Permian pullback: are Chevron and ExxonMobil’s targets salvageable?

In early 2019, Chevron and ExxonMobil separately threw down the gauntlet. Each firm unveiled five-year Permian growth plans targeting over 1 million boe/d apiece. Shale aspirations of similar scale have been shared by other companies before. But not on this timeline and not with billions of dollars of annual cash flow targets. Reaching these milestones would place the US Supermajors far above their Permian competitors. It was initially challenging to have our models meet their projections. Over the past four quarters though, both companies have beat targets. The Majors took the proverbial reins in West Texas. But as the 2020 price crash quickly unfolded, both companies slashed their Permian budgets. The relative scale of the pullback is more than many Permian peers. Guidance from the companies doesn’t extend much beyond this year, but we’ve modelled potential scenarios for how activity scales back up with a price recovery.