Chevron Marks Up Loss for 2016, Slashes Capital Spending to $19.8 Billion

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Researched by Industrial Info Resources (Sugar Land, Texas)--Chevron Corporation (NYSE:CVX) (San Ramon, California) sported its biggest black eye in decades last week when it posted its first annual net loss since 1980. The company prepared to reduce its annual capital expenditures, particularly drilling, for the fourth year in a row, although executives pointed out that high-profile projects that required massive investments over the past few years are mostly complete and set to begin activity. Industrial Info is tracking $80.64 billion in active projects involving Chevron.

Chevron reported a loss of $497 million for the full year, with a late-December uptick in oil and gas prices unable to offset much of 2016's bargain-barrel numbers. Fourth-quarter 2016 net income stood at $415 million, much lower than had been estimated by almost all analysts, with Chevron's refineries contributing an anemic $357 million. Among the additions to Chevron's portfolio in 2016 are 900 million barrels of oil-equivalent from fields in the Permian Basin, Kazakhstan and Australia, which fell shy of fully offsetting the roughly 947 million barrels produced during the year.

"Our 2016 earnings reflect the low oil and gas prices we saw during the year," said John Watson, the chairman and chief executive officer of Chevron, in a press release. "We responded aggressively to those conditions, cutting capital and operating expenses by $14 billion." In a related conference call, Chief Financial Officer Patricia Yarrington said that Chevron is considering more asset sales.

In December, Chevron announced it would lower its capital expenditures in 2017 to $19.8 billion, a 15% drop from 2016, as it seeks to boost oil and gas production over a two-year period by focusing on projects with shorter cycles and higher returns. This marked the fourth consecutive year in which Chevron reduced capital spending.

Much of the new investment will be in the Permian Basin, where Chevron already has 10 oil rigs operating and plans to add another roughly every eight weeks, according to General Manager Frank Mount in last week's earnings conference call. But the company also is at work on several projects offshore the Gulf of Mexico, most notably the $5.1 billion Bigfoot Offshore Platform in the Gulf of Mexico. The project, which is situated about 225 miles south of New Orleans, involves building and installing an extended-tension leg platform with a production capacity of 75,000 barrels per day (BBL/d) of oil and 25 million standard cubic feet per day of natural gas. For more information, see Industrial Info's project report.

Chevron also is at work on a $150 million subsea installation for the Jack and St. Melo fields in the Gulf of Mexico, where the company already has a facility that acts as a hub for 43 drilled wells. Chevron is drilling four new production wells and installing more subsea production equipment to increase production rate to 170,000 barrels per day (BBL/d) of crude and 42 million standard cubic feet per day of natural gas. For more information, see Industrial Info's project report.

Executives also were optimistic about Chevron's Gorgon and Wheatstone projects offshore Australia, several trains of which have been completed and already are producing. Industrial Info is tracking more than $20 billion in active projects involving Gorgon, including the:

• $10 billion construction of Train 3 at the LNG production plant; for more information, see Industrial Info's project report
• proposed, $7.55 billion construction of Train 4; see project report
• proposed, $2 billion feed gas pipeline system and additional subsea production wells and infrastructure; see project report
• $377.5 million construction of a natural gas-processing plant; see project report

"Gorgon currently is stable, with growth output of over 200,000 barrels a day and 130 million cubic feet of domestic gas output," Watson said in the conference call. "A total of 39 cargos have been shipped since the beginning of the year." He added that construction on Train 3 "is complete, and we're well into startup and commissioning. We expect first LNG early in the second quarter of this year."

Industrial Info is tracking more than $21.5 billion in active projects involving Wheatstone, including the:

• $8 billion first phase and $8 billion second phase of the LNG production plant; for more information, see Industrial Info's project reports on Phase I and Phase II
• $1.51 billion subsea natural gas pipeline to supply the LNG production plant; see project report
• $1.51 billion subsea natural gas gathering system involving at least nine wells; see project report

"At Wheatstone, our outlook for first LNG remains mid-2017," Watson said. "All modules for Train 1 and Train 2 are on the foundations, and the site is under permanent power. Ongoing hook up and commissioning of the offshore platform is the critical path activity ... We expect Train 2 to start-up six to eight months following Train 1."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.