Chevron delays big projects, plows the Permian Basin
Friday January 29, 2016
HOUSTON The CEO of Chevron Corp. said his company recently mothballed a $500 million ultra deep-water Gulf of Mexico development not because the oil reservoir was too small to develop but because it had better places to spend its money. Namely, the Permian Basin in West Texas.
There are tough choices being made,†Chevron CEO John Watson told investors on Friday, after the San Ramon, California oil giant posted its first quarterly loss since 2002. The $588 million loss worse than analysts had expected was driven by a series of special charges in the fourth quarter, including Chevron's write off of its Buckskin and Moccasin discoveries in the Gulf.
The oil bust is forcing the No. 2 U.S. oil company and its rivals to cut projects and allocate smaller budgets even as the volatile oil market makes it harder to determine how much they can grow their production. Watson said Chevron's 2016 production growth could be anywhere between zilch and 4 percent, because it's unclear whether the world's oil production will decline enough this year ease oversupplied markets and lift oil prices.
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Until that balance occurs, prices will continue to be constrained and the financial damage to the energy sector seen in 2015 will continue,†Watson said. Chevron is planning to shed 4,000 jobs this year, on top of the 3,200 jobs it cut last year.
The uncertainty has forced Chevron to delay sanctioning projects, including a venture at the Tenghiz oil field in Kazakhstan. The Buckskin and Moccasin was a project that we thought would go forward. First, we thought it might have the potential to be a hub, and then we thought it had the potential to be a tieback,†Watson said.
And I wouldn't say that the project couldn't have gone forward … But relative to our alternatives, we felt that for the foreseeable future, we've got better places to put our money.â€
Chevron's earnings were dragged down by its costly U.S. oil-production business and a punishing oil bust that prompted it to write down the value of $1.1 billion in assets in the fourth quarter. But...