Chevron Details Its Five-year Goal To Be First In Total Shareholder Return
CHEVRON DETAILS ITS FIVE-YEAR GOAL TO BE FIRST IN TOTAL SHAREHOLDER RETURN AMONG OIL MAJORS
SAN FRANCISCO, Nov. 18, 1999 -- Chevron Chairman Ken Derr and Chairman-elect Dave O'Reilly told a large gathering of security analysts here today that the company intends to achieve the best shareholder return among oil majors, even though the industry's competitive landscape has become tougher.
O'Reilly said Chevron has set a goal to be first in total shareholder return among its peers from 2000 to 2004.
"We have achieved the top shareholder return over much of the last 10 years, and we're confident we can do it again," said O'Reilly.
The company's financial targets include a long-term earnings growth rate in the top quartile of the S&P 500, a minimum of 12 percent return on capital employed, and a continuing reduction in operating expense.
"To achieve our goals, we must execute with excellence, exercise superb capital stewardship and grow earnings at a faster rate than our competitors," O'Reilly said.
The company plans to increase its worldwide oil and equivalent gas production at an annual growth rate of 4 to 4.5 percent.
Among the key growth areas discussed with analysts were:
- The Tengiz Field in Kazakhstan, where production has averaged about 215,000 barrels per day (bpd) this year, and is expected to exceed 250,000 bpd in the second half of next year, when additional processing capacity will come on-line. As announced yesterday, the Caspian Pipeline Consortium began laying pipe for the historic pipeline that will connect Western Kazakhstan to the Russian Black Sea port of Novorossiysk by mid-2001 and will enable accelerated Tengiz growth.
- Angola, where the country's first deepwater oil production is expected to come onstream by year-end from the Kuito Field, less than three years after its discovery. Overall production is expected to reach 600,000 bpd by 2002, from 450,000 this year.
- The deepwater Gulf of Mexico, where two fields came onstream this year -- Genesis, producing oil equivalents of 63,000 bpd, and Gemini, producing oil equivalents of 37,000 bpd.
- The East Coast of Canada, where the Hibernia Field's reservoir performance has exceeded predictions and the company has raised the estimate of ultimately recoverable oil to 750 million barrels. Current production is about 150,000 bpd.
- Two new North American natural gas plays, the Viosca Knoll carbonate trend in the Gulf of Mexico and Fort Liard in Canada, where Chevron expects collective production to reach 300 million cubic feet per day by the third quarter of 2000.
- Alberta, Canada, where the acquisition of a 20 percent interest in the Athabasca Oil Sands project is nearing completion. The project, which will start up in 2003, represents a long-term earnings growth opportunity with expected production of 150,000 bpd.
- South America, where Chevron recently acquired Petrolera Argentina San Jorge, S.A., oil and gas company, which produces about 78,000 barrels of oil and 40 million cubic feet of gas per day.
- Thailand, where earlier this year Chevron acquired Rutherford-Moran and became operator of fields that are strategically positioned for growth in natural gas delivery into the promising Thailand gas market.
- Natural gas and electric power sales and marketing, where the merger between Dynegy and Illinova recently received U.S. government approval, paving the way for stronger growth. Chevron will be the sole major industrial shareholder in the new company with ownership of about 25 percent.
The company also said it is evaluating options for the future of its interest in the Norphlet Trend, a deep-gas project in the eastern Gulf of Mexico, where performance has not met expectations.
In the refining and marketing business, Chevron's U.S. performance in 1999 was hampered by two refinery incidents. The company is confident that the root causes have been addressed and expects to return to reliable performance. Branded gasoline sales this year have grown 5 percent over last year and 13 percent over three years. Convenience store sales are on pace to exceed last year's sales by $60 million, a 26 percent increase. Operating expense has been reduced by nearly 40 cents a barrel. The company continues to roll out its innovative e-commerce alliance to better link Chevron to its dealers, streamlining business between the two.
Caltex, Chevron's 50 percent-owned affiliate in the Eastern Hemisphere, has moved its headquarters from Dallas to Singapore and undergone a restructuring to position itself to take advantage of strengthening Asian economies. The company has sold its interest in the last of its refineries in Japan as part of an emphasis on portfolio management, and has aggressive targets for improvement in performance.
Chevron Chemical Co., which has been impacted by an industrywide downturn, is expecting two international projects to come on-line in the next several months. A large aromatics plant in Saudi Arabia is expected to start up next month, while a polystyrene plant in China is due to begin production in May. The chemical company is on schedule to achieve its planned cost reductions and reach top-tier efficiency in manufacturing its major products.
Updated: November 1999