Earnings Summary
Three Months Six Months
Ended June 30 Ended June 30
Millions of Dollars 2002 2001 2002 2001
Operating Earnings
Exploration and Production $1,258 $1,716 $2,399 $3,968
Refining, Marketing
and Transportation 104 670 43 1,126
Chemicals and Other (129) (242) (278) (496)
Total 1,233 2,144 2,164 4,598
Special Items (753) -- (827) --
Merger Effects (73) (36) (205) (57)
Net Income $407 $2,108 $1,132 $4,541
For the six-month period, net income was $1.132 billion ($1.07 per share -
diluted), compared with $4.541 billion ($4.28 per share - diluted) in 2001.
Operating earnings were $2.164 billion ($2.04 per share - diluted) in 2002,
versus $4.598 billion ($4.33 per share - diluted) in 2001.
Net charges for special items in the 2002 second quarter totaled $753 million. Included were $531 million for the write-down of the company's investment in its Dynegy Inc. affiliate, $100 million for the company's share of Dynegy's own write-downs and other adjustments, and $122 million for environmental remediation costs and settlement of a litigation issue. Merger-related expenses reduced earnings $73 million in the 2002 quarter.
The $531 million special-item charge represented a write-down of the company's investment in Dynegy's common and preferred stock to its estimated fair value at June 30, 2002, as required under the applicable accounting rules. Further deterioration of the securities' fair value during July was not reflected in the second quarter charge.
The remaining book value of the company's investment in Dynegy at June 30, following the second quarter write-down, was approximately $2 billion. An additional charge to third quarter earnings may be required to the extent the fair value of the Dynegy securities at Sept. 30, 2002, is below the remaining $2 billion carrying value.
Commenting on Dynegy, Chairman and CEO Dave O'Reilly said, "Despite the partial write-down of our Dynegy investment in the second quarter, we are encouraged by Dynegy's ongoing efforts to improve liquidity, including its announcement yesterday to sell Northern Natural Gas Company. We support this and other actions Dynegy is undertaking to help restore investor confidence." O'Reilly indicated that besides ChevronTexaco's ownership in Dynegy, the two companies have commercial arrangements that include Dynegy's purchase of most of the natural gas and natural gas liquids produced by ChevronTexaco in the United States, as well as ChevronTexaco's purchase of the same commodities for its plant operations from Dynegy.
In other remarks on the quarter, O'Reilly said, "Operating earnings were significantly lower than the very strong results we had in last year's second quarter. In our upstream business this year, lower natural gas and crude oil prices were the primary factors reducing earnings. In our downstream sector, sharply lower refined product margins in the United States accounted for a large portion of the profit decline." O'Reilly said that downstream profits in the year-ago quarter also included $208 million associated with assets that were required to be sold as a condition of the October 2001 merger.
"A highly successful element in this year's quarter was the earnings contribution from synergies achieved following our merger last October," O'Reilly said. "We are pleased with the tremendous progress all of our businesses are making towards the $2.2 billion before-tax objective of synergy savings by early 2003."
Adding to his comments on the upstream sector, O'Reilly said that in the United States, the average natural gas realization dropped nearly 40 percent from the year-ago quarter to $3.04 per thousand cubic feet. Internationally, the decline was almost 20 percent to $1.94. The average U.S. crude oil and natural gas liquids realization was down about a dollar per barrel to $21.75. Internationally, the corresponding decline was 7 percent to about $23. Worldwide oil-equivalent production was down 1.6 percent from the second quarter 2001. Excluding the effects of OPEC-related quotas in both periods, production between quarters was essentially flat. On this same quota-adjusted basis, production for the first half of 2002 increased slightly more than one percent from the average for the full year 2001.
Commenting on the downstream sector, O'Reilly said, "Although improved from depressed levels early this year, refined product margins remain weak -- reflective of slowed world economies.
"Overcoming these difficult downstream market conditions, while enhancing upstream profits, are the key challenges to improving our overall operating earnings," O'Reilly said. "In this first year after the merger, our employees have successfully integrated all of our businesses, and I am optimistic for the future."
O'Reilly said an example of a highly successful integration effort was the company's oil and gas exploration program. In recent months, ChevronTexaco has announced discoveries in Angola, Nigeria and China, and has performed promising follow-up appraisal drilling at its Tahiti prospect in the Gulf of Mexico.
Second quarter 2002 revenues and other income were $25.3 billion, compared with $29.7 billion in the 2001 second quarter. Revenues and other income for the first six months of 2002 were $46.5 billion, versus $59.1 billion in the comparable 2001 period. Revenues declined in both periods, mainly on lower prices for crude oil, natural gas and refined products.
Foreign currency losses included in net income were $141 million, compared with losses of $20 million in the 2001 second quarter. In 2002, fluctuations of the U.S. dollar against the currencies of most other countries in which the company has significant operations resulted in losses, with the notable exception of the Argentine peso, which was permitted to float against the dollar earlier in the year. For the six-month period, foreign currency losses were $10 million, compared with gains of $67 million in 2001.
EXPLORATION AND PRODUCTION
U.S. Exploration and Production
Three Months Six Months
Ended June 30 Ended June 30
Millions of Dollars 2002 2001 2002 2001
Operating Earnings $548 $884 $852 $2,197
Special Items (12) -- (12) --
Segment Income $536 $884 $840 $2,197
U.S. exploration and production operating earnings of $548 million in the 2002
quarter declined mainly due to significantly lower natural gas realizations,
lower liquids realizations and a decline in oil-equivalent production. The
average natural gas realization for the quarter was $3.04 per thousand cubic
feet, compared with $4.80 in the year-ago period. The average liquids
realization was down about 5 percent to $21.75 per barrel. Partially offsetting
these unfavorable earnings impacts were lower operating and exploration
expenses.
Net oil-equivalent production declined 3 percent from last year's second quarter. The net liquids production component was up 2 percent to 627,000 barrels per day. Net natural gas production averaged 2.504 billion cubic feet per day, down 10 percent from the 2001 period. Drilling and production were accelerated in 2001 to take advantage of the favorable natural gas price environment.
The second quarter 2002 special charge was for environmental remediation costs.
International Exploration and Production
Three Months Six Months
Ended June 30 Ended June 30
Millions of Dollars 2002 2001 2002 2001
Operating Earnings $710 $832 $1,547 $1,771
Special Items -- -- -- --
Segment Income $710 $832 $1,547 $1,771
International exploration and production earnings of $710 million declined about
15 percent, mostly the result of lower realizations and higher depreciation
expense. These effects were partially offset by lower exploration expense.
Net oil-equivalent production was essentially unchanged from the year-ago period. The net liquids production component declined about 4 percent to 1,293,000 barrels per day. Production was lower in Indonesia, primarily related to changes in contractual terms. In Nigeria, production declined as a result of OPEC-related curtailments. The effect of OPEC quotas on Nigerian production in the 2002 quarter was 45,000 barrels per day, 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 approximately 20,000 barrels per day in this year's second quarter, compared to about 10,000 barrels per day in the year-ago period. Net natural gas production increased 15 percent to 1.932 billion cubic feet per day. New production from the Philippines, along with higher production in several other countries, contributed to the increase.
Earnings for the quarter included net foreign currency losses of $62 million, compared with losses of $33 million in 2001. Currency losses in several countries, particularly Venezuela and Canada, were partially offset by gains attributable to the weakening of the Argentine peso against the U.S. dollar.
REFINING, MARKETING AND TRANSPORTATION
U.S. Refining, Marketing and Transportation
Three Months Six Months
Ended June 30 Ended June 30
Millions of Dollars 2002 2001 2002 2001
Operating Earnings (Loss) $ 56 $531 $ (98) $720
Special Items (86) -- (86) --
Segment (Loss) Income $(30) $531 $(184) $720
U.S. refining, marketing and transportation operating earnings of $56 million
declined from $531 million in the year-ago quarter. The decrease was mainly due
to significantly lower margins for refined products and the absence in 2002 of
$208 million in earnings from assets that were sold under mandate of the U.S.
Federal Trade Commission as a condition of the merger. The effect of lower gross
margins was partially offset by lower operating expenses.
The quarter's average refined product sales realization decreased 15 percent to $33.91 per barrel. Refined product sales volumes, excluding the company's share of Equilon and Motiva in the 2001 period, decreased 3 percent to 1,681,000 barrels per day, primarily due to a decline in sales of jet and marine fuels. Branded gasoline sales volumes increased about 4 percent to 588,000 barrels per day from the year-ago quarter.
Special items in 2002 were for environmental remediation costs and settlement of a litigation issue.
International Refining, Marketing and Transportation
Three Months Six Months
Ended June 30 Ended June 30
Millions of Dollars 2002 2001 2002 2001
Operating Earnings $48 $139 $141 $406
Special Items -- -- -- --
Segment Income $48 $139 $141 $406
International refining, marketing and transportation earnings of $48 million
declined due to lower overall refined product margins and lower freight rates
for the international shipping operations. Margins declined in the Asia-Pacific
and European areas of operations but improved slightly in Latin America. Total
refined products sales volumes decreased 10 percent to 2,210,000 barrels per
day, primarily the result of lower demand for jet fuel and residual fuel oil.
Earnings in the 2002 quarter included foreign currency losses of $102 million, compared with gains of $6 million in 2001. Currency losses in 2002 occurred mainly in Brazil, New Zealand, Australia, Korea and the United Kingdom.
CHEMICALS
Three Months Six Months
Ended June 30 Ended June 30
Millions of Dollars 2002 2001 2002 2001
Operating Earnings (Loss) $36 $27 $51 $(10)
Special Items -- -- -- --
Segment Income (Loss) $36 $27 $51 $(10)
Chemical operations earned $36 million, compared with $27 million in last year's
quarter. Product sales margins, while improved as a result of lower feedstock
costs in 2002, remained weak.
ALL OTHER
Three Months Six Months
Ended June 30 Ended June 30
Millions of Dollars 2002 2001 2002 2001
Net Charges, Excluding Special Items
and Merger Effects $(165) $(269) $(329) $(486)
Special Items (655) -- (729) --
Merger Effects (73) (36) (205) (57)
Segment Net Charges $(893) $(305) $(1,263) $(543)
All Other consists of the company's 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, and technology companies. Net charges before special
items and merger effects were $165 million, compared to $269 million in the
year-ago quarter. Lower income tax expense and corporate charges were partially
offset by a decline in the company's share of Dynegy's operating earnings.
Foreign currency gains were $21 million, versus $8 million in the 2001 quarter.
Special items in the 2002 quarter included charges of $531 million for the write-down of the company's investment in Dynegy, $100 million for the company's share of Dynegy's own write-downs and other adjustments, and $24 million for environmental remediation costs.
CAPITAL AND EXPLORATORY EXPENDITURES
Capital and exploratory expenditures totaled $4.3 billion for six months 2002, compared with $5.1 billion in 2001. Expenditures in 2002 included the acquisition of assets previously leased and an additional investment in Dynegy common stock. In 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 second quarter 2002 earnings will take place on Tuesday, July 30, 2002, at 8:00 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 third quarter 2002 interim company and industry performance data on its Website on September 24, 2002, at 2:30 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.
This earnings release of ChevronTexaco Corporation contains forward-looking statements relating to ChevronTexaco's operations that are based on management's current expectations, estimates and projections about the petroleum, chemicals and other energy-related industries. Words such as "anticipates," "expects," "intends," "plans," "targets," "projects," "believes," "seeks," "estimates" and similar expressions are intended to identify such forward-looking statements. These statements 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. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. Unless legally required, ChevronTexaco undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
Among the factors that could cause actual results to differ materially are crude oil and natural gas prices; refining margins and marketing margins; chemicals prices and competitive conditions affecting supply and demand for aromatics, olefins and additives products; actions of competitors; the competitiveness of alternate energy sources or product substitutes; technological developments; future developments in the energy-trading business sector and their effects on the operations of the company and its Dynegy affiliate; inability of the company's 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; the successful integration of the former Chevron, Texaco and Caltex businesses; potential disruption or interruption of the company's production or manufacturing facilities due to accidents or political events; 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); and potential liability resulting from pending or future litigation. In addition, such statements 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 Six Months
Ended June 30 Ended June 30
REVENUES AND OTHER INCOME: 2002 2001(A) 2002 2001(A)
Sales and Other
Operating Revenues (B) $25,223 $29,031 $46,067 $58,061
Income from Equity Affiliates 81 574 193 862
Other Income 29 89 228 216
25,333 29,694 46,488 59,139
COSTS AND OTHER DEDUCTIONS:
Purchased Crude Oil
and Products 14,694 17,288 26,507 34,168
Operating Expenses 1,699 1,843 3,451 3,722
Selling, General
and Administrative Expenses 1,153 887 2,016 1,785
Exploration Expenses 135 249 220 411
Depreciation, Depletion
and Amortization 1,241 1,168 2,446 2,325
Write-down of
Dynegy Investment 702 -- 702 --
Taxes Other
Than on Income (B) 4,137 3,941 7,917 7,898
Merger-Related Expenses (C) 119 48 302 73
Minority Interests 10 34 22 72
Interest and Debt Expense 160 217 307 476
24,050 25,675 43,890 50,930
INCOME BEFORE
INCOME TAX EXPENSE 1,283 4,019 2,598 8,209
Income Tax Expense 876 1,911 1,466 3,668
NET INCOME $407 $2,108 $ 1,132 $4,541
PER-SHARE AMOUNTS:
NET INCOME
Earnings - Basic $0.39 $1.99 $1.07 $4.29
Earnings - Diluted $0.39 $1.99 $1.07 $4.28
NET INCOME BY MAJOR OPERATING AREA Three Months Six Months
(unaudited) Ended June 30 Ended June 30
2002 2001 2002 2001
Exploration and Production
United States $536 $884 $840 $2,197
International 710 832 1,547 1,771
Total Exploration
and Production 1,246 1,716 2,387 3,968
Refining, Marketing
and Transportation
United States (30) 531 (184) 720
International 48 139 141 406
Total Refining, Marketing
and Transportation 18 670 (43) 1,126
Chemicals 36 27 51 (10)
All Other (D) (893) (305) (1,263) (543)
NET INCOME $407 $2,108 $1,132 $4,541
(A)Certain items were reclassified to conform to the 2002 presentation.
(B) Includes consumer
excise taxes: $1,751 $1,772 $3,439 $3,554
(C) Includes employee severance and other benefits associated with
workforce reductions, professional service fees, employee and office
relocations, facility closure costs, etc.
(D) Includes the company's interest in Dynegy Inc., coal mining
operations, power and gasification ventures, corporate administrative
costs, worldwide cash management and debt financing activities,
technology investments and real estate and insurance activities.
CHEVRONTEXACO CORPORATION - FINANCIAL REVIEW
(Millions of Dollars)
SPECIAL ITEMS AND MERGER Three Months Six Months
EFFECTS(A) BY MAJOR Ended June 30 Ended June 30
OPERATING AREA 2002 2001 2002 2001
(unaudited)
U. S. Exploration and Production $(12) $-- $(12) $--
U. S. Refining, Marketing
and Transportation (86) -- (86) --
All Other (B) (728) (36) (934) (57)
Total Special Items
and Merger Effects $(826) $(36) $(1,032) $(57)
SUMMARY OF SPECIAL Three Months Six Months
ITEMS AND MERGER EFFECTS Ended June 30 Ended June 30
(unaudited) 2002 2001 2002 2001
Asset Write-offs and Revaluations
- Write-down of
Dynegy Investment $(531) $-- $(531) $--
- Equity share of
Dynegy's write-offs
and revaluations (100) -- (174) --
Environmental
Remediation Provisions (65) -- (65) --
Other, Net (57) -- (57) --
Total Special Items (753) -- (827) --
Merger Effects (73) (36) (205) (57)
Total Special Items
and Merger Effects $(826) $(36) $(1,032) $(57)
FOREIGN EXCHANGE (LOSSES) GAINS $(141) $(20) $(10) $67
EARNINGS BY MAJOR OPERATING Three Months Six Months
AREA, EXCLUDING SPECIAL ITEMS Ended June 30 Ended June 30
AND MERGER EFFECTS 2002 2001 2002 2001
(unaudited)
Exploration and Production
United States $548 $884 $852 $2,197
International 710 832 1,547 1,771
Total Exploration
and Production 1,258 1,716 2,399 3,968
Refining, Marketing and Transportation
United States 56 531 (98) 720
International 48 139 141 406
Total Refining, Marketing
and Transportation 104 670 43 1,126
Chemicals 36 27 51 (10)
All Other (B) (165) (269) (329) (486)
Earnings Excluding Special
Items and Merger Effects 1,233 2,144 2,164 4,598
Special Items and Merger Effects (826) (36) (1,032) (57)
Net Income $407 $2,108 $1,132 $4,541
(A) Includes employee termination and other benefits associated with
workforce reductions, professional service fees, employee and office
relocations, facility closure costs, etc.
(B) Includes the company's interest in Dynegy Inc., coal mining
operations, power and gasification ventures, corporate administrative
costs, worldwide cash management and debt financing activities,
technology investments and real estate and insurance activities.
June 30, 2002
SELECTED BALANCE SHEET DATA (unaudited) Dec. 31, 2001
Cash, Cash Equivalents
and Marketable Securities $3,415 $3,150
Total Assets $77,642 $77,572
Total Debt $16,768 $17,418
Shareholders' Equity $33,756 $33,958
CHEVRONTEXACO CORPORATION - FINANCIAL REVIEW
CAPITAL AND EXPLORATORY EXPENDITURES (A)
(Millions of Dollars) Three Months Six Months
Ended June 30 Ended June 30
2002 2001 2002 2001
United States
Exploration and Production $444 $656 $819 $1,233
Refining, Marketing
and Transportation 148 203 258 366
Chemicals 44 53 71 66
Other 172 470 498 563
Total United States 808 1,382 1,646 2,228
International
Exploration and Production 1,113 995 2,268 2,475
Refining, Marketing
and Transportation 231 228 383 403
Chemicals 7 8 10 12
Other 14 2 16 3
Total International 1,365 1,233 2,677 2,893
Worldwide $2,173 $2,615 $4,323 $5,121
Three Months Six Months
Ended June 30 Ended June 30
OPERATING STATISTICS (A) 2002 2001 2002 2001
NET LIQUIDS PRODUCTION (MB/D):
United States 627 616 623 613
International (B) 1,293 1,342 1,324 1,341
Worldwide 1,920 1,958 1,947 1,954
NET NATURAL GAS PRODUCTION (MMCF/D):
United States 2,504 2,783 2,506 2,835
International 1,932 1,675 1,940 1,724
Worldwide 4,436 4,458 4,446 4,559
SALES OF NATURAL GAS (MMCF/D):
United States 5,125 8,499 5,980 8,708
International 3,168 2,360 3,377 2,377
Worldwide 8,293 10,859 9,357 11,085
SALES OF NATURAL GAS LIQUIDS (MB/D):
United States 223 316 254 340
International 138 105 134 101
Worldwide 361 421 388 441
SALES OF REFINED PRODUCTS (MB/D)(C):
United States 1,681 1,733 1,619 1,664
International 2,210 2,463 2,162 2,410
Worldwide 3,891 4,196 3,781 4,074
REFINERY INPUT (MB/D)(C):
United States 1,041 1,009 955 952
International 1,115 1,132 1,141 1,138
Worldwide 2,156 2,141 2,096 2,090
(A) Includes interest in affiliates.
(B) Excludes volumes produced
under operating service
agreements: 94 104 95 108
(C) Excludes volumes from Equilon and Motiva.
SOURCE ChevronTexaco Corporation