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(Adds commentary on possibilty of future repurchases; update stock; changes headline)
By Ernest Scheyder
WILLISTON, N.D., Jan 30 (Reuters) - Chevron Corp halted its 2015 share repurchase program on Friday, a move designed to conserve cash amid tumbling oil prices and its latest cost-cutting step after slashing capital spending.
The buyback decision took Wall Street by surprise, with shares of the No. 2 U.S. oil producer falling as much as 4 percent after the announcement on a conference call with investors.
Chevron repurchased $5 billion worth of shares in 2014, helping its float shrink nearly 2 percent from 2013 levels.
In announcing the buyback curtailment on the call, Chief Financial Officer Pat Yarrington cited "the change in market conditions," a reference to the roughly 60 percent drop in crude oil prices since last June.
Earlier Friday, Chevron said it would cut 2015 capital expenditures by 13 percent. The move echoed similar steps earlier this week by Royal Dutch Shell, Hess Corp , ConocoPhillips and others to conserve cash in an environment where the crude price drop shows little sign of abating.
Amid the cutbacks, Chief Executive Officer John Watson stressed that Chevron's dividend, currently $1.07 per quarter, remained the "highest priority" for the company's balance sheet. Many investors have long been drawn to Chevron for its high dividend.
Comparing buybacks to a "flywheel," a rotational device that can store or disperse energy as needed, Watson said future repurchases were possible.
"If we get to a circumstance where we are generating cash flow and we don't see other opportunities, we've got no reticence at all to repurchase shares if we think that is a better opportunity for us," he said.
The buyback freeze and capex cut are part of Chevron's efforts to curb spending, with "significant cost-reduction efforts underway," Watson said. He added that layoffs are possible.
If oil prices do not recover, "you will see lower spending, absolutely," he said.
As part of that approach, Chevron is "significantly pacing" its spending on the Kitimat liquefied natural gas (LNG) project in Canada. Apache Corp last year sold its stake to Woodside Petroleum Ltd.
Chevron has not determined whether to fully commit to Kitimat, a decision that doesn't appear coming anytime soon, Watson said.
"I think people are pretty cautious right now in the LNG market," Watson said.
Chevron expects the long-delayed Gorgon LNG project in Australia to record its first sales this year, and that its Wheatstone LNG project, also in Australia, should start up by late 2016. Even with the uncertainty in energy markets, getting Gorgon online is the company's highest priority this year, Watson said.
Chevron said 2015 output would rise at most by 3 percent from 2014 production of 2.57 million barrels of oil equivalent per day.
The San Ramon, California-based company stuck to its goal of lifting output to 3.1 million barrels of oil equivalent in 2017.
The stock was down 2.4 percent to $100.55 in afternoon trading. (Editing by Terry Wade, Jeffrey Benkoe and Chizu Nomiyama)