press release

Chevron Press Release - Chevron Funds Upstream Growth In $5.1 Billion Capital Program

SAN FRANCISCO, Dec. 15, 1998 -- Chevron Corp. today announced a $5.1 billion capital and exploratory spending program for 1999 and a plan to reduce expenses in 1999 by $500 million. The planned actions will fund the company's economic long-term growth plan and address the need to improve near-term results, given poor current industry conditions.

The 99 capital budget is about 8 percent less than projected spending for 1998, but significant spending will continue for promising long-term growth projects in Kazakhstan, West Africa and the Gulf of Mexico.

We have some of the best exploration and production prospects in the industry, and we intend to continue investing in them, said Chairman Ken Derr. This is a balanced plan that will produce long-term growth through capital investment, together with improved near-term earnings through expense reductions.

Derr discussed the company's budget plans for 1999, and beyond, in a meeting today with New York security analysts. Among the topics he addressed was the current merger trend in the oil industry.

As I've said before, we will consider mergers or acquisitions as one possible way to improve business results. But it is not necessary for Chevron to merge with a competitor to continue to provide top returns to our shareholders. We need to execute our business plan.

Derr added, We have the financial strength to deal with low oil prices, poor economic conditions in Asia and other financial challenges over the next few years. Our business is one of cycles. I feel confident and optimistic about our company and our industry over the long term.

Cuts in 99 capital spending will be accomplished primarily in the company's mature North American exploration and production business, as well as in refining and marketing and in chemicals.

Derr named Dave O'Reilly, who became a Chevron vice chairman on Nov. 1, to spearhead the expense reduction effort.

O'Reilly indicated that the business plans submitted by Chevrons operating companies call for significant expense reductions.

We've cut more than $2 billion from our annual operating expenses since 1991, he said. I'm confident that we will deliver operating and other expense reductions of $500 million in 1999 that will improve results and help fund our growth.

Some of the plans call for employee reductions, but net reductions will be modest because of growth in overseas projects. Chevron has 34,000 employees worldwide.

Chevrons 99 capital budget represents the continuation of a strategic trend toward more spending on attractive projects overseas and less spending in the United States.

The company plans to invest nearly $3.7 billion, or 73 percent of the total, in worldwide exploration and production. About $2.6 billion will be outside the United States, while about $1.1 billion will be in the U.S.

The worldwide program includes major projects in:

  • Kazakhstan, where production at the Tengiz Field has risen steadily to 210,000 barrels per day (bpd). An expansion is under way to bring capacity to 250,000 bpd at the turn of the century, and construction is expected to commence on a Caspian export pipeline.
  • West Africa, where Chevron-operated production has increased steadily in Angola and Nigeria. Angolan production recently exceeded 500,000 bpd, and the company made two more major discoveries offshore. Nigerian production exceeds 400,000 bpd.
  • The deep-water U.S. Gulf of Mexico, where the Genesis platform, in water 2,600 feet deep, is expected to start production in January. Chevron has a 57 percent working interest.

In worldwide refining, marketing and transportation, Chevron plans to invest about $870 million, of which more than $540 million will be spent in the United States, including continuous upgrading of the company's service station network. Most of the remainder will be invested outside the United States by Chevrons 50 percent-owned affiliate, Caltex.

Chevron plans to invest about $380 million in the worldwide chemicals business in 1999.

Updated: December 1998