(Reuters) - Oil major Chevron Corp CVX.N said on Tuesday it should be able to raise production as planned by between 4 and 7 percent in 2018 and buy back shares for the first time in at least three years even without a substantial rise in oil prices.

FILE PHOTO: The logo of Chevron (CVX) is seen in Los Angeles, California, United States, April 12, 2016. REUTERS/Lucy Nicholson/File Photo

The No.2 U.S. oil producer’s shares rose as much as 2 percent after Chevron cut $2 billion off the top-end of its capital spending plans and promised, cashflow permitting, to return to share buybacks for the first time since 2015.

The company now expects to invest between $18 billion and $20 billion each year until 2020, compared to an earlier forecast of $17 billion to $22 billion and reassured investors paying dividends remained a top priority.

Chief Executive Michael Wirth said he planned to generate extra free cash by selling off assets, producing more oil at higher margins and cutting expenses, as U.S. oil firms ramp up production in response to a recovery of crude prices.

“We intend to maintain capital discipline,” he said in a statement. “Even with no (further) commodity price appreciation, we expect to deliver stronger upstream cash margins and production growth. This is a powerful combination,”

Chevron, which said it intended to raise free cash flow “in 2018 and thereafter,” said only that buybacks would start “as we generate surplus cash”.

The company said it would increase output of high-margin barrels of oil by more than 200 mboe/d in 2018.

Production in its low-cost shale acreage in the Permian basin in New Mexico and Texas, was expected to reach about 500,000 barrels per day by the end of 2020 and 650,000 by the end of 2022.

The 2018 production estimate excluded asset sales and was based on oil prices at $60 a barrel, versus $66 for Brent crude and $62 for U.S. light crude on Tuesday.

“Our initial takeaway from Chevron’s annual analyst day are positive with the company providing encouraging production guidance beyond 2020 while also tightening the range in forward capital spending,” Jefferies analyst Jason Gammel wrote in a note.

“This adds confidence to our view that the steep ramp up in Chevron’s cash generation will be a key driver of the stock, leading to incremental shareholder returns.”

The company’s shares were up about 1 percent at $114.33 in afternoon trading.