At a meeting with financial analysts in New York, U.S. energy behemoth Chevron Corp. (CVX) unveiled its business strategy. In particular, the company outlined plans to advance its upstream long-term growth on the back of huge natural gas projects in Australia, while continuing to restructure its downstream (refinery, marketing and transportation) operations that has been struggling with weak demand. Chevron will now focus on growth in Asia-Pacific markets and in its gas business.
The super major sees overall 2011 production of about 2.79 million oil-equivalent barrels per day (MMBOE/d), up 1% year-over-year. Chevron also confirmed its 2011 capital expenditure budget of $26 billion, 20% more than a year ago.
Of the total, a large percentage of funds, or roughly 87%, will go towards oil and gas exploration projects worldwide – mainly on liquefied natural gas (LNG) mega-projects in Australia and Angola – while 11% has been allocated for downstream businesses.
The San Ramon, California-based firm stressed that it will go on with its divestment of some refining and marketing properties as part of the streamlining program that started last year. In recent times, Chevron’s downstream results have been sharply lower, adversely affected by depressed refining margins. The company expects the bearish downstream environment (sluggish demand and surplus capacity) to persist well into 2011.
While continuing to reduce the exposure to the refining business, Chevron will focus more on the upstream business, which boasts of a strong portfolio of pipeline projects.
Specifically, Chevron has decided to concentrate on natural gas and Asia Pacific assets. The second-largest U.S. oil company by market value after ExxonMobil Corp. (XOM) also said that it expects its oil and gas production to increase 20% by 2017 – more than twice the rate of growth from 2003 to 2010 – driven by the big Australian gas projects (Gorgon and Wheatstone).
Over the next three years, the integrated major is looking to approve or start 22 new upstream projects with an investment of at least $1 billion.
Like its rivals, Chevron sees natural gas playing an important part in its future. More importantly, the company – which currently retains a Zacks #3 Rank (short-term Hold rating) – plans to intensify drilling for unconventional gas and oil reserves in the U.S. and elsewhere.
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