NGI The Weekly Gas Market Report
In a move similar to those of its peers, Chevron Corp. announcedit would cut expenses by $500 million next year, including someunspecified staff reductions, and spend about $5.1 billion, 8% lessthan was spent in 1998. Cuts in 1999 capital spending will beaccomplished primarily in the company’s mature North AmericanE&P business, as well as in refining and marketing and inchemicals.
The company plans to invest nearly $3.7 billion, or 73% of thetotal, in worldwide exploration and production. About $2.6 billionwill be spent outside the United States, while about $1.1 billionwill be spent in the U.S.
Chairman Ken Derr said the modest expense cuts are all that arerequired at this time given that the company has chopped $2 billionin annual expenses from its budget since 1991. In addition, thecompany will continue significant spending for promising long-termgrowth projects in Kazakhstan, West Africa and the Gulf of Mexico.
“We have some of the best exploration and production prospectsin the industry, and we intend to continue investing in them,” hesaid in a statement that was delivered to securities analysts inNew York. “This is a balanced plan that will produce long-termgrowth through capital investment, together with improved near-termearnings through expense reductions.
“As I’ve said before, we will consider mergers or acquisitionsas one possible way to improve business results. But it is notnecessary for Chevron to merge with a competitor to continue toprovide top returns to our shareholders. We need to execute ourbusiness plan.” Two weeks ago it was rumored the Chevron and Shellwere in merger discussions, but the two companies declined tocomment on the rumors.
“We have the financial strength to deal with low oil prices,poor economic conditions in Asia and other financial challengesover the next few years,” said Derr. “Our business is one ofcycles. I feel confident and optimistic about our company and ourindustry over the long term.”
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