Chevron Corp. late Tuesday warned that its 4Q2006 results will be adversely impacted by lower commodity prices and lower downstream margins. The second-largest U.S. major reported that in the first two months of the final quarter, U.S. liquids and natural gas production fell nearly 1% sequentially from 3Q2006, and international liquids and gas production was off more than 3%.
Earlier on Tuesday, BP plc said it expects to miss its quarterly production targets on start-up delays in the Gulf of Mexico (GOM) and reduced oil flow from its Prudhoe Bay field in Alaska (see Daily GPI, Jan. 10). Last week, ConocoPhillips said "significantly lower" worldwide refining margins and poorer-than-expected results in its midstream and chemicals operations will push its quarterly earnings lower (see Daily GPI, Jan. 5).
Chevron is scheduled to report its quarterly results on Feb. 2.
"U.S. liquids and natural gas production declined almost 1% from the third quarter, largely due to planned project activity -- particularly in the Gulf of Mexico, which continued into December," Chevron said in a statement.
Chevron offered no details on its planned activity offshore. Last month Chevron raised its capital spending this year by 20% and said it plans to spend a "significant component" of the money on deepwater GOM projects (see Daily GPI, Dec. 8, 2006). The company has several major exploration developments in various stages of development, including Blind Faith, Great White Perdido and Tahiti. First production from the Tahiti platform is expected in 2008. Chevron also is evaluating several deepwater GOM projects, including the Jack and St. Malo fields in the Lower Tertiary.
In the first two months of the final quarter, Chevron's U.S. gas production was 1,788 MMcf/d, down from the 1,638 MMcf/d reported in 4Q2005 (full quarter). In 3Q2006, Chevron's gas output was 1,846 MMcf/d. Combined, net liquids and gas production through Nov. 2006 was 766,000 boe/d, ahead of the 717,000 boe/d reported in 4Q2005 (full quarter). Net liquids and gas output in 3Q2006 was 772,000 boe/d.
Chevron's Henry Hub bidweek gas prices averaged $6.56/Mcf for the full final quarter of 2006, compared with $12.99/Mcf for 4Q2005. California border bidweek gas prices for 4Q2006 averaged $5.82, compared with $10.30 in 4Q2005. In the Rocky Mountains, Chevron's bidweek price averaged $4.67 in 4Q2006, well below the $9.56 in 4Q2005.
U.S. natural gas realizations declined $0.51/Mcf in 4Q2006 (full quarter), less than a composite of bidweek price changes for Henry Hub, Rocky Mountain and California border, because of the mix of production in the various regions and spot sales, Chevron said.
Chevron's guidance for net after-tax charges for corporate and other activities in 4Q2006, excluding the company's equity share of Dynegy Inc.'s results, is between $160 million and $200 million. "For the fourth quarter we expect that actual results will be at or above the high end of that range," Chevron said.
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