Chevron Corp. is nearing its goal of producing 1 million barrels of oil equivalent daily in the Permian Basin, thanks to its decade-long strategy, according to Bruce Niemeyer, president of its shale business. By reducing drill rigs and frack crews, the company aims to maintain this level through 2040, generating $5 billion in annual free cash flow by 2027. This will support dividends and buybacks.

The company has cut rigs from 13 to 9 and frack crews from four to three, which will boost free cash flow by $2 billion this year and $3 billion next year. Chevron’s unique mineral rights, inherited from a 19th-century railroad trust, provide about 15% of its production without additional capital expenditure.

Despite oil prices dropping below $70 a barrel, Chevron’s slowdown reflects its focus on building a large-scale, efficient operation. As the second-largest producer in the Permian and one of the fastest-growing, its plateau could impact US output, especially with President Trump advocating for growth.

Analyst Neil Mehta from Goldman Sachs notes that the growth curve is shifting to a plateau, and the key is how long Chevron can sustain it. Unlike conventional oil, shale wells decline rapidly, requiring continuous investment in new wells. Chevron’s scale and efficiency allow it to reduce capital spending without sacrificing production.

“A million barrels is the right plateau for us,” Niemeyer said, emphasizing the need to support dividends. Chevron’s strategic decision to stay in the Permian during its decline in the 1980s and 1990s proved lucrative as the shale revolution took off.

The company’s free cash flow strategy comes at a time when the market doesn’t need significant growth, making it a strategic move to shift to cash flow orientation.

/Bloomberg, Chevron, Goldman Sachs/