Chevron to boost spending on drilling projects
Chevron plans to boost spending on new drilling projects as oil demand and prices recover from the pandemic.
The California oil giant said it plans to spend $15 billion on capital projects and exploratory drilling next year, an increase of more than 20 percent from 2021 levels. Chevron’s capital expenditure budget, however, is at the low-end of its earlier projections and is still lower than pre-pandemic levels of $19 billion to $22 billion.
“The 2022 capital budget reflects Chevron’s enduring commitment to capital discipline,” CEO Mike Wirth said. “We’re sizing our capital program at a level consistent with plans to sustain and grow the company as the global economy continues to recover.”
Big Oil has benefited from aggressive cost cutting during the pandemic and stronger oil demand and prices since coronavirus vaccines became available. The price of crude, which soared past $85 a barrel in October, has been stung by the spread of the omicron variant in recent days. The U.S. benchmark, West Texas Intermediate, settled nearly a dollar higher on Thursday at $67.37.
Before oil’s recent tumble, Chevron made $6.1 billion during the third quarter, its best quarterly performance in eight years.
The giant oil companies aren’t planning to use their wealth to return drilling activity to pre-pandemic levels — at least not yet. Instead, Chevron and its rivals are focused on heeding investor demands to return more value to shareholders through quarterly dividends and share buybacks.
Chevron said it will buy back $3 billion to $5 billion of shares annually, compared with an earlier projection of $2 billion to $3 billion. The company, which raised its quarterly dividend in April by 5 cents, has raised its dividend by 12 percent since the start of the pandemic, the biggest increase among its peers. Chevron paid $2.6 billion in dividends during the third quarter.
“We’re a better company than we were just a few years ago. We’re more capital and cost effi
cient, guided by a clear and consistent objective to deliver higher returns and lower carbon,” Wirth said. “And this enables us to return more cash to shareholders.”
Chevron said it plans to spend $12.6 billion on new exploration and production projects next year, split evenly between U.S. and international projects. About $8 billion will be allocated to currently producing wells, including about $3 billion for the Permian Basin of West Texas and $1.5 billion for other shale plays worldwide.
About $3 billion of the upstream budget is planned for new projects, including Chevron’s Tengiz project in Kazakhstan. About $1.5 billion will be allocated to exploration projects, transportation and carbon reduction ventures.