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Chevron Boosts Deepwater Gulf of Mexico E&P Spending

Chevron Corp. raised its 2007 capital and exploratory budget by 20%, with a "significant component" of the money directed toward deepwater Gulf of Mexico (GOM) projects. The $19.6 billion budget, up from $16 billion in 2006, includes about $4 billion for U.S. upstream projects. Another $1.6 billion will be spent on U.S. downstream projects.

The Gulf of Mexico projects that are expected to benefit the most from Chevron's increased spending include the Tahiti, Great White Perdido, Blind Faith and Jack fields. To help commercialize the company's large natural gas resource base outside the United States, Chevron is budgeting funds to construct liquefied natural gas tankers and gas-to-liquids facilities. Chevron also is putting money toward expanding its Athabasca Oil Sands Project in Canada, and it plans to upgrade refineries in Mississippi and California.

"Our 2007 capital and exploratory program is a record level of investment by our company," said CEO Dave O'Reilly. "About 75% of next year's budget is for oil and gas exploration and production (E&P) projects worldwide. Another 20% is dedicated to the company's global refining, marketing and transportation businesses, which manufacture and sell gasoline, clean diesel fuel, biofuels and other refined products in the company's marketing areas."

Most of the planned increase is related to the company's E&P operations, reflecting the impact of several large, multi-year development projects that are in their most capital-intensive phases. Chevron also attributed some of the increase to the effect of higher costs for materials and services currently experienced by the oil and gas industry worldwide.

"Our long-range focus on capital discipline in executing our excellent project queue is critical in this environment," O'Reilly said.

Capital and exploratory spending of $14.6 billion is budgeted for E&P and natural gas-related projects worldwide, with most of the budget directed toward "opportunities" in the deepwater GOM and western Africa. Funding is also earmarked for further appraisal and evaluation of other prospective areas in the world's major hydrocarbon basins.

"Our upstream investments are aimed at finding and developing oil and gas resources to increase production and help supply the energy needs of world markets," said George Kirkland, executive vice president of upstream oil and gas. "Our focus is both on improving the performance of existing fields and funding new projects that will provide this future production growth."

The board of directors also approved a plan to acquire up to $5 billion of the company's common stock over the next three years. This program follows two other $5 billion stock buyback programs that were initiated in April 2004 and December 2005.

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