You don’t have to “drill, baby, drill” to get more oil out of the ground—which is something Fortune 500 company Chevron and the overall U.S. energy sector have figured out over the years.
Hydraulic fracturing and horizontal drilling unlocked the shale boom that has transformed the global energy landscape over the past decade, and fresh innovations are continuing to boost output even as oil companies have curbed capital expenditures.
On Wednesday, Chevron said it will lay off up 20% of its global workforce amid efforts to trim $2 billion to $3 billion in costs by 2026. Rivals like BP have also announced job cuts recently as crude oil prices have come down from highs seen three years ago, when Russia’s invasion of Ukraine rippled through energy markets.
But oil companies have been doing more with less in recent years as their focus has shifted from growing output to returning more capital to shareholders. Despite the increased discipline on spending, U.S. oil production has kept hitting new record highs.
The most recent data shows U.S. oil production has reached 13.5 million barrels a day, up 55% from 2014. At the same time, the number of U.S. drilling rigs has plunged to 586 from more than 1,900 in 2014. While the rate of growth is expected to slow, more oil will keep gushing out. Earlier this week, the Energy Department raised its forecast for 2025 to nearly 13.6 million barrels from its prior view for 13.55 million.
In a conference call with analysts after reporting fourth-quarter results on Jan. 31, Chevron Chairman and CEO Mike Wirth said improved efficiency helped production from its Permian Basin operations hit new highs in 2024. In fact, the company has posted 16% compound annual growth over the past five years.
“Through optimized pad and drilling designs and completion improvements like triple frac, we’re able to achieve these production levels with 40% fewer company-operated rigs than our plans included just a few years ago,” he added.
In a “triple frac,” three wells are hydraulically fractured simultaneously. Meanwhile, oil companies have also doubled the length of lateral wells to three miles, and switching from diesel-powered equipment to electric pumps has lowered costs as well.
Those new technologies and techniques will be key as Chevron announced in December that capital expenditures for 2025 will come down by about $2 billion.
That includes the Permian, but Wirth said Chevron’s production there should climb 9% to 10% this year after surging 18% last year.
“So we’ll have an asset that will produce something over 1 million barrels a day for many, many years into the future,” he told analysts on the earnings call. “And as we can maintain that with a lower rate of capital investment than we’ve required to get to where we are, that really opens up the free cash flow off of that asset.”
