Chevron Corp projected a major reduction in production growth by the end of the decade as a results from the less planned capital expenditure, which in turn is aimed at countering lower oil prices.
During a presentation to analysts in New York on Tuesday, the oil giants Chief Executive John Watson said the companys production growth will increase by an annual 1% after 2017 as the company reduces its capital expenditure for the years to come.
For 2015, Chevron has planned to slice its spending by 13% to $35 billion, Mr. Watson said, stressing that cutting capital expenditure would be the companys main focus.
However, Mr. Watson confirmed Chevrons target to boost output by 20% to the equivalent of 3.1 million barrels per day by 2017, despite the plunge in oil prices, which have fallen around 50% since last summer.
The company would rely on future projects to drive growth, rather than to seek a large acquisition, Mr. Watson said. “I wouldnt want to signal that were looking for an acquisition in any one play,” he added.
Chevron is betting on five large projects, including two liquefied natural gas facilities in Australia, to boost output in order to hit the targeted increase. Mr. Watson pointed out that the companys shale operations would also contribute to production growth, alongside facilities in the U.S. Gulf of Mexico.
Despite the projected slower growth after 2017, the company plans to maintain its dividend payout and even increase it. Mr. Watson said the company hopes to achieve positive free cash flow within the next two years in order to support the increased payments towards its investors and shake up its reliance on asset sales and debt for its quarterly payouts.
Chevron plan to increase its assets sales by 50% to $15 million accompanied with targeted capital expenditure level of $30 billion by 2017. In comparison the company spend $40.3 billion on new project during the past year.
“It does make a difference. If you spend less, you’ll receive less over time,” Mr. Watson said.
Chevron lost 1.00% on Tuesday and closed at $102.91 in New York, marking a one-year decrease of 11.16%. The company is valued at $195.44 billion. On Wednesday the stock edged up 0.17% to $103.8 during after-hours trading.
According to the Financial Times, the 22 analysts offering 12-month price targets for Chevron have a median target of $113.00, with a high estimate of $133.75 and a low estimate of $85.00. The median estimate represents a 9.80% increase from the last closing price.
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