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Chevron pitches investors on higher oil and gas output, modest spending plans

Stock Markets36 minutes ago (Mar 09, 2021 11:35AM ET)

(C) Reuters. FILE PHOTO: A Chevron gas station sign is seen in Del Mar, California

By Jennifer Hiller and Shariq Khan

(Reuters) – Chevron Corp (NYSE:CVX) on Tuesday outlined a plan to expand oil and gas production through 2025 without spending significantly more and to limit the pace of growth of its carbon emissions.

Falling energy demand due to pandemic lockdowns sent the industry into a tailspin in 2020 and led Chevron to a $5.54 billion annual loss, its first since 2016.

Investors have been pressuring Chevron and other big oil companies to reduce emissions that contribute to climate change, and rivals Royal Dutch Shell (LON:RDSa), BP (NYSE:BP) Plc and Exxon Mobil (NYSE:XOM) have said their oil and gas output would remain flat or fall to stay in line with climate or financial goals.

Chief Executive Officer Michael Wirth made the case on Tuesday in an annual presentation to investors and analysts that Chevron could lower its carbon footprint and generate profits if oil prices dip.

“We’re not betting on higher prices to bail us out,” Wirth said during the virtual presentation.

Chevron is now targeting a 35% reduction in its carbon intensity by 2028 and said it will eliminate routine flaring by 2030. But the intensity goals mean that emissions overall can increase if production rises, and it has not set a net zero carbon target like European and some U.S. peers.

The company’s carbon intensity goals “lag the industry average” and “focus on its controllable elements rather than emphasis on building new business lines,” said Biraj Borkhataria, analyst with RBC Capital Markets.

Production in 2020 was around 2.98 million barrels of oil and gas per day, and an investor presentation showed the company increasing output through 2025, though no numbers were given.

A forecast of generating $25 billion in free cash flow through 2025 after dividends and spending is “underwhelming” and below Wall Street expectations, Borkhataria said.

Chevron said it now expects cost savings of $600 million from its takeover of Noble Energy (NASDAQ:NBL) last year, double its previous estimate, helping lower its operating expenses 10% this year compared with 2019.

The company also expects to more than double its return on capital employed (ROCE) through 2025. Excluding items, it reported an about 3% ROCE in 2020.

Chevron will beef up investments over the next five years in the prolific Permian basin of Texas and New Mexico, where it slashed spending in 2020 to save money, as the costs of a major expansion in Kazakhstan decrease.

Permian production could reach 1 million barrels per day by 2025, it said.

Chevron’s shares were flat at $109.75 in morning trade.

Chevron pitches investors on higher oil and gas output, modest spending plans

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