Chevron boosted its unconventional production by 50,000 barrels of oil equivalent per day in the third quarter on the strength of its operations in the Permian basin in Texas and the supermajor plans to further accelerate development on an asset executives believe could be worth more than $50 billion.

The California-based supermajor is currently running eight operated rigs on its acreage in the Permian and is picking up a ninth immediately and plans to run 10 by the end of 2016, Bruce Niemeyer, vice president of Chevron’s Mid-Continent unit, which includes the Permian, told investors. 

Those operated rigs are augmented by eight units running on acreage where Chevron owns a stake but does not hold operatorship.

Chevron is spending about $1.5 billion this year across its Permian operations and Chevron expects that figure to rise. 

“We are spending $1.5 billion here, and you can see us potentially doubling that — that is the current view that we have,” chief financial officer Pat Yarrington said.

By the end of 2020, Chevron plans to produce 250,000 to 350,000 boepd from tight oil formations in the Permian. 

Chevron holds 2 million acres across the massive Permian basin, which includes both the Midland and Delaware sub-basins as well as areas on the edges of those basins including the Central basin Platform and North-west Shelf. 

Acreage prices in the Permian have rocketed to highs above $40,000 per acre in the core of the play — first in the Midland basin beginning last year and then earlier this year in the Delaware basin — as major operators fought to gain a foothold in what many believe is the lowest-cost production area in the US.

Of Chevron’s total Permian footprint, Niemeyer believes that 600,000 are worth more than $50,000 per acre; 350,000 are worth between $20,000 and $50,000 and the value for the remainder needs further evaluation. 

The acreage valuations add up to a total value of less than half of Chevron’s total Permian position of between $37 billion and $44 billion and do not include any potential increased valuations from additional appraisal work. “We believe the quality of our acreage position is exceptional, with multiple stack geologic targets,” Niemeyer said. 

“These estimates are a snapshot that assumes a simultaneous development, a flat $50 WTI price and are burdened with all the development and production costs as we see them today.”

Some analysts wondered if Chevron would look to sell some of its massive position to take advantage of the boom in prices, but Yarrington said that boom is also making it hard to figure out how much such acreage might ultimately be worth. 

“In some cases pieces of property have moved up by a factor of ten-thousandfold,” she said.

“That is the kind of thing that you would not want to get on the wrong side of in your haste to make a decision about selling an asset.”

Yarrington said that meant the Permian would “get the first call” if Chevron chose to increase its capital spending in the coming years. 

“We have a pretty broad-based portfolio here and we are not looking to take all activity down to the Permian,” she said. 

However, she added: “The value of the Permian — its tremendous economic capability and its capital efficiency, its great flexibility, its short cycle/high return attributes ensure that other parts of the portfolio have to compete for capital against that.”