In an effort to achieve the best shareholder return among oilmajors from 2000 to 2004, Chevron Chairman Ken Derr andChairman-elect Dave O’Reilly told security analysts yesterday thecompany plans to increase worldwide oil and gas production at anannual growth rate of 4 to 4.5%.

Of the key growth areas mentioned, Chevron’s plans for theViosca Knoll area of the Gulf of Mexico (GOM) and the Fort Liardplay in Canada were the two most prominent natural gas assets. TheSan Francisco energy giant plans to have a total of 300 MMcf/dproduced from these regions by the third quarter of 2000.

The Viosca Knoll carbonate trend was discovered by Chevron inApril of 1998. It holds over 1 Tcf of gross reserves. The threeChevron wells producing in the area produce 60 MMcf/d, whichrepresents over 6% of the company’s total GOM production.

Overall, Chevron GOM operations produce 950 MMcf/d, or 40% ofits overall North American production. The company has interest inover 400 deep-water leases in the Gulf, more than 75 are in theViosca Knoll.

Earlier this year, Chevron Canada Resources, Chevron’s Canadianproduction subsidiary, discovered the Fort Liard play (see Daily GPI,May 17). Current production from theplay is in the 70 to 100 MMcf/d range. With estimated reserves in the400 to 600 Bcf range, the discovery is one of the largest in NorthwestCanada, a performer in the top one-tenth of 1% of all 74,000 gas wellsever drilled in the country.

The company also expects to see profit increases from gas andelectric sales and marketing, mainly due to its 25% ownership ofthe newly merged Dynegy-Illinova entity. Chevron is the onlyindustrial shareholder in the new company and said it will invest$200 to $240 million in the new company once it gains fullapproval.

Chevron pegged other areas of operations for increases as well.They include the company’s assets in Kazakhstan, Russia, Angola,Canada’s East Coast, Alberta, South America and Thailand.

Besides being the leader in shareholder returns for oil majors,other financial targets revealed during the meeting included along-term earnings growth rate in the top quartile of the S&P500, a minimum of 12% return on capital employed and a continuingreduction in operating expense.

These goals will have to be obtained without Derr’s leadership.Effective Jan. 1, Derr will retire as chairman and CEO. O’Reilly,the current vice chairman and director of the company, will takeover Derr’s position. Working at Chevron since 1968, O’Reilly hasheld several positions, including being the head of Chevron’sworldwide exploration and production activities and heading thecompany’s $500 million restructuring effort.

While the company set lofty financial goals yesterday, it wastaking a large financial hit from settling a long-standing lawsuit.After 17 years of haggling, Chevron agreed to pay OccidentalPetroleum (OXY) $775 million in an out of court settlement.

Chevron had attempted to petition the Supreme Court to hear thecase (see Daily GPI, Sept. 22), butyesterday’s motion nullified the attempt. The case dates back to 1982when Cities Service Co., a Tulsa oil company, filed a breach ofcontract suit against Gulf Oil Corp. after Gulf terminated anagreement to merge with Cities, which was trying to avoid a hostiletakeover by Mesa Petroleum. Cities Service was subsequently acquiredby Occidental Petroleum in 1982 and Gulf was acquired by Chevron in1984.

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