Declines in Chevron Oil Production
Despite the high price of oil, Chevron was only able to produce 702,000 oil-equivalent barrels compared to over 750,000 in the same period a year ago. The company blames the decline on natural field declines. As an oil field becomes depleted over time, it can be increasingly difficult to pull the oil out. Many experts are predicting that oil production is at or near peak levels since many of the world's biggest oil fields are already in a period of steady decline. The search for new oil fields is increasingly focusing on areas that are more expensive to explore and operate, such as deep-water ocean locations. This points to oil prices remaining high for the foreseeable future. We may see some short-term downward pressures as the high cost of gasoline in the US has led to a substantial decline in the total miles driven in this country. China may also be enacting strong curtailing restrictions on automobiles during the run-up to the Olympic Games, in an effort to reduce smog over the Olympic venues. Over the mid to long term, however, we foresee oil demand continuing to rise while supply faces a difficult time in trying to keep pace.
Chevron's Exploration Spending Plan
In a speech made at the 2008 World Petroleum Conference, John Watson, Chevron's Executive Vice President of Strategy and Planning, announced that Chevron alone is planning $22.9 billion in capital and exploratory spending in 2008, a 15% increase over 2007. "These investments are being made along the entire energy value chain: from exploration and production; to refining and transportation; to geothermal, solar, cellulosic biofuels and other emerging technologies," he said.
Chevron stock closed at $84.42 on Friday after the release of the earnings announcement. This is down from the stock's high-water mark of $104/ share set back in May of 2008. Chevron currently pays a $0.65/ share quarterly dividend representing a very respectable 3.1% yield at the current price. Compare that to Exxon's 2% dividend yield.