With the Gulf of Mexico (GOM) giving it a lift, Chevron Corp.'s U.S. estimated upstream production climbed 14,000 boe in the second quarter over the first three months of this year, the oil major reported late Wednesday.

Using data from April and May only, the second-largest domestic oil company estimated that its U.S. production averaged 665,000 boe/d, versus 651,000 boe/d in 1Q2012 (see Daily GPI, April 30). The 2.1% increase from the first three months of this year compares with a 4.2% decline in all of 2Q2011. Last month's estimated output is to be included in the quarterly report on July 27.

Chevron appears to be keen on building its extensive deepwater GOM operations. In last month's Central GOM lease sale, Chevron offered $190 million in total high bids, which put it fourth among all high bidders (see Daily GPI, June 21).

In its overseas operations, Chevron's output in April and May fell by 30,000 boe/d to about 2.62 million boe/d, which was 1.5% below 1Q2012 numbers and 2.5% lower than the same period of 2011.

Realized U.S. natural gas prices averaged $2.05/Mcf in April and May, which was more than half as much (53%) as a year ago and 17% lower than in the first quarter. U.S. crude oil prices in the two months averaged $108.80/bbl, almost flat from $108.37 in the first quarter and a year ago. International natural gas prices averaged $6.23/Mcf in April and May, 6% more than in 1Q2012 and 13% higher than in 2Q2011.

Chevron offers "a more balanced risk-reward outlook" because its project queue is expected to deliver "substantial growth in long-lived production," wrote JPMorgan Chase and Co. analyst Katherine Lucas Minyard in a note Thursday. She pointed specifically to stakes in two huge Australian liquefied natural gas projects, Gorgon and Wheatstone, which she said would drive gas volumes and maintain Chevron's exposure to oil-linked pricing.

Chevron faces some short-term risks, said Minyard, because of inflation has led to higher capital spending costs. However, "any stock weakness may provide an opportunity for long-term investors."

Tudor, Pickering, Holt & Co. rated the interim update "neutral." After stripping out nonrecurring quarterly items the latest results appear to be "generally in line" with Wall Street's consensus, said analysts.

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