Huge capital outlays for global liquefied natural gas (LNG) projects, deepwater wells and North America’s onshore have waylaid Chevron Corp.’s production growth, but that will begin to change later this year on some major ramp-ups, CEO John Watson said Friday.

Watson was joined by CFO Pat Yarrington on a conference call with analysts to discuss 4Q2013 and year-end performance. A lot of Chevron’s global endeavors now in the queue are taking beaucoup cash, with little output or profits to show for it.

The oil major earned $4.9 billion ($2.57/share) in 4Q2013, well below year-ago profits of $7.2 billion ($3.70). For the year Chevron’s earnings fell to $21.4 billion ($11.09/share) from 2012’s $26.2 billion ($13.32). Sales and other operating revenues in the final period were down at $54 billion, compared with $56 billion in the year-ago period.

Analysts questioned Chevron’s business strategy and whether it’s just too big to operate more efficiently, as ConocoPhillips has since selling its refining arm. Upstream quarterly earnings fell to $4.85 billion from $6.86 billion, while the downstream profits plunged to $390 million from $925 million.

Patience, said Watson.

“Global crude oil prices and refining margins were generally lower in 2013 than 2012. These conditions, as well as lower gains on asset sales and higher expenses, resulted in lower earnings.”

But, “we continue to have an advantaged portfolio, and we have maintained our industry-leading position in upstream earnings per barrel for the past four years.”

Chevron’s “healthy” cash flow generation last year “allowed us to fund a substantial investment program, add several new resource opportunities and, at the same time, raise shareholder distributions.

“Major capital projects currently under construction are expected to deliver significant production growth and shareholder value in the years ahead.”

A lot of big items in Chevron’s lineup have taken several years to near fruition.

The Big Foot and Jack/St. Malo platforms in the deepwater Gulf of Mexico, big money suckers, still aren’t completed. The Kitimat LNG project proposed for British Columbia hasn’t reached a final investment decision, but preliminary work requires capital outlays. And then there is the plethora of overseas projects, including two LNG export projects in Australia: Wheatstone and Gorgon.

“We made significant progress on our LNG projects in Australia during the past year, with Gorgon almost 75% complete and Wheatstone successfully reaching important construction and LNG marketing milestones,” Watson said. “We expect 2014 will be the peak year for spending on these two projects as we move them closer to first production.”

Don’t forget about Chevron’s pursuit of shale and tight-rock opportunities either, said the CEO. The company is a big investor in the Permian Basin, and it’s developing acreage in the Duvernay Shale in Canada.

The Marcellus Shale is the only area of the U.S. onshore where natural gas is the big target, and the only reason that’s happened is because Chevron has a drilling carry, which allows it to reap the benefits of outside investment, Watson said. When Chevron acquired Atlas Energy Inc. in late 2010, which increased its Appalachian holdings, it came with an Atlas joint venture in a portion of the play with India’s Reliance Industries Ltd., which Chevron assumed under the original agreement terms (see Daily GPI, April 30, 2012). The original $1.5 billion drilling carry is down to about $500 million, enough for Chevron to step back and let Reliance pay the tab.

Last year Chevron added about 800 million boe net of proved reserves, close to an 85% replacement rate but far from what is needed to replenish its opportunities. The average reserve replacement over the past three years has been 123%. The largest additions came from the Marcellus, thanks to Reliance, and from the Permian.

Analysts asked Watson why, if the U.S. onshore is expanding Chevron’s reserves, more money and effort isn’t put into it? If an independent held Chevron’s Permian acreage, it would be going full tilt, one analyst suggested.

“I know that’s what the independents tell you,” Watson said with a chuckle. ‘We work very hard to put together sustainable, efficient cash flow. We drilled 460 gross wells [in the Permian] in 2013, more than planned. We have 26 rigs working in the basins, half of them non operated rigs and or own rigs. We are ramping up activity pretty nicely…”

Chevron is attempting to be more efficient with its capital and is focused on making a good return, said the CEO. “We do it at a low-cost fashion, which keeps us in a leading position…We may not go as fast as some of the independents, but I think it’s the right way to move forward.”