updated 3/7/2006 5:55:34 PM ET 2006-03-07T22:55:34

Chevron Corp. sought to ameliorate Wall Street on Tuesday by pledging that its oil and natural gas production would rise 24 percent by 2010, and it announced plans for a possible major expansion of a Mississippi refinery.

Chevron, speaking at an annual gathering of Wall Street analysts, said it would spend between $15 billion and $16 billion a year through 2008 — up from $11 billion in 2005 — to keep annual production growth above 3 percent for the next five years.

Analysts said they were generally pleased with the company’s growth forecasts, though they remained concerned about the execution and timing of the projects, especially after Chevron said its 2006 output would be 60,000 barrels per day lower than originally forecast because of production delays in the hurricane-ravaged Gulf of Mexico

Chevron CEO David O’Reilly estimated that production snags stemming from last summer’s Gulf of Mexico hurricanes would trim $500 million from the company’s bottom line in 2006. The company’s net profit was reduced by $1.4 billion in 2005 for similar reasons.

San Ramon, Calif.-based Chevron, the country’s second-largest petroleum producer, said its output would rise from 2.5 million barrels per day of oil equivalent in 2005 to 2.9 million barrels per day in 2008, and to 3.1 million barrels per day in 2010.

The recent $18 billion acquisition of Unocal Corp. is an important piece of that, executives said, though they emphasized that the company already had significant drilling opportunities under its belt.

The bulk of the growth will come from new Caspian and West African production, while the rest will come from the Asia-Pacific, North American and Latin American regions.

“We as a company are doing a lot about supply,” O’Reilly said in response to a reporter’s question about the criticism the industry has faced from Congress over soaring gasoline prices and tight supplies.

O’Reilly said the company is “evaluating” the possibility of a 200,000-barrel-per-day expansion of its Pascagoula, Miss., refinery to make it the second-largest in the United States.

The Pascagoula refinery, which was shut down for six weeks in the aftermath of Hurricane Katrina, currently processes an average 325,000 barrels of crude oil a day, making it the country’s eighth largest, according to Energy Department statistics.

“The opportunity for us to invest in the refining side of our business are better than they have been in some time,” executive vice president Mike Wirth said. At the same time, Wirth said the company has “been pretty careful not to make a mad dash to process more crude.”

Chevron previously announced plans to add 25,000 barrels per day of processing capacity at the Pascagoula plant.

The largest U.S. refinery is Exxon Mobil Corp.’s 557,000-barrel-per day plant in Baytown, Texas. The second largest, at the moment, is Exxon’s Baton Rouge plant, which refines 493,500 barrels per day.

Oppenheimer & Co. oil analyst Fadel Gheit said Chevron’s “outlook is significantly better than the recent past,” describing the production growth forecast of 3 percent per year through the end of the decade as “very decent.”

But Gheit said he was still left with some questions about “timing.”

As for the potentially major expansion of the Pascagoula refinery, Gheit said it was a good idea. “We need every bit of refining capacity we can get,” he said.

Shares of San Ramon, Calif.-based Chevron fell 53 cents, or 1 percent, to $55.32 in afternoon trading on the New York Stock Exchange. Crude-oil prices fell 83 cents to close at $61.58 a barrel on the New York Mercantile Exchange.

Chevron forecast that its reserves of oil and gas would rise from roughly 12 billion barrels in 2005 to close to 14 billion barrels by 2008.

George Kirkland, the company’s vice president for exploration and production, said the company was making “strong progress” on its drilling program and that Chevron was “specifically focused on reducing decline rates” of wells.

Indeed, some analysts remain concerned about the company’s ability to maintain the long-term growth of its reserves.

Citigroup analyst Doug Leggate said in a report last week that the Chevron’s reserve replacement has been “sub-par” for the past two years when growth from asset purchases is not included. Leggate said he was looking for daily production to grow to 3.3 million barrels per day by the end of 2009.

In January Chevron reported a profit of $14.1 billion for 2005, the company’s best annual performance in its 126-year history.

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