Chevron cuts production growth target in face of rising costs.

FT: “Chevron, the US oil group, has raised sharply its expectation of future oil prices and cut its target for production growth, as it highlighted the steep rise in costs in the industry.”
“John Watson, the chief executive, told analysts at a meeting in New York that the company was “bullish on oil” because of output declines at mature fields, political constraints on production in many parts of the world, and the rising cost of finding and developing new oilfields.
Chevron has raised the price assumption it uses when setting out its projections for investors from $79 per barrel for internationally traded Brent crude to $110 per barrel, its average over the past three years.
That is significantly higher than is implied by the futures market, which shows that the price of oil is expected to fall.
….Mr Watson said the reasons for the weaker outlook included a slowdown in investment in shale gas production in the US, which has been hit by the slump in North American gas prices, higher volumes of oil going to the countries where Chevron operates under production-sharing contracts, and some “project slippage”.
….The company is also stepping up its asset sales, and now plans to raise $10bn from disposals over the next three years, up from a previous target of $7bn, mostly from selling oil and gasfields.
The moves follow a similar announcement last week from ExxonMobil, the largest US oil group, which also cut sharply its projection of future production and said it was scaling back its capital spending.
….Mr Watson also raised again the concerns about rising costs in the oil industry that he had highlighted at the IHS Cera Week conference in Houston last week.
Break-even prices for new oil developments could be over $100 per barrel, he said, after industry costs had doubled in the past decade.The company showed a slide indicating break-even Brent crude prices for different types of oil, suggesting that US shale oil production needed about $65-$85 per barrel, while projects in Canada’s oil sands could need up to $100 and in deep water up to $110 per barrel to break even.”