Argentinian oil company YPF's drilling chief Martin Costa observes two oil drilling rigs at his charge in Vaca Muerta Shale oil reservoir at Loma Campana, in the Patagonian province of Neuquen, some 1180 Km south-west of Buenos Aires, Argentina on December 4, 2014. YPF has an agreement with US Chevron to exploit Vaca Muerta, the world's second largest reserve of shale gas and fourth largest reserve of oil, estimated to contain the equivalent of 27 billion barrels.  AFP PHOTO / JUAN MABROMATA        (Photo credit should read JUAN MABROMATA/AFP/Getty Images)

Chevron, the second-largest US oil group, reported disappointing earnings for the fourth quarter of 2016, as profits slumped at its refining and marketing operations, but held out the prospect of strong production growth this year.

With new projects ramping up output and increased drilling in the Permian Basin shale oil region of west Texas, Chevron said it could increase production by 4-9 per cent in 2017, excluding the effect of disposals.

It said it expected the growth despite a sharp slowdown in capital spending over recent years, helped by some large projects reaching completion and a sharp improvement in the efficiency of its drilling and other operations.

John Watson, chief executive, also joined the ranks of corporate leaders who have welcomed President Donald Trump’s signals about the agenda for his administration.

He said: “We have seen an avalanche of regulation over the last decade, and putting a much more balanced cost benefit framework in place to assess the value of those regulations, freeing up infrastructure pipelines, all of that is quite positive for our business, for the country, [and for] job creation.”

Chevron’s earnings per share were 22 cents for the fourth quarter of 2016, compared to an average forecast from analysts of 64 cents. Revenues were also less than expected at $31.5bn, although they were up 8 per cent from the equivalent period of 2015.

The results had a modest impact on Chevron’s shares, which were down 2.4 per cent at $113.75 in early afternoon trading.

The drop-off in that “downstream” refining and marketing business was particularly steep because of a shutdown for maintenance at Chevron’s refinery in Richmond, California, which cost $300m. However, margins were also under pressure in the US and around the world, reflecting the growth in global refining capacity and the pick-up in oil prices over the past 12 months.

Mr Watson said the company had “responded aggressively” to the downturn in prices by cutting capital spending and operating costs.

Capital and exploration spending dropped to $22.4bn in 2016, from $34bn in 2015, as Chevron completed work on large projects such as the Gorgon liquefied natural gas plant in Australia, and slowed down commitments to new projects.

The company said it had replaced 95 per cent of its oil and gas production with additions to its reserves, mostly from the planned expansion to the Tengiz project in Kazakhstan, the Permian Basin, and Wheatstone, another Australian LNG project.

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