Two oil fields rewarding Chevron, Exxon
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 that 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 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 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 again starting to look tight. Brent oil this month traded above $90 a barrel 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 million barrels a day this year to a record.