The Rising Influence of Rising Affluence

[DewDiligence]

Chevron Presents Investment Case

[CVX held its annual Investor Day webcast on Mar 15, which includes hundreds of slides available on the company’s website. By 2017, CVX expects upstream production to increase from 2.8M boe/d currently to 3.3M boe/d in 2017 as mega-projects such as Gorgon come online while annual attrition in base projects is held to 4-5%. Gorgon and Wheatstone alone are expected to produce 420K boe/d of volume for CVX on a net basis when both projects are fully operational in 2017. From an investment standpoint, what’s attractive about these LNG mega-projects is that the supply contracts are tied to the global price of oil rather then the regional price of NG (#msg-41374691).

Not mentioned here is the degree to which CVX is cutting back in the downstream arena. In the next few years, CVX’s downstream operations will pull out of many countries and global refining capacity will shrink to 2.5M bbl/day (from 2.9B currently), about ¾ of the planned upstream volume on a b.o.e. basis.]

http://online.wsj.com/article/SB10001424052748704893604576200703612059740.html

›MARCH 15, 2011
By MATT DAY And ISABEL ORDONEZ

Chevron Corp. said it plans to increase drilling for unconventional gas and oil reserves in the U.S. and elsewhere, and it plans to raise total production 1% this year [net of volume adjustments to PSC’s caused by price changes].

In a meeting with analysts, Chevron said Monday that its production in 2011 is expected to be 2.79 million barrels of oil equivalent per day, driven by the start-up of the Tahiti Phase 2 project in the Gulf of Mexico, Agbami 2 in Nigeria and Platong 2 in the Gulf of Thailand.

Chevron, the second-largest U.S. oil company by market value after Exxon Mobil Corp. also confirmed it plans to increase by 20% its capital expenditure budget this year to $26 billion [as previously reported in #msg-57601893], with a big portion devoted to the development of large natural gas projects [i.e. LNG] world-wide.

Speaking to reporters after the meeting, Chevron Chief Executive John Watson said he is unsure if natural gas resources in the U.S. will be sufficient to result in a significant export business for the nation. "There are tremendous opportunities to use gas more fully in the U.S. first," he said.

Separately, Mr. Watson said the company will exhaust all the legal appeals available in Ecuador to fight a recent ruling that ordered the company to pay more than $8.6 billion in damages, in an 18-year-old lawsuit over alleged oil contamination in Ecuador's oil-rich Amazon rain forest. He said the company will also continue to defend itself in courts outside of the South American country as well.

Meanwhile, Chevron said its massive liquefied natural gas projects offshore Australia—Gorgon and Wheatstone, will help the company increase production to 3.3 million barrels of oil equivalent per day in 2017, or 19% above its 2010 production levels. "Natural gas will drive our long-term growth," Chevron's Vice Chairman George Kirkland said.

Gorgon is confirmed to start production in 2014 [#msg-41374691], while Wheatstone is expected to see a final investment decision in the second half of this year and start production in 2016.

The company has already secured more than $25 billion in contracts for the Gorgon project, which is estimated to cost $37 billion, said Jim Blackwell, an executive vice president for Chevron.

Chevron, based in San Ramon, Calif., said it is planning to drill its first deep water wells in Liberia and China this year. It will also start drilling this year for shale gas in Poland and Canada, where the company recently acquired large acreage positions.

In the U.S., Chevron expects this year to drill 70 wells in the Marcellus Shale [#msg-56610359], a giant rock formation underlying Pennsylvania, New York and other states that has become a prolific source of natural gas in the U.S. The company gained access to the area after it acquired natural-gas producer Atlas Energy last month [#msg-56505666].‹