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Chevron Corp on Tuesday outlined a plan to expand oil and gas production to 2025, but without spending significantly more, promising to limit the rate of growth of its carbon emissions.
The declining energy demand due to pandemic-driven shutdowns hit the industry in 2020, leading Chevron to an annual loss of $ 5.54 billion, the first since 2016.
Investors have put pressure on Chevron and other oil companies to keep spending flat and reduce emissions that contribute to climate change. Competitors Royal Dutch Shell, BP Plc and Exxon Mobil have pledged to keep production down or down to meet climate or financial targets.
EXXON MOBILE, CHEVRON CEOS BOOKED MERGER
| Ticker | Safety | Last | Alter | Alter% |
|---|---|---|---|---|
| CVX | CHEVRON CORP. | 109.50 | -0.25 | -0.23% |
| BP | BP PLC | 26.11 | -0.43 | -1.62% |
| XOM | EXXON MOBIL CORP. | 59.93 | -0.94 | -1.54% |
CEO Michael Wirth said during a presentation to analysts on Tuesday that Chevron could meet its production and carbon targets, regardless of oil price fluctuations.
“We are not betting on higher prices to save us,” he said in an apparent dig at Exxon and others, counting on oil recovery to cover dividends and repayments. By 2025, Chevron can more than double its return on capital, a measure of how efficiently a business invests, to more than 10%.
Nevertheless, some analysts were not impressed with the climate and emissions targets and considered them too modest. Shares fell a fraction of a year high to $ 109.50.
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Biraj Borkhataria, an analyst at RBC Capital Markets, says a forecast of free cash flow of $ 25 billion by 2025 after dividends and project expenses.
The carbon intensity targets’ laugh the industry average ‘and’ focus on its controllable elements’ rather than build new business lines’, which could contribute to profits, he added.
The goal of investing about 2% of total project spending on lower carbon emissions indicates that Chevron is not turning its underlying operations around, said Raymond James analyst Pavel Molchanov.
Other majors for oil have outlined plans to invest in renewable energy and carbon capture and storage.
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Chevron nevertheless said that by 2025, annual capital expenditure would amount to about $ 14 billion and increase oil and gas production on a compound annual basis by about 3.5%.
It is planned to promote investments until 2025 in the Permian basin of Texas and New Mexico, the leading American shale field, as the cost of a major expansion in Kazakhstan declines.
Overall, it aims to increase production by 2025 to around 3.5 million barrels of oil and gas per day (mbpd), from around 2.98 mbpd last year. Permian production can reach 1 million barrels per day.
Chevron will be the largest player in the Perm basin with a “wide margin on production volumes above ExxonMobil, about 40% larger,” said Third Bridge analyst Peter McNally.
The climate focus includes reducing its carbon emissions per unit of production by 2028 by 35%. According to officials, routine groundbreaking will stop by 2030 to 2030.
The intensity goal is less ambitious than opponents who want to reduce the absolute emissions of carbon gases. Overall emissions could increase as production rises, and Chevron could not set a net zero-emission target like European and some US counterparts.
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Chevron is on a “road to net zero” emissions, Wirth said Tuesday, but added that technological breakthroughs, carbon markets and policy changes are needed.
“We will make more specific commitments as time goes on,” he said.
Chevron, which acquired Noble Energy during last year’s lows, increased its expected cost savings from the agreement to $ 600 million, which reduced operating expenses this year by 10% compared to 2019.