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Chevron Cuts Spending, Expenses

Chevron Cuts Spending, Expenses

In a move similar to those of its peers, Chevron Corp. announced it would cut expenses by $500 million next year, including some unspecified staff reductions, and spend about $5.1 billion, 8% less than was spent in 1998. Cuts in 1999 capital spending will be accomplished primarily in the company's mature North American E&ampP business, as well as in refining and marketing and in chemicals.

The company plans to invest nearly $3.7 billion, or 73% of the total, in worldwide exploration and production. About $2.6 billion will be spent outside the United States, while about $1.1 billion will be spent in the U.S.

Chairman Ken Derr said the modest expense cuts are all that are required at this time given that the company has chopped $2 billion in annual expenses from its budget since 1991. In addition, the company will continue significant spending for promising long-term growth projects in Kazakhstan, West Africa and the Gulf of Mexico.

"We have some of the best exploration and production prospects in the industry, and we intend to continue investing in them," he said in a statement that was delivered to securities analysts in New York. "This is a balanced plan that will produce long-term growth through capital investment, together with improved near-term earnings through expense reductions.

"As I've said before, we will consider mergers or acquisitions as one possible way to improve business results. But it is not necessary for Chevron to merge with a competitor to continue to provide top returns to our shareholders. We need to execute our business plan." Two weeks ago it was rumored the Chevron and Shell were in merger discussions, but the two companies declined to comment on the rumors.

"We have the financial strength to deal with low oil prices, poor economic conditions in Asia and other financial challenges over the next few years," said Derr. "Our business is one of cycles. I feel confident and optimistic about our company and our industry over the long term."

Rocco Canonica

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