Chevron, the second-largest oil producer in the United States, announced its first reduction in capital expenditure since the pandemic-driven oil crash of 2021, the Financial Times reports.
The company unveiled a capital budget of $14.5 billion to $15.5 billion for 2025, down from $15.5 billion to $16.5 billion for the current year. This move reflects Chevron’s cautious approach amidst a global market weighed down by concerns over oversupply and waning oil prices.
The decision comes at a time when oil prices have softened, with global producers, including OPEC, opting to limit output to stabilize the market. Chevron CEO Mike Wirth emphasized the company’s commitment to “cost and capital discipline,” highlighting its focus on high-return, lower-carbon projects to sustain free cash flow growth.
Chevron plans to allocate $4.5 billion to $5 billion to the Permian Basin in 2025, slightly down from $5 billion in 2024. This oil-rich region has been a cornerstone of Chevron’s US production strategy, with output soaring from 159,000 barrels of oil equivalent per day (boe/d) in 2018 to 950,000 boe/d in the third quarter of this year. Chevron aims to surpass 1 million boe/d in the Permian next year but will prioritize profitability over rapid expansion in production.
The spending cut contrasts sharply with the incoming administration of President-elect Donald Trump, who has pledged to bolster US energy dominance with expanded drilling efforts. Trump’s campaign highlighted plans to increase fossil fuel production to lower consumer energy prices and create jobs. However, analysts note that market conditions and corporate strategies often outweigh political rhetoric in shaping energy production decisions.
Chevron’s announcement also includes a plan to streamline operations and reduce overhead costs by $2 billion to $3 billion by the end of 2026. The company expects to record restructuring charges between $700,000 and $900,000 in the fourth quarter, alongside $400,000 to $600,000 in impairments and asset sales.
Chevron’s cautious approach mirrors broader trends in the US oil sector, where explosive growth has tempered amid Wall Street’s push for financial discipline. While Chevron and other companies, such as ExxonMobil, remain committed to maintaining production in key regions like the Gulf of Mexico, they are increasingly prioritizing efficiency over aggressive expansion.
Analysts warn that overproduction risks exacerbating the current supply-demand imbalance, potentially driving prices lower. Chevron’s reduced spending reflects a more measured strategy to navigate these market uncertainties while continuing to invest in sustainable projects for long-term growth.
As the industry adapts to shifting market dynamics, Chevron’s recalibrated plans underscore the delicate balance between maintaining output and ensuring profitability in a volatile energy landscape.
