Forced frenemies, Exxon and Chevron take diverging paths as leaders of the booming Permian

While West Texas production leader Exxon aims to spike its volumes another 50% in the next five years and keep growing beyond 2030, Chevron is taking a “plateau” approach and focusing on free cash flow.

The two companies reported their earnings Aug. 1 just two weeks after they were reluctantly forced into becoming partners when a ruling from a contentious arbitration fight in Chevron’s favor allowed the company to close on its $53 billion acquisition of Hess and its crown jewel 30% stake in Exxon’s oil discovery offshore of Guyana—arguably the biggest oil discovery of the century.

However, for both companies, the Permian is their leading base of oil and gas volumes. In fact, the Permian represents almost half of the nation’s record-high 13.4 million barrels per day of crude oil. Exxon reported growing its volumes to 1.6 million barrels of oil equivalent a day, including natural gas, while Chevron hit its 2025 target of 1 million barrels daily during the second quarter.

Chevron aims to keep its Permian output relatively steady going forward.

“We’re very pleased to have such a large shale portfolio and, at some point, growth is less the objective than free cash flow, and we’re approaching that point,” said Chevron chairman and CEO Mike Wirth in an earnings call.

On the other hand, Exxon aims to hit a whopping 2.3 million barrels daily in the Permian by 2030. Exxon chairman and CEO Darren Woods said he “absolutely” disagrees with the idea of “peak” Permian oil production amid weaker prices and a maturing basin. Exxon also finds itself in an enviable position after its $60 billion acquisition last year of Permian leader Pioneer Natural Resources.

“We’re a long-ball hitter. Everybody in the unconventional [shale] space is playing the short game,” Woods said, citing scale and technology advantages that lead to much greater cost efficiencies, allowing for more value-oriented growth. “That has led us to have growing confidence the projection we have past 2030 is an upward vector and will continue to grow.”

Woods said Exxon is even open to more acquisitions going forward—just not growth for the sake of growth. Any deal must prove “one plus one equals three.”

“That is, in my mind, the magic of successful acquisitions and what we’re looking for,” Woods said.

Exxon and Chevron both delivered quarterly beats, but their earnings are down in a lower oil price environment. Exxon’s quarterly net income of $7.1 billion fell 23% year over year from $9.2 billion. Chevron’s $2.5 billion in net income dipped 43% year over year from $4.4 billion.

Hotly anticipated ruling

In Guyana, the long-awaited ruling from an arbitration panel overseen by the International Chamber of Commerce decided July 18 that Chevron’s acquisition of Hess did not violate Exxon’s right of first refusal for Hess’ Guyana stake because it bought the whole company and not just the Guyana position.

Although most industry observers expected Chevron to prevail, Woods said Aug. 1 that the ruling was a “surprise.”

“We were highly confident in our position,” Woods said. “Having co-written the contract, we understood its intent and believed the contractual language conveyed it. Unfortunately, the tribunal interpreted it differently. While disappointed, we respect the process and the ruling.”

Woods said the shared Guyana production volumes should grow to at least 1.3 million barrels of oil equivalent daily by 2030.

For Chevron, the Hess and Guyana acquisition helps offset “disappointing” global oil and gas exploration results in recent years. The company had leaned in on onshore U.S. volumes, cost reductions, and long-cycle international developments that were in development, Wirth said.

Exploration will grow going forward, he said. “But overall, our MO (modus operandi) or our reputation for capital discipline will remain.”