Chevron has revealed its bold intentions for the upcoming year, projecting a substantial increase in capital expenditure to fuel new oil and gas ventures.
The US-based oil major announced plans to allocate between $18.5 billion and $19.5 billion toward pioneering projects in 2024, marking an 11 percent surge from its expenditure this year.
The energy giant revealed an anticipated organic capital expenditure range of $15.5 to $16.5 billion for its consolidated subsidiaries, complemented by an affiliate capital expenditure budget hovering around $3 billion.
Upstream Ventures Dominate Allocation
The lion’s share of the projected $14 billion upstream spending in 2024 is earmarked for the United States. A significant portion of this allocation, approximately $6.5 billion, will fuel the development of Chevron’s U.S. shale and tight portfolio, with an astounding $5 billion targeted specifically for Permian Basin development. The Gulf of Mexico projects, constituting 25 percent of U.S. upstream capex, notably includes the eagerly anticipated Anchor project, slated for its inaugural oil extraction in 2024.
Downstream and Corporate Expenditure Insights
Downstream capital expenditure is anticipated to hover around $1.5 billion, with a whopping 80 percent allocated to initiatives within the United States. Meanwhile, corporate and other capex are estimated at approximately $0.5 billion.
A Thrust Towards Sustainability
Notably, Chevron’s capex budget incorporates a substantial $2 billion aimed at lowering the carbon footprint of conventional operations and fostering the growth of new energy business lines. An illustrative project in this vein is the Geismar renewable diesel expansion set to commence operations in 2024.
Affiliate Ventures on the Horizon
The affiliate capex, accounting for approximately $3 billion, is strategically channeled toward pivotal projects. Nearly half of this expenditure is earmarked for the Tengizchevroil’s FGP / WPMP project in Kazakhstan, with roughly a third allocated to Chevron Phillips Chemical Company. Notably, the WPMP field conversion is slated to commence its start-up phase in the first half of 2024.
This investment outlook, in line with rival Exxon Mobil’s strategy, signals a resurgence in the industry following pandemic-induced slowdowns, recent strategic acquisitions, and a heightened focus on carbon reduction initiatives. Exxon plans to maintain an annual spending range between $22 billion and $27 billion through 2027, demonstrating a steadfast commitment to expansion and innovation, Reuters news report said.
Despite the augmented spending, the combined investments of both companies remain approximately half of the colossal $84 billion they collectively spent back in 2013 when oil prices soared above $100 per barrel. Chevron and Exxon currently benefit from elevated energy prices and operational cost efficiencies stemming from pandemic-related adjustments.
Chevron’s projected expenditure encompasses an estimated $15.5 billion to $16.5 billion earmarked for organic capital expenditure within consolidated subsidiaries, alongside an additional $3 billion allocated for affiliates. Notably, nearly half of the affiliate spending is allocated to the Tengizchevroil project in Kazakhstan, reflecting Chevron’s strategic global initiatives.
However, Chevron’s outlined budget does not incorporate the anticipated impact of its proposed acquisition of rival Hess, a deal expected to finalize in the coming year. Upon completion, this acquisition is forecasted to expand Chevron’s capital spending to a range between $19 billion and $22 billion.
This acquisition aims to augment Chevron’s U.S. oil presence and secure a stake in Exxon Mobil’s significant offshore oil discoveries in Guyana. The anticipated merger is poised to significantly impact Chevron’s total oil and gas output, expected to reach approximately 3.7 million barrels per day following the completion of the deals.
Chevron intends to allocate roughly $9 billion of its forthcoming budget to the U.S., aligning with industry trends of relocating investments to the Americas to mitigate costs and geopolitical risks. Specifically, approximately $5 billion is earmarked for its rapidly expanding Permian shale production, an increase attributed to its recent acquisition of PDC Energy.
Projects in the Gulf of Mexico are allocated over $2 billion, with the commencement of production from the new Anchor oil platform anticipated in the upcoming year. Additionally, around 80 percent of the $1.5 billion designated for refining and chemicals will be directed within the U.S., emphasizing Chevron’s commitment to domestic operations.
Moreover, once the Hess deal concludes, Chevron plans to enhance its share repurchase program by an additional $2.5 billion, reaching the upper threshold of its annual guidance of $20 billion, underlining the company’s commitment to maximizing shareholder value.