ChevronTexaco Corp. revealed in a first quarter interim update late Thursday that its domestic oil and natural gas production in the first two months of 2004 fell by 3-4% while its international liquids volumes were down 3%. The proxy statement also disclosed that CEO Dave O’Reilly’s salary doubled last year.

The major, headquartered in San Ramon, CA, attributed its production drop in the United States to natural declines and asset sales. And international volumes fell because of a January shut-in of a field in Thailand that is being expanded, along with asset sales.

The statement reaffirmed Chevron’s forecast of a 6% overall decline in U.S. production this year, excluding asset sales. It also reiterated expectations for after-tax charges of $160-$190 million in the first quarter, excluding an equity share in Dynegy Inc.’s results. Chevron has written off its Dynegy investment, which was nearly 27% at one time, since the former energy merchant restructured last year.

In January and February, Chevron reported 2.04 Bcf/d of U.S. gas production, down from 2.1 Bcf/d in the fourth quarter of 2003. Net liquids production in the United States was 527,000 bbl/d, down from 547,000 bbl/d. International liquids volumes dropped to 1.36 million bbl/d from 1.39 million bbl/d in the fourth quarter, while gas production outside the United States increased to 2.1 MMcf/d from 2.07 MMcf/d in the December quarter.

U.S. gas realizations rose by $1.11/Mcf in the first two months, which were in line with the average bidweek price increases, the company said. Chevron projected that its before-tax exploration expense worldwide for 2004 will be 10% higher than last year’s $570 million.

The proxy also disclosed that CEO O’Reilly, who also serves as chairman, saw his cash and stock compensation doubled last year to $7.82 million. O’Reilly’s salary was raised 21% to $1.31 million, and his cash bonus more than quadrupled to $3.15 million. He did not receive restricted stock in 2003; however, Vice Chairman Peter Robinson and three other top executives did.

Chevron said in the proxy statement that O’Reilly’s salary was increased to keep him on a par with other energy company CEOs. The “vast majority” of O’Reilly’s compensation, the company said, is ranked by performance-based programs.

Credit Suisse First Boston (CSFB) said in a research note Friday that Chevron’s production and refining volumes were below its own forecasts, but added that historically, the first quarter has lower refining volumes than in other periods. Its U.S. gas realization was slightly above CSFB’s forecast, while other prices were in line with expectations.

CSFB maintained an “outperform” rating on Chevron, compared with an “underweight” rating for the integrated oils group as a whole.

“Overall we expect Chevron to have a strong quarter relative to its peers — driven by strong oil and gas prices and refining margins in the areas the company operates in,” CSFB said in the research note.

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