America’s second largest oil company, Chevron, has reduced its 2017 production targets by 6%. The company also said that high market prices have pushed its breakeven price to more than $100 per barrel, according to news agency Reuters.
The company, like many of its peers, has seen mixed results from heavy spending to lift oil and natural gas production, and shareholders in the sector are pushing for more cost discipline.
Chevron trimmed its 2017 production outlook to 3.1 million barrels of oil equivalent per day (boepd) from a previous forecast of 3.3 million boepd, but stuck to plans to spend $40 billion this year on capital projects, about as much as last year.
“Our growth strategy remains intact, though some things have changed,” chief executive John Watson told Reuters at the company’s analyst day in New York.
Despite the more cautious production forecast, Chevron raised the oil price used in its planning models to $110 a barrel from $79. Exxon Mobil, the largest U.S. oil company, is using a similar level of $109 a barrel in its budgets, based on 2013 average prices.
“There comes a point when some projects just won’t be able to compete for capital” below $110 per barrel, Watson told reporters after the analyst meeting.
Watson cautioned that not all price rises go to Chevron. High crude oil prices have, paradoxically, cut Chevron’s cost reimbursement in some contracts and increased costs, Watson said. An increase in the price of oil can entitle Chevron’s partners to a higher share of production.
“When prices increase, it’s just arithmetic at that point,” he said.
In January,
Chevron said it expected production of 2.6 million boepd this year, up 0.5 percent from last year.
Chevron’s stock fell $1.33, or 1.1 percent, to close Tuesday trading at $114.51.
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