(Adds commentary on possibilty of future repurchases; updatestock; changes headline)
By Ernest Scheyder
WILLISTON, N.D., Jan 30 (Reuters) - Chevron Corp halted its 2015 share repurchase program on Friday, a movedesigned to conserve cash amid tumbling oil prices and itslatest cost-cutting step after slashing capital spending.
The buyback decision took Wall Street by surprise, withshares of the No. 2 U.S. oil producer falling as much as 4percent after the announcement on a conference call withinvestors.
Chevron repurchased $5 billion worth of shares in 2014,helping its float shrink nearly 2 percent from 2013 levels.
In announcing the buyback curtailment on the call, ChiefFinancial Officer Pat Yarrington cited "the change in marketconditions," a reference to the roughly 60 percent drop in crudeoil prices since last June.
Earlier Friday, Chevron said it would cut 2015 capitalexpenditures by 13 percent. The move echoed similar stepsearlier this week by Royal Dutch Shell, Hess Corp, ConocoPhillips and others to conserve cash inan environment where the crude price drop shows little sign ofabating.
Amid the cutbacks, Chief Executive Officer John Watsonstressed that Chevron's dividend, currently $1.07 per quarter,remained the "highest priority" for the company's balance sheet.Many investors have long been drawn to Chevron for its highdividend.
Comparing buybacks to a "flywheel," a rotational device thatcan store or disperse energy as needed, Watson said futurerepurchases were possible.
"If we get to a circumstance where we are generating cashflow and we don't see other opportunities, we've got noreticence at all to repurchase shares if we think that is abetter opportunity for us," he said.
CAUTION IN LNG MARKET
The buyback freeze and capex cut are part of Chevron'sefforts to curb spending, with "significant cost-reductionefforts underway," Watson said. He added that layoffs arepossible.
If oil prices do not recover, "you will see lower spending,absolutely," he said.
As part of that approach, Chevron is "significantly pacing"its spending on the Kitimat liquefied natural gas (LNG) projectin Canada. Apache Corp last year sold its stake toWoodside Petroleum Ltd.
Chevron has not determined whether to fully commit toKitimat, a decision that doesn't appear coming anytime soon,Watson said.
"I think people are pretty cautious right now in the LNGmarket," Watson said.
Chevron expects the long-delayed Gorgon LNG project inAustralia to record its first sales this year, and that itsWheatstone LNG project, also in Australia, should start up bylate 2016. Even with the uncertainty in energy markets, gettingGorgon online is the company's highest priority this year,Watson said.
Chevron said 2015 output would rise at most by 3 percentfrom 2014 production of 2.57 million barrels of oil equivalentper day.
The San Ramon, California-based company stuck to its goal oflifting output to 3.1 million barrels of oil equivalent in 2017.
The stock was down 2.4 percent to $100.55 in afternoontrading. (Editing by Terry Wade, Jeffrey Benkoe and Chizu Nomiyama)
