Chevron on Friday revised slightly lower an earlier future production target due to prolonged but uncertain lower oil prices, while at the same slashing its capital spending for 2016 by 25% compared to this year. The company now sees production at 2.9 million-3 million b/d of oil equivalent in 2017, down from an earlier target of 3.1 million boe/d, mainly due to slower growth in US shales, less near-term spending in the Marcellus Shale natural gas play and no output from the Gulf of Mexico Big Foot project, Chevron CEO John Watson said in a quarterly earnings call. At the same time, Chevron slashed its 2016 budget to $25 billion-$28 billion, down from $35 billion this year, and further expects ranges of $20 billion-$24 billion in 2017 and 2018. Some of that will come from naturally lower spending as its giant LNG Gorgon and Wheatstone LNG projects come online next year and Angola LNG restarts, and elsewhere from a tight focus on reining in and wringing costs out of the system, Watson said. "We've taken about $15 billion of capital out of the business in go-forward projections from 2016 and 2017 total, so that impacts our base declines" for production, Watson said. "So if you add [the company's natural decline rate of 2% to that, it's 100,000 boe/d over a couple of years." Also, work force reductions of 6,000-7,000 people are also expected due to the lower investment levels, or about 10% of the 61,000 employees worldwide, he said, adding a similar amount of contractor reductions are expected. In addition, the company is high-grading its shale oil operations, notably the Permian Basin of West Texas and New Mexico, Watson said. So "while the growth profile in shales is nice, it will be a little lower" than originally envisioned. Less natural gas spending in the Marcellus Shale – even while costs are trending lower in that unconventional play in Pennsylvania and surrounding US states -- is also in store for the near-term, he said. "We can compete with anybody there, but no one makes money that I'm aware of at $1.50/Mcf gas," Watson said, adding gas futures prices also remain low. "So for the time being we're scaling back investment there." A year ago, Chevron's output there was 80,000 b/d and was expected to be "somewhere" under 70,000 b/d in 2017, the CEO said. "Our plan is for that production to come back by 2017," he said, adding Kuwait is being hurt by the production shut-in of a gross 200,000 b/d and therefore has motivation to begin issuing work permits and visas while resolution of disputes continue. As for Big Foot, the project's tension-leg platform was moved to sheltered waters earlier this year when several pre-installed tendons lost buoyancy. The platform was designed for 75,000 b/d of crude and 25,000 Mcf/d gas at peak. Watson said the company has not built-in any production from the field in its 2017 estimates. — Agencies
