U.S. energy behemoth Chevron Corp. (CVX) offered a glimpse of its 2012 capital spending plans. The integrated major said that it will boost its capital expenditures by about $4.7 billion in 2012, as the company allocates the bulk of funds toward the ‘Exploration & Production’ segment, while continuing to be cautious about the amount of resources it devotes to the refining business. Chevron’s focus on the upstream business can be attributed to its strong portfolio of pipeline projects.
The second-largest U.S. oil company by market value has pegged its 2012 capital budget at $32.7 billion, up nearly 17% from the $28 billion it expects to invest by the end of 2011 (excluding the $4.5 billion expended to buy Atlas Energy). Of the total, roughly 87% will go toward oil and gas exploration projects worldwide, and 11% for downstream businesses.
A major portion of the 2012 spending has been earmarked for large, multiyear developments. Chevron is planning to spend $28.5 billion for the exploration, production and natural gas-related projects, concentrating on the company’s successful and focused exploration results in recent years, as well as for further appraisal and evaluation of other prospective areas in the world’s major hydrocarbon basins. Major initiatives in 2012 are expected to consist of the Gorgon and Wheatstone natural gas projects in Australia, as well as opportunities in the deepwater Gulf of Mexico, Nigeria, Angola and China.
Capital spending in the downstream segment is expected to be $3.6 billion in 2012, including $2.1 billion for projects in the U.S., primarily assigned for improving refinery efficiency, maximizing yield and producing cleaner fuels. Downstream outlays will include projects at the company’s refinery in Pascagoula, Mississippi.
Lastly, the company is expected to spend approximately $600 million in 2012 for technology, power generation and other corporate activities.
Chevron’s move to raise spending by a sixth not only marks the most that it has ever budgeted for capital expenditure but also put its outlay near that of the industry leader ExxonMobil (XOM), which plans to spend $33–$37 billion per year in the coming years.
San Ramon, California-based Chevron is one of the largest publicly traded oil and gas firms in the world, based on proved reserves. It is engaged in oil and gas exploration and production, refining and marketing of petroleum products, manufacturing of chemicals and other energy-related businesses.
Chevron shares currently retain a Zacks #3 Rank, which translates into a short-term 'Hold' rating. We are also maintaining our long-term 'Neutral' recommendation on the stock.
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