Chevron shifts operation from more challenging areas

Chevron says it’s shifting its attention to other projects particularly its Permian basin onshore insisting it has no regrets cancelling the deepwater Bucksin-Moccasin project in the Gulf of Mexico.
Chevron’s Chairman and CEO John Watson was reported to have said in a conference in January that the current market failures prompted the decision.
“Right now” he said, “the costs in the deepwater haven’t come down quite as fast as they have onshore.” “We obviously have seen some rig rate reductions but in generation as we get to deeper and deeper water, some projects are challenged,” he said. Adding that the company was hit with a $500 million charge after it wrote the project off.
“I won’t say that that project couldn’t have gone forward and that it wouldn’t meet minimum thresholds depending upon your forward view of prices,” he said. “But, relative to our alternatives, we felt that for the foreseeable future, we’ve got better places to put our money. And so we made the very difficult decision not to go forward with that project.”
The California-based company had also reported a deficit of $588 million in the last quarter of 2015, against earnings of $3.5 billion the same time in 2014; Its full-year 2015 earnings were $4.6 billion, compared with $19.2 billion in 2014.
Decreased earnings for the company reflected nearly a 50% year-on-year decline in crude oil prices, Watson said.
“We’re taking significant action to improve earnings and cash flow in this low price environment. Operating expenses and capital spending were reduced $9 billion in 2015 from 2014, and I expect similarly large reductions again in 2016. In addition, asset sales proceeds were $6 billion in 2015, with additional sales planned for 2016 and 2017” he said.
A whooping $1.95 billion lost in its US upstream projects last quarter of 2015 against earnings of $432 million the year earlier, attributing it to “lower crude oil realizations, higher depreciation expenses, higher exploration expenses and lower gains on asset sales, partially offset by higher crude oil production.”
Chevron also progressed its major upstream projects that included first production from two deepwater projects in Africa, besides ramping up production from Jack/St. Malo project in the deepwater Gulf of Mexico.
Its Australian Gorgon LNG project has been on course, with production expected within the next couple of weeks, Watson said.
“Successful completion and start-up of these and other major capital projects” Watson said would translate into significantly lower capital spending, higher production and growing cash generation in the months ahead.”