Chevron Corporation is well positioned to deal with difficult market conditions given its strong balance sheet, numerous new growth projects coming on-stream and a disciplined approach to cost management, executives said March 10 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.
Mike Wirth, executive vice president of Global Downstream, outlined development activities at four key refineries to improve reliability and profitability. He provided additional details about ongoing efforts to streamline the company’s refined products marketing.
“We’re investing to further strengthen our superior refining assets,” Wirth said. “We are sharply focused on reducing costs and absolutely committed to sustaining our utilization improvements.”
The refinery investments include reliability, feedstock flexibility, yield improvement and energy efficiency projects at the company’s refineries in California, Mississippi and South Korea. On the marketing side of the business, Wirth said the company will continue to streamline its lubricant product line and exit certain retail markets to reduce costs and improve returns.
Pat Yarrington, chief financial officer, outlined the company’s financial priorities. “We plan to sustain and grow our dividend and to maintain our financial strength and flexibility throughout the commodity price cycle,” she said. She emphasized the company’s strong track record of balancing current performance with future earnings growth.
Chevron Corporation is one of the world’s leading integrated energy companies, with subsidiaries that conduct business worldwide. The company’s success is driven by the ingenuity and commitment of approximately 62,000 employees who operate across the energy spectrum. Chevron explores for, produces and transports crude oil and natural gas; refines, markets and distributes transportation fuels and other energy products; manufactures and sells petrochemical products; generates power and produces geothermal energy; provides energy efficiency solutions; and develops the energy resources of the future, including biofuels and other renewables. Chevron is based in San Ramon, Calif.