US supermajor Chevron announced in its Q3 results that it expects to make further workforce reductions in the realm of 6000-7000 in an effort to cut costs.
The company’s earnings this quarter were better than anticipated, according to analysts Simmons & Co. thanks to its downstream segment. Chevron reported a net income of US$2 billion, down from the $5.6 billion reported in Q3 2014. As a result, Chevron said it will sharply cut its capital expenditures in 2016.
“We expect capital and exploratory expenditures for 2016 to be $25-28 billion, roughly 25% lower than this year’s budget,” said Chevron’s chairman and CEO John Watson. “We expect further reductions in spending for 2017 and 2018, to the $20-24 billion range, depending on business conditions at the time. With the lower investment, we anticipate reducing our employee workforce by 6–7000.”
Simmons & Co. stated that capital cuts were expected, however, not to this degree. The analyst firm said this move, "[highlights] both the company's commitment to attain cash flow neutrality and also the challenges of such an objective given current levels of outspend."
Chevron reported that capital and exploratory expenditures in the first nine months of 2015 were $25.3 billion, compared with $29 billion in the corresponding 2014 period. Expenditures for upstream represented 92% of the company-wide total in the first nine months of 2015.
Operations update
The company is pressing forward with its $54 billion Gorgon LNG project off Western Australia. The project includes a three-train, a 15.6 MTPA LNG facility and an onshore domestic gas plant with the capacity to provide 300 terajoules of gas per day. The project was supposed to come online late 2015, but the company is now targeting early 2016, Chevron told investors in August.
Chevron reported continued progress on commissioning activities in preparation for startup of Gorgon’s train 1. The Jansz-Io Field subsea infrastructure is fully complete and the first two wells have been opened to the Jansz pipeline, Chevron said in its Q3 results. “All train 2 modules are set on foundations and construction is progressing on critical path activities. Nine of 13 train 3 modules have been delivered to site and set on foundations,” the supermajor said.
Gorgon LNG is being developed jointly by Chevron Australia (47.3%), Shell Development Australia (25%) and Mobil Australia Resources (25%), Osaka Gas (1.25%), Tokyo Gas (1%), and Chubu Electric Power (0.417%).
Additionally, more progress has been made at Chevron’s other mega project off Western Australia, the $29 billion Wheatstone LNG, which is a two-train LNG facility capable of producing a combined 8.9 MPTA of LNG and a 190 MMcf/d domestic gas plant, both at Ashburton North. The project is expected to startup in late 2016.
Chevron reported that all subsea equipment and flowlines have been installed and offshore platform hookup and commissioning is progressing on target. Seventeen of 24 train 1 process modules required for first LNG have been delivered to site, the supermajor said.
The Wheatstone LNG project, which sits 200km off the coast, is a joint venture project between Chevron (64.14%), Kuwait Foreign Petroleum Exploration Company (KUFPEC) (13.4%), Woodside Petroleum (13%), and Kyushu Electric Power Company (1.46%), together with PE Wheatstone Pty Ltd, part owned by TEPCO (8%).
Image: Chevron's Gorgon project at Barrow Island
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