Chevron not holding back on projects during downturn



Chevron is well positioned to deal with difficult market conditions given its strong balance sheet, numerous new growth projects coming onstream and a disciplined approach to cost management, executives said today at the company’s annual meeting with financial analysts in New York.

“We are continuing to execute our key strategies,” Dave O’Reilly, chairman and CEO, told the meeting. “We’re moving legacy projects to development, we’re moving resources to reserves, and we’re continuing to deliver our industry-leading exploration program. In the downstream, we’re continuing our program to improve reliability and feedstock flexibility, and we are sharply focused on reducing costs.”

O’Reilly said the company is well positioned for these challenging market conditions because of its strong balance sheet. He reaffirmed the company’s long-held strategies and emphasized the advantages the company earned through consistent execution.

“For the longer term, we believe global energy demand will rise as economic growth resumes. We have more exposure to some of the top growth regions in the world,” O’Reilly explained. “Shorter term, our portfolio is relatively less exposed to sectors that are most sensitive to an economic downturn.”

George Kirkland, executive vice president of Upstream and Gas, outlined the strong 2008 performance of the upstream and natural gas business, with record earnings, nine major capital projects completed and strong competitive performance in the key areas of earnings per barrel, cost structure and return on capital employed.

Kirkland also provided details on how the industry-leading queue of Chevron’s major capital projects will deliver significant growth and provide flexibility in the current economic environment. “Over the next two years, we expect new project startups and continued ramp-ups to contribute production of 650,000 barrels per day,” he said. “In addition, the depth of our portfolio provides us with the flexibility to optimize project timing to take advantage of lower expected capital costs.”

In discussing future growth, Kirkland focused on Chevron’s liquefied natural gas (LNG) portfolio, particularly Gorgon and Wheatstone in Australia, as well as the crude oil opportunities in the Lower Tertiary trend in the deepwater U.S. Gulf of Mexico. “We’ve made substantial progress on both Gorgon and Wheatstone in the past 12 months. We expect Gorgon to be sanctioned during the second half of 2009, and Wheatstone is advancing toward front-end engineering and design later this year,” Kirkland said.

Kirkland also revealed new details about development plans for Chevron’s high profile Jack and St. Malo discoveries in the Lower Tertiary trend. He said the company has begun front-end engineering and design for a production facility that will have a capacity of between 120,000 and 150,000 barrels of oil-equivalent per day. The facility will co-develop the Jack Field and the nearby St. Malo Field, which have combined recoverable resources in excess of 500 million barrels.


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