Tank Terminals - NEWS

April 30, 2024 [World Oil]- If you want to understand why the two largest U.S. oil companies are together spending in excess of $100 billion on acquisitions right now, look no further than the amount of crude they’re extracting from the two hottest oil fields on the planet.

 

Exxon Mobil Corp. and Chevron Corp., which reported earnings Friday, are both predicting their production in the Permian basin — the U.S. region that already supplies more oil than Iraq — will increase by 10% this year.

Exxon also revealed that production from its massive oil development in Guyana in the first quarter surged 70% from a year earlier. That’s enough to supply almost a fifth of the global demand growth this year that’s forecast by the International Energy Agency.

Guyana and the Permian basin stand out for relentless levels of production growth in an industry that has otherwise struggled to find new, low-cost resources in recent years. Now Exxon and Chevron are racing to cement their positions, outpacing their biggest European peers in the process.

Exxon is set to become the Permian’s biggest producer once it closes its $64 billion acquisition of Pioneer Natural Resources Co. while Chevron is spending $52 billion on Hess Corp. to gain a 30% share of Guyana’s prolific Stabroek Block.

The Permian basin and Guyana “are big growth drivers at both companies,” said Neal Dingmann, an analyst at Truist Securities. “There are definitely fears on U.S. inventory and shortages worldwide because of lack of investment in the group over several years now.”

After years of reduced investment in oil and gas as fossil-fuel companies focused on returns and reducing emissions, crude supplies are once again starting to look tight. Brent oil earlier this month traded above $90 a bbl for the first time since the fall, with tensions in the Middle East threatening to send prices even higher. For all the efforts to transition to greener sources of energy, oil demand is forecast by the IEA to grow by about 1.3 MMbpd this year to a new record.

European supermajors Shell Plc and bp Plc, who are set to report over the next two weeks, are in a very different position. Shell walked away from Guyana months before Exxon drilled its first discovery in 2015 and sold its Permian position to ConocoPhillips in 2021. bp’s presence in the Permian basin is much smaller than either of the U.S. majors.

Furthermore, Shell and bp had in recent years sought to push into renewables. They’re now pivoting back toward bolstering oil and gas production. But that’s easier said than done, and both have anemic growth profiles out to 2030 compared with their U.S. competitors — assuming the Pioneer and Hess deals are completed.

For Exxon and Chevron, both of committed to fossil fuels during the initial wave of ESG investing. Targeting the Permian and Guyana will not just grow production but also lower their overall cost of supply. Both regions can produce oil at a profit of less than $35 a bbl.

While sitting on two big growth engines, the two companies must be mindful about spending because investors still see capital discipline and a strong balance sheet as a “top priority,” according to Nick Hummel, an analyst at Edward D. Jones & Co. That’s because OPEC still has 5 MMbpd “sitting on the sidelines” that could come back into the market at some point, he said.

For now, both Exxon and Chevron are stuck in a holding pattern, waiting to close the acquisitions of Pioneer and Hess. The former is awaiting approval from the Federal Trade Commission, while the latter is tied up in arbitration because Exxon claims it has a right of first refusal over Hess’s 30% stake in Guyana. Even so, both say they expect to complete their respective deals by the end of the year.

“These are big deals that will definitely impact the overall growth trajectory for both companies,” Hummel said. “The focus will be on execution over the next few quarters.”

 

Free Trial: Access 13,300 Tank Terminal and Production Facilities

13,300 tank storage and production facilities as per the date of this article. Click on the button and register to get instant access to actionable tank storage industry data

ONEOK Announces Completion of NGL Fraction and Pipeline Expansion Projects
12.06.2024 - NEWS
December 06, 2024 [ONEOK]- ONEOK, Inc. today announced the completion of MB-6, a 125,000-barrel p... Read More
Aker Horizons and VNG Sign Term Sheet for the Supply of Green Ammonia from Norway to Germany
12.06.2024 - NEWS
December 06, 2024 [VNG]- The Leipzig-based gas trader VNG Handel & Vertrieb GmbH (VNG H&V... Read More
VNG and HyCC Plan to Produce Green Hydrogen in Lutherstadt Wittenberg
12.06.2024 - NEWS
December 06, 2024 [VNG]- Leipzig-based energy company VNG AG, its wholly-owned gas trading subsid... Read More
Belgium and Oman Strengthen Green Hydrogen Ties Under New Agreement
12.06.2024 - NEWS
December 06, 2024 [H2 View]- Belgium and Oman have agreed to “further strengthen” collaborati... Read More