Chevron's weak production outlook spooks Wall Street
By Ernest Scheyder
(Reuters) - Chevron Corp (CVX.N: Quote), the second-largest U.S. oil company, said its quarterly profit dropped 32 percent and posted a modest production outlook for this year despite surging capital spending, sending shares down sharply on Friday.
The stock recorded its biggest daily percent decline since October 2012, losing 3.2 percent to $112.70 in afternoon trading.
Like Exxon Mobil (XOM.N: Quote), Royal Dutch Shell (RDSa.L: Quote) and other international energy giants, Chevron has tried to offset declining production at its oil and natural gas wells by spending massively on new exploration projects.
Chevron spent $41.9 billion last year on new oil and natural gas projects, a 23 percent increase from 2012. Chief Executive John Watson said he expects capital spending to be in the "$40 billion range" for the next few years.
Despite the higher spending, oil and natural gas production fell 3.4 percent to 2.6 million barrels of oil equivalent per day (boe/d) in the fourth quarter.
Chevron said rising production in the United States and Nigeria wasn't enough to offset declining production at legacy fields around the world, which typically lose about 4 percent of their reserves annually.
For 2014, Chevron expects total production of 2.6 million boe/d, up only 0.5 percent from 2013 levels. The estimate missed Wall Street's expectations and disappointed investors, who had hoped 2014 would be a "positive transition year" toward 2017 when new projects come online, Credit Suisse analyst Edward Westlake said in a note.
Even if Chevron hits its 2014 production goal, it would only be on par with 2012 levels. Continued...