Chevron Corp. has mapped a second 5 year campaign designed to maintain its robust financial performance.
Chevron's calculations show it is No. 1 in total stockholder return - combined appreciation in stock price and dividends-among major oil companies. It marked achievement of that goal with a cash bonus and a commemorative watch for about 42,000 employees at the end of a 5 year financial program that just ended (OGJ, Jan. 10, Newsletter).
"It will be much harder to repeat this great accomplishment," said Chevron Chairman Ken Derr, "but we are committed to being No. 1..."
Derr outlined the new financial program late last month while speaking to about 30,000 Chevron employees via satellite broadcast and audio links to 135 sites in the U.S., U.K., Canada, Angola and other places.
Key elements of the program include:
- Continuing to reduce operating and administrative costs, which have been slashed by $1.1 billion in the past 2 years. Such costs during 1993 averaged $6.51/bbl of production, down 95/bbl from 2 years previously. Chevron's new goal is a further reduction of 25/bbl, or about $300 million, by the end of 1994.
"Cost management must remain a priority in all aspects of our business," Derr said. "This is especially critical in the current environment of $14-15/bbl crude oil prices."
- Attaining at least a 12% return on capital employed (ROCE), adjusted for special items. In 1991, Chevron's ROCE was 7.8%, lowest among its competitor group that included Exxon, Mobil, Texaco, Amoco, and ARCO. In 1993, at 11%, it was the highest.
- Although cost reduction will remain a major objective, Derr said, the company also will focus on a broader goal of pursuing growth opportunities to increase shareholder value. "Our cost reductions have put us in a stronger competitive position, better able to fund exciting current projects and several new opportunities that will drive our future growth," he said.
- Maintaining capital and exploration spending for 1994 essentially flat at $3.7 billion, excluding affiliates. The total program, including affiliates, is projected at about $4.9 billion, up 11% from the $4.4 billion spent in 1993. The increase is focused on the high growth Pacific Rim areas of Caltex, Chevron's 50% owned refining and marketing affiliate in the Eastern Hemisphere.
"The strength and flexibility achieved through major cost reductions have allowed us to maintain this level of expenditures," Derr said. "However, if low oil prices persist, we may adjust our capital spending as the year progresses."
Worldwide, Chevron plans to invest about $2.4 billion in exploration and production, up slightly from 1993 spending. About 75% of this will be spent outside the U.S., continuing a trend toward more non-U.S. spending that began several years ago.
E&P PROGRAM
Chevron's exploration and production program includes projects in:
- Kazakhstan to remove mercaptans and double productive capacity in big Tengiz field within the next year to 130,000 b/d.
- Angola to begin the first phase of a multipart project that will boost current production of about 300,000 b/d by almost 200,000 b/d by 2000.
- Indonesia to expand the Duri field steamflood, the world's largest, where the field holds 3.2 billion bbl of proved reserves.
- Canada to continue the Hibernia oil field development project off Newfoundland so production can start in 1997. Productive life is estimated at 50 years at least.
- North Sea to expand production of Alba field, which went on stream last month, and to place Britannia gas field on production in 1998.
- U.S. Gulf of Mexico to begin production this year from the vast Jurassic Norphlet gas trend, where Chevron's share of reserves is 1 tcf.
Worldwide refining, marketing, and transportation spending is projected at about $2 billion, up about 20% from 1993. Most of the increase focuses on Caltex which is building a refinery in Thailand and expanding refineries in Singapore and Korea.
U.S. refining and marketing outlays are planned at $900 million. Major projects include two major upgrades at Chevron's California refineries, in Richmond and El Segundo, to improve efficiency and meet new cleaner fuel mandates. Ultimately, about $1.2 billion will be spent on these projects.
Chevron also plans to invest about $200 million in the worldwide chemicals business, or about 14% less than 1993 spending.
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
