US supermajor Chevron is set to shave its budget by as much as 36% by next year, as the company approaches the finish line for global construction projects, and sets its sights on increasing production.
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Jack/St. Malo. Images from Chevron. |
The California-based oil and gas giant plans to spend US$17-$22 billion in 2017 and 2018, representing a 36% drop from 2016’s planned $26.6 billion.
“We’re completing major projects that have been under construction for several years. This enables us to grow production and reduce spending at the same time, which should improve our net cash flow significantly,” John Watson, Chevron chairman and chief executive officer said.
In the company’s annual security analyst meeting, Watson said that Chevron’s financial priorities include strong dividend growth and balance sheet. He also noted that Chevron has held a record of 28 consecutive years of dividend increases, with plans to limit debt increases beyond 2016.
“Industry conditions are tough right now, with low oil and natural gas prices. We believe markets will improve, and we’ll be well positioned when they do,” Watson said.
Capital projects are scheduled to come online and contribute to Chevron’s production in the next few years.
Chevron’s production grew about 2% in 2015 with major ramp-ups including Jack/St.Malo, and Tubular Bells in the deepwater Gulf of Mexico; in addition to start-ups at Agbami 3 off Nigeria, Lianzi off Angola, and Moho Nord, off the Republic of Congo.
At Jack/St.Malo, which was delivered on time in late 2014, was a key contributor to Chevron’s production growth, Johnson said.
“This is our first lower tertiary project in deepwater Gulf of Mexico and performance today has been very encouraging for future development in this play. Production continues to ramp up as well as been brought online. Production is currently around 75,000 b/d from six wells, and three additional well are expected online by mid-year.”
Johnson went on to say that stage one performances has been strong in all areas, as well performances met expectations and operational reliability has been at a high 96%. In addition, development drilling performance on the project is in the top quartile to the Gulf of Mexico for the company. Given the positive results, Chevron is now progressing with stage two, and anticipates an additional four wells to come online in 2017.
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Big Foot. |
At Big Foot, the design of the tension leg platform and the mooring system have been validated, Jay Johnson, Chevron executive vice president said.
“The collapse of the of the tendon was due to a failure of connection between the temporary buoyancy modules and the tendons. The initial site recovery work in complete and the TLP has been moved to a safe location and inspection work has confirmed that all well and the subsea templates can be reused along with most of the components of the recovered tendons,” Johnson said.
Fabrication of new tendons at Big Foot, and required temporary insulation equipment is expected to commence in Q2 and production is set for 2H 2018.
Also this year, Chevron will start-up include Alder in the North Sea in 2H; Mafumeira Sul offshore Angola with firs production expected in 2H; Angola LNG in Q2; and Bangka off Indonesia in 2H.
Other projects that Chevron is looking forward to include Hebron off the east coast of Canada, Claire Ridge in the North Sea, Stampede in the deepwater Gulf of Mexico, and Sonam off Nigeria, which are all set to begin production in the 2017-2018 time frame.
Yesterday, (7 March), Chevron started production from the Gorgon LNG project on Barrow Island, off Western Australia. The first LNG cargo is expected to be shipped next week.
Chevron also reiterated its goal to target $5-$10 billion in divestments.
Last month, the supermajor said it was putting its focus on its deepwater assets in the Gulf of Mexico, and was selling its shelf assets in the area, as the company looks to divest up to $10 billion in the next two years.
In late-January, Chevron’s Q4 2015 earnings call revealed that the company was canceling its Buckskin-Moccasin project, choosing to advance other projects.
Read more:
Chevron achieves first LNG at Gorgon
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