- Upstream earnings improve 18 percent to $3.3 billion on higher prices
for crude oil and increased production
- U.S. upstream results include charges of $300 million for costs
associated with last year's hurricanes
- Downstream profits of $1 billion up slightly from year-ago quarter, due
in part to improved U.S. refinery utilization
- Capital and exploratory expenditures of $4.3 billion increase 70 percent
from second quarter 2005
SAN RAMON, Calif., July 28 /PRNewswire-FirstCall/ -- Chevron Corporation (NYSE: CVX) today reported net income of $4.4 billion ($1.97 per share - diluted) for the second quarter 2006, compared with $3.7 billion ($1.76 per share - diluted) in the year-ago period. For the first six months of 2006, net income was $8.3 billion ($3.77 per share - diluted), compared with $6.4 billion ($3.04 per share - diluted) in the 2005 first half.
Sales and other operating revenues in the second quarter 2006 were $52 billion, up $5 billion from the same period in 2005. The increase was mainly attributable to higher prices for crude oil and refined products and the inclusion of revenues related to the former Unocal operations acquired in August 2005. Partially offsetting these effects in the 2006 period was the impact of an accounting-rule change beginning in the second quarter for certain purchase and sale contracts. Six-month 2006 sales and other operating revenues were $106 billion, up from $88 billion in the 2005 first half.
Earnings Summary
Three Months Six Months
Ended June 30 Ended June 30
Millions of Dollars 2006 2005 2006 2005
Income by Business Segment -
Upstream - Exploration and
Production $3,272 $2,772 $6,730 $5,151
Downstream - Refining,
Marketing and Transportation 998 976 1,578 1,385
Chemicals 94 84 247 221
All Other (11) (148) (206) (396)
Net Income* $4,353 $3,684 $8,349 $6,361
* Includes foreign
currency effects $(56) $54 $(164) $33
Quarterly Results
"The earnings improvement in the second quarter was driven mainly by our upstream business outside the United States," said Chairman and CEO Dave O'Reilly. "Worldwide upstream results in this year's quarter benefited from both higher prices for crude oil and a 10 percent increase in oil-equivalent production." O'Reilly noted that U.S. upstream results in the 2006 quarter included charges of about $300 million ($0.13 per share) for uninsured costs associated with the dismantlement or repair of infrastructure damaged by last year's hurricanes in the Gulf of Mexico.
For the company's downstream business, O'Reilly said profits of approximately $1 billion were up slightly from the second quarter 2005 on improved results in the United States. Contributing to the U.S. earnings improvement were higher average margins for refined products and a higher refinery-utilization rate. The company's U.S. fuels refinery network operated at 100 percent of its crude oil capacity in the 2006 quarter.
Sustained Financial Performance
"Our recurring strong cash flows from operations funded $4 billion of capital and exploratory expenditures in the second quarter of this year," O'Reilly remarked. "We also retired $1.7 billion of debt during the quarter that was assumed with last year's acquisition of Unocal and purchased $1.3 billion of our common shares in the open market. We expect to complete our $5 billion stock buyback program by the end of the year. Earnings for the past 12 months resulted in a 24 percent return on capital employed for the period."
Strategic Focus
O'Reilly also noted recent achievements by the company's upstream operations and initiatives related to investments in alternative fuels:
-- Angola - Production of first crude oil from the offshore Lobito Field.
The Benguela, Belize, Lobito and Tomboco fields form the 31 percent-
owned and operated BBLT Development. As additional fields and wells
are added over the next two years, BBLT's maximum production is
expected to reach approximately 200,000 barrels of oil per day.
-- United Kingdom - Production of first crude oil from the 85 percent-
owned and operated Area C Project in the Captain Field. Eventual
maximum production for the project is estimated at 15,000 barrels per
day.
-- Azerbaijan - Participation in the first shipment of crude oil through
the 8.9 percent-owned Baku-Tbilisi-Ceyhan (BTC) pipeline. The initial
crude oil is being supplied by the Azerbaijan International Oil
Company, in which Chevron has a 10.3 percent interest.
-- Brazil - Commitment to develop the 52 percent-owned and operated
offshore Frade Field. Initial production is targeted by early 2009,
with a maximum annual rate for the project estimated at 85,000 oil-
equivalent barrels per day.
-- Nigeria - Discovery of crude oil in the 20 percent-owned offshore Oil
Prospecting License 214.
-- Australia - Discovery of natural gas at the Chandon-1 exploration well
offshore northwest Australia in the Greater Gorgon development area.
Chevron's interest in the property will be 50 percent.
-- Vietnam - Signing of a 30-year production-sharing contract with Vietnam
Oil and Gas Corporation for a 50 percent interest in Block 122 offshore
eastern Vietnam. The company has a 3-year work program for seismic
acquisition and drilling of an exploratory well.
-- Biofuels - Acquisition completed of a 22 percent interest in Galveston
Bay Biodiesel L.P., which is building one of the first large-scale
biodiesel plants in the United States. Chevron also entered into a
partnership with the Georgia Institute of Technology to pursue advanced
technology aimed at making cellulosic biofuels and hydrogen into viable
transportation fuels.
UPSTREAM - EXPLORATION AND PRODUCTION
Worldwide net oil-equivalent production, including volumes produced from oil sands and production under an operating service agreement, was 2,669,000 barrels per day in the second quarter 2006, an increase of 10 percent from the corresponding period in 2005. The increase was associated with the production from the former Unocal operations.
Average U.S. prices for crude oil and natural gas liquids in the second quarter 2006 increased by $16 to $60 per barrel. Outside the United States, prices were up by more than $17 per barrel to $62. The average U.S. natural gas sales price decreased about 7 percent to $5.90 per thousand cubic feet, while outside the United States the average natural gas price of $3.80 per thousand cubic feet was 27 percent higher than a year earlier.
U.S. Upstream
Three Months Six Months
Ended June 30 Ended June 30
Millions of Dollars 2006 2005 2006 2005
Income $901 $972 $2,115 $1,739
U.S. upstream income of $901 million in the second quarter decreased 7 percent from the 2005 period. Net charges of approximately $300 million were recorded in the 2006 quarter for additional uninsured costs related to the dismantlement or repair of wells and facilities that were damaged in last year's hurricanes in the Gulf of Mexico. Other operating expenses were also higher in this year's quarter. These effects were partially offset by the benefits of higher prices for crude oil and higher oil-equivalent production between periods.
Net oil-equivalent production increased 4 percent to 768,000 barrels per day in the 2006 quarter due to volumes added from the former Unocal operations. The net liquids component of production was down about 1 percent to 463,000 barrels per day. Net natural gas production averaged 1.8 billion cubic feet per day, up 13 percent.
International Upstream
Three Months Six Months
Ended June 30 Ended June 30
Millions of Dollars 2006 2005 2006 2005
Income* $2,371 $1,800 $4,615 $3,412
*Includes foreign
currency effects $(96) $57 $(219) $39
International upstream income of $2.4 billion increased from $1.8 billion in the second quarter 2005. The improvement was due mainly to higher average prices for crude oil and natural gas and increased oil-equivalent production. Foreign currency effects reduced earnings by $96 million in the 2006 quarter, compared with a $57 million benefit to income in the year-ago period.
Net oil-equivalent production, including volumes produced from oil sands and production under an operating service agreement, increased 13 percent to 1,901,000 barrels per day in the 2006 quarter. The net liquids component increased 3 percent to 1,362,000 barrels per day, due to volumes added from former-Unocal operations. This production increase was partially offset by the effects of maintenance activities at the Captain Field in the United Kingdom and the Athabasca oil sands project in Canada, as well as lower cost-oil recovery volumes in Indonesia. Natural gas production was up 50 percent to 3.2 billion cubic feet per day due to the added Unocal-related volumes.
In July 2006, the United Kingdom enacted an increase in the corporation tax on oil and gas companies in the U.K. North Sea, which effectively increased the tax rate from 40 percent to 50 percent. The changes are effective from January 1, 2006. The company will record a one-time charge of approximately $200 million in the third quarter 2006 to adjust deferred taxes as of the effective date and to recognize the effect of the incremental tax for the first half of 2006. The effect of the incremental tax rate on earnings in the second half of 2006 is estimated at $80 million.
DOWNSTREAM - REFINING, MARKETING AND TRANSPORTATION
U.S. Downstream
Three Months Six Months
Ended June 30 Ended June 30
Millions of Dollars 2006 2005 2006 2005
Income $554 $398 $764 $456
U.S. downstream earnings of $554 million increased $156 million from the 2005 quarter, mainly as a result of higher refined-product margins and increased refinery utilization.
Sales volumes for refined products decreased 3 percent to 1,468,000 barrels per day in the 2006 quarter due to a change in accounting beginning April 1 related to certain purchase and sale contracts. Previously, transactions for these contracts were reported as both a purchase and sale. The new accounting requires the transactions to be netted. Excluding the impact of this new accounting rule, sales of refined products were about 2 percent higher in the 2006 quarter.
International Downstream
Three Months Six Months
Ended June 30 Ended June 30
Millions of Dollars 2006 2005 2006 2005
Income* $444 $578 $814 $929
*Includes foreign
currency effects $14 $12 $23 $24
International downstream earnings of $444 million decreased $134 million from the year-ago period, as the benefits of higher refined-product margins and improved refinery utilization were more than offset by the effect of higher average income tax rates and an increase in operating expenses.
Refined-product sales volumes of 2,100,000 barrels per day were down
10 percent. Excluding the effect of the new accounting rule, sales were down
4 percent, primarily due to lower gasoline sales in Asia-Pacific and Europe
and lower fuel oil sales.
CHEMICALS
Three Months Six Months
Ended June 30 Ended June 30
Millions of Dollars 2006 2005 2006 2005
Income* $94 $84 $247 $221
*Includes foreign
currency effects $(5) $(1) $(11) $(2)
Chemical operations earned $94 million, up 12 percent from the 2005 quarter. Earnings improved for both the 50 percent-owned Chevron Phillips Chemical Company LLC affiliate and the company's Oronite subsidiary. Average income tax rates were also higher between periods.
ALL OTHER
Three Months Six Months
Ended June 30 Ended June 30
Millions of Dollars 2006 2005 2006 2005
Net Charges* $(11) $(148) $(206) $(396)
*Includes foreign
currency effects $31 $(14) $43 $(28)
All Other consists of the company's interest in Dynegy, mining operations of coal and other minerals, power generation businesses, worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities and technology companies.
Net charges were $11 million in the second quarter 2006, compared with net charges of $148 million in the corresponding 2005 period. The decrease in net charges was partly associated with improved Dynegy-related results, which included a gain on the redemption of the company's investment in Dynegy preferred stock. The company also recorded a gain on the retirement of Unocal debt.
CAPITAL AND EXPLORATORY EXPENDITURES
Capital and exploratory expenditures in the first six months of 2006 were $7.4 billion, compared with $4.2 billion in the corresponding 2005 period. Included in these expenditures were approximately $800 million and $700 million for the company's share of equity affiliate expenditures in 2006 and 2005, respectively. Upstream expenditures represented 77 percent of the companywide total in 2006.
NOTICE
Chevron's discussion of second quarter 2006 earnings with security analysts will take place on Friday, July 28, 2006, at 8:00 a.m. PDT. A webcast of the meeting will be available in a listen-only mode to individual investors, media and other interested parties on Chevron's Web site at www.chevron.com under the "Investors" heading. Additional financial and operating information is contained in the Investor Relations Earnings Supplement that is available under "Financial Reports" on the Web site.
Chevron will post selected third quarter 2006 interim company and industry performance data on its Web site on Wednesday, September 27, 2006, at 2:00 p.m. PDT. Interested parties may view this interim data at www.chevron.com under the "Investors" 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 press release of Chevron Corporation contains forward-looking statements relating to Chevron'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," "schedules," "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. The reader should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. Unless legally required, Chevron undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
Among the important factors that could cause actual results to differ materially from those in the forward-looking statements 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; the results of operations and financial condition of equity affiliates; inability or failure of the company's joint-venture partners to fund their share of operations and development activities; potential failure to achieve expected net production from existing and future crude oil and natural gas development projects; potential delays in the development, construction or start-up of planned projects; potential disruption or interruption of the company's net production or manufacturing facilities due to war, accidents, political events, civil unrest or severe weather; potential liability for remedial actions under existing or future environmental regulations and litigation; significant investment or product changes under existing or future environmental statutes, regulations and litigation; potential liability resulting from pending or future litigation; the company's acquisition or disposition of assets; government mandated sales, divestitures, recapitalizations or restrictions on scope of company operations; the effects of changed accounting rules under generally accepted accounting principles promulgated by rule-setting bodies; and the factors set forth under the heading "Risk Factors" on pages 31 and 32 of the company's 2005 Annual Report on Form 10-K. 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.
CHEVRON 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 2006 2005 2006 2005
Sales and other operating
revenues (1)(2) $52,153 $47,265 $105,677 $87,755
Income from equity
affiliates 1,113 861 2,096 1,750
Other income 270 217 387 445
Total Revenues and
Other Income 53,536 48,343 108,160 89,950
COSTS AND OTHER DEDUCTIONS
Purchased crude oil and
products, operating and
other expenses (2) 38,054 35,134 78,294 65,246
Depreciation, depletion
and amortization 1,807 1,320 3,595 2,654
Taxes other than
on income (1) 5,153 5,311 9,947 10,437
Interest and debt expense 121 104 255 211
Minority interests 22 18 48 39
Total Costs and
Other Deductions 45,157 41,887 92,139 78,587
Income From Continuing
Operations
Before Income Tax Expense 8,379 6,456 16,021 11,363
Income tax expense 4,026 2,772 7,672 5,002
NET INCOME $4,353 $3,684 $8,349 $6,361
PER-SHARE OF COMMON STOCK
Net Income - Basic $1.98 $1.77 $3.79 $3.05
- Diluted $1.97 $1.76 $3.77 $3.04
Dividends $0.52 $0.45 $0.97 $0.85
Weighted Average Number of
Shares Outstanding (000's)
- Basic 2,196,134 2,077,743 2,205,008 2,084,141
- Diluted 2,206,009 2,085,763 2,214,877 2,092,792
(1) Includes excise,
value-added and
other similar taxes. $2,416 $2,162 $4,531 $ 4,278
(2) Includes amounts in
revenues for buy/sell
contracts with the same
counterparty for periods
prior to second quarter
2006. (Associated costs
are included in Purchased
crude oil and products,
operating and other
expenses.) The company
adopted a new accounting
rule effective April 1,
2006, that requires these
types of transactions to
be netted in the income
statement. Not
Applicable $5,962 $6,725 $11,337
CHEVRON CORPORATION - FINANCIAL REVIEW
(Millions of Dollars)
INCOME BY MAJOR OPERATING AREA Three Months Six Months
(unaudited) Ended June 30 Ended June 30
2006 2005 2006 2005
Upstream - Exploration
and Production
United States $901 $972 $2,115 $1,739
International 2,371 1,800 4,615 3,412
Total Exploration
and Production 3,272 2,772 6,730 5,151
Downstream - Refining,
Marketing and Transportation
United States 554 398 764 456
International 444 578 814 929
Total Refining, Marketing
and Transportation 998 976 1,578 1,385
Chemicals 94 84 247 221
All Other (1) (11) (148) (206) (396)
Net Income $4,353 $3,684 $8,349 $6,361
SELECTED BALANCE SHEET ACCOUNT DATA June 30, Dec. 31,
2006 2005
(unaudited)
Cash and Cash Equivalents $10,080 $10,043
Marketable Securities $1,053 $1,101
Total Assets $131,183 $125,833
Total Debt $10,349 $12,870
Stockholders' Equity $66,906 $62,676
CAPITAL AND EXPLORATORY Three Months Six Months
EXPENDITURES (2) Ended June 30 Ended June 30
2006 2005 2006 2005
United States
Exploration and
Production $1,151 $538 $1,971 $924
Refining, Marketing and
Transportation 252 122 444 233
Chemicals 24 24 41 43
Other 108 61 154 138
Total United States 1,535 745 2,610 1,338
International
Exploration and
Production 1,998 1,388 3,691 2,329
Refining, Marketing and
Transportation 767 333 1,039 481
Chemicals 11 8 17 15
Other -- 16 2 17
Total International 2,776 1,745 4,749 2,842
Worldwide $4,311 $2,490 $7,359 $4,180
(1) Includes the company's
interest in Dynegy, mining
operations of coal and
other minerals, power
generation businesses,
worldwide cash management
and debt financing activities,
corporate administrative
functions, insurance
operations, real estate
activities, and technology
companies.
(2) Includes interest in affiliates:
United States $38 $37 $70 $73
International 435 365 714 622
Total $473 $402 $784 $695
CHEVRON CORPORATION - FINANCIAL REVIEW
Three Months Six Months
OPERATING STATISTICS (1) Ended June 30 Ended June 30
NET LIQUIDS PRODUCTION (MB/D): 2006 2005 2006 2005
United States 463 470 458 461
International 1,239 1,179 1,234 1,187
Worldwide 1,702 1,649 1,692 1,648
NET NATURAL GAS
PRODUCTION (MMCF/D): (2)
United States 1,832 1,621 1,807 1,611
International 3,234 2,151 3,199 2,153
Worldwide 5,066 3,772 5,006 3,764
OTHER PRODUCED VOLUMES-
INTERNATIONAL (MB/D) (3) 123 143 130 140
TOTAL NET OIL-EQUIVALENT
PRODUCTION (MB/D): (4)
United States 768 740 759 729
International 1,901 1,681 1,897 1,687
Worldwide 2,669 2,421 2,656 2,416
SALES OF NATURAL GAS
(MMCF/D): (5)
United States 6,839 5,697 6,899 5,281
International 3,865 1,990 3,481 2,012
Worldwide 10,704 7,687 10,380 7,293
SALES OF NATURAL GAS
LIQUIDS (MB/D): (5)
United States 128 170 118 170
International 89 114 99 111
Worldwide 217 284 217 281
SALES OF REFINED PRODUCTS
(MB/D): (6)
United States 1,468 1,510 1,501 1,486
International 2,100 2,327 2,215 2,329
Worldwide 3,568 3,837 3,716 3,815
REFINERY INPUT (MB/D):
United States 935 912 937 884
International 1,063 1,007 1,073 1,010
Worldwide 1,998 1,919 2,010 1,894
(1) Includes interest
in affiliates.
(2) Includes natural gas
consumed on lease (MMCF/D):
United States 58 58 44 55
International (5) 411 325 383 317
(3) Other produced volumes
- International (MB/D):
Athabasca Oil Sands
(Canada) 16 32 20 29
Boscan Operating Service
Agreement (Venezuela) 107 111 110 111
123 143 130 140
(4) Oil-equivalent production
is the sum of net liquids
production, net gas
production and other
produced liquids. The
oil-equivalent gas
conversion ratio is
6,000 cubic feet of
natural gas = 1 barrel
of crude oil.
(5) 2005 conformed to 2006
presentation.
(6) Includes volumes for
buy/sell contracts (MB/D): *
United States Not 78 53 81
International Applicable 137 49 137
Total 215 102 218
* The company adopted a new
accounting rule effective
April 1, 2006, related to
buy/sell contracts with
the same counterparty.
Previously, transactions
for these contracts were
reported as both a purchase
and sale. The new accounting
requires the transactions to
be netted, resulting in no
volumes from these transactions
reported as "Sales of refined
products" for periods beginning
in the second quarter 2006.
SOURCE Chevron Corporation
-0- 07/28/2006
/CONTACT: Donald Campbell of Chevron Corporation, +1-925-842-2589/
/Web site: http://www.chevron.com/
(CVX)
CO: Chevron Corporation
ST: California
IN: OIL CHM
SU: ERN CCA
EB-JB
-- SFF021 --
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