Chevron reduces capex to $20B. Earmarks most of it for upstream business

Chevron has reduced its capex to $19.8 billion for 2017, a steep drop from a year ago levels.

The 2017 budget represents a reduction of 42 percent from 2015 outlays and is expected to be at least 15 percent lower than projected 2016 capital investments, the company said.

The budget for 2015 had been $35 billion; and $26.6 billion for 2016.

Of the total 2017 budget, $17.3 billion will be spent on Upstream business; 2.2 billion will be spent on downstream.

In the Upstream business, approximately $8.5 billion of planned capital spending relates to base-producing assets, including about $2.5 billion for shale and tight investments, the majority of which is slated for Permian Basin developments in Texas and New Mexico.

Chevron said that another $7 billion of the planned upstream program is related to major capital projects currently underway, including approximately $2 billion toward the completion of the Gorgon and Wheatstone LNG projects in Australia and $3 billion of affiliate expenditures associated with the Future Growth Project-Wellhead Pressure Management Project (FGP-WPMP) project at the Tengiz field in Kazakhstan.

Of the total upstream budget, Chevron has set aside around $1 billion for global exploration funding, and the remainder is primarily related to early stage projects supporting potential, future development opportunities.

“Our spending for 2017 targets shorter-cycle time, high-return investments and completing major projects under construction. In fact, over 70 percent of our planned upstream investment program is expected to generate production within two years,” said Chairman and CEO John Watson. “This is the fourth consecutive year of spending reductions. Construction is nearing completion on several major capital projects, which are now online or expected to come online in the next few quarters. This combination of lower spending and growth in production revenues supports our overall objective of becoming cash balanced in 2017.”

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