Chevron Corporation (NYSE: CVX) executives, at the company's annual security analyst meeting in New York, expressed confidence in the long-term energy business and highlighted its growth outlook through 2017. At the same time, company executives outlined near-term actions to address the recent decline in commodity prices.

"The fundamentals of the oil and gas business remain attractive for our company and investors, as our products are vital to a growing world economy," said John Watson, Chevron's chairman and CEO. Watson added, "We are well-positioned to manage through the recent drop in commodity prices and are taking several responsive actions, including curtailing capital spending and lowering costs."

"Over the next few years, we expect to deliver significant cash flow growth as projects currently under construction come online. Our intention is to demonstrate performance that will allow our 27-year history of successive increases in our annual dividend payout to continue," Watson added.
George Kirkland, vice chairman and executive vice president, upstream, reviewed Chevron's upstream portfolio, strategies, and historical performance, including the company's consistent exploration and resource capture success over the past decade. He also highlighted the upstream segment's superior financial performance relative to industry peers, as well as its leading competitive cost structure.

"This was the fifth consecutive year we have led the integrated peer group on earnings per barrel," Kirkland said. "Our base business is performing exceptionally well and is profitable, even in a lower-price environment. Our large, diverse resource base allows us to be very responsive to market conditions, with flexibility to select only the most attractive opportunities to move forward."

Jay Johnson, senior vice president, upstream, provided an overview of the specific actions being taken to manage capital outlays, lower costs and improve operating efficiencies, all of which will contribute to improving upstream cash flow. He also provided a comprehensive update on Chevron's deep queue of projects and other future investment opportunities, emphasizing their strong cash and value generation potential.

"We continue to make steady progress on our LNG and deepwater developments, and will continue to ramp-up production from our shale and tight assets, particularly from our very attractive Permian Basin acreage position," Johnson said. "We expect to achieve 20 percent production growth by 2017, a rate which is simply unmatched by our industry peers. More importantly, our new production is expected to have considerably higher margins than in our existing portfolio."

Pat Yarrington, vice president and chief financial officer, and Mike Wirth, executive vice president, Downstream and Chemicals, also participated during the question and answer session of the meeting, following the main presentations. Presentations and a full transcript of the meeting are available on the Investor Relations website at www.chevron.com.

▪ Integrated business model resilient through the commodity price cycle
▪ Company on track to grow daily production to 4.3 million oil-equivalent barrels by 2017
▪ Seven major Upstream project startups expected in 2015

Exxon Mobil Corporation (NYSE:XOM) expects to start up 16 major oil and natural gas projects during the next three years and is on track to increase daily production to 4.3 million oil-equivalent barrels by 2017, said Rex W. Tillerson, chairman and chief executive officer.

"Our long-term capital allocation approach has not changed," Tillerson said at the company's annual analyst meeting at the New York Stock Exchange. "We remain committed to our investment discipline and maintaining a reliable and growing dividend. Our integrated model along with our unmatched financial flexibility enable us to execute our business strategy and create shareholder value through the commodity price cycle."

In 2015, ExxonMobil expects to increase production volumes 2 percent to 4.1 million oil-equivalent barrels per day, driven by 7 percent liquids growth. The volume increase is supported by the ramp up of several projects completed in 2014 and the expected startup of seven new major developments in 2015, including Hadrian South in the Gulf of Mexico, expansion of the Kearl project in Canada, Banyu Urip in Indonesia and deepwater expansion projects at Erha in Nigeria and Kizomba in Angola.

In 2016 and 2017, production ramp up is expected from several projects including Gorgon Jansz in Australia, Hebron in Eastern Canada and expansions of Upper Zakum in United Arab Emirates and Odoptu in Far East Russia.

"ExxonMobil has a deep and diverse portfolio of opportunities around the world and a total resource base of more than 92 billion oil-equivalent barrels," Tillerson said. "We have unparalleled flexibility to select and invest in only the most attractive development projects."

ExxonMobil anticipates capital spending of about $34 billion in 2015 – 12 percent less than in 2014 – as it continues to bring major projects online. Annual capital and exploration expenditures are expected to average less than $34 billion in 2016 and 2017.

"We are capturing savings in raw materials, service, and construction costs," Tillerson said. "The lower capital outlook also reflects actions we are taking to improve our set of opportunities while enhancing specific terms and conditions and optimizing development plans."

ExxonMobil's Downstream and Chemical businesses remain resilient in the lower commodity price environment and continue to generate solid cash flow, helped by abundant North American crude and natural gas supplies that have led to lower feedstock and energy costs, Tillerson said.

Approximately 75 percent of ExxonMobil's refining operations are integrated with chemical and lubricant manufacturing, resulting in economies of scale and greater flexibility to produce higher-value products, including diesel, jet fuel, lubes, and chemicals based on market conditions, Tillerson said.

During the meeting, ExxonMobil reviewed its leading performance in 2014. Highlights include:
▪ ExxonMobil distributed $23.6 billion to shareholders in the form of dividends and share repurchases, for a total cash distribution yield of 5.4 percent.

▪ Return on average capital employed was 16.2 percent – more than 5 percentage points higher than its nearest competitor. During the past five years, return on capital employed averaged 21 percent, also about 5 percentage points above its nearest competitor.

▪ Upstream profitability of $19.47 per barrel led competitors and increased by $1.44 per barrel compared with 2013.

▪ ExxonMobil replaced 104 percent of production by adding proved oil and gas reserves totaling 1.5 billion oil-equivalent barrels, marking the 21st-consecutive year the reserves replacement exceeded 100 percent.

NYC-based PIRA Energy Group reports that February Cushing inventories rose and the WTI contango deepens. In the U.S., record crude stocks testing limits of storage capacity. In Japan, crude runs eased and stocks drew. Specifically, PIRA's analysis of the oil market fundamentals has revealed the following:

February Cushing Inventories Rise; WTI Contango Deepens
Inventories continued to rise at Cushing, fueling deepening WTI contango, despite a rise in absolute prices after seven consecutive monthly declines. As Cushing fundamentals weakened, differentials to WTI strengthened across the board — from Alberta and Wyoming to Texas and Louisiana. Meanwhile, onshore drilling activity continued to plunge, signaling an approaching near-term hiatus in month-on-month shale production growth.

Record U.S. Crude Stocks Testing Limits of Storage Capacity
Gauging exactly how much crude storage capacity remains available has been a hot topic of late, and last week's build, propelling U.S. crude stocks to a new record, will certainly add to the urgency of this discussion. PIRA sees crude stock build continuing, testing the limits of onshore storage capacity.

Japanese Crude Runs Eased and Stocks Drew
Crude runs eased again from maximum seasonal levels, while imports were low enough to induce a stock draw. Finished product stocks also drew moderately. Gasoline demand was modestly higher, but lower incremental exports built stocks fractionally. Gasoil demand eased with higher yield, but a jump in incremental exports drew stocks yet again for the sixth straight week. The indicative refining margin remained strong. Gasoline, naphtha, and gasoil cracks firmed, thus offsetting a decline in the fuel oil crack.

Shift in PADD V Crude Balances Allowing ANS Exports
ANS exports are allowed but rare due both to infrequent arbitrage incentives and the requirement that U.S. flag vessels be used. With recent re-opening of arb incentives over the last two weeks, there is the potential for a near-term export. Longer term, with increased rail crude to PADD V and potentially more U.S. flag vessel availability (due to lower requirements as ANS production declines), occasional export opportunities are more likely.

Deferring Well Completions in a Low Crude Price Environment
As shale oil operators discuss in detail their plans for 2015, much attention has been paid to announcements of deferred well completions. The current contango market presents an opportunity for operators to improve well economics by deferring well completions to reap the benefits of higher future prices and perhaps also lower completion costs.

Onshore Crude Storage Will Be Close to Full in April
PIRA estimates the practical maximum storage capacity in the three major OECD markets. PIRA sees crude inventory levels building close to these levels by the end of April and even somewhat higher in May.

The information above is part of PIRA Energy Group's weekly Energy Market Recap - which alerts readers to PIRA's current analysis of energy markets around the world as well as the key economic and political factors driving those markets.