Chevron Corp. indefinitely delayed a $5.1 billion oil development in the U.S. Gulf of Mexico after an equipment failure, casting doubt on the company’s ability to meet its target of 20 percent output growth by the end of 2017.
Some of the cables needed to tether a floating platform to the seafloor sank between May 29 and May 31, the San Ramon, California-based company said in a statement Monday. None of the wells at the Big Foot oilfield had begun pumping crude and there were no spills or injuries.
Unmanned, remotely operated vehicles have been deployed to search the seafloor and assess the amount of damage suffered by the cables, Cameron Van Ast, a Chevron spokesman, said in an e-mail on Tuesday. The company plans to provide a new start date for the oil field when it posts second-quarter results in late July or early August, he said.
Chevron has spent billions of dollars and the better part of a decade preparing the deep-water field for production, which had been scheduled to begin later this year. Discovered in 2006, Big Foot was one of the linchpins in Chief Executive Officer John Watson’s plan to increase Chevron’s global production to the equivalent of 3.1 million barrels of crude a day over three years.
The Atlantic hurricane season that began on the same day Chevron disclosed the reversal means the cables probably won’t be repaired and reinstalled for at least six months, given the threat of dangerous storms, William Featherston, a UBS Group AG analyst, said in a note to clients on Tuesday. Featherston lowered his full-year 2016 earnings estimate for the company by a penny to $4.03 a share.
The platform is designed to collect oil and natural gas from wells in the field, strip out hydrogen sulfide and brine, and send the fuels to shore on pipelines. The oilfield is located about 225 miles (362 kilometers) south of New Orleans in waters 5,200 feet deep in a section of the Gulf that experiences violent currents akin to underwater hurricanes, and waves that ebb and flow hundreds of feet beneath the surface.
The currents “pluck and pick steel pipes like they’re nylon guitar strings,” Chevron said in the September 2008 issue of its in-house technology magazine, Next.
The platform was moved to “sheltered waters,” the company said.
Chevron was little changed at $102.58 at the close in New York. The shares are down 8.6 percent this year.
The setback may worsen the impact of lower crude prices that have eroded cash available for exploratory drilling and the acquisition of new prospects. Every $1 decline in the price of Brent crude, the global benchmark, cuts $325 million to $350 million from Chevron’s quarterly cash flow.
Big Foot is one of several marquee developments around the world that Chevron leads or is a major investor in. Others include the Gorgon and Wheatstone gas-export projects in Australia, which together will cost more than $80 billion, the $10 billion Moho Nord field in the Republic of Congo and the $5.6 billion Mafumeira Sul venture in Angola.
Liquefied natural gas is slated to account for the largest chunk of Chevron’s output growth between now and the end of 2017, followed by offshore crude and shale, the company said in a March presentation to investors.