Chevron Corp. (CVX) – the second-biggest U.S. energy firm – offered a glimpse of its 2010 capital spending plans. The integrated major said that it will prune its capital expenditures by about $1.2 billion in 2010, as the company allocates a larger percentage of funds towards the Exploration & Production (E&P) segment as against the under-pressure refining business. Chevron’s change in focus to the upstream business can be attributed to plummeting refining profits on the back of weak demand for gasoline, diesel and jet fuel.
 
The California-based firm has pegged its 2010 capital budget at about $21.6 billion, down about 5% from the $22.8 billion it expects to invest by the end of 2009. Of the total, about 80% will go towards oil and gas exploration and projects worldwide, and 16% towards downstream businesses. The remaining portion of the budget will be allocated for chemicals and other spending. 
 
A major portion of the 2010 spending has been allocated for large, multiyear projects. Chevron is planning to spend $17.3 billion for the exploration, production and natural gas-related projects, concentrating on the company’s successful and focused exploration results in recent years, as well as for further appraisal and evaluation of other prospective areas in the world’s major hydrocarbon basins. Major developments in 2010 are expected to consist of the Gorgon natural gas project in Australia and opportunities in the Gulf of Mexico, Brazil, offshore western Africa and the Gulf of Thailand.
 
Capital spending in the downstream segment is expected to be $3.4 billion in 2010, which includes $1.6 billion for projects in the U.S, primarily earmarked for improvements of the refinery network. Downstream outlays in 2009 include projects in the company’s refineries in Mississippi and California.
 
Lastly, the company is expected to spend approximately $900 million in 2010 for chemicals, technology, power generation and other corporate activities.
 
Chevron’s move to chop capital spending follows similar decision by smaller rivals Marathon Oil Corporation (MRO) and ConocoPhillips (COP), which earlier announced 7% and 12% reduction in their 2010 budget, respectively. However, another super major, ExxonMobil (XOM), has maintained its capital spending even during the current downturn in an effort to lift production.
 
San Ramon, California-based Chevron is engaged in oil and gas exploration and production, refining and marketing of petroleum products, manufacturing of chemicals and other energy-related businesses. We currently rate Chevron shares as Neutral.
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