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Texaco Expects to Hold 1Q Production Levels

Texaco Expects to Hold 1Q Production Levels

Texaco has halted the decline in its U.S. oil and gas production and expects to maintain first quarter levels through the rest of the year, Comptroller George Batavik told analysts Wednesday.

Texaco's natural gas production in the U.S. was down for the quarter to about 1.487 Bcf/d or 9% less than the 1.738 Bcf/d produced in 1Q98. U.S. crude oil and natural gas liquids production was 406 b/d in the quarter just ended, down about 10% from the 452 b/d in 1Q98.

Responding to analysts' questions on a Internet conference call, Batavik said that despite forecasts for higher oil and gas prices, Texaco had "no plans to adjust capital spending" to increase production. Projects already underway should replace declining production on the Gulf Coast and the Gulf of Mexico. Batavik said Texaco expects the Gemini project in the Gulf to start producing about 100 MMcf/d about mid-year, which would offset declining natural gas production rates.

Meanwhile Texaco Chairman Peter Bijur told the company's annual meeting in Rye, NY, "we think oil prices have turned the corner," citing the OPEC countries' decision to hold some production off the market. Plus the world economy appears to be on the mend. Bijur cited hopeful signs from developing Asia, Europe, Russia and Brazil, with only Japan as "a serious soft spot." A stronger economy will require more energy this year and in 2000, Bijur said.

Bijur did not rule out new mergers or acquisitions for Texaco, but "we are not interested in a merger solely for the sake of getting bigger." He pointed out there were other ways to improve shareholder value, including a successful exploration program and alliances such as those the company made last year in the U.S. with Shell and Saudi Aramco. Texaco has targeted a total of $650 million in costs to be eliminated this year and next.

"These cost cuts could boost Texaco's return on capital employed by about 2%, which is the same level we calculate will be generated by the savings announced through the Exxon/Mobil merger and the BP/Amoco merger."

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