Chevron (NYSE: CVX) is setting ambitious targets for its financial growth, aiming to increase its free cash flow by $6 to $8 billion by 2026. This goal will be achieved by reducing expenses by several billion dollars, according to the company’s CEO, Michael Wirth. Chevron’s free cash flow for 2023 reached $19.78 billion, with a year-to-date figure of $22.8 billion for the first nine months of 2024.
Strategic Investments in Oil Production
Wirth’s strategy to reach this target includes ramping up production from several key projects. Chevron expects a significant boost from new and expanded production efforts in Kazakhstan, U.S. shale, and the U.S. Gulf of Mexico. Oil production in the Gulf of Mexico is projected to grow to 300,000 barrels per day by 2026, up from 200,000 in 2023. Chevron’s offshore oil production in Kazakhstan is also set to climb, reaching 270,000 barrels per day by the end of 2024.
One of Chevron’s key milestones came in August 2024, with the start of production from a deepwater field in the Gulf of Mexico. This field, under extreme pressures, is expected to reach a peak production of 75,000 barrels per day. Chevron also has two more offshore projects slated for development.
Natural Gas and Energy Demand Projections
At the Goldman Sachs Energy, CleanTech & Utilities Conference, Wirth addressed the potential oversupply of natural gas in the latter part of the decade. However, he noted that the growing demand for power, especially to support data centers powering artificial intelligence, would likely lead to an increase in natural gas power generation plants. Wirth suggested that these plants would likely be developed before nuclear power plants, which he believes are at least a decade away from widespread implementation.
“We’re blessed with an abundance of natural gas,” Wirth said, emphasizing its role in meeting future energy needs.
Hess Acquisition Update
In addition to its production growth, Chevron is moving forward with its $53 billion acquisition of Hess Corp. The deal, which had been delayed due to a dispute with Exxon Mobil regarding a stake in the Guyana oil field, is expected to close by the end of 2024. The merger has received approval from shareholders and U.S. regulators, though it has faced challenges related to Exxon’s claim of a right of first refusal for Hess’ 30% stake in the Stabroek block.
Wirth expressed confidence that Chevron would successfully close the acquisition, dismissing Exxon’s claims as “baseless” and “without merit.” The arbitration panel overseeing the dispute is expected to make a decision in the third quarter of 2024.
Conclusion
Chevron’s plans for significant free cash flow growth, bolstered by strategic investments in oil production and natural gas, highlight the company’s ambitions for continued profitability. With major projects underway and an impending merger with Hess Corp, Chevron is positioning itself for long-term success in the energy sector.
Sources:
- Chevron
- Goldman Sachs Energy Conference
- International Chamber of Commerce
