Chevron Holds Back on Permian, Tamping Down Expectations under Trump

Chevron Corp. said Thursday it expects to reduce hydrocarbon production in the United States Permian Basin “in favor of free cash flow”, indirectly echoing sentiments that a fossil fuel-championing government under Trump would not necessarily drive companies to drill more.

The Big Oil company expects its Permian spending next year to be lower than 2024 at $4.5 billion to $5 billion. About two-thirds of Chevron’s total expected upstream expenditures of $13 billion are for the U.S.

“The remaining U.S. investment is split between the DJ Basin and the Gulf of Mexico, where deepwater growth projects continue to ramp and are expected to deliver offshore production of 300 mboed in 2026”, it said in a statement.

Chevron has earmarked $1 billion for Australia including backfill investments in the Gorgon liquefied natural gas (LNG) facility. Last year, the U.S. and Australia are the only countries to account for at least 10 percent of the company’s net property, plant and equipment assets, according to Chevron’s annual report.

Chevron also expects to budget two-thirds of its planned $1.2 billion downstream capex next year for the U.S.

“Within total upstream and downstream budgets, about $1.5 billion of capex is dedicated to lowering the carbon intensity of our operations and growing New Energies businesses”, it said in the statement on its website. “Corporate and other capex is expected to be around $0.7 billion”.

Overall, Chevron expects organic capex for consolidated subsidiaries in 2025 to range between $14.5 billion and $15.5 billion, compared to its projected 2024 figure of $15.5 billion to $16.5 billion. An additional $1.7 billion to $2 billion in affiliate capex is forecast for 2025, compared to $3 billion for 2024.

"The 2025 capital budget along with our announced structural cost reductions demonstrate our commitment to cost and capital discipline”, said chairman and chief executive Mike Wirth. "We continue to invest in high-return, lower-carbon projects that position the company to deliver free cash flow growth."

The capital plan reflects sentiments by analysts about Donald Trump’s plan to unleash American oil in his second term as president.

Trump’s support for expanding U.S. oil and gas production is “unlikely to spur additional growth anytime soon”, Wood Mackenzie chief analyst Simon Flowers wrote in a team insight about the election result.

“For the large public E&Ps [exploration and production companies] that control half of the US Lower 48’s rigs and develop much of the best leasehold, it’s the return of capital frameworks that will dictate investment”, Flowers said in an article November 7. “And increased tariffs threaten to expose the industry to cost inflation”.

Moreover, while the incoming administration may roll back emission regulations, “many E&Ps have already undertaken considerable self-regulation, as they did with their drilling activity, to lower their scope 1 and 2 emissions”, Flowers said.

In the Medium Term

The industry did voice support for maintaining the U.S.’ position as a key global oil supplier.

“We look forward to working with the incoming administration and leaders in both parties to advance bipartisan solutions that unleash American energy as a driver of economic prosperity, environmental progress and stability around the world”, the American Petroleum Institute (API) said in a statement November 6 congratulating Trump.

On November 12 the lobby group wrote to Trump calling for the repeal of the outgoing administration’s partial pause on LNG exports and several policies that disfavor fossil fuel consumption, as well as the repeal of oil and gas permitting barriers.

Flowers said that simplifying the well permitting process “could encourage more niche onshore drilling on federal land”.

Another positive for oil and gas under Trump, particularly for Lower 48 producers, would be that “conditions to raise fresh capital could improve because investors perceive less terminal value risk under an oil- and gas-oriented Washington”.

“And if corporate M&A [mergers and acquisitions] becomes more streamlined, a build cycle of new private E&Ps could support some activity growth in the coming years”, Flowers added.

Already Declining

Production in the Permian, the U.S.’ main oil-producing basin, is already poised to slow down this year due to natural factors, according to an analysis by Goldman Sachs published July 23.

The Permian is expected to post an annual average growth of 340,000 barrels per day (bpd), slashed from 520,000 bpd last year. Growth can remain “robust” through 2026, at 270,000 bpd that year, the bank said.

Goldman Sachs pegged the overall U.S. production growth in 2024 at 500,000 bpd, down from over one million bpd a year ago.

While “technological and efficiency gains” have made the Texas-New Mexico shale basin account for all growth in U.S. petroleum production since 2020, “the Permian is maturing, and its deteriorating geology will weigh on the production of crude oil down the road”, Goldman Sachs wrote on its website. It blamed Permian geological deformations on “years of intense exploration and production”.

Moreover, the most productive wells are also depleting and upstream activity is, as broadly the case in the U.S., declining, it said.

“The rig count will likely keep edging downwards, from 309 today to fewer than 300 by the end of 2026”, Goldman Sachs added. “But output per rig will keep growing, as industry consolidation increases the share of more productive rigs, and as technologies improve”.

For 2024 Goldman Sachs projected that the initial production of Permian wells will rise by 100 bpd, before falling to 50 bpd between 2025 and 2026, only a third of the growth in 2019.

Growth through 2026 will remain “robust” thanks to drilling and completion efficiency, it said.

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