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Chevron Corp outlined a plan on Tuesday to expand oil and gas production by 2025, but without spending much more, and promised to limit the pace of growth in its carbon emissions.
The drop in energy demand due to blockages caused by a pandemic caused the industry to screw up in 2020 and led Chevron to an annual loss of $ 5.54 billion, the first since 2016.
Investors have been lobbying Chevron and other oil companies to keep spending unchanged and to reduce emissions that contribute to climate change. Competitors Royal Dutch Shell, BP Plc and Exxon Mobil have pledged to keep production steady or allow it to decline to meet climate or financial goals.
EXXON MOBIL, CHEVRON CEOS DISCUSSION THE MERGER
| Ticker | Safety | Last | Change | Change % |
|---|---|---|---|---|
| CVX | CHEVRON CORP. | 109.50 | -0.25 | -0.23% |
| BP | BP PLC | 26.11 | -0.43 | -1.64% |
| XOM | EXXON MOBIL CORP. | 59.93 | -0.94 | -1.54% |
CEO Michael Wirth told analysts in a presentation on Tuesday that Chevron could achieve its production and carbon targets, regardless of oil price fluctuations.
“We are not betting on higher prices to bail us out,” he said in an apparent excavation at Exxon and others that rely on oil recovery to cover dividends and debt payments. By 2025, Chevron can more than double its return on capital employed, a measure of how efficiently a company invests, to more than 10%.
Still, some analysts were not impressed with the climate and emissions targets, considering them to be very modest. The stock fell a fraction of its biggest rise in a year to $ 109.50.
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A forecast of $ 25 billion in free cash flow by 2025 after dividends and project expenses is “not surprising,” said Biraj Borkhataria, an analyst at RBC Capital Markets.
The carbon intensity targets “lag behind the industry average” and “focus on its controllable elements” rather than building new lines of business “, which can contribute to profits, he added.
The goal of investing about 2% of the project’s overall expenses in lower carbon emissions, indicates that Chevron is not boosting its underlying operations, said Pavel Molchanov, an analyst at Raymond James.
Other oil companies have outlined plans to invest in renewable energy and carbon capture and storage.
GAS PRICES ARE RISING UP AND MAY GO EVEN HIGHER IN THE SPRING: ANALYST
Still, Chevron said that by 2025 it would set annual capital outlays at about $ 14 billion and increase oil and gas production by about 3.5% on a compound annual basis.
It plans to increase investments by 2025 in the Permian basin in Texas and New Mexico, the main shale field in the United States, as the costs of a major expansion in Kazakhstan decrease.
Overall, the goal is to increase production to around 3.5 million barrels of oil and gas per day (mbpd) by 2025, from about 2.98 mbpd last year. Permian production can reach 1 million barrels per day.
Chevron will be the largest player in the Permian basin with “a large margin on production volumes over ExxonMobil, about 40% higher,” said Peter McNally, an analyst at Third Bridge.
Its climate focus includes a 35% reduction in its rate of carbon emissions per unit of production by 2028. Routine flaring of natural gas, which contributes to climate warming, will be halted in 2030, officials said.
The intensity target is less ambitious than rivals that seek to reduce absolute emissions of carbon gases. Releases in general may increase if production increases, and Chevron has failed to set a zero net emissions target, as in Europe and some United States.
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Chevron is on a “path to zero net emissions,” Wirth said on Tuesday, but added that technological advances, carbon markets and policy changes are needed.
“We will make more specific commitments over time,” he said.
Chevron, which acquired Noble Energy during last year’s market downturns, increased its expected cost savings from the business to $ 600 million, helping to reduce operating expenses by 10% this year compared to 2019.