Chevron Corp., the second largest U.S. oil and natural gas company, plans to allocate $32.7 billion for its capital and exploratory budget in 2012 — $2 billion higher than originally planned — mostly to fund upstream developments in the deepwater Gulf of Mexico (GOM) and two huge liquefied natural gas (LNG) projects in Australia.

ConocoPhillips and Marathon Oil Corp. last week also unveiled their capital budgets for the coming year, with plans to spend the bulk of their money in North America.

Chevron’s total investments for the coming year reflect close to $28 billion in capital and exploratory expenditures, as well as to fund $4.5 billion to acquire Atlas Energy Inc., which closed earlier this year (see NGI, Nov. 15, 2010). Chevron’s 2011 capex budget is about $28 billion.

The 2012 capital spending plan would approach that of ExxonMobil Corp., which expects to spend $33-37 billion a year over the next few years; its final budget hasn’t been publicly released.

“We are building new legacy positions with major investments in LNG projects and the deepwater Gulf of Mexico,” Vice Chairman George Kirkland said. “Our global LNG investments are estimated to reach peak spending in 2012 and 2013.”

Chevron’s worldwide oil and natural gas output has been flat over the past year and by investing in projects today the payoff will come in the years ahead, said CEO John Watson.

“We continue to develop an unparalleled project queue,” said Watson. “We believe these investments will yield significant production growth and reward our shareholders for years to come. By 2017, we expect our net crude oil and natural gas production to grow about 20% to 3.3 million b/d. This growth profile, along with our current financial strength, supports our priority of continuously growing our dividends.” Chevron raised its quarterly dividend in October by 3.8%.

“Our 2012 capital program includes spending of nearly $9 billion in the United States, with major new investments in the deepwater Gulf of Mexico, the Marcellus Shale in Pennsylvania and our refinery at Pascagoula, MS,” he said. The Marcellus Shale properties, as well as other onshore unconventional fields, were included in the Atlas acquisition.

Projects under development in the GOM that will see a boost in capex next year include Jack/St. Malo, Big Foot, Tahiti-2 and Tubular Bells. Both the Jack/St. Malo and Big Foot projects are close to 20% complete; first production from the projects is expected in 2014.

Australian LNG development will take a big chunk from the 2012 upstream budget. The Gorgon LNG project, one-third complete and in its third year of construction, is scheduled for first production in 2014. The Wheatstone LNG development, about 60 miles south of Gorgon, has its first year of construction under its belt and is scheduled to ramp up in 2016. Together the two LNG facilities are expected to net 350,000 boe/d for Chevron, which would be able to sustain those levels for “many years,” the company said.

ConocoPhillips, which is readying a spinoff of its refinery operations to reemerge as the largest pure-play explorer in North America, is planning to spend $15.5 billion for its capital program in 2012 and repurchase up to $10 billion more of its common stock.

About 90%, or $14 billion, of the 2012 capital program would support exploration and production (E&P) with 60% directed to North America projects. Next year’s budget includes $2.2 billion for worldwide exploration.

The increase in U.S. and Canadian spending compared with prior years reflects “improved market conditions, with additional emphasis on liquids-rich resource plays and high-return investments,” said CEO Jim Mulva.

“The 2012 capital program reflects our strategic emphasis on delivering value by investing in the most profitable opportunities. We expect competitive returns from our increased investments in sanctioned unconventional resource projects, such as our growing oilsands business in Canada, liquids-rich shale plays in the U.S. Lower 48” and a liquefied natural gas venture in Australia.

“As our production profile adjusts over time to reflect our increased levels of investment in liquids plays and lower levels in North American conventional natural gas, we expect to continue increasing margins in the upstream business.”

ConocoPhillips’ North American projects are varied. In the Lower 48 states capital funding is to be directed on the Eagle Ford Shale, as well as other liquids-rich plays in the Permian Basin and Bakken and Barnett shales. The program also funds ongoing development in the San Juan Basin as well as the company’s contribution to the Marine Well Containment Co. in the offshore.

Spending in Canada is slated to be focused on existing steam-assisted gravity drainage oilsands projects and selective programs in Western Canada conventional basins, primarily on high-graded resource plays and to maintain a position for future development. Meanwhile, spending in Alaska is expected to be lower than in 2011, with most of the capital directed to existing Prudhoe Bay and Kuparuk fields, as well as fields on the western North Slope.

The company also plans to keep its focus on “accessing, testing and appraising material opportunities in both conventional and nonconventional oil and gas plays.” Among the North American projects slated for more appraisal are the Tiber and Shenandoah discoveries in the GOM, as well as delineation of the company’s position in the Eagle Ford, and pilot programs in Canada’s Horn River Basin.

The Houston-based company said it also remains committed to its plan begun in 2010 to sell $15-20 billion of assets through 2012. Through September the program has “yielded proceeds of $8 billion,” it said. Recently announced agreements to sell the company’s interests in two U.S. pipeline companies, along with other sales already closed in 4Q2011, are expected to increase the total to about $10.5 billion.

A healthy slice of Marathon’s $4.8 billion capex budget for next year is targeted at the Eagle Ford in South Texas.

Liquids-rich plays are seen as providing the greatest amount of the company’s projected 5-7% compound average production growth from 2010 to 2016, said CEO Clarence P. Cazalot Jr.

“Approximately two-thirds of our 2012 capital spending next year is allocated to our growth assets, and nearly half of that amount is designated to substantially ramping up our operations in the Eagle Ford Shale,” he sad. “A large portion of our planned spending on these growth assets will also allow us to build on our substantial positions in the Bakken and Anadarko Woodford shale plays and continue to establish our business in the emerging Niobrara shale play of the DJ [Denver-Julesburg] Basin.”

About $3 billion of the capital spending budget is allocated to exploration and production growth projects. Of that, $2.7 billion is concentrated on the Eagle Ford, Bakken, Anadarko Woodford and the Niobrara formations. The company’s “substantial plans” for the Eagle Ford include ramping up to 17 rigs, drilling 155-170 net wells (200-210 gross, all company-operated) and adding two additional hydraulic fracturing crews, bringing the total to four by mid-2012.

Marathon started this year with an agreement to pay $3.5 billion to acquire the Eagle Ford Shale assets of Hilcorp Resources Holdings LP, adding to a transaction in late 2010 that gave it entry to the play. Combined with other transactions during the year, the company set out to more than double its Eagle Ford position to 285,000 net acres. Some analysts at the time of the Hilcorp deal estimated that Marathon was paying as much as $25,000/acre (see NGI, Nov. 7; June 6).

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