The Permian: One Million Barrels a DayNarrow moat

Chevron (CVX) — moat facet

A century of owned acreage lets Chevron drill the Permian cheaply, but it sells every barrel and every cubic foot at somebody else's price.

The Permian Basin is the part of Chevron that grows without anyone's permission. In 2025 it reached one million barrels of oil equivalent a day, the target Chevron had set for it1. On the 10-K's own figures the basin produced 435,000 barrels of crude oil, 280,000 barrels of natural gas liquids and 1.8 billion cubic feet of gas a day2, across more than 1,750,000 net acres in the Delaware and Midland basins3.

Permian net daily production, 2025Crude oil (thousand bbl)435Natural gas liquids (thousand bbl)280Natural gas (thousand boe)300 (1.8 bcf)Chevron Form 10-K FY2025; gas converted at 6,000 cubic feet a barrel
Oil is less than half of what the basin produces.

That makes it a large share of the company. Chevron's total United States production was 1,858 thousand barrels of oil equivalent a day in 20254, so the Permian was about 54 percent of the American business and about 27 percent of Chevron's worldwide output of 3,723 thousand barrels a day5. In the second quarter of 2026 American production reached a record 2,077 thousand barrels a day6.

Why is this an advantage and not just a location? Because the acreage is already owned. Shale wells decline quickly and have to be replaced by new ones every year, and the cost of doing that depends mainly on what the land cost. A company drilling on land it has held for generations pays less for each new well's rock than one that bought its acres at a recent auction. Chevron's plan for 2026 puts nearly $6 billion into shale and tight assets in the Permian, DJ and Bakken basins, out of an upstream budget of $17 billion7.

The other side of the Permian is that it is a price-taker in two markets at once. It sells crude at world prices and gas at West Texas prices, and in the second quarter of 2026 Chevron's realised price for American gas was $0.91 per thousand cubic feet against $70.80 a barrel for American liquids8. The gas that comes up with the oil is close to worthless where it is produced; the danger page below takes that up.

Chevron's 10-K says the Permian grew production by more than 10 percent in 2025 with lower capital spending than the year before9. That is what an owned land position should allow: more barrels for less money. The DJ Basin in Colorado is a second shale position of about 580,000 net acres10.

The Permian is a narrow advantage: owned land, a large and flexible drilling programme, and no pricing power of any kind. It proves itself if production holds near a million barrels a day on a budget of about $6 billion a year for all three shale basins; if holding the level starts to need materially more capital, the land has started to run out of its best rock.

Moat trajectory: Holding steady

Reached one million barrels a day in 2025; American output a record 2,077 thousand in Q2 2026.

The number that tests this moat
Reported
United States net production, latest quarter
2,077 MBOED, a record (Q2 2026)

The Permian is about half of it; a decline on a flat shale budget would mean the best acreage is used up.

Source: Chevron Q2 2026 earnings release ↗
⚠ Threats to the moat
⚠ THREAT 01
Gas Worth Ninety-One Cents
Almost a third of the Permian's output is gas that sold for 91 cents per thousand cubic feet in mid-2026.
References
  1. ReportedIn 2025 it reached one million barrels of oil equivalent a day, the target Chevron had set for it.
    Chevron fourth-quarter and full-year 2025 earnings release, Form 8-K exhibit 99.1. — FY2025 · publ. 30 January 2026 · source ↗
  2. ReportedOn the 10-K's own figures the basin produced 435,000 barrels of crude oil, 280,000 barrels of natural gas liquids and 1.8 billion cubic feet of gas a day, across more than 1,750,000 net acres in the Delaware and Midland basins.
    Chevron Form 10-K for fiscal 2025 - Items 1 and 2: upstream operations, reserves, concessions and employees. — FY2025 · publ. 24 February 2026 · source ↗
  3. ReportedOn the 10-K's own figures the basin produced 435,000 barrels of crude oil, 280,000 barrels of natural gas liquids and 1.8 billion cubic feet of gas a day, across more than 1,750,000 net acres in the Delaware and Midland basins.
    Chevron Form 10-K for fiscal 2025 - Items 1 and 2: upstream operations, reserves, concessions and employees. — FY2025 · publ. 24 February 2026 · source ↗
  4. ReportedChevron's total United States production was 1,858 thousand barrels of oil equivalent a day in 2025, so the Permian was about 54 percent of the American business and about 27 percent of Chevron's worldwide output of 3,723 thousand barrels a day.
    Chevron Form 10-K for fiscal 2025 - Items 1 and 2: upstream operations, reserves, concessions and employees. — FY2025 · publ. 24 February 2026 · source ↗
  5. Moat Explorer calcChevron's total United States production was 1,858 thousand barrels of oil equivalent a day in 2025, so the Permian was about 54 percent of the American business and about 27 percent of Chevron's worldwide output of 3,723 thousand barrels a day.
    Moat Explorer calculation from Chevron's reported figures ($ millions unless stated). Segment mix 2025: external sales upstream US 19,608, upstream international 33,844, downstream US 65,331, downstream international 65,545, All Other 104, total 184,432; upstream 19,608 + 33,844 = 53,452, 53,452 / 184,432 = 29.0%; downstream 65,331 + 65,545 = 130,876, 130,876 / 184,432 = 71.0%; upstream US 19,608 / 184,432 = 10.6%; upstream international 33,844 / 184,432 = 18.4%; downstream US 65,331 / 184,432 = 35.4%; downstream international 65,545 / 184,432 = 35.5%. Upstream share of external sales 2015 (4,117 + 15,587) / 129,925 = 15.2%. Intersegment: upstream US 25,910 / 45,518 = 56.9%. Segment earnings 2025: upstream 12,822, downstream 3,022, sum 15,844; downstream 3,022 / 15,844 = 19.1%; upstream 12,822 / 15,844 = 80.9%. Downstream assets 55,243 / 324,012 = 17.0%. Change 2024 to 2025: upstream 12,822 - 18,602 = -5,780; downstream 3,022 - 1,727 = +1,295; 1,295 / 5,780 = 22.4%; Brent 81 - 69 = 12, 5,780 / 12 = about 480 per $1. 2022 upstream 12,621 + 17,663 = 30,284; downstream 5,394 + 2,761 = 8,155. Margins 2025 on sales before eliminations: upstream US 5,815 / 45,518 = 12.8%; upstream international 7,007 / 42,861 = 16.3%; downstream US 1,375 / 72,485 = 1.9%; downstream international 1,647 / 69,925 = 2.4%. Earnings over year-end segment assets: upstream 12,822 / 256,975 = 5.0%; upstream US 5,815 / 84,559 = 6.9%; upstream international 7,007 / 168,200 = 4.2%; downstream 3,022 / 55,243 = 5.5%; downstream US 1,375 / 33,745 = 4.1%; downstream international 1,647 / 21,146 = 7.8%. US downstream 531 / 3,904 - 1 = -86.4%. CPChem 352 / 8,985 = 3.9%; 352 / 903 - 1 = -61.0%. TCO revenue 21,986 / 18,872 - 1 = 16.5%; TCO net income 2,496 / 5,779 - 1 = -56.8%. Hess net income 193 / 48,000 = 0.4%. ROCE 2015-2025: 2.5, -0.1, 5.0, 8.2, 2.0, -2.8, 9.4, 20.3, 11.9, 10.1, 6.6; sum 73.1 / 11 = 6.6% average; years at or above 8%: 2018, 2021, 2022, 2023, 2024 = 5 of 11. Production: Permian 1,000 / US 1,858 = 54%; 1,000 / 3,723 = 27%; Australia 472 / 3,723 = 12.7%; Q2 2026 4,070 / 3,396 - 1 = 19.8%; 4,070 / 3,120 - 1 = 30.4%. Guyana 30% x 1.7 million gross = 510 thousand. Gas: 0.91 x 6 = 5.46 per barrel of oil equivalent; 5.46 / 70.80 = 7.7%; 1.8 billion cubic feet / 6,000 = 300 thousand boe a day. Reserves: 3,723 x 365 = 1,359 million boe a year; 10,591 / 1,359 = 7.8 years. California refining 290 + 257 = 547 of 1,099 = 49.8%. Largest holders 8.56 + 7.50 + 7.00 + 6.70 = 29.76%. Balance sheet and returns: net debt 34,461 / 17,756 = 1.94, up 94%; dividends per share 6.84 / 4.28 - 1 = 59.8%; 6.84 / 6.63 = 1.03; returns 27.1 / 12.3 = 2.2 times; free cash flow 16.6 - 12.751 = 3.8 bn; buyback authorisation 75 - 44 = 31 bn; Q2 2026 buyback 3.0 bn / 16.2 million = $185 a share; shares 1,980 / 1,755 - 1 = 12.8%, 1,980 - 1,755 = 225 million; employees 43,039 / 45,600 - 1 = -5.6%; operating and SG&A 33,444 / 29,240 - 1 = 14.4%, 33,444 - 29,240 = 4,204; DD&A 20,132 / 17,282 - 1 = 16.5%, +2,850; income tax 7,258 / 12,299 = 59.0%. Valuation: trailing sales 184,432 - 90,476 + 114,755 = 208,711; trailing net income 12,299 - 5,990 + 14,282 = 20,591; 403.40 / 20.591 = 19.6 times; 403.40 / 12.299 = 32.8 times; implied forward earnings 403.40 / 12.77 = 31.6 bn, 31.6 / 12.3 = 2.6 times; trailing EPS approximately 20,591 / 1,970 = 10.45. Swings: timing 2.9 + 1.4 = 4.3 bn; international downstream 1,013 + 2,457 = 3,470. Further: California inputs 261 + 253 = 514, 514 / 1,038 = 49.5%; GS Caltex 58 / 4,403 = 1.3%, 437 / 4,403 = 9.9%; equity affiliate income 3,000 / 5,131 - 1 = -41.5%; affiliate production 538 / 3,723 = 14.5%; Hess share of 2025 production increase 261 / 385 = 67.8%; enterprise value less market value 431.95 - 403.40 = 28.55 bn; capital employed 232,934 / 177,698 - 1 = 31.1%; total assets 324,012 - 256,938 = 67,074; Hess issuance 15% / 6% = 2.5 years, 15% / 3% = 5 years; external sales 2015 downstream US 48,420 + 4,426 = 52,846, downstream international 54,296 + 2,933 = 57,229; 2020 downstream US 32,589 - 2,150 = 30,439 - sales mix, production and ownership. — 2015-2026 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in Chevron's Forms 10-K, 10-Q, earnings releases, proxy statement and market data; operands shown in the source line.
  6. ReportedIn the second quarter of 2026 American production reached a record 2,077 thousand barrels a day.
    Chevron second-quarter 2026 earnings release, Form 8-K exhibit 99.1 - operations: production, refining, realisations, curtailments and business events. — Q2 2026 · publ. 31 July 2026 · source ↗
  7. ReportedChevron's plan for 2026 puts nearly $6 billion into shale and tight assets in the Permian, DJ and Bakken basins, out of an upstream budget of $17 billion.
    Chevron Form 10-K for fiscal 2025 - Items 1 and 2: upstream operations, reserves, concessions and employees. — FY2025 · publ. 24 February 2026 · source ↗
  8. ReportedIt sells crude at world prices and gas at West Texas prices, and in the second quarter of 2026 Chevron's realised price for American gas was $0.91 per thousand cubic feet against $70.80 a barrel for American liquids.
    Chevron second-quarter 2026 earnings release, Form 8-K exhibit 99.1 - operations: production, refining, realisations, curtailments and business events. — Q2 2026 · publ. 31 July 2026 · source ↗
  9. ReportedChevron's 10-K says the Permian grew production by more than 10 percent in 2025 with lower capital spending than the year before.
    Chevron Form 10-K for fiscal 2025 - liquidity and capital resources: debt, ratings, capital spending, dividends and share repurchases. — FY2025 · publ. 24 February 2026 · source ↗
  10. ReportedThe DJ Basin in Colorado is a second shale position of about 580,000 net acres.
    Chevron Form 10-K for fiscal 2025 - Items 1 and 2: upstream operations, reserves, concessions and employees. — FY2025 · publ. 24 February 2026 · source ↗
Sources
Generated September 25, 2026