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Bullish Chevron to outspend Exxon

Bullish Chevron to outspend Exxon

Chevron has long been overshadowed by its larger rival ExxonMobil. Next year, however, it will overtake Exxon on one important measure: capital and exploration spending. This is striking because Exxon is so much bigger: it produces 54 per cent more oil and gas than Chevron and its market capitalisation is 85 per cent bigger. The fact that Chevron is nevertheless planning to invest more than Exxon shows how sharply the companies’ strategies have diverged. Exxon is aiming for stability, while Chevron is going for growth.

Chevron is planning to invest about $40bn per year in 2014-16: slightly less than the $42bn it reported for 2013. Exxon is cutting its spending more sharply, from $42.5bn last year to about $40bn this year, and then an average of less than $37bn per year in 2015-17.

George Kirkland, Chevron’s vice-chairman and head of exploration and production, says the disparity reflects the two companies’ differing production profiles. Exxon produced an average of about 4.18m barrels of oil equivalent per day in 2013, and expects to produce 4.3m boe/d in 2017: an increase of about 3 per cent. Chevron produced 2.6m boe/d last year, and is targeting 3.1m boe/d in 2017: an increase of 19 per cent.

“That 500,000 barrels per day is huge growth, and the capital spending is what gets us there,” Mr Kirkland told the Financial Times.

Chevron is investing heavily to complete projects including Gorgon and Wheatstone, its two large liquefied natural gas plants in Australia. Costs have soared at both, but Gorgon is 78 per cent complete and Wheatstone 30 per cent. It also has two large projects coming on stream in the Gulf of Mexico: Jack/St Malo this year and Big Foot next.

Exxon also has new projects coming into production, including Papua New Guinea LNG and an expansion at the Sakhalin 1 oilfield off the far east coast of Russia. It has more starting up in 2014 than in any year in its history. Yet all those projects will do little more than offset the decline of its mature fields and the loss of its share in the foreign companies’ oil concession in Abu Dhabi, which expired in January.

In part, the difference is a sign that Chevron has had better investment opportunities. It has been highly successful with its exploration, particularly in the Gulf of Mexico, generating a flow of discoveries to bring into production over the next few years.

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Fonte: The Financial Times

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