U.S. oil and gas major Chevron cuts spending on exploration and production for next year by 15 percent, but expects things to start bottoming out. File Photo by Mohammad Kheirkhah/UPI | License Photo
SAN RAMON, Calif., Dec. 8 (UPI) -- Chevron said its spending plans next year for exploration and production should be about 15 percent lower as market pressures endure for the company.
Chevron said it pegged its exploration and production budget for next year at $19.8 billion, 15 percent lower than this year and 42 percent below 2015 levels.
"This is the fourth consecutive year of spending reductions," Chairman and CEO John Watson said in a statement.
The company reported third quarter net income of $2.65 billion, against $4.24 billion during the same period last year. Production was down 3 percent to 3.8 million barrels of oil equivalent per day.
The third quarter marked the fourth consecutive quarter for a downturn for the world's largest publicly traded oil company. First quarter earnings of $1.8 billion were the weakest in more than a decade.
Chevron said about 10 percent of its spending plans for next year target the Permian shale basin in the United States, one of the more resilient reserves in the country. About 35 percent of the spending will be geared toward liquefied natural gas assets in Australia and around 15 percent is designated for operations in oil-rich Kazakhstan.
"Global exploration funding accounts for approximately $1 billion of the total upstream budget, and the remainder is primarily related to early stage projects supporting potential, future development opportunities," the company said.
Crude oil prices are holding steady near the $50 per barrel mark on expectations that some level of balance between supply and demand is returning to the market. Weatherford International, one of the larger companies servicing the exploration and production side of the energy sector, said its results for the third quarter were indicative of a market that turned the corner as crude oil prices start to even out.
Chevron's CEO said some of the company's major projects were near completion and that should help the bottom line.
"This combination of lower spending and growth in production revenues supports our overall objective of becoming cash balanced in 2017," he said.