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Chevron: We can go it alone
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December 15, 1998: 7:32 p.m. ET
Oil giant says it doesn't need a merger to grow but it won't rule out a deal
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NEW YORK (CNNfn) - Chevron Corp. said Tuesday it would consider a merger or acquisition but the company doesn't believe that it needs to team up with another oil producer in order to grow.
In a meeting with Wall Street analysts, Chevron (CHV) Chairman Kenneth Derr said Chevron will not be pressured to announce a deal by the latest wave of mergers to hit the oil industry.
"As I've said before, we will consider mergers or acquisitions as one possible way to improve business results," he said. "But it is not necessary for Chevron to merge with a competitor to continue to provide top returns to our shareholders."
Chevron has been mentioned repeatedly over the last few weeks as a possible merger candidate, particularly in light of the proposed deal between Exxon Corp. (XON) and Mobil Corp. (MOB).
Spending cuts on the horizon
Chevron executives said the San Francisco-based oil company will cut next year's capital spending by 8 percent and shift money from the United States to more lucrative projects overseas.
Derr said he expected "less than 1,000" jobs, out of a total 34,000 jobs, would be cut as a result of the company's plans to cut spending next year by $500 million.
Oil companies have come under increased pressure to cut costs to offset the steep drop in world oil prices this year. Over the past few months a number of large, multinational oil companies have announced plans to cut jobs and spending plans.
"I'm confident that we will deliver operating and other expense reductions of $500 million in 1999 that will improve results and help fund our growth,'' Derr said in a statement.
Dave O'Reilly, newly named vice chairman, will oversee the company's cost-reduction plan.
Chevron said $3.7 billion, or 73 percent, of its capital spending will be for worldwide exploration and production in a continued trend to shift spending from the United States to overseas. Important projects include fields in Kazakhstan and West Africa.
The $3.7 billion exploration and production budget earmarks $2.6 billion for overseas projects and $1.1 billion for U.S. fields.
Chevron plans in Kazakhstan include an increase in daily production from the huge Tengiz field to 250,000 barrels per day (bpd) by 2000 from 210,000 bpd currently. Construction is expected to begin on an oil export pipeline from that region.
In West Africa, Chevron reported increased production from fields it operates there. Angolan production recently rose above 500,000 bpd, and the company has made two more major discoveries offshore. Nigerian production exceeds 400,000 bpd.
Deepwater project still on tracks
In the United States, deepwater production from the Genesis platform in the Gulf of Mexico is expected to start production in January. Chevron has a 57 percent working interest in that project.
Chevron said in its worldwide refining, marketing and transportation business, it plans to spend about $870 million next year, with more than $540 million invested in the United States.
The oil firm plans to continue renovation of its 7,800 U.S. service stations. Most of the remaining refining and marketing budget will be invested in the company's 50-percent-owned overseas venture, Caltex.
On Tuesday, Chevron's stock fell 2-11/16 to 83 a share in New York Stock Exchange trading.
-- From staff and wire reports
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Chevron
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