Chevron Scales Up Triple-Frac Technology in Permian for Big Gains

Chevron Corporation CVX has planned to double down on innovation in the Permian Basin by scaling up its use of “triple-frac” technology. The technique will enable the company to fracture subterranean rock in three wells simultaneously, resulting in a reduction in the cost and time required to produce oil. After testing the method in March last year, CVX now plans to deploy it across 50% to 60% of its wells in 2025, a major jump from just 20% last year. With the use of this technology, it expects to grow output in the Permian even after lowering the capital spending in the basin.

Recently, Chevron announced a $2 billion reduction in its 2025 capital spending, including a notable decrease in investments in the Permian Basin, its most productive asset. It planned to allocate $4.5 billion to $5 billion to the Permian, down from the 2024 levels, shifting its focus from aggressive production growth to maximizing free cash flow. Therefore, this triple-frac technology was the “need of the hour” that can help the company to slash completion time by 25% and cut per-well costs by about 12%, leading to efficient use of capital and a better return on investment.

Innovation in the Shale Industry

Technological innovation has been a driving force in the U.S. shale oil industry. The broad adoption of hydraulic fracturing turned the unreachable fossil fuel deposits in shale formations into commercially viable resources by the late 2000s. The use of technology is crucial, particularly in the shale industry, where oil production rapidly declines over time. Over the years, shale producers have consistently embraced innovation, mastering the technique of bending drill bits horizontally and extending their reach over longer distances. Recently, artificial intelligence has also been added to technological reforms to process the drilling data in real time for better results.

Artificial intelligence has helped oil and gas companies speed up drilling processes by predicting potential problems in wells even before they occur. Chevron has been using AI-powered drones in Texas and Colorado that remotely monitor its shale operations to identify potential issues such as emissions or leaks and alert field workers. Now, Chevron, currently carrying a Zacks Rank #3 (Hold), is taking this innovation game to the next level. By fracking three wells at once rather than the more common one or two.

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However, speed brings new challenges. Triple-frac requires 60% more water and sand per day, creating intense logistical demands — with over 10 trucks an hour delivering sand to each well site. Even though the process consumes 50% more energy per day, Chevron is effectively regulating the power surge with primarily electric-powered equipment.

Looking Ahead

Chevron hit a production milestone of 1 million barrels of oil equivalent per day from the Permian in December. Though the company aims to grow output by another 10% this year, it’s also signaling a shift: future operations will lean more toward generating free cash flow rather than aggressive expansion and triple-frac plays a key role in achieving that goal.

The Current Economic Scenario Requires Operational Efficiency

The current economic scenario of unpredictable tariffs has largely impacted the U.S. shale industry. A major U.S. shale producer, Diamondback Energy, Inc. FANG, recently took the matter directly to social media and publicly called for clarification from the U.S. Energy Secretary, Chris Wright.

With WTI crude prices dropping to $55 per barrel as of Wednesday morning, Chevron and other U.S. oil producers like Expand Energy Corporation EXE and Exxon Mobil Corporation XOM face mounting pressure to enhance operational efficiency. The current price sits roughly $10 below the $65 per barrel breakeven point for new well drilling, as reported in the Dallas Fed Energy Survey, raising concerns about potential slowdowns in drilling activity and production levels across the sector.

Midland, TX-headquartered Diamondback Energy is an independent oil and gas exploration and production company with its primary focus on the Permian Basin. FANG focuses on growth through a combination of acquisitions and active drilling in America's hottest and lowest-cost shale region.

Expand Energy is a leading U.S.-based natural gas producer, leveraging a vast asset base across the prolific Haynesville and Appalachian shale plays. With key assets in the prominent basins, EXE is well-positioned to capitalize on rising demand from LNG exports, AI/data centers and electrification.

ExxonMobil has a combination of diversified and high-value assets in its portfolio, which represents an advantage in terms of mitigating risks. XOM’s strong presence in the prolific Permian Basin and Guyana has consistently resulted in increased production capacity. ExxonMobil also has heavy investments in U.S. shale and global exploration projects.

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This article originally published on Zacks Investment Research (zacks.com).

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