Good morning. I'm Wayne Bordoon, General Manager of Investor Relations for Chevron. I'd like to welcome those of you in the room and those joining us by webcast to Chevron's 2019 Security Analyst Meeting. Before we begin, a few important reminders. 1st, please take a moment to locate the nearest exit.
And in the event of an emergency, the hotel staff will provide further instructions. And please silence all cell phones and other devices. Today's presentation will begin with a overview by our Chairman and Chief Executive Officer, Mike Wirth, followed by a review of our Upstream business by our Executive Vice President of Upstream, Jay Johnson. We'll end the morning with a Q and A session where Mike and Jay will be joined by Pat Yerington, Vice President and Chief Financial Officer and Mark Nelson, Executive Vice President of Downstream and Chemicals. Before we begin, a reminder that today's presentation contains estimates, projections and other forward looking statements.
These statements are subject to certain risks, uncertainties and other factors that may cause actual results to differ. Please take a moment to review the Safe Harbor statement that is available in your booklets and on our website. Thanks for your attention. And I'd now like to introduce our Chairman and Chief Executive Officer, Mike Wirth.
Thank you, Wayne. Good morning, and welcome, everyone, both in the room and those watching via webcast to Chevron's 2019 Security Analyst Meeting. I'm excited about where Chevron's going, and I'm honored to represent 45,000 people across our company who are committed to driving superior results, winning in any environment and creating value for our shareholders. I'll provide forward guidance today on a number of key performance dimensions, including capital spending, production, cash flow and returns. I'll also update you on our view of the Permian, which is even better today than it was just a year ago.
Moving to slide 2. Over the last few years, we've repositioned the company to deliver sustained value for our investors. I'd like to begin by calling out 4 elements of our story that differentiates Chevron from our competitors and how we're poised to win in any environment. 1st, we've built an advantaged portfolio that's delivering strong cash flow and is underpinned by resource and reserve replacement strength. 2nd, we have an unmatched combination of balance sheet strength and low dividend breakeven price, providing resilience through the price cycle.
3rd, we're committed to a disciplined returns driven approach to capital allocation. And 4th, this all adds up to a superior capacity to return cash to shareholders. Over the last few years, we've repositioned Chevron to deliver disciplined growth and free cash flow with much lower risk. I'll start with a bedrock of our success, which is operational excellence. Safety and environmental performance are ingrained in our culture.
This results in a relentless commitment to the safety of our operations, which is the foundation of an efficient, reliable and profitable business. For a number of years, we've led our integrated peers with best days away from work and oil spill rates. On process safety, we've reduced loss of containment events by 30% since 2015. Disciplined execution is the foundation for delivering consistent results. We're leading, and we intend to continue to do so.
Moving to the macro environment. The demand outlook for our core commodities continues to be positive. Over the next 25 years, the global population is expected to grow from 7,500,000,000 people to roughly 9,000,000,000. The world will need affordable, reliable and ever cleaner energy. The chart on the left reflects IEA's new policies scenario, an independent view of global energy demand that incorporates known and expected changes in policy and technology.
Oil and gas demand is projected to grow by more than 25% and represent roughly the same share of the total energy mix in 2,040 as it does today. The chart in the upper right shows the investment needed over the 2 decades to offset production declines from existing fields and also meet the growing demand for liquids. The chart in the lower right illustrates the strong underlying demand growth for petrochemical products. This is driven by a growing middle class and will also require ongoing investments. Any way you look at it, the world will need more of what we produce, not less.
Against that backdrop, I'd like to talk about how we're positioned to compete and win in any environment. I'll begin with our advantaged portfolio. In the Upstream, we're diverse in asset class, geography and asset maturity. Risk is decreasing as our capital spending becomes more weighted towards smaller, shorter cycle investments. In 2018, we led our peers in earnings per barrel.
We grew production by over 7%, and we maintained low unit production costs. In Downstream, we also lead our peers in earnings per barrel, a strong indicator of reliable operations, cost control and margin capture. Our fuels business leverages integrated value chains, anchored by the highest Nelson complexity refining network and economies of scale. In petrochemicals, our advantages come from low cost feedstock, world class facilities and superior technologies. Moving to Slide 6.
The strength of our portfolio provides both upside leverage and downside resilience. Chevron is in a much stronger position today than we were just 5 years ago, and we're now uniquely positioned to deliver shareholder returns through the price cycle. In a high price environment, our liquids weighted upstream gives us upside leverage. And our commitment to capital discipline means that higher cash flow can be returned to shareholders. In a low price environment, our low cost of supply, more flexible C and E program and differentiated balance sheet ensures downside resilience.
These attributes, together with the commitments to disciplined cash flow growth and portfolio high grading illustrated in the middle of the slide, yield a compelling pathway to shareholder returns through the price cycle. We increased share repurchases during the Q4 of last year, and we increased our dividend by more than 6% in the Q1 of this year, demonstrating our confidence in future performance and our commitment to shareholder returns. Turning to Slide 7. These charts show Chevron's robust capability to grow production while replacing reserves organically. We grew both production and reserves last year, and we have a large high quality resource base to support high value growth well into the future.
The chart on the left illustrates 5 year reserve replacement, where we've added more reserves than we've produced and sold. Our shale and tight portfolio is a key contributor here. These are high quality reserves with lower geologic risk, lower above ground risk and low breakeven cost of development. The chart on the right shows our reserves to production ratio is both prudent and stable. It's not too high, too low or too volatile.
This stable ratio demonstrates that our portfolio is resilient through the price cycle. We don't have resource anxiety. We won't chase lower return investments, and we don't need to ramp up spending to restock a diminishing reserve base. Moving to Slide 8. Our position in the Permian Basin just continues to get better and underpins the depth of our resource base.
Today, we're updating our assessment of resource to 16,200,000,000 unrisked barrels of oil equivalent, up about 75% from a little over 9,000,000,000 barrels just 2 years ago. Continued appraisal success, improved drilling and completion performance, ongoing land optimization and ever improving technology have allowed us to characterize more benches and increase our inventory of resource. These same drivers have also increased the economic value of our acreage. Based on our valuation models, our estimate of the value of our Permian position has more than doubled over those same 2 years using the same price assumptions. You all have your own methodologies for determining asset value.
With the new data on production, cost and resource that Jay provides today, I believe you too will see a dramatic rerating of this asset. We remain focused on a capital efficient returns driven strategy integrated across the value chain underpinned by a low or no royalty position on most of our acreage. Turning to Slide 9. In a portfolio of assets that generate industry leading returns, there's a higher bar against which other assets must compete. As part of our capital allocation program, we continually review and evaluate our portfolio.
This updated Wood Mackenzie chart shows that our portfolio is grounded in large core assets that are reasonably young or long lived. The chart also illustrates that we have assets deeper into their life cycle that have been positive value and cash generators in our portfolio, but at this point may be worth more to others. The bubbles shown in green represent assets that are being actively marketed. Our criteria for divestments is straightforward. We screen our portfolio for strategic alignment, resource potential, relative economics and value.
2018 was the first of a 3 year program to divest $5,000,000,000 to $10,000,000,000 of assets. We're well on our way to achieving that goal. And while divestments are part of the high grading story, we continue to assess swaps and acquisitions too, looking to build an even stronger portfolio for the future. Moving to Slide 10. Our advantaged and sustainable portfolio is underpinned by an industry leading balance sheet and dividend cash flow breakeven.
Both are fundamental strengths, enabling Chevron to focus on what we can control and reinforcing our ability to deliver to shareholders even in the face of price uncertainty and market volatility. Our strong balance sheet is a key differentiator. The chart on the left shows Chevron's net debt ratio at the end of 2018 and the ratios of our competitors. The results speak for themselves. The chart on the right is WoodMac's estimate comparative breakevens across the same group of competitors.
We're leading here too and are well positioned to cover our capital spend and growing dividend even at prices well below where we are today. Companies with weaker balance sheets or outsized capital spending plans could be at greater risk of trade offs that restrict cash flow available for shareholders. We are not one of those companies. We have the portfolio, capital program and financial strength to balance growth and cash returns to shareholders. Now let's turn to our capital program.
This chart illustrates our 5 year outlook for total capital and exploratory spending. Our organic C and E budget for 2019 is $20,000,000,000 in line with last year, and CapEx in 2020 is expected to remain within the $20,000,000,000 range. In the outer years from 2021 to 2023, assuming a flat $60 Brent price, we're guiding to a range of $19,000,000,000 to $22,000,000,000 Let me say it again. We're a much stronger company than we were just a few years ago. We've completed multiple major capital projects.
Those projects are now generating strong cash flow. We've significantly reduced our preproductive capital. We've refocused our investment priorities towards shorter cycle projects that deliver returns more quickly and expect 70% of this year's spend to deliver cash flow within 2 years. Capital discipline always matters. And efficient capital deployment generates superior returns.
The chart on the left, drawn from several published sell side forecasts, illustrates a forward looking measure of capital spending intensity for Chevron and for our peers. Between 2018 2021, we expect to have a lower level of cash CapEx relative to operating cash flow. Over time, a lower level of capital intensity and some of the industry's most economic investment opportunities delivers improved returns and stronger cash flow. The chart on the right summarizes the impact of actions we're taking to improve cash return on capital employed. The big levers are growing volumes and cash margins, further lowering costs, selectively allocating capital by investing only in the best projects and actively optimizing our portfolio.
We've been successful increasing cash returns by almost 2 percentage points last year. We're targeting greater than 3 percentage points of improvement over the next few years at a flat price, which brings us to the subject of cash generation. As our production grows over the next 5 years, we expect to sustain our industry leading cash margins, resulting in strong upstream cash flow growth. Over the next 5 years, we expect net production to grow at a 3% to 4% compound annual rate. This comes on top of 5% growth in 2017 and 7% growth last year.
And I'll point out that we expect to generate this level of growth even with contract expirations in Thailand and Indonesia during this period. The depth and quality of our current portfolio provides a much clearer line of sight to capital efficient production growth with much lower execution risk than we've had in the past. The chart on the right shows that we expect to sustain our advantaged cash margin even at a flat $60 Brent price. In a higher oil price environment, the picture looks even better. Growing volumes with sustained peer leading margins is a powerful combination cash generation, which I'll cover on Slide 14.
Last year at $71 Brent, we delivered on all four financial priorities, returning more than $10,000,000,000 to shareholders in the form of dividends and share repurchases, while at the same time substantially lowering our net debt. This year, we'll continue to deliver on these commitments. We're positioned to cover cash CapEx and dividends at about $52 Brent, in line with last year. And at $60 Brent, we expect to generate nearly $30,000,000,000 from all sources, which not only covers our capital program and dividends, but also covers $4,000,000,000 of share repurchases and further balance sheet strengthening. And over time, we expect the cash flow picture to continue improving even in a flat price environment.
As a stronger company, we're better positioned to return more cash to shareholders. Over the next 5 years, we're set to return a higher percentage of cash flow to shareholders at a lower Brent price than in either of the preceding 5 year periods. We remain absolutely committed to our top priority of growing the annual dividend payout. And we expect to return surplus cash to shareholders in the form of share repurchases in any reasonable price environment, which leads me to my final slide. Chevron offers a winning value proposition, delivering industry leading value to shareholders in any environment.
On the left hand side of this slide, our financial priorities remain unchanged. At the core, our competitive advantage is created by a strong portfolio of long lived, low decline assets, anchored by future short cycle, high return investments that carry a much lower degree of execution risk. Chevron is operating from a position of strength today. The balance sheet is strong. Our dividend breakeven is low.
We're disciplined with capital, and we're generating strong free cash flow. Our investors don't need to wait several years for the story to come together, nor do you need to hope for higher prices to see higher cash returns. We increased our dividend by more than 6%, and we raised our annual buyback objective to $4,000,000,000 Together, we expect to return $13,000,000,000 this year, which equates to a total shareholder yield of nearly 6%. We're delivering now. That concludes my prepared remarks.
I'd like to turn the podium over to Jay Johnson to give you a deeper dive into our Upstream business. Jay?
Thank you, Mike. Good morning. We've got a great story, so let's get started. The photo is a picture of a diver preparing to connect the oil export pipeline at Bigfoot Platform in the Gulf of Mexico where we started production last November. This is the new asset in our diverse and advantaged upstream portfolio.
The pie chart on the left shows our diversity by asset class. The number of barrels in the shale and tight category has increased and now represents a third of our portfolio. We expect our shale on tight resource to continue to grow as we derisk the less mature areas. We have a strong position in key hydrocarbon plays around the world and the map shows some of our most important producing assets, many of which I'll discuss further this morning. Our advantage comes from having multiple long life positions in key geographic areas that generate strong returns and industry leading performance.
Our Upstream business is positioned to win in any environment. As you can see on the left, we've significantly reduced our capital program over the last 5 years. Looking forward, we plan to maintain a relatively flat and ratable level of capital spend that supports continued growth of production and cash flow. The chart at the top right shows we consistently lead our peers in unit production cost. We're driving efficiency in our operations through cost discipline, supply chain management and workflow transformations that leverage digital technology.
Today, we're more efficient and cost effective, and the result is industry leading earnings per barrel as shown on the bottom right. We're earning nearly as much per barrel today as we were in 2014 when Brent prices averaged almost $100 a barrel. We now lead our closest peer by more than 20%. Let's turn to resources and reserves, important indicators for sustainability of our business. In 2018, we replaced 136 percent of our production with proven reserves.
Our 5 year reserve replacement ratio is 117%, impressive results when you consider that we've increased production by about 15 percent over the same 5 year period. Over the last 10 years, we've achieved 147 percent resource replenishment rate by adding a net 4,600,000,000 barrels of resource even as we exit concessions and sell assets. We're spending at a rate that enables growth. Our strong resource base gives us flexibility and choices. And we'll continue to actively manage our portfolio, be disciplined in our capital spending and fund the projects we believe will yield the best returns.
Now let's go to our largest resource, the Permian. As you're all aware, we have a great position in the Permian. Mike's already highlighted the increase in our resource base and the doubling of our portfolio value. I'll share some additional information that supports these increases. We have a unique advantage, which is characterized by a long held acreage, 0 to low royalty on more than 80% of our land position and minimal drilling commitments.
Between 2017 2018, we transacted more than 150,000 acres through swaps, joint ventures, farm outs and sales that enabled an additional 1600 long lateral wells. Going forward, we'll continue optimizing our land position, further increasing the value of our portfolio. Our long standing strategy in the Permian is to be competitive in our execution, leverage our midstream capabilities and use our advantaged royalty position to make us the clear leader in financial returns. The charts on the left show the improvement in our type curves for each of the last 3 years. The solid lines show our actual production, closely tracking the type curves, verifying our increased well recoveries and the predictability in our well performance.
In the Delaware Basin, our average EUR for wells put on production in 2018 is 2,000,000 barrels of oil equivalent. And in the Midland Basin, it's 1,300,000 barrels. The chart on the right shows our operated unit development and production cost relative to our non operated wells. We remain competitive in both well performance and cost. We're developing new technologies that improve recoveries, lower costs and increase efficiency across our Permian assets.
That in turn is driving stronger cash flows, higher returns and increased value. Now let's turn to Permian production. Based on continued performance improvements, we're raising our guidance in the Permian. We're projecting Permian unconventional production to reach over 600,000 barrels a day by the end of 2020 and over 900,000 barrels a day by the end of 2023. Our updated guidance is still based on a fleet of 20 operated and 7 to 10 net non operated rigs over the period.
And we still expect to be cash flow positive in 2020 at $55 a barrel WTI. We have the capability and the land position to further expand our drilling fleet. And obviously, this would represent upside what we're showing you today. But in addition to the Permian, we also have other emerging shale and tight assets. We're actively developing attractive shale and tide assets in Argentina, Canada and Appalachia.
We share technology, best practices and lesson learned between them, continually improving our performance. In the Loma Campana area and the Southern Vaca Muerta Shale, performance improvements in cost and production are yielding attractive returns, and we've increased the pace of our drilling program. We're also excited about another 162,000 net acres we hold in 3 prospective areas in the northern Vaca Muerta, as shown by the cross hatch on the map. We have an 8 well pilot in the El Trapial area and another 4 well pilot in the adjacent Nerambuena area scheduled for this year. We believe these three areas could offer an incremental 2,000,000,000 barrels of resource.
Next is the Duvernay Shale in Canada, where we generate significant value from the produced condensate, which supplies local markets. The Marcellus and Utica Shale in Appalachia is predominantly a gas play. And with low development cost and improved infrastructure in the region, realizations have strengthened and returns are competitive. Now let's turn to TCO. TCO is a highly efficient world class operation in Kazakhstan, a legacy asset in our portfolio that continues to generate industry leading returns.
To kick things off, I'm going to show you a video that highlights the strength of our TCO operations and the progress we're making on the future growth wellhead pressure management projects.
Tengiz is one of the most prolific oil and gas producing fields in the world today. And Chevron's operations at TCO have been a foundational part of our portfolio since the partnership was formed in 1993. Since its start up, the facilities have been expanded and optimized to increase production capacity and reliability while improving safety and environmental performance. In 2,008, the 2nd generation plant came online and since then multiple debottlenecking initiatives have increased reliability to 98% and its capacity by more than 20%. In 2016, the TCO partnership approved the plan to further develop the Tengiz field with 2 interconnected projects, the wellhead pressure management project and the future growth project.
WPMP is designed to extend the production plateau of TCO well beyond 2022 by providing facilities that allow new and existing wells to flow even at lower reservoir pressures. FGP is an expansion project that builds on proven sour gas injection technology to enhance recovery and increase production to approximately 1,000,000 barrels of oil equivalent per day. The project has 5 phases that run concurrently. The engineering phase is 90% complete. Our off-site module fabrication phase is progressing well and is 65% complete.
In South Korea, we are building a total of 91 process and utility modules. In Italy, we are building 5 gas turbine generators. And in Kazakhstan, we are building 75 pipe rack modules. As part of the logistics phase, we've implemented a unique transportation solution that uses a combination of international and inland waterway systems. These systems are connected to a purpose built offloading facility in the Caspian Sea adjacent to the Tengiz field.
Logistics activity will peak in 2019 with daily arrival of process modules, pipe racks, gas turbine generators and other equipment. As part of the on-site construction phase, we are completing the civil and underground work while making good progress on pipe racks and other equipment installations. We are also constructing an integrated operations center where operations, maintenance and engineering will work in a centralized digital environment to make better, faster decisions that result in increased reliability and production. For the drilling phase, 25 wells have already been drilled and completed. Recent optimization and the implementation of best practices have reduced drilling time by 50%.
As a result, drilling is currently well ahead of plan. As modules and equipment arrive on location, productivity is a key focus area. In 2018, we have deployed and proven the effectiveness of specific project management tools that break down complex workflows into simpler, discrete actions that drive daily performance. By the end of 2019, we expect main engineering to be essentially completed. All work at the Italy, Kazakhstan and 1 of the 2 Korean fabrication yards to be completed.
All gas turbine generators and pipe rack modules to be delivered and installed and nearly 70% of the process and utility modules to be delivered. As we look to the future, TCO remains on track to deliver 1st oil in 2022.
So I hope the video provided insights into our operations at TCO, the main activities associated with the FGP, WPMP project and the progress that we're making towards first oil in 2022. I was in Tengiz last month and also visited the module fabrication yards in Korea. And as you saw in the video, we derisked key aspects of the project in 2018 with module fabrication, logistics, on-site construction and drilling all tested and progressing well. As you also heard, last year we deployed comprehensive construction planning tools and saw rising workforce productivity. With these tools now in place, we're hitting the ground running as we focus on interconnecting the modules and energizing the first systems.
Now let's move to our Australia gas assets. With 5 LNG trains at our Gorgon and Wheatstone plants, we're using a systematic approach to increase the reliability, utilization and plant capacity just as we've done at TCO. As a result, we've seen an initial 2% increase in capacity at Gorgon and 6% at Wheatstone. With these increases, high reliability and no planned shutdowns in the Q4, our net production for Gorgon and Wheatstone was just under 400,000 barrels a day. We've also identified further reliability and capacity improvements that we expect to implement over time.
We have over 50 TCF of discovered equity resource offshore Western Australia, and we're working to monetize it to provide the highest returns. This includes leveraging expected Ullage at other existing LNG facilities in Northwest Australia. As an example, our undeveloped CLEO Acme fields are close to existing infrastructure. This offers an efficient development option with higher returns. Ultimately, we see an interconnected basin with shared infrastructure as the best development option for all stakeholders, much as we see in the U.
S. Gulf of Mexico. In our deepwater portfolio, we saw 1st production from Stampede, Tahiti Vertical Expansion Project, Jack St. Malo Stage 3 and Bigfoot during 2018. Our operations have demonstrated industry leading reliability and our production in 2018 increased by almost 10% from the prior year.
We're focused on improving returns by reducing our unit operating and development costs. Operating costs today are less than $10 a barrel, approximately half of what they were in 2014. For new opportunities such as Anchor, Ballymore and Whale, we're targeting $16 to $20 unit development costs, which is roughly a third lower than our last set of greenfield deepwater investments. We're lowering development costs by standardizing equipment, utilizing fit for purpose surface facilities that require less capital and employing drill to fill strategies. We also continue to advance technologies in the deepwater.
As an example, we just completed certification of multiphase subsea pumps that will be field tested at Jack St. Malo later this year. These pumps can increase recovery and extend the lengths of potential tiebacks. Around 60% of our exploration blocks are within tieback range as shown by the red circles on the map. Tieback opportunities utilize existing infrastructure, which can provide early production systems and improve the returns of smaller discoveries.
Now I want to start pulling all this together. This chart shows the 3 primary sources of our new production over the next 5 years. The biggest source of new production is expected to come from the Permian shown in green. A growing source of new production is the other shale and tight assets including Vaca Muerte, Kaibab Duvernay and Appalachia shown in dark blue. Later in the period shown in light blue, we expect contributions from major capital projects that are already in execution such as FGP.
As you can see by the maroon sliver, our new production over the next 5 years is not dependent on sanctioning new major capital projects. By the end of 2023, these sources should contribute around 1,500,000 barrels of new production each day. Now the last step in our production story is to look at how our new production offsets base decline rates, contract expirations and asset sales, providing our overall 5 year production outlook. Today, we're guiding to a compound annual growth rate of 3% to 4% over the next 5 years at a flat $60 a barrel Brent price, And this includes the impact of announced asset sales and the effect of contract expirations in Indonesia and Thailand in 2021 2022. With the majority of our new production coming from shale and tight assets, our growth is disciplined and ratable with lower risk.
Remember, we view production as an outcome of our investment decisions and our disciplined approach to monetizing assets. We've said before that all barrels are not created equal. So let's look at the value we expect to generate with our future investments. Based on an analysis by Wood Mackenzie, Chevron's return on investments over the 2019 to 2,035 time frame is expected to be the highest among our peers. The analysis shows that we have superior portfolio of new investment opportunities that can deliver industry leading returns.
It's this rich portfolio of attractive investments that's driving our production growth and profitability and ultimately offers a differentiated value proposition from our peers. So I've described our Upstream business and why we believe we're advantaged. We have a sustainable portfolio that's underpinned by high quality resource additions and strong reserve replacement. We expect to grow production with a disciplined and ratable capital program, investing in lower risk and higher return opportunities than our peers. Our production growth coupled with strong cash margins leads to growing cash flow.
We are not asking you to wait for it. We are doing it now. And with that, I'm going to invite Mike, Pat and Mark up to the stage. Thank you.
All right. Thank you, Jay. And before we begin Q and A, just a couple of guidelines. As you raise your hand and I call on you, please identify yourself and your firm. And please limit yourself to one question and one follow-up, I'll start up front here with Phil.
Hey, good morning.
Phil Gresh from JPMorgan. Thanks for the presentation today. I guess first question for Mike, the new capital spending budget of $19,000,000,000 to $22,000,000,000 you've laid out through 2023. Is this a message that is similar to the past where this capital spending number is a cap on the CapEx? Or as you think about a higher price scenario, would you be willing to spend more for some of these major capital project opportunities that you have?
Yes. So we Phil, we've laid that out at a $60 price. But the intent is to stick to that budget really through any price environment in that range. I mean, we've got flexibility. One of the key things that I hope you've taken away from the presentation is because of the short cycle nature of the majority of our capital spending, we have the ability to flex it up or flex it down.
The intent is to keep it in a pretty ratable band and not to chase the price cycle if it heads up and not to get spooked if we see a downturn. We've got the ability to deliver strong returns and strong cash flow out of the portfolio we've got today. And the key is execution. And I think one of the key things that Jay has talked about in the Permian is the steady improvements that we're seeing in all aspects of our Permian production simply improves the returns out of those investments. And so those are very attractive even at a relatively low oil price much more so at a high price.
But we don't need to chase higher spending if prices were to cycle up to still deliver strong growth in cash flow.
I guess just the follow-up question to that. In a higher price case, what would you do with the excess cash flow? I mean, you're doing $4,000,000,000 of buybacks at this point at $60,000,000 So should we be thinking for $65,000,000 or $70,000,000 the incremental dollars would go back to the shareholders incrementally? Or just kind of tying it back to the previous question? Thanks.
Sure. And we've been consistent with our capital priorities for a long time. Our financial priorities, dividend number 1, reinvest in the business number 2, strong balance sheet number 3, and returns through share repurchase is the 4th priority. I think we've demonstrated that as we've begun to see surplus cash flow accrue that we're willing to use share repurchases to return it. And we'll continue to be mindful of the fact that our dividend is very important to all our shareholders.
We've got a 32 year history and we're set for the 32nd consecutive year of annual per share payouts this year. Ratable capital program, strong balance sheet. That takes us to the 4th priority pretty quickly. And I think you would see that through share repurchases in really in any reasonable environment. Jason?
Thanks, everyone. Jason Gammel, Jefferies. I've got 2 on the Permian, so I'll just ask them both at the same time. Maintaining a 20 rig cadence in the guidance, obviously generating tremendous results, but why is 20 still the right number? Is there potential to accelerate even further?
And I guess the opposite side of that question is how big would you be comfortable with the Permian actually becoming? It looks like about percent of the portfolio by the time we get out to the latter projection that you have. Are you comfortable with it going to 40%, 50% or is there some cap that you would have?
Yes. I'll give you a short answer and then let Jay build out on that, Jason. Number 1, we're saying with the program we've outlined for many years that we were going to steadily build to a 20 rig company operated fleet and then as Jay said 7 to 10 non operated rigs. That's been because we've had a clear commitment to discipline in the way we're building this up to returns and to building a factory that can deliver strong performance. You need a land factory on the front end to be sure that you've worked to core up good contiguous drilling acreage.
You need strong factory fundamentals in how you drill and complete those wells, build surface infrastructure. Your midstream and downstream approach also needs to be built to take the growing production that you see. And so we've had a plan and we've stuck with our plan. And our plan has been to consolidate here at 2020 and be sure that we're working all the efficiencies we possibly can. You've been around long enough.
You may have heard me talk about the reliability of refinery. Back during the golden age of refining, when everybody was clamoring to build new refineries, I green lighted a new refinery inside of our downstream business, but I gave them a capital budget of 0. And I said, you can find a refinery by operating our existing system better. And we improved by 10% and found a 200,000 barrel a day refinery sitting right there. We can do reliability rigs too.
Out of 20 rigs with the improvements we're seeing, we can get more work done out of the same rig fleet. And so that's where we are today. But as Jay said, we've got the capacity clearly to grow that, which would represent upside. It's clear that our unconventional position is getting bigger. It's the lowest geologic risk in the portfolio.
It's low above ground risk and it's the highest return use of our dollars and it's short cycle. And so seeing it grow larger, the best asset that you have, seeing it grow to a larger and larger percentage of your portfolio is not something that causes undue concern. Jay, I'll let you add there.
I don't know what else to add. You covered that really well. I would just say our focus in the beginning has been on returns. And so what we want to really make sure we're doing is optimizing our land position and our fleet to get the best returns. But we certainly have the capability to go higher on that rig fleet once we get things where we really are happy and we feel that's the next best step for the incremental investment, then we'll decide to do that.
Okay, Blake.
Thanks. I had two questions. 1, Jay, I think you outlined the growth on production, but can you talk a little bit about what the assumptions were on the base decline? And then I'll just ask both questions. 2nd piece is on CapEx.
What is embedded in there as far as assumptions on Permian inflation? I think previously you were assuming 5% to 10% inflation in the Permian. So that assumption and then also TCO which had been running a bit hot, what's the embedded assumption there? Thank you.
Okay. So first on the TCO, I'll just cover. That is working really well. We are seeing performance is strong in terms of the execution performance. I've talked about some of the engineering issues that we've had to work through.
Those are largely in the rearview mirror. Some of the impacts have been felt in the fabrication and construction. But as we move now into 2019, it's a very important year for us. We're very focused on getting our workforce productivity and our work at site going well. In terms of the first question, sir?
Decline and then Permian inflation.
In terms of decline, our assumption on decline isn't much different than it's been in the past. We've actually seen very shallow decline rates in our base business. Our base business changes. So for example, now our base business has Gorgon and Wheatstone in it. And with assets like Gorgon, Wheatstone, Tengiz, these are long lived assets that are limited by plant capacity, not necessarily by the field on the front end.
So our decline rates are relatively low. But looking forward, as the Permian and other shale and tight get to be a larger percentage of our portfolio production base, we would expect to see decline rates pick up somewhat.
Okay. And did you address Permian inflation?
Permian inflation right now, we have seen some pressures on cost. But overall, the improvements in efficiency and performance have been largely offsetting those costs. Really, we've been able to manage the impact of any inflation through the longer contracts that we have. We've got internationally sourced material. We have index contracts.
We have staggered duration, so they don't come due at the same time. All of that has worked to really moderate what we were worried about in terms of the cost inflation in the Permian.
Okay. Roger.
Thanks. Roger Read, Wells Fargo. Maybe to hit the Permian one more time. Permian acquisitions have been in the news, not so much you, but others. Just curious how you mentioned 150,000 of swaps, but how do you think about your overall position?
Should it get bigger? Should you take an opportunity as much as you've grown it to buy acreage that might have additional upside? Just curious how you're evaluating that aspect.
Yes. Roger, I'll just reiterate what I think I said in my comments and we've said before, which is we're always looking to get better. And so we've been actively high grading our Permian acreage, as Jay indicated, over the last 2 years. And I used an analogy with somebody the other day. We're from the Bay Area.
After the Golden State Warriors won a couple of NBA titles, they added Kevin Durant to try to get better. They added DeMarcus Cousins to try to get when you're doing well, it doesn't mean you're going to stop there. And so I think we need to get better. We're big. So bigger is not necessarily an imperative.
I think better is something that you're always looking to do. Sam?
I was going to
can I get a sense? I'm sorry, we didn't get your follow-up. Go ahead.
That's all right. Thanks for rubbing it in. I was a Rockets fan
there. Sorry about that.
Just real quick on LNG expansion, I was just curious, really didn't talk about it, didn't show it in a major capital projects out to 'twenty three is having really any impact. How do you think about LNG here? Is it multiple years of just working out Gorgon and Wheatstone and then pulling the trigger? Or is there something you're looking for in the broader LNG sort of financial returns potential before you make another move in that area?
Yes, I'll deal with it broadly and then Jay can add a little bit. Job number 1 is to get the most out of our investments that we've got out there today. And Jay talked about improvements at both Gorgon and Wheatstone already in terms of the capacity that we can move through those units and the fact that we've identified a number of other things that can be executed through the turnaround cycles to further improve performance. He also talked about Western Australia infrastructure, all that could open in other facilities and the gas resource that we possess in Western Australia. And we don't necessarily have to move the gas through our own facilities.
There's certainly commercial opportunities to move it through other facilities as they open up. And those are issues that are actively being worked. So it's a pretty capital light way to continue to grow your LNG business. And then we've got other options. Certainly, we've got Kitimat.
We've looked at things in other parts of the world and continue to look for the right opportunities. The key on big LNG investments is to be down the cost curve. You do not want to be out at the high end of the cost curve, really want to be in the lower cost facilities because those are the ones that are likely to get funded, to get built in, to be economic. And so that's how we're thinking about it.
Do you have
anything you want to add to that, Jay?
I would just say we've got assets in various locations. Our primary focus, as Mike said, is to really get the absolute most we can out of Gorgon and Wheatstone. We've made that investment. So those are very valuable incremental barrels to get. The opportunities, we have the opportunity to expand either Gorgon or Wheatstone.
They were both designed with expansion in mind. We also have the unconventional gas plays up in Western Canada with Kitimat that offers some opportunity. We've been working hard to get the development cost of the plant proper to a point where it's competitive with U. S. Gulf Coast delivered into Asia Pacific.
There's opportunities in Middle East expansion, and we produce a lot of gas in the U. S. Gulf Coast area that can be potentially run through other people's facilities there on the Gulf Coast and access that way. So there's a lot of different options open to us that we continue to evaluate and look at what's the next best step for us. Okay.
Paul?
Paul Chan, Barclays. Two questions. First, I think a lot of people have been talking about digitalization and how it's going to improve the operation. Jay, in the upstream, how big is the grand prize we may be talking about? And how what is, say, inning that we are I assume that we are in the very early stage?
Can you give us some example and elaborate that?
So you're going to get some great examples this afternoon at the Technology Showcase, and I hope you'll attend that because we've got some of our practitioners that will be there. I think a couple of the areas where the digital work is going to really yield and is yielding results today. First, for example, in places like the Permian, we have the ability now to actually run decline curve analysis, not only on our own wells, but on every well in the basin every month. And this is done through artificial intelligence. It gives us tremendous insight into how the basin is working, where are the most prolific areas.
We are seeing opportunities in our supply chain to be much more efficient in how we procure services and goods. We are seeing opportunities for asset integrity work. It's just across the board. And I think we're early in the process. And I really think the digital efforts are going to drive that efficiency that we continue to seek at making our business more and more effective and cost effective and increased production.
So I'd say we're in the early days of this thing. Those are just a few of the examples, but you're going to hear more of it this afternoon. And it's a pretty exciting area because I think it's going to revolutionize the upstream business.
Jay, is there a number that you can share that? How big is that grand price may look like? Is it 10% of your overall operating costs or productivity? Anything that you can share?
You're asking me to speculate, and I don't like to do that. I rarely do it. This one is big. I won't put a number on it, but I think it's got real potential. In terms of operating cost and lowering cost is one thing in terms of lowering our unit operating cost because it works on both the numerator and the denominator.
We get more production and we get fewer costs at the same time with many of these applications, and that's what makes it so powerful.
The second question is on Gulf of Mexico. You target the development cost 16 to 20. How far along that we are on that journey? Because when we're looking at your production profile, you talk on to 2023, I mean, looking at the graph, doesn't look like that you have any new Gulf of Mexico or deepwater projects in there or at least not much. So where are we in the process?
So I'd say we're pretty much there in terms of being able to get to those unit development costs. The work on standardization has been yielding some real benefits. And it's not so much that we don't have the projects. The reason you don't see them in that 5 year production forecast is just because we haven't needed them. They're not the most attractive.
But we have Ballymore, Whale and Anchor. And I would expect to see those progress in a ratable fashion over the coming years. That production is largely going to start being apparent in the middle to end of the next decade, not in the early part.
The other thing I would add, Paul, is I hope you heard Jay's message on longer distance tiebacks and the amount of acreage we have that's within tieback range. And so rather than, if you want to call them home runs, big new greenfield projects, there are going to be a lot of singles and doubles with tiebacks into facilities as all it starts to open up that are highly economic as well. Doug, Terreson over here.
Mike, spending increases have historically led to higher volumes, but lower returns and valuation for the big wells during the past decade. So given this history, my question is whether you can provide some specificity on how we're going to see the returns improvement that you guys talked about on Page 12. Why are you confident meaning are the gains expected to come from the upstream or the downstream and within those businesses where do you expect them? So the question is really about transparency to value and how are shareholders going to get rewarded from this higher spending?
Yes. So I'll start with just a reminder that we're not talking really about big spending increase. We're talking about a ratable investment profile. We're talking about not investing in everything. And so Jay talked about some deepwater projects that are still in the portfolio.
Rosebank is not. Tigris is not. Those are both economic projects. They both met our economic thresholds. We simply have better things to invest in.
And as Jay just said, one of the reasons you see that profile over the next 5 years is we are investing in the best things in our portfolio. And at the same time, we're taking other opportunities and we're making them better. And I've said this before, but I'll repeat it. I think one of the great benefits of the advent of shale is it has inspired greatness in other asset classes, a different approach to design, to standardization, to execution of deepwater projects, for instance, and other things. So we'll lay out the improvement in returns largely with ratable capital spending as we see some of the larger spending over time depreciate off the books and we invest in these short cycle higher return assets and see production grow and sustain margins, I think the equation will be pretty clear to you.
Okay. And then renewables and power generation concerns over climate related and electricity and transport appear represent pretty meaningful threats to the industry. So my question is, how significant do you see these threats? How does it play into the plan for ratably higher spending today, which I think was your phrase? Or are they so far out, Mike, that you don't see them as relevant factors?
So how does it play into today's comments?
Yes. Look, so today, as I said, there's 7,500,000,000 people on the planet. 1,000,000,000 of those people don't have electricity today. It's hard to believe, but it's true. Nearly 3,000,000,000 of those people still use biomass or animal dung for indoor heating and cooking.
By 2,040, there will be 9,000,000,000 people on the planet. The 1,500,000,000 that are added are generally going to be in developing countries. There is a need for more energy around the world of all types and there's room for all types. And so we have core competencies in investing in the business that we know. We also invest in renewables.
We've invested in wind and solar and biofuels and intend to continue to learn in those areas. But just as Jay said, Deepwater has got to compete with other things within our portfolio for investment, so do renewables. And we need to find things that are economic, that are scalable for us to invest in them. It doesn't mean that others shouldn't and others won't. But we see a very attractive set of opportunities for the foreseeable future that leverage our core strengths and wouldn't pull us away into things that perhaps we don't have as much experience in or that may still not be established at scale and with the same robust economics.
Paul?
Thanks, Mike. Paul Sankey at Mizuho. If we look back at pre use analyst meetings, particularly at the very top of the market, the outlook had been for $40,000,000,000 a year of spending, which became a challenge for you guys, obviously. What's I guess, my question is somewhat just the inverse of fills. How much do you intend to or expect to change CapEx in the lower price environment?
And I'm thinking particularly of the Permian. Or to what extent would you see this 2018 to 2020 type time frame 2020 type CapEx frame as being something that you'll stick with pretty much to really quite low prices? And the follow-up would be, in the previous cycle, you had built fortress balance sheet in anticipation of potential outspend. In this environment, is there potential for you to actually increase buybacks in a lower price environment? Or how would you manage that potential environment?
Yes. So there's a bit of a hypothetical construct there, Paul. And a lower price environment for a short period of time, I don't think much changes. I think if we see a structural reason why we believe we've downshifted from we've laid this all out at a $60 flat world, which at least according to most of the things I read that are written by people that cover our industry is in the ballpark of what people would expect. If we were to move into a lower range than that, that we thought was sustainable, I think you would see some adjustments because we have the flexibility to make adjustments.
But we still have a lot of investments that are economic at $50 or at $45 or at $40 And so it wouldn't be a dramatic shutdown of spending because we still have good returns in the best of our portfolio at those prices, and it's still getting better. So the intent here really is to lay out a ratable plan not to be swung by the price cycle, which is hard to predict in our industry other than you know we're going to see higher prices than today and also lower prices than today. I'll touch on the balance sheet and share repurchases and then see if Pat wants to add anything on that. We've also tried to be very clear that as we've resumed the share repurchase program, we don't intend to swing that with the price cycle as well, and we intend to see it through in any reasonable price environment that would be a higher or a lower price environment that we're in today.
I don't think I have much to add. When we started the program or restarted the program, we took a look at a number of pricing scenarios and tried to peg a rate of annual repurchases that we felt could be sustained over a long period of time. And certainly having balance sheet strength now allows us to have comfort in that through, as we say, any sort of reasonable price environment.
Yes, that's reasonable. I think the $60,000,000 everyone expects it, so it's probably not going to happen. And the risk may well be to the downside. If you were to really which you seem to be saying, say that you're going to rate this buyback and keep doing it through a downturn, the obvious conclusion is that you're going to flex the balance sheet.
Well, I think we pointed to the two sources of resilience, Paul, as our best in peer group balance sheet and our lowest breakeven. So at a lower price, we feel less pain than others. And our breakeven is likely to go down over time. And so you can endure a lower price better and you've got a better balance sheet to see these things through. So I think that's not a logical way to think about it.
Sam, I came to you and then I skipped you. So I want to come back to you.
Thanks a lot. Yes, I guess just maybe expanding a little further on that price outlook. I know it's best to run the business side kind of an agnostic and just chase the best return opportunities you have. But is your suite of projects sort of that you referenced down to $45 breakevens, does that sort of inform this $60 band and why we can't go higher? Because you start out with this big need for global reinvestment that may be not being met right now.
And so I just I'm wondering if you're looking at your own portfolio and you see some opportunities that are economic down to $45 is that why you want to stay captive in this kind of $60 outlook and not presume that we're going to be in some kind of deficit?
Well, we've laid out $60 not because it's our planning price. We've laid it out because it's reasonably close to current prices and it's a price that seems to be generally viewed externally as a reasonable number. What I would just tell you is that we're driving for financial returns, not for production levels. And we've talked about this already, but the objective here is to find the best projects, fund the best projects, take projects that look like they've got prospectivity and improve them until they can compete with the best we have in our portfolio, do it in a ratable manner that derisks execution. So we believe we can deliver on that and then do it very steadily.
So we've got a very clear, repeatable, consistent, deliverable value proposition. And that's not something that whipsawing the budget, whipsawing activity is generally supportive of. So about a long term value creating, cash generating model that we're focused on.
Sure thing. And then just one follow-up back to the Gulf of Mexico and the Permian. It sounds like the Gulf of Mexico is a cost story, but you're exiting some other places around the world too. Is there anything else that's going on that you're seeing whether it's the fiscal regime or visibility and cost? Is there something that's pushing you towards the U.
S. Concentration in the future or is that just something the way the portfolio is aligning today?
It's good rocks. Yes, Neil.
Thanks very much for today's presentation. The first question I had was on downstream. Can you just provide some thoughts on how Chevron is positioned in that business, particularly as we get closer to IMO 2020? And related to that, your latest thoughts on the chemicals FID, potentially at Cedar Bayou? And then I have a follow-up.
Yes. So I'm going to turn both of those over to the newly minted head of Downstream and Chemicals, Mark Nelson. Thanks for
the question, Neil. So from an IMO perspective, I think we've shared that we're very well positioned as a company. And that has to do in reality with the kit that we already have. You heard earlier about our complexity index. And that positions us we're in a spot where we're producing over 40% mid distillates and just about 5% of heavy sulfur fuel oil.
So we're not particularly exposed. And I think we've got plans for placing that product as well as maybe making some minor adjustments at refineries to limit that exposure. And our shipping portfolio is essentially all ready today. So all in, I think we're very well positioned. And I would essentially say it's not material necessarily for the company, but certainly a net positive for us.
The second question was on the chemicals side of the equation. From my perspective, it's not so we are very interested long term in regard to growing the chemicals business. From our vantage point, it's about advantage feedstocks, and I'm not so concerned about pace as I am ensuring that we're picking the right project so that we can be on the right side of the supply stack over time. We're continuing to work that with our partners at CPChem.
Mike, the follow-up question I had, these are a little bit more nitty gritty here, but two questions as we think about dialing these into the model. How do we think about the split of liquids versus gas in the Permian? Then how do we think about the evolution of cash CapEx versus headline CapEx, especially as TCO rolls into completion?
So I'll give you liquids, gas at a portfolio level and maybe then see if Jay wants to add some English on it for the Permian. And I'll talk a little bit about cash and non cash CapEx. So we're kind of sixty-forty liquids gas today in terms of production. In terms of realizations from a pricing standpoint because we have the large LNG projects that have come online, we're in the low 70s, say, between 70% 75% liquids pricing or oil based pricing, so higher than what the production number would be. On CapEx, today we've got a sizable piece of non cash CapEx as we're pursuing the project at TCO.
We've had that the last few years with a petrochemicals project at CPChem as well. And as Mark just mentioned, we're certainly looking at actively developing options for further growth in the petrochemical sector. So as TCO comes off, the question would be, does it get replaced by another large project that's not it's a little early to speculate on that. I think at some point, it's quite likely that it does. When and how large?
What's the profile look like? I don't want to really speculate on, but cash CapEx would go up a little bit if we're in that range than if non cash CapEx comes down. But I think that will be highly dependent upon finding good attractive projects both within the portfolio where we cash as well as looking for those in some of our large affiliates. Okay. Doug?
Thank you, Mike. Doug Leggate from Bank of America. Just to, I guess, follow ups to a number of the questions that have been asked. Slide 13 shows a dip in cash margins before it rebounds through 2023. I just wonder if you could walk us through the dynamics there.
I'm guessing TI over Brent is part of that given the swing towards the Lower forty 8. My follow-up and I guess first, Pat, congratulations again on your retirement. My a key part of your investment case over the years has been low sustaining capital. So with the as such a large part of the portfolio, I wonder if you could speak to how the sustaining capital trend evolves over the next several years?
So if you look at the scale there, what looks like a little bit of an up and down is in a relatively small band, Doug. And what it reflects is in the near term, the growing production in the Lower forty eight is a little gassier. And so you've got a little bit of a shift there. As we get out to the back end of that period of time, we bring a lot more oil in Kazakhstan. But I think the real story here is it's relatively stable, It's enduring and it continues to lead our peers.
And it's matched up with 3% to 4% compound annual growth through that whole period of time. So we're not chasing lower margin dilutive barrels to grow. The second thing I would say about that is the while the Permian may dilute the cash margin a little bit, the returns on the Permian investments are far and away the highest within the portfolio. So these are the most economic barrels that we have to invest in. Your longer term question was on sustaining capital.
We moved away a little bit from the base plus shale and tight. We got some feedback from people that it was a little hard to understand. And as our base would change over time, that just from a modeling standpoint, it was difficult. And so really what we've given you is broad guidance on capital for 5 years, which is something that we have not necessarily been all that thrilled about doing historically. We've decided to put out longer range capital guidance and longer range production guidance so you can see the big picture.
And the big picture is of ratable and relatively modest capital spending relative to a company our size and steady continued growth while we're sustaining the leading margin position. Did you have a follow-up? Yes. So the question for those that couldn't hear it, sustaining capital Doug had it previously at 12% to 13%. And does that go up as shale and tight become a bigger part of the portfolio?
It's a question I really can't answer because as shale and tight become a bigger part of the portfolio, shale and tight is growing, not declining. And so I don't think it's I think there's a bit of a disconnect there. Yes, John, in the back.
Yes. Looking at your PV-ten information
This is John Herland from SocGen, I think.
Yes, sorry. John, looking at your PV-ten information, you've obviously had your PUDs in the U. S. Go up quite lot I assume mainly Permian last 3 years also your development expenditures. So I was curious as to for the development expenditures, how much is drilling and how much is infrastructure midstream with respect to the permit and spending?
Yes. So I'll tell you on midstream, there's not much midstream because we've had a strategy to take our large position, our strong balance sheet and our very visible production growth profile and go to midstream service providers who have competed pretty aggressively to offer us attractive transportation rates and good access to multiple markets. So we're not putting much capital in the midstream because we can get access to it given the nature of our portfolio. And we'd rather deploy our own capital into higher return investments than pipelines. In terms of the breakdown on drilling versus completion and some of the details down below that, I'll see if Jay wants to take a crack at that.
So first on the drilled but uncompleted wells. We're really not building an inventory over time. You may see some variations quarter to quarter just based on multi well pads, and you may have some wells that have not yet been placed on production because we have to bring them all on together. But as a company, our completions have been very, very efficient. So we've been staying right with our drilling on the different projects that we have, the development areas that we have in the Permian.
For the unconventional wells, particularly long laterals, a big component of the cost, and I'm not going to break it down exactly. But it's a pretty significant amount of the cost is in the completion that pretty much balances with the drilling side of the business. What we look at is the total cost on a unit basis. So our focus is on what is our unit development cost for the barrels that we're going to produce in our EURs. That's why we showed you the type curves and that's why we showed you being so closely matching those type curves because it's really the barrels that we're going to get out of those wells and what did we have to pay for them that we're most closely following.
Okay. And the
follow-up for me is what's your average well length in the Permian? That's it.
It's been growing here as we've been improving our land position. As you know, a lot of our land is checkerboarded, so we work hard to fill that in. We've had some good land transactions to do that. So it's generally been growing. I'd say it's probably in the 7000 to 8000 foot range is kind of the average that I would expect over this year.
Yes, over here.
Yes, thanks. Jason Gabelman from Cowen. On the Permian breakeven, I know you mentioned 55 Ti. I'm just wondering what you're realizing on gas out of the Permian and if there's any risk to the continuation of realizing whatever price you're assuming where maybe you'd have to ratchet up investments to continue to realize that gas
price? Yes. We're moving our gas. We're not flaring gas. We only flare for operational reasons.
But the gas market has been a tougher market than the oil market. And that's something that we're actively working with our midstream and our commercial people to ensure we're getting the highest realizations on gas. The economics on these things largely pivot around the liquids, but you don't want to be leaving money on the table. So we're working hard on the gas as well. I don't want to we typically don't comment on specific commodity realizations.
So I won't comment on that. But I will acknowledge that gas has been tough for the industry, and we're working hard to be sure that we're getting every penny we can for gas realizations.
Thanks. If I could just ask a follow-up on CapEx. The high end of the range, if you're going up to $22,000,000,000 is that activity you're ratcheting up? Is it more in the shale and tight bucket? Is it in the is it kind of pre FID longer timeline projects?
Thanks.
Yes. It will be in the best projects that we have to invest in. And over time, we'll have things that wind down. So as TCO winds down, that opens up room. Jay has cited a number of But I'll tell you the shale and tight is But I'll tell you the shale and tight is highly attractive not just in the Permian, but in the other basins that we talked about as well.
And so those are very attractive from an investment standpoint. They're short
cycle and lower risk from a return standpoint.
And so they They're short cycle and lower risk from a return standpoint. And so they really become the option that we look at other things in the portfolio to check against. All right. We can go to a second question for some people because it looks like we're up. John, we haven't got to John yet.
Thank you. It's John Rygiel from UBS. Just one question. Your balance sheet, as you acknowledge is a differentiating factor. There's a wide range of gearing across the majors and you are towards the low end.
And looking at your cash flow profile, the implication is it goes lower not higher in most oil price scenarios that I can think of. Would you just leave that as something that just enables you to manage through the cycle, as you sort of indicated? Or do you see it also as an opportunity? It's something that you can leverage to access new opportunities in a fairly disciplined way, but something you can use to add to the portfolio over the next 3 to 5 years as you indicate?
Well, I'll take what sounds like an embedded M and A question, and then I'll let Pat take the balance sheet question. I said earlier, we're always looking to high grade our portfolio. So that's just a fact. We're always looking at things, but we don't comment on that further until we have something specific to talk about. Pat, do you want to talk about the balance sheet more generally?
Yes. I mean, I just say I would say you use the balance sheet for all of the above. And in the case that we showed on one of slides in the $60 world, we're relatively balanced in terms of all sources of cash and cash C and E dividends and the share repurchase program. And it's really because of the share repurchase program, I think, that we're balanced at a $60 rate. We did show a very small sliver there for continuing strengthening of the balance sheet, but it's relatively small.
I look at the balance sheet as the outcome of a whole series of really good decisions that we have made previously. And that concerns how much you're spending and reinvesting in the business both organically and inorganically, what your dividend profile is and the growth of the dividend. And right now, because of the strength of our portfolio and the fact that we've got a very ratable C and E program that delivers strong value growth, strong production growth over the next several years. We see that supporting the dividend and supporting the share repurchase program is a very stable place to be.
Okay. We've got time for one more.
Paul?
Thank you, Mike. Paul Chan, Barclays. First, Pat, just want to say thank you and congratulations on your retirement. Hope you have a lot of fun. Thank you.
But don't spend too much time in the business too long. Thank you. Two questions. One actually is either for Maile or Pat. Right now, your balance sheet is already very strong.
But at some point in the future, we know oil price will see another drop and maybe down for 2 or 3 years. So should we talk the opportunity that at this point that you maybe even drive down to a ridiculous low number like net debt 0 so that just prepare yourself in the event that at some point when you drop, you have even a better flexibility that you do M and A or other things. The second question is for Jay. Argentina, let's assume that all the pilot project is successful, but given the lack of infrastructure on the ground, realistically, how fast a development program could proceed? Thank you.
So Paul, I'll take the first one on the balance sheet. I don't think we need to go to a ridiculously low level of debt because we got the lowest breakeven oil price in our portfolio, and it's going lower. And we've got a much more flexible capital program than we've had before. So these things are contextual. And Pat talked about it's the result of a series of decisions.
When we were at a point where we had a high oil price, we had a high breakeven for our portfolio and we had a lot of long dated capital spending, we needed to have a very, very strong balance sheet as a risk mitigator. We're at a point now where our breakeven price is much lower, our capital spend is lower, it's shorter cycle. And we just don't have the same need for that degree of risk mitigation. So our balance sheet is strong. As Pat said, it may get a little bit stronger.
But I don't think going to net debt of 0 is something that would be appropriate for a company that's got those attributes to our portfolio and our spend profile. I'll let Jay talk about Argentina infrastructure. So in Argentina, down in
the southern part where we have Loma Campana, we're in partnership with YPF. There, the infrastructure right now is really not a limitation. It's just been what pace do we want to develop. So we've been running 2. We've just stepped it up to 3 rigs.
And we've got capacity to increase that further should we choose to. In the northern part, if those pilots are successful, that is already an existing oilfield, El Trapial. So there is some basic infrastructure already in that general area. But clearly, with the capacity that we could go to, we'd have to see some further build out of infrastructure. And just as we do in the Permian, where we work from land position all the way through to realizations, that's part of the pace that we'd want to do any development work is not outstripping the capacity of the offtake and the realizations that we can get to make sure we get the returns we're looking for.
So we're pretty optimistic about it. It looks like good rocks, and we'll keep you informed.
Okay. That looks like we're getting to the end of the time that we've got here for Q and A. So I've got a couple of final remarks that I would like to make before we go to a break. And since things spin up here, I'll start them. First of all, Chevron has a long history of innovation and using technology to meet complex challenges and improve our performance.
Paul, this gets a little bit to your question. We're aggressively expanding the application of digital technologies and working to broaden their impact across our company. We're using digital to change the way we work and to strengthen a culture of innovation and agility. We're focused on 4 key value drivers: increasing revenue, lowering costs, improving reliability and enhancing safety. I think all of these will be a key lever to further improve performance in the future.
We have many examples to share, some of which you'll see later today at the technology showcase. We're also investing in the future of energy, and this gets to Doug's question. This requires smart moves to deliver affordable, reliable and ever cleaner energy the world needs. This slide illustrates 4 ways in which we're doing just that. Our Future Energy Fund is investing in breakthrough technologies such as EV infrastructure and direct air CO2 capture.
We've linked employee variable compensation to achieving reductions in flaring and methane's emission intensity. We're working with industry partners to develop smart solutions for reducing greenhouse gas emissions. And we're investing in renewables to support our operations and lower carbon intensity. We also recognize shareholders who are seeking more information about how we manage climate related risks and other ESG issues. On the left, you'll see our recently released update to the Climate Change Resilience Report, which is sitting at your table and also available on our website.
As shown on the right, the Chevron Way guides how we conduct our business to get results the right way. Here, we highlight Chevron's greatest resources, the ingenuity, creativity and innovation of our people. Before I wrap up, I'd like to recap the headlines from today's presentation. 1st, we have a highly advantaged portfolio with some of the industry's best quality assets. Jay highlighted several of these today.
Notably, we've increased Permian Resources by 5,000,000,000 barrels of oil equivalent in the last 12 months and almost 7,000,000,000 barrels in the last 2 years. Our view of the value of the Permian has more than doubled over that same period. 2nd, we expect to grow production at a compound annual rate of 3% to 4% over the next 5 years. This will be underpinned by more than 900,000 barrels of oil equivalent net daily production from the Permian by the end of 2023. 3rd, we've announced capital spending guidance of $19,000,000,000 to $22,000,000,000 for the years 2021 to 2023, and we expect to increase cash return on capital employed by more than 3 percentage points over the next 5 years.
Finally, we're translating all of this into success and value for our shareholders, supporting a more than 6% dividend increase and $4,000,000,000 of share repurchases. In summary, Sharon has a unique, differentiated, de risked and extremely compelling investment proposition that is being delivered today and will continue over the long term. I appreciate your time today and your interest in Chevron. I also want to take a moment here to recognize a special person and an outstanding career. Today is the last Investor Day for Pat.
She's had a remarkable 39 year run at Chevron, the last decade serving as our Chief Financial Officer. She's been a principled steward of your investments, a passionate advocate for your interests and an impactful leader for our company. Please join me in congratulating her on exceptional Thank you very much. And that concludes our live webcast.
None of that was in any of the