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Texaco VP Touts New Exploration Focus

Texaco VP Touts New Exploration Focus

As it adjusts its exploration and production portfolio, Texaco, like its brethren among major producers, is turning away from the United States and focusing on the international arena. However, the deep-water Gulf of Mexico still shines like a new diamond, and the company also has professed a desire to become more weighted to natural gas.

John Bethancourt, vice president of business development for the company's international manufacturing and marketing division, said Texaco is turning away from smaller incremental growth projects, mainly in the United States, in favor of "international mega-projects."

"If I were to describe the current portfolio to you, I would say it's very mature. A lot of late in life properties. It's highly leveraged to liquid reserves and production, about 73% of the portfolio. At the current crude price, that's a strength, but as we all know I don't think that's going to continue forever. We're clearly over-dependant on heavy crude oil. About 33% of our worldwide production comes from lower-revenue, higher-operating-cost heavy oil production," Bethancourt told attendees at a Houston Independent Petroleum Association of America (IPAA) luncheon last week.

Texaco is shifting away from late-life fields and is acquiring what Bethancourt calls impact reserves. "The first step is our property sales. We have a program under way to sell mature assets in the United States, offshore Trinidad and in the North Sea in the UK. This sales initiative, which is under way, is about 1,000 barrels a day of oil equivalent. That's 8% of Texaco's worldwide current production. While it's 8% of our production, it's only about 2% of our 1999 upstream earnings. It's expected to generate in excess of $700 million of proceeds after tax. We're going to have this program completed in 2000. The majority of that is either contracted or in the later stages of negotiation. With these property sales, we will be transferring to the purchasers about $500 million of future abandonment liability worldwide."

Besides the deep-water Gulf, Texaco's current exploration efforts focus on offshore Brazil and offshore Nigeria. "This program is primarily focused on drilling prospects that can generate over 100 million barrels of net reserves to Texaco on a prospect-by-prospect basis."

Bethancourt said it is worth noting that 65% of Texaco's 2000 capital investment will be in what he calls "new barrels," with only 35% of the budget going to maintenance and exploitation of its existing production base, a "significant shift from past trends."

As for Texaco's midstream and marketing business, Bethancourt conceded it has not performed as well as the company would like. "Our midstream gas business has not returned what we've been after the last three years. We've had quite a bit of change in that recently. The performance is improving, and improving significantly. Texaco plans to continue to work that business and grow it wherever it can."

Bethancourt's remarks fit in with those made by Texaco CEO Peter I. Bijur to security analysts last month. "I have spoken to you before about my dissatisfaction and impatience with Texaco's exploration program. One of the major changes we made was to reposition this program for success. We concentrated on three major deltaic plays in the world. They are Nigeria, Brazil, and the Gulf of Mexico. All of these areas have the potential to deliver high-impact reserves, which we define as at least 100 million barrels of recoverable reserves and significant production of 50,000 to 100,000 barrels per day of production - Texaco share."

Joe Fisher, Houston

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