Chevron Press Release - Chevron Chairman Announces Plans To Build On 1997 Success
NEW YORK CITY, Feb. 18, 1998 -- Chevron Chairman and CEO Ken Derr told financial analysts today that the company plans to build on the success it achieved in 1997 through a series of growth initiatives.
Derr and other company executives reviewed Chevron's record-setting financial performance in 1997, including $3.18 billion in operating earnings and the company's highest return on capital employed -- 14.7 percent -- in the past decade. Cash flow was strong enough to support a dividend increase, the tenth in 10 years, while still reducing debt. The company also embarked on a $2 billion stock repurchase program.
"We set or extended a number of operational records as well, including the highest oil and gas production in more than a decade," said Derr. "One of Chevron's traditional strengths is our ability to find oil and gas, and we had another strong year in 1997 -- replacing 142 percent of our oil and equivalent gas production, excluding acquisitions and a couple of significant property sales. That's our fifth consecutive year with new reserves in excess of production."
The company reiterated its "overarching" goal to deliver the highest total shareholder return (stock price appreciation combined with reinvested dividends), in its peer group. Over the past nine years, Chevron has achieved the best total shareholder return in its peer group -- more than 19 percent per year.
"Looking to the future, one of the key earnings drivers will be ongoing growth in international liquids production -- 8 percent to 9 percent annually over the next three years," Derr added. "When we combine that with our U.S. operations, we expect worldwide production of oil and equivalent gas to grow more than 5 percent per year through 2000."
Among the key areas of production growth (gross) for the company are:
- The Tengiz field in Kazakhstan, where production is expected to rise from about 160,000 barrels per day (bpd) in 1997 to 250,000 bpd in less than three years.
- The Southern Africa business unit, comprising operations in Angola, Congo Republic, and the Democratic Republic of Congo, where production is expected to increase by 250,000 bpd by 2001. The company recently confirmed three deep-water crude oil discoveries -- one offshore Congo and two in Block 14 offshore Angola.
- Nigeria, where production is expected to increase from 400,000 bpd to 600,000 bpd in the next four years;
- Venezuela, where the LL652 project in Lake Maracaibo is forecast to exceed 100,000 bpd in about five years;
- Hibernia, the offshore Newfoundland project which produced its first oil last November and is expected to reach 150,000 bpd by mid-1999;
- Britannia, in the U.K. North Sea, where start-up is scheduled for the third quarter, with peak production of 740 million cubic feet of gas and 70,000 bpd of liquids;
- Genesis, the deep-water Gulf of Mexico field, which is forecast to begin production in December.
The company announced a new strategy to accelerate the growth of its Caspian area earnings, including the formation of a high-level action team to find ways to help Chevron remain the dominant oil company in the area for decades. The team will focus on accelerating Chevron's oil and gas production in the area, as well as considering other projects, such as infrastructure, new markets, or regional business opportunities. Along these lines, the company recently agreed to establish an alliance with Shell to jointly identify and develop new projects in this area. This alliance will initially focus on exploration, production and transportation projects.
Derr also stressed Chevron's ongoing focus on cost reduction as an important contributor toward improved earnings performance. "Since 1991 we've taken about $1.8 billion out of our annual cost structure. We plan to drive down our unit operating cost by an additional 7 percent over the next three years, while growing the business.
"Given our outstanding portfolio of growth prospects, I believe we can continue to increase shareholder value if we continue to execute with excellence as we did in 1997," Derr concluded.
Note to Editors:
This press release contains forward-looking statements about Chevron's future production, earnings, and other operating results. Actual results may differ materially, and plans may change based on changing business conditions. Among the factors which could cause such differences are the following: crude oil and natural gas prices, refining margins and marketing margins; potential failure to achieve expected production from existing and future oil and gas developments; and potential disruption or interruption of the company's production or manufacturing facilities due to accidents or political events.
For further discussion of additional factors that could cause actual results to differ materially from those in the forward-looking statements, please refer to Chevron's 1996 Annual Report on Form 10-K, pages 26, 27, FS-4, and FS-5 (available on the SEC web site as one of Chevron's SEC Edgar Reports).
Updated: February 1998