Chevron Corporation (NYSE:CVX) reviewed its outstanding 2010 financial results at a recent analyst meeting, and also outlined its large inventory of upstream oil and gas projects and the production growth this will generate over the next five years.
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Chevron reported net income of $19 billion, or $9.48 per diluted share in 2010, with more than 90% of these earnings from the upstream sector. The company's return on capital employed, a key measure of performance for large integrated oil companies, came in at 17% for the year, with the upstream segment returning 23%.
The company also pays a decent dividend and has consistently raised that payout historically, including a 6% increase in early 2010. The stock now has a yield of 2.9%.
Chevron reported net production of 2.76 million barrels of oil equivalent (BOE) per day in 2010, and although this represented production growth of only 2% over 2009, the company is making investments that will increase this growth rate in future years.
2011 Capital Expenditures
Chevron has established a $22.6 billion upstream capital budget for 2011, and expects to produce 2.79 million BOE per day in 2011. The company estimates that the upstream investments it is making during this decade will increase production to 3.3 million BOE per day by 2017. This is 18% higher than 2011, or an approximate compound annual growth rate of close to 3%.
Chevron's largest upstream project under development is the Gorgon project in Australia, which the company operates and owns a 47% interest. The project is located off the northwest coast of Western Australia, and involves developing several offshore natural gas fields and the construction of a Liquefied Natural Gas (LNG) facility.
The facility will have 15 million ton per year capacity and will export most of the LNG to Asia. The project will also include a domestic gas plant to supply Australian markets with natural gas. Chevron expects first production in 2014, and estimates that the total project will cost approximately $37 billion.
Since this project is so expensive, Chevron has taken on several partners, including Exxon Mobil (NYSE:XOM) and Royal Dutch Shell (NYSE:RDS), which each own 25%. Also, three Asian based companies own small percentages of this project.
Australia is a popular area for the oil and gas industry as it looks to find new supplies of energy. Apache Corporation (NYSE:APA) is active here and drilled 31 wells in 2010. The company has 12 million gross acres in many different parts of the country.
The Bottom Line
Chevron spent a recent analyst day highlighting the company's 2010 operational and financial achievements in 2010. The company also reviewed the major upstream projects that the company has under development in the United States and internationally. (For related reading, also take a look at Unearth Profits In Oil Exploration And Production.)
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