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ChevronTexaco to Pare U.S. Fields to 400, Cut Some Western Canada Assets

ChevronTexaco to Pare U.S. Fields to 400, Cut Some Western Canada Assets

ChevronTexaco Corp. has begun an ambitious plan to grow its upstream profitability in several core areas, which includes paring down its U.S. inventory to 400 fields and selling off some of its mature producing fields in western Canada.

CEO Dave O'Reilly said Friday that the organization is focused on new processes in North America, which will reduce its development costs by $1 per barrel over the next year.

The San Ramon, CA-based major also is moving forward with its global gas strategy, which includes targeting North American and Asian markets through its expanding liquefied natural gas (LNG) business.

"We have a major effort underway in the U.S. to upgrade our portfolio," O'Reilly told analysts during an hour-long conference call. He said that asset sales will continue through this year to give the company's exploration and production unit more time to focus on select properties. "We are restructuring our portfolio and expect to see a significant improvement in our cost structure in the U.S. in upstream." He also said some of ChevronTexaco's "maturing fields in western Canada" were being considered for sale.

There were no specifics on which properties may be sold, nor where the future E&P focus will be. However, the strategy is part of an effort to stem ChevronTexaco's continuing U.S. production losses. Full-year 2003 U.S. oil and gas production fell 7%, including asset sales. International production increased about 4%. And worldwide, oil and gas production fell sequentially from the third quarter to 2.588 billion boe/d from 2.637 billion boe/d.

Net oil-equivalent production in the United States declined 3%, or 29,000 boe/d, compared with 4Q2002. The decline resulted primarily from normal field declines, which were only partially offset by first-time production in some fields and higher production in areas of the Gulf of Mexico that were affected by storm damage in late 2002. U.S. net liquids production was down 2% to 547,000 bbl/d. Domestic net natural gas production averaged 2.1 Bcf/d, down 4%.

In the fourth quarter, ChevronTexaco's net income was nearly double that of a year ago, with preliminary net income of $1.7 billion ($1.63/share), compared with net income of $0.9 billion ($0.85/share) a year earlier. The quarter included a net gain of $89 million from special items, compared with net special-item charges of $161 million in 4Q2002. For the full year, net income was $7.2 billion ($6.96/share), versus $1.1 billion ($1.07) in 2002.

"While turning in an excellent year from the standpoint of earnings and cash flows, we also made significant progress furthering our longer-term strategic objectives," O'Reilly said. "Among the initiatives undertaken during the year was the formation of two new business units. One is focused on commercializing our vast international natural gas resource base. The other is dedicated solely to the identification and development of large-scale investment opportunities throughout the world."

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