Chevron Corp., which is focusing more on deepwater projects and overseas, reported Friday that its U.S. natural gas production declined by 12% in 3Q2010.

Net gas output in the United States reached 1,255 MMcf/d in 3Q2010, compared with 1,420 MMcf/d in 3Q2009. Sales of natural gas in the United States totaled 6,091 MMcf/d, versus 5,832 MMcf/d a year earlier.

Domestic oil-equivalent production fell to 692,000 boe/d net, which was 7% lower, or 53,000 boe/d less, than in 3Q2009. Net liquids output also fell 5% year/year to 482,000 b/d. However, worldwide net oil-equivalent production rose slightly to 2.74 million boe/d, about 1% higher than in the year-ago period.

Chevron, unlike many of its Big Oil peers, has eschewed North American shale projects to concentrate more on deepwater prospects and overseas. During a conference call with energy analysts, CFO Pat Yarrington was asked whether Chevron could change its strategy any time soon.

"We're not opposed to shale because it's shale gas," Yarrington said. "I think we have expressed that and we are picking up acreage in Canada, Poland and Romania."

However, Chevron would want to find a "cost effective entry point" to buy domestic shale assets and "we have not found that to be the case in the U.S. market...That's not to say that it will never be the case, but not right now."

Yarrington noted that there is "a lot of spread between the quality of shale properties, which is important for the asset quality that you are acquiring."

Chevron's European shale prospects are in early development, she said. "We don't have a full plan. We're just on the acquiring side and shooting seismic...It's early days..."

However, the deepwater Gulf of Mexico is more promising for Chevron long term.

CEO John Watson, who did not participate in the conference call, stated that Chevron's overall operational success continues "to show gains in upstream production and progress on our downstream restructuring." He also praised the federal government's decision to lift the Gulf of Mexico drilling moratorium.

"We have submitted one deepwater drilling permit application and plan to submit several additional applications over the next few months. We look forward to the timely approval of our drilling permits and to getting back to work as soon as possible," Watson said.

Chevron in October sanctioned its long-awaited Jack/St. Malo project in the Lower Tertiary of the deepwater Gulf of Mexico (see Daily GPI, Oct. 22). When the project ramps up, anticipated in 2014, it is expected to produce up to 42.5 MMcf/d of gas and 170,000 b/d of oil. Chevron has a working interest of 50% in the Jack Field, 51% in the St. Malo Field and 50.7% for the host facility.

Chevron's profits fell in the latest quarter to $3.77 billion ($1.87/share) from $3.83 billion ($1.92) in 3Q2009. Results in the year-ago period included about $400 million (20 cents/share) in gains from upstream asset sales and tax items.

U.S. upstream earnings, however, were $57 million higher than a year ago at $946 million.

The San Ramon, CA-based oil major credited higher crude oil and natural gas realizations and lower exploration expenses, which were partially offset by higher operating expenses, "in part due to the Gulf of Mexico drilling moratorium and decreased net oil-equivalent production."

Chevron's average sales price per barrel of crude oil and natural gas liquids was about $69 in 3Q2010 quarter, compared with $60 a year ago. The average sales price of natural gas was $4.06/Mcf, up from $3.28 a year earlier.

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