Chevron 4Q13 Earnings Call Notes

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Our 2013 performance was solid

“Our financial performance in 2013 was solid. Once competition results are fully analyzed we expect to once again post the highest upstream cash and earnings margins per barrel compared to a broad set of peer competitors.”

Reserve replacement ratio 85%

“Our one year reserve replacement was 85%, brining our 3 year replacement ratio to 123%. We are proud of our performance this past year.”

$11 in EPS

“For the year earnings were $21.4 billion, this equates to $11.09 per diluted share.”

2.6 Million barrels per day

“Production declined by 13,000 barrels per day in 2013. Production averaged 2.6 million barrels per day for the year, 98% of our original guidance.”

Similar production forecast for 2014

“our net production outlook for 2014 is 2.61 million barrels oil equivalent per day based on average Brent price of $109 per barrel, which was the same average price as 2013. This outlook does not assume OPEC curtailments, material and security or other market impacts.”

Base business contracting at 4% per year

“Papa-Terra and in the Permian Basin. These are expected to be partially offset by declines from our base producing assets, where we continue to assume an average decline rate of approximately 4%. Our focus is on managing the decline rate related to our base business, which is performing very well and on executing with excellence”

Five big projects to add 500k barrels per day

“five large projects; Angola LNG, Jack/St. Malo, Big Foot, Gorgon and Wheatstone, which in total will add over 500,000 barrels per day of net new production to Chevron at full capacity. In 2015, we’ll see the start-up of Gorgon and Big Foot and additional ram up of Jack/St. Malo.”

We can understand the fundamental nature of the project. We can’t predict oil prices

“One of the reasons I have told you and others before, one of the reasons we haven’t put out long-term capital forecast is because it is very hard to predict oil prices, foreign exchange, local content requirements, cost of goods and services. What we have been fairly good at understanding is the competitive nature of our project, so when we put out long-term production forecast we’ve had a view that we know the world is going to need energy, we know that we’ve got projects that will compete because of the resource and general nature of the project.”

Argentina has the best shale outside North America

“Argentina, as far as we know it’s the best shale outside of North America. So we took the opportunity to bring those into the portfolio. ”

Not fond of the MLP structure, but don’t mind selling assets to them

“We’re in the process right now of making some sales in our midstream business for example. You referenced MLPs our approach – we’re not fond of the MLP structure as a way for us to hold assets, but we can sell into MLPs and get that value. And so we have been selling pipelines and we’ll continue to do so for pipelines where they are not critical to our upstream or downstream business, now there is more merchant type lines.”

With spread volatility, it’s good to be integrated

“I think when you look in the middle of the country today I think it makes all the sense in the world to be an integrated company. You’ve had tremendous volatility in relationship – in crude pricing and you capture refinery, recapture on the upstream side just depending upon how infrastructure moves and we’re capturing that in Salt Lake. So I frankly think that the integration story for us is pretty straightforward.”

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