Drilling in the Permian has plateaued in recent months, but production is still growing. Crucially, Permian production is expected to continue to grow for years to come, but the region is increasingly dominated by the oil majors rather than mom-and-pop shale companies.
Chevron (NYSE: CVE) and ExxonMobil (NYSE:XOM) both held investor meetings on Monday, where both oil majors detailed aggressive drilling strategies in the Permian. Chevron expects to more than double output in the Permian to 900,000 bpd over the next five years, a 40 percent increase from its previous plan. ExxonMobil, for its part, expects to top 1 million barrels per day in the Permian in that same timeframe.
The presentations from both companies illustrate a growing trend in the Permian. Small and medium-sized shale companies were the ones to really develop the Permian in the early years. The oil majors were late to both the shale party in general, as well as to the Permian specifically.
However, they are making up for lost time. “The shale game has become a scale game,” Chevron CEO Mike Wirth told the Wall Street Journal. “The race doesn’t go to the one who gets out of the starting blocks the fastest. The race goes to the one who steadily builds the strongest machine.” As the WSJ notes, the oil majors including Exxon, Chevron, BP (NYSE:BP), Royal Dutch Shell (NYSE:RDS.A), as well as Occidental Petroleum, accounted for a combined 9 percent share of Permian output five years ago. As of October, they made up 16 percent of Permian output. But with the oil majors entering an aggressive growth phase in the Permian, their combined market share in the Permian will balloon over the next five years.
The majors are now some of the largest drillers in the Permian. Exxon already has 48 rigs in the Permian, accounting for nearly 10 percent of the total 466 rigs in the entire basin. The oil major expects to raise its number of rigs in the Permian to 55 by the end of 2019.
