Chevron, the second-largest U.S. oil and gas company, said Thursday it expects its capital spending to rise by about 15 percent as the company works to bring several large-scale oil and gas projects online in a high-cost environment.
he company said it expects to spend $22.9 billion on capital and exploratory projects in 2008, up from projected 2007 spending of $20 billion.
About 76 percent of Chevron's 2008 spending budget is earmarked for oil and gas exploration and production projects, and 18 percent will be set aside for its refining and marketing usinesses.
The San Ramon, California-based company said $2.6 billion of its 2008 spending is by affiliated companies.
Costs to drill new oil and gas projects have been rising steadily along with oil prices, due to sky-high demand for the steel, equipment and laborers needed for the fields. The costs have nearly doubled since 2005, according to a study by Cambridge Energy Research Associates.
Chevron has a pipeline of new projects around the world, including the deepwater Gulf of Mexico, Nigeria and Kazakhstan.
The company expects its Blind Faith field in the Gulf and its Agbami field offshore Nigeria to begin production next year.
The $4.1 billion the company plans to spend on its refining and marketing operations includes $1.5 billion for refinery improvements in the United States.
Credit Suisse analyst Mark Flannery said in a research note that the increased spending levels by Chevron indicate that the company is drilling for oil at a higher break-even price than many of its peers.
Still, he said that many of those competitors will likely soon follow Chevron's lead and drill for more costly oil.
Chevron shares rose $2.10, or 2.35 percent, to $91.40 on the New York Stock Exchange as crude oil prices that surged over 3.5 percent pushed up stocks across the energy industry Thursday afternoon.