Chevron posts strongest year of crude discoveries since 2011

By Kevin Crowley on 2/2/2018

HOUSTON (Bloomberg) -- Chevron Corp. had its best year of oil and natural gas discoveries in more than half a decade as rebounding energy prices lifted drillers out of the worst slump in a generation.

Chevron found enough untapped fields to replace 155% of the crude and gas it pumped last year, the highest reserves replacement since 2011. The biggest additions were in the U.S. Permian basin and Australia, the company said in a statement on Friday.

Chevron’s geological prowess didn’t impress investors who dumped shares after the company posted weaker-than-expected profit and production figures for the fourth quarter. Per-share earnings, excluding one-time items, amounted to 67 cents, far below the $1.22 average of 19 estimates from analysts in a Bloomberg survey.

Production of oil and gas equated to 2.74 MMbbl, less than the 2.802 million analysts expected. Chevron’s stock fell 1.7% to $123.50 at 8:41 a.m. in pre-market trading.

CEO Mike Wirth, who began in the role on Thursday after being named CEO-in-waiting in September, comes at a time when the company is gearing up for significant production growth this year and next, finally reaping the rewards after years of investment into expensive mega projects from Australia to Kazakhstan.

Wall Street darling

As spending of those projects dwindles, the company is reducing capital expenditures, raising the possibility of future dividend increases, according to Cowen & Co. Chevron boosted its quarterly payout earlier this week for the first time since 2016 and the company has become a Wall Street favorite, with 15 buy recommendations and one sell among 28 analysts. The stock has climbed 47% in the past two years.

Changing course from the capital-intensive, long-life projects of the past, Wirth’s key focus for growth is the Permian basin, where the company is spending $3.3 billion this year while reducing expenditure elsewhere. The company is the biggest net acreage holder in the U.S.’s most prolific shale field after holding leases there for almost a century.

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