Chevron sees Permian shale play as top five asset by 2020
By Ernest Scheyder
NEW YORK (Reuters) - Chevron Corp (CVX.N: Quote) is making the oil-rich Permian shale formation a top investment priority, aiming to turn its West Texas acreage into one of its top five assets by 2020, Vice Chairman George Kirkland said in an interview.
The move is a return home of sorts for the second-largest U.S. oil company, which has operated in the Permian since the 1920s. But until now, it has been slow to follow rivals in West Texas who over the last five years have deployed new techniques to recover previously unreachable oil.
"We have such a good acreage position and we're looking for a high production over a long period of time, Kirkland said. "In 2020, we'll be looking at (the Permian) as one of our top five assets in the whole company."
As part of a choreographed plan to show Wall Street it's serious about the Permian, Chevron is taking the rare step of holding its 2014 shareholder meeting in the small city of Midland, Texas, next Wednesday.
While Chevron has invested billions of dollars in energy projects across Africa, Asia and South America in recent years, investors have grown anxious as smaller independent oil and natural gas companies, including Chesapeake Energy (CHK.N: Quote) and Continental Resources CLR.N, successfully developed shale plays across the U.S.
More than half of Chevron's 1.5 million Permian acres don't require royalty payouts to landowners, an advantage over rivals like Pioneer Natural Resources (PXD.N: Quote) and Concho Resources (CXO.N: Quote). That will help boost returns as Chevron looks to lift Permian production 67 percent to 250,000 barrels of oil equivalent per day by 2020.
Because Chevron chose not to sell its Permian holdings during low prices of the 1980s, it already was sitting on land prime for hydraulic fracturing and horizontal drilling, but the slow development was a frustration for analysts.
"We have now done a lot of appraisal work, both us directly, and indirectly by those drilling around us," Kirkland said. "If you're in a hydrocarbon producing area, technology will allow you over time to increase productivity. That underlying belief is really coming to fruition for us." Continued...