-- Exploration and production earnings decline on lower prices for crude oil and natural gas -- U.S. refining, marketing and transportation operations incur net loss for 2002 quarter -- Merger synergy activities on track to capture savings target of $1.8 billion annually
SAN FRANCISCO, Apr 25, 2002 --ChevronTexaco Corp. (NYSE: CVX) today reported net income of $725 million ($0.68 per share - diluted) for the first quarter 2002, compared with net income of $2.433 billion ($2.29 per share - diluted) in the year-ago quarter. Excluding special items and merger-related expenses in both periods, operating earnings were $931 million ($0.88 per share - diluted), down from $2.454 billion ($2.32 per share - diluted) in the 2001 quarter.
Earnings Summary
Three Months Ended
March 31
Millions of Dollars 2002 2001
Operating Earnings
Exploration and Production $1,141 $2,252
Refining, Marketing and Transportation (61) 456
Chemicals and Other (149) (254)
Total $931 $2,454
Special Item (74) --
Merger-related Expenses (132) (21)
Net Income $725 $2,433
Commenting on activities and results for the quarter, Chairman and CEO Dave
O'Reilly said, "We made tremendous progress in recent months integrating the
former operations of Chevron, Texaco and Caltex into the new ChevronTexaco.
Despite this, profits in the first quarter were negatively affected by prices
for crude oil, natural gas and refined products that were significantly lower
than a year ago. Operating earnings in the period declined over 60 percent from
a very strong quarter last year when industry price levels were much higher."
O'Reilly said the lower prices affected the company's U.S. businesses the most.
In exploration and production, for example, profits of $304 million were off 77
percent between periods -- with the average U.S. crude oil realization falling
about 30 percent to $17.38 per barrel and the average natural gas realization
declining by two-thirds to $2.27 per thousand cubic feet. The U.S. downstream
sector recorded a $154 million loss for the quarter, reflecting margins that
were at their lowest levels since the mid-1990s.
O'Reilly added, "Despite the weak industry fundamentals in the first quarter, I
am optimistic for the longer term. We are beginning to see signs of economic
recovery in many areas of the world that will help stimulate demand for our
company's products. And we are well positioned to take advantage of those
improved market conditions when they occur."
O'Reilly said teams of employees in all of the company's businesses continue to
capture savings from merger synergies that are making immediate contributions to
profits and cash flow. "By the end of the first quarter, we had processes in
place to achieve our interim target rate of $1.2 billion in annual synergy
savings before-tax. We accomplished this milestone ahead of our targeted
objective of six to nine months from the date of the merger last October,"
O'Reilly commented. "And we're well on the way toward achieving our total annual
before-tax savings objective of $1.8 billion by early next year."
O'Reilly said that some of the key merger-related initiatives include
implementing a restructured exploration program, reducing costs by leveraging
operating efficiencies in areas of overlap, utilizing best practices across the
company and completing the disposition of assets mandated by the U.S. Federal
Trade Commission.
An early success of the new exploration program was the recent announcement of a
significant discovery at the Tahiti prospect, located in the deepwater Gulf of
Mexico. The company's 58 percent ownership is composed of interests separately
held by Chevron and Texaco prior to the merger.
Progress also has been made in upstream producing operations, as well as in
other businesses, to reduce operating expenses. For example, in the San Joaquin
Valley heavy oil fields, former Chevron and Texaco facilities and operations are
being optimized to improve costs of the steam injection process, while
maintaining crude oil production. Companywide, oil-equivalent net production in
the first quarter was up about 1 percent from the average for the full year
2001.
O'Reilly also commented that agreements have been reached on all of the asset
dispositions mandated by the FTC. The sale of the company's interests in Equilon
and Motiva -- joint ventures engaged in U.S. downstream businesses -- closed in
February, resulting in cash proceeds of $2.2 billion. Other asset sales have
either closed or are scheduled to close in the coming months.
First quarter 2002 revenues and other income were $21.2 billion, compared with
$29.4 billion in the 2001 first quarter. Revenues declined on sharply lower
prices for crude oil, natural gas and refined products.
The special item in the 2002 quarter represented the company's share of an asset
write-down by its Dynegy affiliate.
Foreign currency gains included in first quarter 2002 net income were $131
million, compared with $87 million in 2001. Gains of $159 million in the 2002
quarter were attributable to the recent devaluation of the Argentine peso. These
gains were partially offset by losses associated with the weakening of the U.S.
dollar against the Australian dollar.
EXPLORATION AND PRODUCTION
U.S. Exploration and Production
Three Months Ended
March 31
Millions of Dollars 2002 2001
Segment Income $304 $1,313
U.S. Exploration and Production earnings of $304 million for the first quarter
2002 declined by slightly more than $1 billion compared with last year's
quarter, driven by significantly lower crude oil and natural gas realizations
and a 5 percent decline in oil-equivalent production. Partially offsetting these
unfavorable effects were lower operating and exploration expenses. Operating
expenses for fuel, steam and utilities decreased as a result of lower natural
gas prices. Exploration expense reductions reflected lower amounts for well
write-offs and acquisitions of seismic and survey data.
The average natural gas realization for the quarter was $2.27 per thousand cubic
feet, compared with $7.52 in the year-ago period. The average crude oil
realization was $17.38 per barrel, versus $24.42 in the corresponding 2001
quarter.
Net liquids production increased 2 percent to 619,000 barrels per day, as a
result of higher production in deepwater Gulf of Mexico. Net natural gas
production averaged 2.509 billion cubic feet per day, down 13 percent from the
2001 period. Drilling and production had been accelerated in the year-ago period
to take advantage of the favorable natural gas price environment.
International Exploration and Production
Three Months Ended
March 31
Millions of Dollars 2002 2001
Segment Income $837 $939
International Exploration and Production earnings of $837 million decreased 11
percent, mainly the result of 20 percent-lower average liquids and natural gas
realizations. Partially offsetting these effects were a 3 percent increase in
net oil-equivalent production and gains of $37 million from mark-to-market
accounting applied to certain natural gas sales contracts under an accounting
rule that became effective at the beginning of the year.
Net liquids production increased 1 percent to 1,356,000 barrels per day --
primarily from operations in the United Kingdom. OPEC curtailments restrained
net production approximately 35,000 barrels per day in the 2002 quarter, versus
having no effect in the corresponding 2001 period. Production under certain
operating service agreements, which are not included in net working interest
production statistics, was also curtailed 20,000 barrels per day in this year's
first quarter, compared with approximately 5,000 barrels per day in the year-ago
period.
Net natural gas production increased 10 percent to 1.948 billion cubic feet per
day. New production from the Philippines and higher production in Australia,
Colombia, Nigeria, and Thailand offset declines in Canada and Denmark.
Earnings for the quarter included net foreign currency gains of $153 million,
compared with $46 million in 2001. The 2002 quarter included gains of
approximately $159 million attributable to the devaluation of the Argentine
peso, partially offset by losses against the Australian dollar.
REFINING, MARKETING AND TRANSPORTATION
U.S. Refining, Marketing and Transportation
Three Months Ended
March 31
Millions of Dollars 2002 2001
Segment (Loss) Income $(154) $189
U.S. Refining, Marketing and Transportation incurred a loss of $154 million,
down $343 million from the year-ago quarter. Weaker product margins resulted
from refined product prices that declined more between periods than the cost of
crude oil feedstock for the refineries. More extensive planned refinery
maintenance in the 2002 quarter, requiring product purchases, contributed to the
decline in margins. Included in earnings for the first quarter 2002 was $36
million from investments in Equilon and Motiva, compared with $69 million in the
2001 quarter.
The average refined product sales realization decreased 35 percent to $26.24 per
barrel. Refined product sales volumes, excluding the company's share of Equilon
and Motiva in 2001, decreased less than 1 percent in the first quarter 2002 to
1,582,000 barrels per day, despite a 5 percent increase to 570,000 barrels per
day in branded gasoline sales.
International Refining, Marketing and Transportation
Three Months Ended
March 31
Millions of Dollars 2002 2001
Segment Income $93 $267
International Refining, Marketing and Transportation earnings of $93 million in
the first quarter 2002 declined by $174 million, primarily due to lower overall
refined product margins and lower earnings for the shipping operations. Earnings
in the 2002 quarter included foreign currency losses of $18 million, primarily
from New Zealand, South Africa and the company's Australian affiliate, compared
with gains of $55 million in 2001.
Total refined products sales volumes decreased 8 percent to 2,147,000 barrels
per day, mainly on lower trading, marine fuels, and Canadian refined product
sales.
CHEMICALS
Three Months Ended
March 31
Millions of Dollars 2002 2001
Segment Income (Loss) $15 $(37)
Chemical operations earned $15 million in 2002, compared with losses of $37
million in last year's first quarter. Profits were higher for the company's
Oronite business, while losses were lower for the 50 percent-owned Chevron
Phillips Chemical Company LLC affiliate. Product sales margins for the
affiliate, while improved as a result of lower feedstock costs in 2002, remained
weak.
ALL OTHER
Three Months Ended
March 31
Millions of Dollars 2002 2001
Net Charges, Excluding Special Item
and Merger-related Expenses $(164) $(217)
Special Item (74) --
Merger-related Expenses (132) (21)
Net Charges $(370) $(238)
Net charges before the special item and merger-related expenses were $164
million in 2002, $53 million lower than the 2001 quarter.
All Other consists of the company's 26 percent ownership interest in Dynegy
Inc., coal mining operations, power and gasification businesses, worldwide cash
management and debt financing activities, corporate administrative costs,
insurance operations, real estate activities, technology companies and certain
e-businesses.
Net interest expense declined by $49 million compared with the 2001 quarter. The
special item in the first quarter 2002 represented the company's share of an
asset write-down by its Dynegy affiliate. Merger expenses of $132 million in
2002 included employee severance benefits, actuarial losses on pension benefits
for terminated employees and expenses associated with contract terminations.
CAPITAL AND EXPLORATORY EXPENDITURES
Capital and exploratory expenditures totaled $2.150 billion for 2002, compared
with $2.506 billion in the 2001 quarter. Over half of the expenditures in each
year were for international upstream projects. Expenditures in 2002 also
included additional investments in Dynegy and the acquisition of assets
previously leased. In the first quarter 2001, expenditures included the
acquisition of an additional 5 percent interest in the Tengizchevroil affiliate
and higher development spending in the Gulf of Mexico related to natural gas
production.
NOTICE
The conference call to discuss ChevronTexaco's first quarter 2002 earnings will
take place on Thursday, April 25, 2002, at 7:30 a.m. PDT. The conference call
will be available in a listen-only mode to individual investors, media and other
interested parties on ChevronTexaco's Web site at www.chevrontexaco.com under
the "Investor Relations" heading. Additional financial and operating information
is contained in the Investor Relations Supplement that is available under
"Financial Reports" on the Website.
ChevronTexaco will post selected second quarter 2002 interim company and
industry performance data on its Website on June 25, 2002, at 2:00 p.m. PDT.
Interested parties may view this interim data at www.chevrontexaco.com under the
"Investor Relations" heading.
Cautionary Statement Relevant to Forward-Looking Information for the Purpose of
"Safe Harbor" Provisions of the Private Securities Litigation Reform Act of
1995.
Some of the items discussed in this earnings release are forward-looking
statements relating to ChevronTexaco's operations that are based on management's
current expectations, estimates and projections about the petroleum, chemical
and other industries, in which the company operates. Words such as,
"anticipates," "expects," "intends," "plans," "projects," "believes,"
"estimates," and similar expressions are used to identify such forward-looking
statements. The statements included in this release are not guarantees of future
performance and are subject to certain risks, uncertainties and other factors,
some of which are beyond our control and are difficult to predict. Among the
factors that could cause actual results to differ materially are crude oil,
natural gas and other commodity prices; refining and marketing margins; actions
of competitors; technological developments; inability of joint venture partners
to fund their share of operations and development activities; potential failure
to achieve expected production from existing and future oil and gas development
projects; potential delays in the development, construction or start-up of
planned projects; potential disruption or interruption of the company's
production or manufacturing facilities due to accidents or political events;
unexpected damage to company facilities; potential liability for remedial
actions under existing or future environmental regulations and litigation;
significant investment or product changes under existing or future environmental
regulations (including, particularly, regulations and litigation dealing with
gasoline composition and characteristics); potential liability resulting from
pending or future litigation; and the successful integration of the former
Chevron, Texaco and Caltex businesses. In addition, such outcomes could be
affected by general domestic and international economic and political
conditions. Unpredictable or unknown factors not discussed herein also could
have material adverse effects on forward-looking statements.
CHEVRONTEXACO CORPORATION - FINANCIAL REVIEW
(Millions of Dollars, Except Per-Share Amounts)
CONSOLIDATED STATEMENT OF INCOME
(unaudited) Three Months
Ending March 31
REVENUES AND OTHER INCOME: 2002 2001
Sales and Other Operating Revenues (A) $20,844 $29,030
Income From Equity Affiliates 112 288
Other Income 199 127
21,155 29,445
COSTS AND OTHER DEDUCTIONS:
Purchased Crude Oil and Products 11,813 16,880
Operating Expenses 1,818 1,879
Selling, General and Administrative Expenses 797 898
Exploration Expenses 85 162
Depreciation, Depletion and Amortization 1,205 1,157
Merger-related Expenses 183 25
Taxes Other Than on Income (A) 3,780 3,957
Interest and Debt Expense 147 259
Minority Interests 12 38
19,840 25,255
Income Before Income Tax Expense 1,315 4,190
Income Tax Expense 590 1,757
NET INCOME $725 $2,433
PER-SHARE AMOUNTS
Earnings - Basic $0.68 $2.30
Earnings - Diluted $0.68 $2.29
Dividends $0.70 $0.65
Average Common Shares Outstanding (000's)
- Basic 1,060,080 1,058,635
- Diluted 1,062,010 1,059,754
NET INCOME BY MAJOR OPERATING AREA Three Months
(unaudited) Ending March 31
2002 2001
Exploration and Production
United States $304 $1,313
International 837 939
Total Exploration and Production 1,141 2,252
Refining, Marketing and Transportation
United States (154) 189
International 93 267
Total Refining, Marketing and Transportation (61) 456
Chemicals 15 (37)
All Other (B) (370) (238)
NET INCOME $725 $2,433
(A) Includes consumer excise taxes. $1,688 $ 1,782
(B) Includes coal mining operations, the company's investment in Dynegy
Inc., corporate administrative costs, worldwide cash management
and debt financing activities, power and gasification ventures,
technology investments, and real estate and insurance activities.
CHEVRON CORPORATION - FINANCIAL REVIEW
(Millions of Dollars)
SPECIAL ITEMS AND MERGER-RELATED Three Months
EXPENSES BY MAJOR OPERATING AREA Ending March 31
(unaudited) 2002 2001
All Other * $(206) $(21)
SUMMARY OF SPECIAL ITEMS AND Three Months
MERGER-RELATED EXPENSES Ending March 31
(unaudited) 2002 2001
Dynegy Asset Write-downs (74) --
Merger-related Expenses (132) (21)
Total Special Items
and Merger-related Expenses $(206) $(21)
FOREIGN CURRENCY GAINS $131 $87
EARNINGS BY MAJOR OPERATING AREA, EXCLUDING
SPECIAL ITEMS AND MERGER-RELATED EXPENSES Three Months
(unaudited) Ending March 31
2002 2001
Exploration and Production
United States $304 $1,313
International 837 939
Total Exploration and Production 1,141 2,252
Refining, Marketing and Transportation
United States (154) 189
International 93 267
Total Refining, Marketing and Transportation (61) 456
Chemicals 15 (37)
All Other * (164) (217)
Earnings Excluding Special Items
and Merger-related Expenses 931 2,454
Special Items and Merger-related Expenses (206) (21)
Net Income $725 $2,433
* Includes coal mining operations, the company's investment in Dynegy
Inc., corporate administrative costs, worldwide cash management
and debt financing activities, power and gasification ventures,
technology investments, and real estate and insurance activities.
SELECTED BALANCE SHEET ACCOUNT DATA March 31, 2002 Dec. 31, 2001
(unaudited)
Cash, Cash Equivalents
and Marketable Securities $4,336 $3,150
Total Assets $78,544 $77,572
Total Debt $17,835 $17,418
Shareholders' Equity $34,123 $33,958
CHEVRON CORPORATION - FINANCIAL REVIEW
CAPITAL AND EXPLORATORY EXPENDITURES (A) Three Months
(millions of dollars) Ending March 31
2002 2001
United States
Exploration and Production $375 $577
Refining, Marketing and Transportation 110 163
Chemicals 27 13
Other 326 93
Total United States 838 846
International
Exploration and Production 1,155 1,480
Refining, Marketing and Transportation 152 175
Chemicals 3 4
Other 2 1
Total International 1,312 1,660
Worldwide $2,150 $2,506
Three Months
OPERATING STATISTICS (A) Ending March 31
NET LIQUIDS PRODUCTION (MB/D): 2002 2001
United States 619 610
International (B) 1,356 1,341
Worldwide 1,975 1,951
NET NATURAL GAS PRODUCTION (MMCF/D):
United States 2,509 2,888
International 1,948 1,774
Worldwide 4,457 4,662
SALES OF REFINED PRODUCTS (MB/D):
United States (C) 1,582 1,593
International 2,147 2,345
Worldwide 3,729 3,938
REFINERY INPUT (MB/D):
United States (C) 868 894
International 1,167 1,144
Worldwide 2,035 2,038
(A) Includes interest in affiliates, unless otherwise indicated.
(B) Excludes liquids volumes produced
under operating service agreements. (MBD) 96 111
(C) Excludes Equilon/Motiva.
SOURCE ChevronTexaco Corp.